The International Comparative Legal Guide to Cartels and Leniency 2009 (The International...

Cartels & Leniency 2009

Published by Global Legal Group with contributions from:

A practical insight to cross-border Cartels & Leniency

www.ICLG.co.uk

The International Comparative Legal Guide to:

Advokatfirmaet Selmer DA

Allende & Brea

Allens Arthur Robinson

Andreas Neocleous & Co. LLC

Balcar Polanský Eversheds s.r.o.

bpv Braun Haškovcová s.r.o.

Brigard & Urrutia Abogados S.A.

Camilleri Preziosi

Cleary Gottlieb Steen & Hamilton LLP

Crowell & Moring

ELIG, Attorneys-at-Law

Elvinger Hoss & Prussen

Grau García Hernández & Mónaco

J Sagar Associates, Advocates and Solicitors

Kim & Chang

Liniya Prava

LMR Attorneys Ltd.

Loze, Grunte & Cers

Luiga Mody Hääl Borenius

Magalhães, Nery e Dias Advocacia

Marques Mendes & Associados

Meitar Liquornik Geva & Leshem Brandwein

Nagashima Ohno & Tsunematsu

Nysingh advocaten-notarissen N.V.

Odvetniki Šelih & Partnerji

Pachiu & Associates

Penkov, Markov & Partners

PI Partners

Plesner

Preslmayr Rechtsanwälte OG

SAI Consultores, S.C.

Schellenberg Wittmer

Setterwalls

SJ Berwin LLP

Sutkiene, Pilkauskas & Partners

Szecskay Attorneys at Law

Webber Wentzel

Wilson Harle

WKB Wiercinski Kwiecinski Baehr

www.ICLG.co.uk

DisclaimerThis 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 profes-sional when dealing with specific situations.

Further copies of this book and others in the series can be ordered from the publisher at a price of £200. Please call +44 20 7367 0720

Contributing EditorsSimon Holmes and PhilippGirardet, SJ Berwin LLP

Brand ManagerOliver Smith

Marketing ManagerRocio Cortinas

Cover DesignF&F Studio Design

EditorCaroline Blad

Senior EditorPenny Smale

Managing EditorAlan Falach

PublisherRichard Firth

Published byGlobal Legal Group Ltd.59 Tanner StreetLondon SE1 3PL, UKTel: +44 20 7367 0720Fax: +44 20 7407 5255Email: [email protected]: www.glgroup.co.uk

Printed byAshford Colour Press Ltd.February 2009

Copyright © 2009Global Legal Group Ltd.All rights reservedNo photocopying

ISBN 978-1-904654-56-8ISSN 1756-1027

The International Comparative Legal Guide to: Cartels & Leniency 2009

General Chapter:1 Settling Cartel Cases: Recent Developments in Europe - Simon Holmes & Philipp Girardet,

SJ Berwin LLP 1

Country Question and Answer Chapters:2 Argentina Allende & Brea: Julián Peña 93 Australia Allens Arthur Robinson: Wendy Peter & Fiona Crosbie 144 Austria Preslmayr Rechtsanwälte OG: Dieter Hauck & Esther Hold 195 Belgium Crowell & Moring: Thomas De Meese 246 Brazil Magalhães, Nery e Dias Advocacia: Carlos Francisco de Magalhães &

Gabriel Nogueira Dias 287 Bulgaria Penkov, Markov & Partners: Smilena Stoilova & Elina Ruseva 338 Colombia Brigard & Urrutia Abogados S.A.: Carlos Umaña & Camilo Enciso 399 Cyprus Andreas Neocleous & Co. LLC: Elias Neocleous & Eleana Spyris 4510 Czech Republic bpv Braun Haškovcová s.r.o.: Arthur Braun & Dagmar Bicková 5211 Denmark Plesner: Christian Karhula Lauridsen & Gitte Holtsø 5612 Estonia Luiga Mody Hääl Borenius: Kaja Leiger & Kätlin Kiudsoo 6013 European Union SJ Berwin LLP: Simon Holmes & Philipp Girardet 6614 Finland LMR Attorneys Ltd.: Ilkka Leppihalme 7515 France SJ Berwin: Natasha Assadi-Tardif & Delphine Cohen 8116 Germany SJ Berwin LLP: Dr. Alexander Rinne & Tilman Siebert 8817 Greece PI Partners: Vassilis Stergiou 9418 Hungary Szecskay Attorneys at Law: Dr. Judit Budai & Dr. Gusztáv Bacher 9919 India J Sagar Associates, Advocates and Solicitors: Manas Kumar Chaudhuri &

Mansoor Ali Shoket 10620 Israel Meitar Liquornik Geva & Leshem Brandwein: Michal Halperin & Yuval Sasson 11321 Italy Cleary Gottlieb Steen & Hamilton LLP: Mario Siragusa & Cesare Rizza 11922 Japan Nagashima Ohno & Tsunematsu: Eriko Watanabe 12723 Korea Kim & Chang: Chang-Sik Hwang & Richard J. Lee 13424 Latvia Loze, Grunte & Cers: Karlis Reihmanis & Andra Rubene 14025 Lithuania Sutkiene, Pilkauskas & Partners: Dr. Lina Daruliene & Andrius Bambalas 14526 Luxembourg Elvinger, Hoss & Prussen: Patrick Santer & Léon Gloden 15127 Malta Camilleri Preziosi: Adrian Mallia 15628 Mexico SAI Consultores, S.C.: Lucía Ojeda Cárdenas 16129 Netherlands Nysingh advocaten-notarissen N.V.: Cees Dekker & Ekram Belhadj 16630 New Zealand Wilson Harle: Ian Denton & Allison Ferguson 17231 Norway Advokatfirmaet Selmer DA: Harald Evensen & Ingvill Tollmann Fosse 17832 Poland WKB Wiercinski Kwiecinski Baehr: Aleksander Stawicki & Bartosz Turno 18533 Portugal Marques Mendes & Associados: Mário Marques Mendes & Pedro Vilarinho Pires 19234 Romania Pachiu & Associates: Delia Vasiliu & Ramona Lie 19935 Russia Liniya Prava: Tatiana Kachalina & Oleg Volkov 20536 Slovakia Balcar Polanský Eversheds s.r.o.: Michal Zahradník & Helga Mad’arová 21237 Slovenia Odvetniki Šelih & partnerji, o.p., d.n.o.: Nataša Pipan Nahtigal & Ziva Zoric 21738 South Africa Webber Wentzel: John Oxenham & Anthony Norton 22339 Spain SJ Berwin LLP: Ramón García-Gallardo Gil-Fournier & Marta Arias Díaz 22940 Sweden Setterwalls: Ulf Djurberg & Maria Lehmann-Horn 23641 Switzerland Schellenberg Wittmer: Dr. Jürg Borer & Michael Vlcek 24142 Turkey ELIG, Attorneys-at-Law: Gönenç Gürkaynak 24743 United Kingdom SJ Berwin LLP: Simon Holmes & Philipp Girardet 25444 USA Cleary Gottlieb Steen & Hamilton LLP: Michael Lazerwitz & Adam Miller 26145 Venezuela Grau García Hernández & Mónaco: Miguel J. Mónaco & Jose Ignacio Hernandez 268

Preface:Preface by Simon Williams, Senior Director, OFT Cartels and Criminal Enforcement Group, Office of Fair Trading, UK

.

v v

EDITORIAL

Welcome to the second edition of The International Comparative Legal Guideto: Cartels & Leniency.

This guide provides corporate counsel and international practitioners with acomprehensive worldwide legal analysis of the laws and regulations of cartelsand leniency.

It is divided into two main sections:

One general chapter. This chapter outlines the recent developments in Europewith regards to settling cartel cases.

Country question and answer chapters. These provide a broad overview ofcommon issues in cartels and leniency laws and regulations in 44 jurisdictions.

All chapters are written by leading competition lawyers and we are extremelygrateful for their excellent contributions.

We are also pleased to include a Wall Chart, which contains a summary tableof key features relating to cartels and leniency laws and regulations in each ofthe 44 jurisdictions.

Special thanks are reserved for the contributing editors Simon Holmes andPhilipp Girardet of SJ Berwin LLP for their invaluable assistance.

Global Legal Group hopes that you find this guide practical and interesting.

The International Comparative Legal Guide series is also available online atwww.iclg.co.uk.

Alan Falach LL.MManaging EditorGlobal Legal [email protected]

PREFACE

Tackling cartels is the major priority for competition authorities worldwide.Furthermore, it is an area which is changing fast with authorities developingimmunity and leniency programmes or refining existing ones, revising theirapproach to fining policy, introducing novel settlement procedures and lookingto encourage private enforcement in the courts. In short, it is a complex andevolving area and competition authorities, advisers and the businesscommunity need to keep abreast of developments.

Cartels are increasingly international in scope and competition authorities haveput in place effective mechanisms to discuss and co-ordinate their activitiesthrough multilateral networks such as the European Competition Network inEurope and, globally, the International Competition Network as well as amultitude of bilateral cooperation agreements. Similarly, businesses and theiradvisers need to think globally when seeking to manage any exposure arisingfrom cartel conduct which may have been identified.

I hope you will find The International Comparative Legal Guide to: Cartels &Leniency 2009 to be a useful source of guidance in this field of practice.

Simon Williams Senior Director, OFT Cartels and Criminal Enforcement Group Office of Fair Trading, UK

1WWW.ICLG.CO.UKICLG TO: CARTELS AND LENIENCY 2009

© Published and reproduced with kind permission by Global Legal Group Ltd, London

Chapter 1

SJ Berwin LLP

Settling Cartel Cases:Recent Developmentsin Europe

1. Introduction

While there is a long tradition of settling cartel cases in the USunder the Department of Justice’s “plea bargaining” arrangements,the concept of making admissions in cartel cases outside the scopeof a leniency policy is still fairly novel and untested in Europe.Having said this, several significant developments in this areasuggest that settlements will feature more in European cartel casesin the future. The most significant development in this respect isthe adoption by the European Commission of a formal settlementprocedure for EU cartel cases which came into force on 1 July 2008.There are, however, also interesting developments in relation to theincreasing use of - sometimes more and sometimes less formal -settlement procedures at national EU Member State level whichshould not be overlooked. This article summarises the general stateof play on settlement procedures in Europe and then explores someof the tensions between attempts to develop settlement proceduresand the promotion of other established policy objectives ofEuropean competition authorities, such as safeguarding effectiveleniency programmes and encouraging private claims for carteldamages.

2. The Concept of Settlement

The introduction of settlement procedures into European cartelproceedings, both by the Commission and a number of nationalcompetition authorities in Europe is rightly considered a significantstep in the field of anti-cartel enforcement. With ever-increasingnumbers of companies revealing the existence of cartels throughleniency applications, competition authorities are struggling with agrowing backlog of cartel cases. (The Commission as well as 25 ofthe 27 EU Member States now operate their own separate leniencyregimes whereby companies can approach competition authoritiesand provide evidence of the existence of a cartel, in return for areduction, or complete immunity, from any fine.) The length oftime it takes to prosecute a cartel and reach a fully reasoneddecision (a process which can take four years or more from dawnraid to a decision at the Commission level), means that enforcementagencies and in many cases also businesses under investigationhave a considerable interest in seeking to find ways of concludingsuch cases more speedily.Furthermore, with as many as two thirds of the Commission’sdecisions being appealed to the Court of First Instance (with thepossibility of subsequent appeals to the European Court of Justice),the authorities and the parties concerned can find themselvesengaged in a process which takes many years to reach a conclusion.Settlement procedures offer an alternative means to leniency for allparties involved in such procedures to resolve the matter more

quickly, avoiding protracted legal arguments, costs and a significantdiversion of management time. It allows businesses to move onwhich at an advanced stage of an investigation decide “to put thematter behind them”.While leniency procedures are designed to assist a competitionauthority with building their case, settlement procedures aredesigned to speed up the resolution of a case after the investigationphase of the case has been concluded. To achieve this settlementprocedures normally offer a reduction of financial penalties inreturn for specific admissions of liability or at least a promise not tochallenge the authority’s contemplated infringement findings and apromise to only make limited use of a party’s right to be heard.Cooperation under settlement procedures is therefore different tocooperation provided by a company under a leniency regime.Leniency rewards companies which produce evidence which eithertriggers an investigation or significantly advances an investigationat an early stage. Leniency also requires an open-endedcommitment by a company of complete and continuous cooperationwith the competition authority’s investigation. By contrast,settlement procedures reward companies which decide (havingbeen provided with details concerning the strength of the authority’scase against them) to admit liability rather than defend the case. Inthis regard, settlement procedures usually require only specificallydelineated acts of cooperation to enable competition authorities toexpedite the conclusion of the case. In more pragmatic terms,leniency can be described as helping the authority to build its casewhereas settlement forms part of an attempt to speed up thearguably inevitable conclusion of an otherwise protractedprocedure.Leniency and settlement are therefore related but distinct processesin a competition authority’s anti-cartel enforcement regime. This is,among other factors, illustrated by the fact that, as a general rule,the window for leniency applications closes before the window forsettlement discussions opens. At the same time, most competitionauthorities which operate settlement procedures of some form treatleniency and settlement as cumulative forms of cooperation incartel cases and cooperation under both policies can therefore leadto cumulative reductions in fines.While the basic concept of settlement is widely accepted across theEU as having the potential to be of benefit for both enforcementagencies and parties under investigation, formal settlementprocedures are not a common feature in the EU yet. TheCommission’s adoption of a formal policy for settlementprocedures in July 2008 is therefore likely to lead to an increase ofsuch policies at EU Member State level (albeit with possiblydifferent features). It should, however, be noted that it is notnecessary to have in place a formal settlement policy in order to

Philipp Girardet

Simon Holmes

2

SJ Berwin LLP Settling Cartel Cases: Recent Developments in Europe

ICLG TO: CARTELS AND LENIENCY 2009WWW.ICLG.CO.UK© Published and reproduced with kind permission by Global Legal Group Ltd, London

settle cases in practice. Two interesting examples for this are theUK and Germany. While the UK does not have a formal settlementpolicy, there is by now a fairly developed practice of settling casesin the UK which is based on a case-by-case approach with casespecific settlement offers. The UK’s OFT refers to these procedureseither as “settlements” or as “early resolution agreements”. InGermany, there is also no formal settlement policy and the FederalCartel Office (or Bundeskartellamt) (the “FCO”), in contrast to theUK, has so far not publicly acknowledged that it applies de factosettlement procedures. However, a number of recent cases stronglysuggest that the FCO is also prepared in appropriate cases to applyinnovative early resolution procedures which appear to amount tode facto settlement procedures. This article will consider theprincipal aspects of the different approaches to settlements acrossEurope before looking at a number of wider policy implications ofthe increasing use of such settlement procedures.

3. The Commission’s New Settlement Procedures in Cartel Cases

As noted above, the success of the Commission’s leniencyprogramme has led to an increasing backlog of cartel cases in DGCompetition. While the Commission is trying to speed up its generaladministrative procedures this is not easily achieved given theadversarial nature of cartel proceedings and the often considerablesize of the Commission’s investigation file in cartel cases to which itmust grant all parties extensive access. The Commission thereforedeveloped a new formal policy for settling cases over the past fewyears which is distinct from cooperation under its leniency policy.The Commission consulted on draft proposals in October 2007 andadopted its final settlement policy on 30 June 2008 under which theCommission offers (i) a fixed reduction in fines of 10% and (ii) a capto any multiplier for deterrence of 2 under its fining guidance (whichmay in particular benefit larger companies). In return, theCommission requires that a party must make specific admissions ofliability and must limit its requests for access to the Commission’sfile and its submissions in response to the Commission’s Statement ofObjections (the “SO”). Competition Commissioner Neelie Kroesemphasised in a press notice that the policy was not a sign of theCommission going soft on cartels:

“This new settlements procedure will reinforce deterrence byhelping the Commission deal more quickly with cartel cases,freeing up resources to open new investigations.”

Commentators have tended to agree with her but have questionedwhether the policy offers sufficient incentives for parties to settlecases with the Commission to allow the Commission to achieve theprocedural efficiencies the policy is designed to generate (this willbe explored further below).Before the introduction of the new settlement procedure, theCommission was (and still is) able to settle competitioninvestigations where parties offer binding commitments (Article 9of Regulation 1/2003). However, the provisions of Article 9 makeit clear that such procedures are not suitable where cases involvefines. As a result, the Commission was not able to use this existingprocedure for cartel cases; a new legislative instrument wastherefore required. The Commission’s settlement procedure is nowset out in a new Article 10a of Commission Regulation 773/2004which lays down the core practical rules concerning the conduct ofEU competition cases. (The amendments to Regulation 773/2004are contained in Commission Regulation (EC) No 622/2008 of 30June 2008, OJ L 171/3 of 1 July 2008.) In addition, theCommission has published an explanatory notice (the“Commission’s Settlement Notice”) which contains further detailsas to how the Commission will conduct settlement procedures.

(See the Commission Notice on the conduct of settlementprocedures in view of the adoption of Decisions pursuant to Article7 and Article 23 of Council Regulation (EC) No 1/2003 in cartelcases, OJ C 167/1 of 2 July 2008.)Like the Commission’s traditional fully adversarial administrativeprocedure, the new settlement procedure is based on Articles 7 and23 of Regulation 1/2003. This means that, as in the fully adversarialprocedure, there will be a formal decision (based on Articles 7 and23) finding an infringement of Article 81 EC and imposing a fine,but the process followed to this end is quite different.Under the new settlement procedure, the Commission has a broaddiscretion as to whether to make a settlement offer in a given case.The first necessary pre-condition for a case to be capable of beingsettled under the new procedure is that the case amounts to a “cartelcase”. The Commission’s Settlement Notice defines cartels for thispurpose broadly as:

“agreements and/or concerted practices between two ormore competitors aimed at coordinating their competitivebehaviour on the market and/or influencing the relevantparameters of competition through practices such as thefixing of purchase or selling prices or other tradingconditions, the allocation of production or sales quotas, thesharing of markets including bid-rigging, restrictions ofimports or exports and/or anti-competitive actions againstother competitors.” (The Commission’s Settlement Notice,at footnote 2.)

When assessing whether a cartel case may be suitable for asettlement procedure, the Commission will have regard to:

the probability of reaching a common understanding with theparties involved in view of: (i) the number of partiesinvolved in the case; (ii) any likely contestation of the facts;and (iii) any foreseeable conflicting positions on attributionof liability;the prospect of achieving procedural efficiencies, forexample in relation to the provision of access to theCommission’s file; andthe possibility of setting a precedent.

Once the Commission has provisionally concluded that a cartel caseis in principle suitable for its settlement procedure, the Commissionwill write to all parties under investigation, requesting them toexpress their interest in entering into settlement discussions. Theparties under investigation will be given a period of at least twoweeks during which they must inform the Commission of theirinterest in entering into settlement discussions. Parties must notcoordinate their decision whether or not to enter into settlementdiscussions which are then subsequently conducted with thoseparties who have accepted the offer to explore a settlement optionon a strictly bilateral basis. The initial declaration by a party of itswillingness to enter into settlement discussions does not imply anadmission of liability. Once the Commission has received andconsidered any expressions of interest in settlement, it will decidewhether or not to go ahead and enter into settlement discussionswith those parties which expressed an interest (as before theCommission enjoys a broad discretion in this regard).The Commission’s Settlement Notice states that the Commissionwill provide the parties engaged in settlement discussions withinformation concerning:

“the essential elements taken into consideration so far, suchas the facts alleged, the classification of those facts, thegravity and duration of the alleged cartel, the attribution ofliability, an estimation of the range of likely fines, as well asthe evidence used to establish the potential objections.” (TheCommission’s Settlement Notice, at paragraph 16.)

Upon request by a party, the Commission will also provide themwith a list of all accessible documents in its case file at this point in

WWW.ICLG.CO.UK3


ICLG TO: CARTELS AND LENIENCY 2009© Published and reproduced with kind permission by Global Legal Group Ltd, London

time and will grant access to non-confidential versions of anyspecific documents the party may request access to “in so far as thisis justified for the purpose of enabling the party to ascertain itsposition regarding a time period or any other aspect of the cartel”.(The Commission’s Settlement Notice, at paragraph 16.)It is on the basis of the above information provided by theCommission that the settlement discussions take place. The natureof these discussions remains unclear at the moment. While theCommission insists that it will not be “cutting deals” (see“Settlements in cartel cases”, speech by Commissioner Kroes at the12th Annual Competition Conference at Fiesole on 19 September2008), the settlement procedure does foresee that there will be an“exchange of arguments on potential objections, liability [and] finesrange” (Section III of the final “Overview” section of theCommission’s Settlement Notice) during the settlementdiscussions.If no agreement can be reached during the settlement discussions,the procedure reverts back to the normal adversarial process.Where a party and the Commission have reached a “commonunderstanding” on the scope of the potential objections and therange of the likely fine, the Commission will ask the party willingto settle to produce formal written settlement submissions in whichthe party will need to:

acknowledge in clear terms its liability for the alleged facts(including the duration of the unlawful conduct and its rolewithin the arrangements); give an indication of the maximum level of fine it wouldaccept under the settlement framework; andconfirm that its right to be heard has been fully protected (i.e.that it has been adequately informed of the objections andthat it will not request further access to the Commission’s fileor an Oral Hearing).

The Commission will then issue a streamlined SO, reflecting thecommon understanding and the party’s subsequent settlementsubmissions. The settling party would then reply to the SO with asimple confirmation that the SO is consistent with its settlementsubmissions and that the party remains committed to the settlementprocedure. Next, the Commission would issue a streamlined finaldecision, which again should reflect the settlement submissions,including significantly a fine which does not exceed the maximumfine specified in the settlement submissions.It should however be noted that the Commission has reserved itsright to discontinue the settlement procedure at any stage up untilthe final decision should the Commission form the view that - in theround - the settlement procedure does not give rise to the expectedprocedural efficiencies. Where the Commission abandons asettlement procedure after a party’s reply to an SO, the Commissionmust issue a new SO and grant full access to its file to ensure thatall parties’ rights of defence are fully protected.By contrast, the Commission’s Settlement Notice states that acompany cannot revoke a settlement commitment unilaterally afterit has made its settlement submissions. The Notice however alsostates that a party’s reply to a streamlined settlement SO which doesnot simply confirm the accuracy of the SO may be deemed as atermination of the settlement procedure by the Commission. Inpractice, this means that the prohibition for a party’s ability towithdraw from the settlement procedure unilaterally may only beeffective after it has reconfirmed its commitment to the settlementin its reply to the Commission’s streamlined SO.In addition to the above outline of the basic procedures under theCommission’s settlement policy, the following further elements ofthe policy are noteworthy:

Leniency applications cannot be made once the settlementprocedure has started.

The Commission will consider settlement up until thepublication of an SO.Settlement submissions can be made orally to minimisesubsequent disclosure risks (similar to the procedure appliedby the Commission in leniency cases).If several companies which are seeking settlement belong tothe same group (i.e. form part of the same undertaking), ajoint legal representative must be appointed.The party must agree to receive the SO and the final decisionin an agreed official EC language.It is not necessary for all parties in a cartel case to settle withthe Commission in each case, i.e. the Commission’s policydoes not rule out hybrid cases where some parties settle andothers do not.The parties under investigation remain free to appeal aCommission decision, even when they have settled the casewith the Commission (although it is unlikely that such appealswill be as frequent as following a fully adversarial procedure).

Based on the Commission’s policy alone, and in the absence ofactual cases having settled under the policy to date, there remains aconsiderable degree of uncertainty as to whether the procedure willbe attractive to parties under investigation. We would note inparticular the following considerations in this regard.

Low fine reduction - The fixed 10% reduction would appearto be not sufficiently attractive to persuade parties to enterinto settlement talks if the Commission is not prepared toengage in some form of discussion during the settlementdiscussions of the scope and/or the fine range of a case. TheCommission noted in its press release announcing theintroduction of the Commission’s procedure that “theCommission neither negotiates nor bargains the use ofevidence or the appropriate sanction, but can reward theparties’ cooperation to attain procedural economies”. Incontrast, parties will look to offer the lowest possiblemaximum level of fine which they are prepared to accept andmake their willingness to settle conditional upon theimposition of a reasonable fine. It therefore remains to beseen whether the Commission’s practice is more nuancedthan its press release suggests and some form of“negotiation” seems in practice virtually inevitable if theprocedure is to work in practice. (We note, however, that incertain cases, for example cases involving companies withlarge turnover, the Commission’s promise under its Notice tolimit any multiplier for deterrence to a factor of 2 may offera further incentive to settle.)Effects of “hybrid” cases - Given that many cartel cases aremulti-party cases, and given that the low fine reduction onoffer creates only limited incentives to engage in settlementdiscussions, it can reasonably be expected that (at leastinitially) many of the parties which have not applied forleniency in cartel cases may prefer to defend a case ratherthan settle. It remains to be seen whether the Commissionwill in practice decide to settle hybrid cases, i.e. cases wherenot all implicated parties agree to settle (its policy wouldallow the Commission to do so). Should the Commissiondecide to settle hybrid cases, it is unclear whether theCommission is likely to achieve the significant proceduralefficiencies the settlement procedure is designed to generate.Should the Commission decide not to settle hybrid cases, thenumber of settled cases may remain low for some time andagain the Commission would fail in its objective to introduceprocedural efficiencies under its settlement policy. In thiscontext, it would be important to better understand theCommission’s attitude to some form of coordination betweenparties in a case which the Commission is in principleprepared to settle.Scope of “early disclosure” - It remains to be seen howextensive the “early disclosure” access to the Commission’sfile will be during settlement discussions. A party whose

4



“early disclosure” access requests have been refused may notbe prepared to confirm in its settlement submissions that itsrights of defence have been fully protected and the settlementdeal would be “off the table”. Should the Commission grantgenerous access to its file under its “early disclosure”regime, this would again reduce the Commission’sprocedural efficiencies.Lack of legal certainty - The asymmetry in relation to aparty’s ability to withdraw from the settlement procedureseems highly unsatisfactory from a company’s perspective.In particular, it will be a significant disincentive forsettlements that the Commission reserves the right todiscontinue the settlement procedure vis-à-vis a party afterthat party has made extensive admissions in its settlementsubmissions and may have confirmed these in its response toan SO. The Commission’s assurance that such admissionswill not be used against that party subsequently may providelittle comfort, given that its admissions are likely to remainimplanted in the minds of the Commission’s case team. Lack of transparency - It seems that the Commission candecide to withdraw from a settlement process for reasonsunconnected with a specific bilateral agreement, e.g. theCommission may decide that it did not receive a sufficientlevel of “buy in” from the parties under investigation. By wayof an example, the Commission could therefore decide toterminate settlement procedures with Party A for reasonsrelated to Parties B and C of which Party A has no knowledge.This lack of transparency is likely to be a significantdisincentive to parties considering whether to settle a case (inthe absence of any permissible coordination between theparties on settlement issues).

On the basis of the above considerations, it would appear that fornow there are only clear-cut incentives for engaging in settlementdiscussions with the Commission where a party has already madeadmissions under the Commission’s leniency policy. This wouldallow a leniency applicant to maximise its reductions of the fine,having already made its admissions under the leniency policy. Onlypractical experience will tell whether the Commission’s settlementpolicy is attractive for parties which have chosen not to apply forleniency at an earlier stage of the investigation. In this respect, itwill be of interest to see to what extent ‘private damages related’considerations will play a role (possibly a decisive role) in decidingwhether to settle or not. Should the Commission be willing toremove a significant amount of evidence from a settled decision(compared to a contested decision) this may over time become theoverriding incentive to settle a case for non-leniency parties. Suchan approach would however be in direct conflict with theCommission’s stated policy objective to encourage privateenforcement in Europe. This issue is further discussed in Section5.2 below.

4. Other European Approaches to Settling Antitrust Cases

While we are still waiting for the first Commission case to settleunder the Commission’s new policy, it should be noted that the useof settlement procedures in cartel (and indeed a number of non-cartel) cases is already occurring in various forms at EU MemberState level.

4.1 The United Kingdom

The UK’s Office of Fair Trading (“OFT”) has over the past fewyears established a significant track record for settling cases on aninformal and case-by-case basis, in the absence of a formalpublished settlement policy.

The OFT first used settlement procedures in the IndependentSchools case (OFT Decision No CA98/05/2006 of 20 November2006) where, following the publication of an SO stating that 50 fee-paying schools in the UK had illegally exchanged informationregarding the schools’ anticipated fees and fee increases, the OFTand a body representing the Independent Schools entered into asettlement agreement. In the agreement, all of the schools admittedtheir involvement in the conduct, admitted that such actionsamounted to an infringement of Chapter I of the UK’s CompetitionAct 1998, and agreed to pay a nominal fine of £10,000 per school.(Indeed, the settlement agreement was conditional on all schoolsagreeing to settle the case on identical terms.) The schools alsoagreed to make ex gratia compensatory payments totalling £3million into a charitable educational trust for the benefit of thepupils who had attended the schools during the years in question.The OFT then used settlement procedures again in August 2007 inits Competition Act case against British Airways and VirginAtlantic concerning collusion on fuel surcharges for long-haulpassenger flights. Virgin benefited from immunity under the OFT’sleniency policy in this case. British Airways was fined a total of£121.5 million. The OFT noted in its press release announcing thesettlement that “the level of penalty reflects not only the granting ofleniency to BA but also the additional cooperation BA has agreedto provide to enable the case to be resolved more speedily andeffectively”. This suggests a cumulative application of leniency andsettlement policies in this case. A final decision confirming thesettlement terms in this case has not been adopted by the OFTpending its ongoing parallel criminal prosecutions of variousallegedly implicated BA executives.In December 2007, the OFT has used what it has termed “earlyresolution agreements” to settle investigations with a number ofsupermarkets and dairy producers for collusion in relation to thesetting of retail prices for milk, cheese and other dairy products. Inits press release, the OFT commented that “the early andconstructive cooperation of [the supermarkets and dairyproducers] has enabled some of this case to be resolved effectivelyand swiftly, which will significantly reduce the costs of pursing theinvestigation to the OFT and the businesses concerned”. The OFTwent on to comment that this “case demonstrates the flexibleapproach the OFT is prepared to take to reduce the burden ofinvestigations, while maintaining strong and effective competitionlaw enforcement”. In July 2008, the OFT reached another “early resolutionagreement” with six companies (including the supermarket chainsAsda and Somerfield and tobacco firm Gallaher) which admittedengaging in unlawful practices in relation to the retail price settingfor tobacco products in the UK. Each party will receive asignificant reduction in the financial penalty that might otherwisehave been imposed as long as they continue to co-operate with theOFT in its investigations which are continuing against some sixcompanies which have not reached early resolution agreements.The OFT also adopted a similar settlement approach in March 2007when it announced that it would reduce the financial penalties oncompanies which are under investigation for bid-rigging in theconstruction industry in England (and who had not applied forleniency), if they were prepared to admit participation in the offenceand co-operate with the OFT’s investigation. Again, this case isongoing.Aside from the OFT using settlement procedures in cartel cases, itis noteworthy that the UK’s Office of Rail Regulation (“ORR”)(which has concurrent competition law powers with the OFT in therail sector) also adopted a de facto settlement approach in adominance case (under Chapter II of the Competition Act andArticle 82 of the EC Treaty). In this case, ORR noted the following

WWW.ICLG.CO.UK5



in its press release announcing its decision on 17 November 2006:“ORR has had regard to EWS’ co-operation in theinvestigation and has applied a 35 per cent discount to thepenalty. In particular, EWS has accepted ORR’s infringementfindings as set out in the decision which has allowed the caseto be more quickly and effectively resolved than wouldotherwise have been the case.”

It should be noted that EWS’ cooperation to ORR was not providedunder the leniency policy as the case did not concern cartel conduct.It is therefore clear that the OFT takes a case-by-case approach onthe issue of settlement and that other sector regulators may beprepared to adopt de facto settlement procedures to cases which donot qualify as cartel cases. While the specific terms of the OFT’ssettlements referred to above are not yet a matter of public record,it appears that the OFT required in each case an admission ofliability and the waiving of certain rights of defence (possiblyregarding contestation of the facts, limited access to file, limitedwritten submissions on the SO and no oral hearing) in return for areduction of fines. While the amount of the applicable reductionshave not been made public by the OFT so far, the public accountsof one party which settled in one of the above cases suggests thatthe OFT may be prepared to grant a reduction of up to 35% toparties willing to settle a case. This would of course besignificantly above the Commission’s fixed 10% level.

4.2 Germany

German law does not expressly provide for settlement proceduresand the German Federal Cartel Office (or FCO) has like the UK’sOFT, no formal published settlement policy. However, in practice,the FCO appears to be willing to adopt a de facto settlementapproach to resolve a case more quickly than normal in appropriatecases. A striking example of this is the FCO’s cartel investigation againstthe private German TV broadcasters RTL and Pro7Sat.1 in 2007. Inits decision of 30 November 2007, the FCO fined RTL andPro7Sat.1 €96 million and €120 million respectively for applyingexclusionary rebate schemes for TV advertising on their channelsthat unfairly discriminated against smaller TV broadcasters. In itspress release announcing the decision, the FCO stated that RTL andPro7Sat.1 had accepted the fines imposed by the decision at thebeginning of October 2007. It would also appear that the fines weresignificantly lower than they could have been under German law.The case is further exceptional in that the parties’ apparentcooperation allowed the FCO to close its investigation less than fivemonths from the FCO’s dawn raids on the offices of RTL andPro7Sat.1. While the FCO makes no reference to settlementprocedures in its press release, it would appear that it has applied ade facto settlement procedure in its dealings with RTL andPro7Sat.1.A further interesting de facto settlement case in relation to a non-cartel case may be the FCO’s proceedings against 35 gas providersin Germany on suspicion of abusive pricing. In October 2008, theFCO closed the investigation into six regional gas providers that arecontrolled by the energy service provider E.ON after consumerbenefits were offered in return. The agreement provides for €55million of benefits to be made available to customers of these sixgas providers (through rebates and delayed price increases). Whilethis case has similarities to a more traditional case closure decisionbased on behavioural commitments given (which has been possibleboth at EU and national level for some time now), it is unusual forthese commitments to be of a direct financial (and indeedcompensatory) nature. In this sense there are parallels between thiscase and the OFT’s Independent Schools settlement (see Section 4.1

above). This is another example of the innovative approaches takenby some European competition authorities at national level inrelation to adopting case specific settlement or early resolutionprocedures in appropriate cases.

4.3 France

In France, the French Competition Council has the power to grantfine reductions in relation to anticompetitive behaviour where acompany does not contest the alleged infringements and offerscommitments to modify its behaviour in the future.An example of this policy is the announcement of the Council inJune 2008 that it had granted a 20% fine in the context of asettlement in a cartel case concerning bid-rigging activities in thebuilding maintenance sector. In this case, the implicated companiesengaged in a settlement process which involved, among otherthings, the admission of the infringement and the roll-out of acompetition law compliance programme (which included acommitment to dismiss any employee found to have engaged inanticompetitive behaviour in the future). It appears from this caseas well as from prior decisions by the Council that when settling acase, the Council has regard to an internal indicative “reduced finesschedule” which sets out fine reduction levels for certaincooperative acts by companies under investigation, e.g. 10% forsetting up a compliance programme; 20% for implementing awhistle-blowing procedure; and 25-30% for undertaking furthersignificant behavioural commitments.

4.4 The Netherlands

As regards other Member States, the Dutch Competition Authority(the “NMa”) has for some time made extensive use of settlementprocedures with, it would appear, significant reductions in fines inreturn for admissions and cooperation in its long-runninginvestigations into bid-rigging activities in the Dutch constructionindustry. See the NMa website at www.nmanet.nl for furtherinformation.

5. Effects of Introducing Settlement Proceedings Into Cartel Enforcement

Whilst the introduction of settlement procedures into Europeancartel enforcement has been broadly welcomed by the legalcommunity, it is clear that competition authorities will have to becareful to ensure that its introduction does not adversely affect otherelements of their cartel enforcement regime, in particular, theirleniency programmes and their efforts to promote privateenforcement in relation to cartel damages.

5.1 Settlement and Leniency

Under the Commission’s 2006 Leniency Notice, companies can(assuming that the relevant criteria are fulfilled) obtain immunityfrom fines, or a reduction in their fine by providing the Commissionwith evidence of an infringement. The focus of the reward for aleniency applicant is therefore related to the provision of “evidence”which enables the Commission to successfully prosecute the cartel.This is different to the objective of a settlement procedure where theCommission seeks to reward companies for enabling theCommission to attain “procedural efficiencies”. Companies which wish to make use of either the Commission’sleniency regime, or its settlement procedure, will be required to

6



“cooperate” with the authority. Under the Commission’s LeniencyNotice, leniency applicants are under a duty to cooperate“genuinely, fully on a continuous basis and expeditiously from thetime of submitting its application throughout the Commission’sadministrative procedure”. Parties who fail to meet this duty maybe refused leniency or have its provisional award of leniencywithdrawn. (It must be assumed that this cooperation requirementdoes, however, not extend to compelling leniency applicants also tosettle cases with the Commission as the Commission has been atpains to emphasise that it will not impose settlements on anyparties.)Parties are also under a duty of cooperation under the Commission’ssettlement procedure, i.e. they are required to offer a “commitmentto cooperate in the expeditious handling of the case” (theCommission’s Settlement Notice, at paragraph 21). Thiscooperation is, however, not as indeterminate and open-ended asunder the Commission’s leniency policy. The cooperation requiredunder settlement is now clearly set out in the Commission’sSettlement Notice.Notwithstanding the fact that companies are able to obtain both areward for leniency and a reward for settlement, there is a risk thatsome companies may favour settlement over leniency, thusweakening a competition authority’s leniency regime. This isparticularly true for companies “further down the line” in terms ofan award for leniency who are only likely to obtain the lowestreduction in any fine (“up to 20%” under paragraph 26 of theCommission’s 2006 Leniency Notice). Such entities may decide towait and see how the authority’s case develops in the knowledgethat significant reductions of fines may still be available under apossible subsequent settlement offer. The obvious risk to acompetition authority is that if companies choose to adopt such anapproach this may potentially lead to less evidence of theinfringement being provided to the authority at an early stage of thecase, making it more difficult to prosecute the cartel. Competitionauthorities will therefore have to ensure that settlement proceduresdo not undermine the attractiveness of their existing leniencyregimes. It would appear that it is precisely this consideration which has ledthe Commission to set the fixed fine reduction for settlements at avery low 10%. The question now arises whether, while such a 10%level may protect the Commission’s leniency policy, it may be toolow a level to make the new settlement policy attractive to partiesunder investigation.In countries (such as the UK) where there is also a parallel regimefor criminal sanctions on individuals for cartel conduct, onedistinguishing factor between leniency and settlement rewards maybe the availability of individual protection on offer under eitherregime. It may be that a competition authority in such a countrywill be prepared to give greater protection (or comfort) on criminalsanctions for implicated executives under leniency (even in caseswhere a company is not one of the first to apply for leniency) thanunder a subsequent settlement offer.

5.2 Settlement and Private Enforcement

The theme of private enforcement of competition law has beengreatly debated both at a Commission and EU Member State level.On 2 April 2008, the Commission adopted a White Paper ondamages actions for breach of the EC competition rules. In the UK,the OFT published its recommendations for private enforcement on26 November 2007.The central theme of private enforcement is that harmed consumerswill be able to obtain redress for any damage suffered as a result of

anticompetitive conduct by suing those parties guilty of aninfringement. In order to bring such actions, consumers must haveevidence of the company’s wrongdoing and must also be able toshow that harm was suffered as a result of the infringement.One of the main ways in which potential litigants can obtainevidence, and seek to prove infringement (and the resulting harmsuffered), is by relying on the SO and/or a decision of theCommission, or other competition authority. For example, as a matter of Community law, the Commission isrequired to publish an SO prior to adopting any final decision.However, in settlement cases, given that the parties to the settlementagreement will have “agreed” the allegations made against them,the Commission does not have to issue a fully reasoned SO, giventhat the parties will not contest its conclusions. As a result, anythird parties wishing to bring a damages claim in a case where allor most parties have settled may find that there is limitedinformation available on which to bring their claim. This has botha positive and a negative aspect for competition enforcementpolicy: it would provide a strong incentive to settle cartel cases withthe public authorities but make private enforcement more difficult.This is of course a particular concern where all parties in a casesettle with the Commission. It is less clear how “streamlined” (inthe Commission’s words) an SO can be in cases where only some,but not all, parties to a case decide to settle.In this context, it is also important to consider the position of thirdparty complainants in settled cases. The Commission notes inRegulation (EC) 622/2008 (which implements its settlementprocedures) that:

“Complainants will be closely associated with settlementproceedings and be duly informed of the nature and subjectmatter of the procedure in writing to enable them to providetheir views thereon and thereby cooperate with theCommission investigation.” (Commission Regulation (EC)622/2008, at recital 5)

Nevertheless, the Commission goes on to state that:“in the particular context of settlement proceedings,providing systematically a non-confidential version of thestatement of objections to complainants would not alwaysserve the purpose of enabling complainants to cooperatewith the Commission’s investigation and may occasionallydiscourage the parties to the proceedings from cooperatingwith the Commission. To this end, the Commission shouldnot be obliged to provide a non-confidential version of thestatement of objections to complainants.” (Ibid)

As third parties may not be able to obtain a non-confidential versionof the SO in settlement cases, this will obviously limit the amountof information (and the ease with which any information can beobtained) for use in private enforcement actions. The Commissionhas further made clear that complainants or other interested thirdparties will not be given access to any settlement submissions.Another related factor in relation to private enforcement is that anysettled (or streamlined) SO and subsequent decision may notinclude any meaningful evidence and/or discussions about theactual or possible “effects” of the relevant cartel activity. This isbecause it is unlikely that there will be any chance of a “commonunderstanding” between the Commission and a settling party at theSO stage on the complex and invariably highly contested issue ofeffects in cartel cases. As a result, the SO and the decision may belargely silent on the issue of effects. A private litigant maytherefore not have the benefit of any effects evidence in a settledCommission decision when claiming damages. Having to provethis nexus therefore creates an additional hurdle. In this regard, it is interesting to note the OFT’s approach in theIndependent Schools case and the ORR’s approach in the EWS case,

WWW.ICLG.CO.UK7



where the effects of the anticompetitive activities were notdiscussed in the final infringement decision despite the reasonableassumption that the OFT and ORR must have had some relevantindications or evidence in this respect. It will be interesting to see whether the Commission (and othercompetition authorities) will in future cases seek to include insettled SOs and decisions some evidence and/or discussion of thepossible effects of the alleged cartel activity. Early indications fromCommission officials, however, indicate that the Commission mayaccept that a settled decision will simply contain significantly lessevidence than a contested decision. Should this be the case, it islikely that one of the most significant incentives for settling a casewill be the ‘removal’ of evidence from a decision for the benefit ofthe settling parties and to the detriment of potential futureclaimants. Such a practice would of course directly undermine theCommission’s stated policy objective that it wishes to encourageprivate enforcement in Europe.

6. Conclusions

It is clear from the discussion above that the introduction ofsettlement procedures into European cartel enforcement isgathering pace and the adoption of the Commission’s SettlementNotice is likely to further accelerate developments in this area at EU

Member State level. Having said this, it remains to be seen whetherthe Commission’s attempt to strike an effective balance betweenintroducing an attractive settlement policy while not underminingthe considerable success of its leniency policy will work in practice.It will also be interesting to assess in the future to what extent“streamlined” settled Commission (and other) cartel decisions willhave a chilling effect on the development of private enforcementactions which the EU competition authorities are keen toencourage. It may turn out that the greatest incentive for a cartelparticipant to enter into settlement discussions with, in particular,the Commission is the possibility of reducing the scope of any finaldecision and/or the evidence contained in that decision, in particularin relation to the possible effects of the unlawful conduct. In turn,the Commission may over-time seek to minimise this effect(although the Commission is currently sending out conflictingmessages in this respect).The one thing that seems certain at the moment is that goingforward settlement procedures will play an increasingly significantpart in anti-cartel enforcement procedures across Europe, both atCommission level and at national level. As a result, the alreadyhigh degree of complexity surrounding a company’s strategicchoices as to whether to defend a case or whether to cooperate withan investigation will increase further in the future.

8



Philipp Girardet

SJ Berwin LLP 10 Queen Street PlaceLondon EC4R 1BEUnited Kingdom

Tel: +44 20 7111 2055 Fax: +44 20 7111 2000Email: [email protected] URL: www.sjberwin.com

Philipp Girardet is a senior associate in the firm’s EU & Competitiondepartment. Philipp advises on a broad range of competition law and regulatoryissues in a wide range of industry sectors, including telecoms, water,music and film. He has particular expertise in cartel and leniencyissues. Philipp also has experience of advising on complex licensingand merger issues both at EU and national level and has advised oncontentious matters before the Competition Appeal Tribunal, theHigh Court and the Court of Appeal.Prior to joining SJ Berwin LLP, Philipp was the deputy director of theCartel Group at the OFT where he was responsible for the OFT’s civilcartel cases and for developing and operating the OFT’s leniency policy.He also worked on criminal cartel offence investigations. Philippchaired the ECN Leniency Working Group for two years and is the co-author of the ECN Model Leniency Programme. He represented theOFT on cartel issues both nationally and internationally and workedclosely with the European Commission and the US Department ofJustice on a broad range of competition policy issues. He frequentlypublishes and speaks on cartel and leniency issues.

Simon Holmes


Tel: +44 20 7111 2281 Fax: +44 20 7111 2000Email: [email protected]: www.sjberwin.com

Simon Holmes is head of EU & Competition at SJ Berwin in Londonand is an experienced competition and trade lawyer. He is recognisedas a ‘Leading Lawyer’ in Chambers and as a ‘legal expert’ in Legal 500,as well as featuring in the Guide to the World’s Leading Competitionand Anti-Trust Lawyers and Who’s Who of Competition Lawyers.Although based primarily in London, Simon has spent several extensiveperiods in Brussels and continues to work there on a regular basis. Forover 25 years, Simon has had a broad diet of contentious and non-contentious competition law and (unusually among London-basedlawyers) international trade and customs work. His competition lawwork also involves advising clients on a broad range of issues includingbringing, defending and settling all types of competition disputes,cartels, dawn raids, compliance programmes, whistle-blowing andleniency applications, dominance, pricing, discounts, promotions,parallel trade, refusals to supply, state aid and the application ofcompetition law to a wide range of commercial agreements - bothonline and offline. He regularly advises on mergers under UK and EUlaw, acting for either one of the merging parties or third parties, suchas complainants or investors. Through this latter work, he has advisedon a very high proportion of the largest deals. His trade work covers awide range, from anti-dumping through to customs issues and otherforms of trade protectionism.Simon won scholarships to both Cambridge and Brussels Universities.At Cambridge, he obtained a first class honours degree in Economicsand Law. In Brussels, he obtained a Grande Distinction in EuropeanLaw. He is fluent in French, has written a number of articles oncompetition and international trade, and has spoken in these areas inLondon, Brussels, Washington DC, Tokyo, France, Italy and Brazil.From 1983 to 1986, he taught EU Law at the London School ofEconomics. He is also a former chairman of the Law Society’sEuropean Group.

SJ Berwin’s EU & Competition department has extensive experience of advising on and defending alleged cartel casesbefore the European competition authorities, including the European Commission and the national competitionauthorities of the Member States. This includes advising on compliance programmes, fines, leniency applications andstrategy, handling on-site inspections and subsequent investigations by the authorities. It also has extensive experiencein EU and Member State level competition-related litigation, including judicial review, as well as applications forinjunctions and damages and defending such applications. SJ Berwin represents clients in a number of significantcases before the European Court of Justice as well as the national courts of the Member States.

SJ Berwin’s EU and competition department has been a core practice area of the firm since its establishment. Thedepartment is widely recognised as one of the leading practices in EU regulatory and competition law, operating fromBrussels, London, Madrid, Milan, Munich and Paris. Three times voted ‘Competition Team of the Year’ in the UK LegalBusiness Awards, the team regularly features in the Global Competition Review’s ‘GCR 100’, a survey of the world’sleading competition practices.

Unlike many other European law firms, SJ Berwin’s EU and competition practice spans not only competition law butalso a broad range of other areas of EU law, which includes an active regulatory practice in pharmaceuticals, telecoms,energy and chemicals, an established trade law practice and a cutting edge EU/competition law litigation practice beforeboth national and EU courts.



Chapter 2

Allende & Brea

Argentina

1 The Legislative Framework of the Cartel Prohibition

1.1 What is the legal basis and general nature of the cartelprohibition, e.g. is it civil and/or criminal?

Section 1 of the Argentine antitrust law (Law 25.156 of 1999)provides that: “acts and behaviours related to the production ortrade of goods and services limiting, restricting or distortingcompetition or constituting an abuse of a dominant position in amarket, in a manner which may result in a damage to the generaleconomic interest, are prohibited and shall be sanctioned pursuantto the rules of this law”.The antitrust law does not prohibit any anticompetitive conduct perse. Rather shall all anticompetitive practices be analysed under therule of reason. The antitrust law does not consider anticompetitiveconducts as illegal if such conducts are proven to be pro-competitive and pro-efficient. An anticompetitive conduct shallfurther not be considered illegal under the antitrust law if thoseaccused of having engaged in such practice do not have enoughmarket power to cause a potential damage to the general economicinterest. The general economic interest has been interpreted in thepast decade as comparable to the concept of economic efficiency,although more inclined to consumer surplus rather than to totalsurplus. The concept is currently under redefinition by the antitrustauthorities, though no new definition has yet been issued or applied. The Supreme Court of Justice has sustained that cartels haveenough capacity to affect the general economic interest since theydeprive consumers of the benefits that could be obtained if pricesand quantities were determined through competition. Thus, in casethere is overt collusion, the courts tend to presume the existence ofdamage to the general economic interest.However, in case there is covert collusion, the Supreme Court ofJustice has held that the existence of parallel pricing is not enoughto prove the existence of a cartel.

1.2 What are the specific substantive provisions for the cartelprohibition?

While the guiding principle is set forth by Section 1 of the antitrustlaw, Section 2 gives a series of examples of anticompetitivebehaviours. Among these examples, there are some collusivepractices such as:a) To directly or indirectly determine, arrange or manipulate the

sales price or the purchase price of goods or services offeredor demanded in the market, as well as to exchange

information with the same purpose or effect.b) To establish obligations to produce, process, distribute,

purchase or commercialise only a restricted or limitedquantity of goods, or to render a restricted or limited number,volume or frequency of services.

c) To horizontally divide territories, markets, customers andsupply sources.

d) To arrange or coordinate positions in tenders or bids.e) To arrange limitation or control of technical development or

investments destined to production or marketing of goodsand services.

f) To regulate markets of goods or services by means ofagreements in order to limit or control research,technological development and production of goods orrendering of services, or in order to hinder investmentsdestined for the production of goods or services or theirdistribution.

1.3 Who enforces the cartel prohibition?

The authorities who enforce the cartel prohibition in Argentina arethe National Commission for Defence of Competition (“CNDC”)and the Secretary of Domestic Trade of the Ministry of Economyand Production (the “Secretary”). The CNDC is composed of five members. The President of theCNDC is designated by the President of Argentina who can removehim without cause. The remaining four commissioners are alsodesignated by the President of Argentina but last in their offices for4-year periods. Each investigation is carried out by the CNDC who issues a reportwith recommendations to the Secretary, who takes the final decisionon what measures are to be taken. Such decisions may be appealeddirectly to the federal courts of appeals. No other governmentalagency has any enforcement powers in cartel cases.The antitrust law contemplates the creation of an independentadministrative antitrust court, the National Tribunal for Defence ofCompetition (“TNDC”), which will have seven members.However, the TNDC has not yet been constituted, although, in 2003there was a call for candidates. The legal uncertainty caused by thefailure to create the TNDC was exacerbated by a series of judicialrulings questioning the CNDC’s and/or the Secretary’s competenceas transitory enforcers. This series of cases was known as the“judicialisation” of antitrust law and was solved by a SupremeCourt ruling in June 2007, which held that the Secretary was theantitrust authority responsible for the final decision and the CNDCwas responsible for carrying out the investigative procedures andissuing the recommendations to the Secretary.

Julián Peña

10

Allende & Brea Argentina


1.4 What are the basic procedural steps between the openingof an investigation and the imposition of sanctions?

Antitrust procedures in Argentina may be initiated by anyindividual. However, once a claim is filed, it is at the CNDC’s solediscretion whether to perform an investigation. There are no legalinstruments to force the CNDC to do so.Once an investigation is initiated, the CNDC grants the defendantsa 10-day-period to submit its explanations regarding the conduct inquestion. If the CNDC, after a pre-investigation period, finds thatthere are grounds to file charges against the defendants, it issues aresolution opening the investigation and grants the defendant a 15-day period to submit its defenses and designate its evidences. The evidence production period can be from 90 to 180 businessdays, depending on the investigation, leaving the antitrustauthorities 60 business days to subsequently issue the finalresolution. During the procedure the antitrust authorities may issue injunctionsordering the parties to suspend the conduct in question until thefinal resolution is issued. The parties may also propose a voluntary suspension of a conductsubject to the approval by the antitrust authorities.Once a final resolution is issued by the Secretary, a cartel case canonly be appealed before the Federal Court of Appeals.

1.5 Are there any sector-specific offences or exemptions?

Under Argentine antitrust law there are neither any sector specificoffences nor any exemptions.

1.6 Is cartel conduct outside Argentina covered by theprohibition?

A cartel conduct outside Argentina is covered by the prohibition aslong as it affects the general economic interest. The 1999 lawadopted the “Effects Doctrine” and introduced in its Section 3 theprinciple of extraterritoriality of the law. However, there has notbeen any known case in which this principle has been enforced.

2 Investigative Powers

2.1 Summary of general investigatory powers.

Table of General Investigatory Powers

Please Note: * indicates that the investigatory measure requires theauthorisation by a Court or another body independent of thecompetition authority.

2.2 Specific or unusual features of the investigatory powersreferred to in the summary table.

There are no specific or unusual features of the investigatorypowers referred to in the summary table.

2.3 Are there general surveillance powers (e.g. bugging)?

The antitrust authorities do not have general surveillance powers.This is an exclusive power of criminal courts.

2.4 Are there any other significant powers of investigation?

The antitrust law provides the enforcement authorities with broadinvestigative powers. According to Section 24 of the antitrust law,the antitrust authorities may: a) Hold hearings with the presumably responsible people,

claimant, damaged parties, witnesses or experts, take theirdeclarations and order confrontations, for which purpose thehelp of public force could be requested.

b) Make the necessary review on books, documents and otherelements of the investigation, control of stock, confirmorigins and cost of raw material or other goods.

c) Have access to the places subject to inspection subject to theconsent of the inhabitants or by means of a court orderrequested from the competent judge of the Court, who shallmake a ruling within 24 hours.

d) Request the competent judge to order the precautionarymeasures he/she deems necessary; such measures to beresolved within 24 hours.

2.5 Who will carry out searches of business and/or residentialpremises and will they wait for legal advisors to arrive?

The search of business and/or residential premises can solely beperformed by those authorised by a criminal court. Generally, thejudge issuing a search order allows representatives of the antitrustauthorities to participate. They will not necessarily wait for legaladvisors to arrive, though, generally they do in order to avoid legalquestionings to the information gathered without the presence of alegal advisor.

2.6 Is in-house legal advice protected by the rules of privilege?

The in-house legal advice is not protected by the rules of privilege.

2.7 Other material limitations of the investigatory powers tosafeguard the rights of defence of companies and/orindividuals under investigation.

The limitations to the investigatory powers to safeguard the rights

Arg

entin

a

Investigatory power Civil / administrative Criminal

Order the production of specific documents orinformation Yes Yes

Carry out compulsory interviews with individuals Yes Yes

Carry out an unannounced search of businesspremises Yes* Yes

Carry out an unannounced search of residentialpremises Yes* Yes

Right to ‘image’ computer hard drivesusing forensic IT tools

Yes* Yes

Right to retain original documents Yes* Yes


Right to require an explanation of documents or information supplied

Yes Yes

Right to secure premises overnight (e.g.by seal)

Yes* Yes

WWW.ICLG.CO.UK11



of defence of companies and/or individuals are the ones establishedby the Constitution of Argentina, such as the right to the due processof law and the right to private property (only a criminal court mayaffect private property).

2.8 Are there sanctions for the obstruction of investigations? Ifso, have these ever been used?

Pursuant to Section 50 of the antitrust law, anyone who impedes orobstructs the investigation or does not meet the requirements of thecourt can be fined in an amount of up to AR$500 per day(approximately US$150). The antitrust authorities have imposed aseries of these fines and, when appealed, they have been upheld bythe courts of appeal.

3 Sanctions on Companies and Individuals

3.1 What are the sanctions for companies?

Pursuant to Section 46 of the antitrust law the sanctions, which maybe imposed to companies involved in cartel cases, are: a) The cessation of the acts or conducts set forth in chapters I

and II and, if relevant, the removal of its effects.b) In case of commitment of any of the acts forbidden by

chapters I and II and by Section 13 of chapter III, fine fromAR$10,000 to AR$150,000,000, which shall be adjusted onthe following basis: 1) the loss suffered by the personsaffected by the forbidden activity; 2) the benefit obtained bythe persons involved in the forbidden activity; and 3) thevalue of the assets involved belonging to the people indicatedin item 2 at the moment when the violation was committed.In case of default in the payment, the amounts of the fineshall be doubled.

c) The compliance with measures aiming at neutralisation ofthe distorting aspects of competition or the request of thecompetent judge to order that the offending companies bedissolved, liquidated, dispersed or divided.

Section 47 of the antitrust law makes companies liable for theconduct of individuals who had acted in their name, with the helpor for the benefit of the legal entity, even if the act on which therepresentation was based was ineffective.

3.2 What are the sanctions for individuals?

Section 48 of the antitrust law states that “when the infractions setforth by this law are committed by a legal entity, a fine shall also beapplied jointly to directors, managers, administrators, trustees ormembers of the Syndic Office, agents or legal representatives of thesaid legal entity who by means of their action or omission of theirduties of control, supervision or security, had contributed,encouraged or allowed the commission of the infraction”. There areno known cases in which corporate management has beensanctioned for cartel cases, though there are cases in which they arebeing investigated. There are no prison sanctions for individuals.

3.3 What are the applicable limitation periods?

Pursuant to Section 54 of the antitrust law, the applicable limitationperiod for the imposition of sanctions for cartel conduct is 5 years.

3.4 Can a company pay the legal costs and/or financialpenalties imposed on a former or current employee?

There are no legal obstacles for companies to pay the legal costsand/or financial penalties imposed on a former or current employeeinvolved in a cartel case.

4 Leniency for Companies

4.1 Is there a leniency programme for companies? If so, pleaseprovide brief details.

There is no leniency programme for companies in Argentina but theCNDC has announced, in December 2008, that it plans toimplement a Leniency Programme by mid-2009.

4.2 Is there a ‘marker’ system and, if so, what is required toobtain a marker?

There is no ‘marker’ system in Argentina.

4.3 Can applications be made orally (to minimise anysubsequent disclosure risks in the context of civil damagesfollow-on litigation)?

Not applicable since there is no leniency programme in Argentina.

4.4 To what extent will a leniency application be treatedconfidentially and for how long?


4.5 At what point does the ‘continuous cooperation’requirement cease to apply?


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


5 Whistle-blowing Procedures for Individuals

5.1 Are there procedures for individuals to report cartelconduct independently of their employer? If so, pleasespecify.

There are no whistle-blowing procedures for individuals who reportcartel conduct independently of their employer in Argentina; nor arethere any known proposals under study.

6 Plea Bargaining Arrangements

6.1 Are there any early resolution, settlement or pleabargaining procedures (other than leniency)?

Pursuant to Section 36 of the antitrust law, the defendant maypropose an immediate or gradual cease of a conduct or a change incertain aspects. This can be done only prior to the issuance of thefinal resolution and is subject to the antitrust authorities’ approval.

Arg

entin

a

12



7 Appeal Process

7.1 What is the appeal process?

Pursuant to Section 52 of the antitrust law, the following antitrustauthorities’ resolutions can be appealed: a) Imposition of fines.b) Cessation or abstention of a form of behaviour.c) Dismissal of an accusation by the antitrust authorities.The appeals of fines have suspensive effects, while the otherappeals are to be conceded with returning effect.Section 53 of the antitrust law states that appeals should be filedwithin 15 days of the notification of the final resolution. Theantitrust authority then has 5 days to submit the file to the pertinentfederal court of appeals.Currently, there is a jurisdiction problem in the city of Buenos Airessince there is more than one federal court of appeals. According toDecree 89/2001, which implements certain aspects of the antitrustlaw, the Civil and Commercial Federal Court of Appeals should becompetent to hear antitrust cases. However, in a decision of 2006the Supreme Court of Justice held that the Economic CriminalFederal Court of Appeals should be the judicial body in charge ofanalysing antitrust appeals. Up till now the CNDC keeps sending the appeals to the Civil andCommercial Federal Court of Appeals since the Supreme Courtdecision omitted to declare the unconstitutionality of the provisionsof Decree 89/2001. Therefore, the antitrust authorities are obligedto follow what the Decree states.However, one of the three chambers of the Civil and CommercialFederal Court of Appeals has declared itself not competent toanalyse antitrust cases, transferring all pending cases to theEconomic Criminal Federal Court of Appeals. The two remainingchambers are still considering themselves competent on antitrustissues.In order for this dispute to end, the Supreme Court would have totake a position on the constitutionality of Decree 89/2001. Untilsuch decision is issued, the appeal of antitrust cases in the city ofBuenos Aires will be handled by either the Civil and CommercialFederal Court of Appeals or the Economic Criminal Federal Courtof Appeals, depending on what chamber takes the case.

7.2 Does the appeal process allow for the cross-examination ofwitnesses?

The appeal process does not allow for cross-examination ofwitnesses.

8 Damages Actions

8.1 What are the procedures for civil damages actions for losssuffered as a result of cartel conduct?

Section 51 of the antitrust law grants individuals or legal entitiesdamaged by the acts forbidden by this law the right to initiate anaction for damages before a judge with jurisdiction on the matter.There is no need to have a previous resolution issued by theantitrust authorities.

8.2 Do your procedural rules allow for class-action orrepresentative claims?

The procedural rules do not allow for class action or representativeclaims in Argentina.


The applicable limitation period is 5 years.

8.4 What are the cost rules for civil damages follow-on claimsin cartel cases?

In order to access the courts, a judicial fee of 3% of the claimedamount shall be paid in advance.

8.5 Have there been any successful follow-on or stand alonecivil damages claims for cartel conduct?

There are no known cases of successful civil damage claims in thepast in Argentina.

9 Miscellaneous

9.1 Provide brief details of significant recent or imminentstatutory or other developments in the field of cartels andleniency.

There has been significant developments in the fields of cartels andleniency in Argentina.The CNDC announced that it started to draft a leniency programmein order to implement it in mid-2009. The announcement was madein December 2008 by the CNDC commissioners in occasion to themonthly breakfast meeting of the Argentine antitrust community.According to the CNDC, a first draft for discussion will becirculated by March 2009 among practitioners with the goal ofhaving the final resolution by mid-year.In recent years, the CNDC has significantly increased its battleagainst cartels, having imposed two multi-million dollar fines to thecement and medical oxygen industries. The fine to the cementcompanies (for a total amount of approximately US$100 M, thebiggest in Argentine antitrust history) was ratified by the Court ofAppeals in August 2008. The number of dawn raids has alsoincreased significantly in the last few years and so has theinvolvement of the directors and the managers of the companies inthe investigations; though, there are no known cases in which theyhave yet been sanctioned.In the majority of the cartel cases, the courts of appeals havegenerally been very harsh regarding the antitrust authorities’resolutions on cartel cases. Most of the cartel fines imposed in thepast decade have either been revoked or drastically reduced. Noneof the important cartel fines have so far been upheld by the courtsof appeals. The reasons for this are very broad. Sometimes thecourts have questioned the grounds on which the antitrustauthorities had based their decisions, and in other cases the courtshave questioned the amounts of the fines imposed and consideredthem excessive. For instance, in a case concerning television rights related tofootball games, the antitrust authorities imposed fines ofAR$500,000 (at that time US$500,000) to 3 cable televisionoperators for agreeing on a minimum resale price with the owners

Arg

entin

a

WWW.ICLG.CO.UK13



of the television rights. The CNDC ruled that the coincidence of theresale price agreed by each cable operator with the television rightsowner was part of a collusive practice. However, the EconomicCriminal Federal Court of Appeals held that the agreementsresponded to vertical restraints imposed by the television rightsowners and after redefining and broadening the definition of therelevant market, held that the television rights owners did not haveenough market power to harm the general economic interest.In other cases, the Federal Courts of Appeals held that the antitrustauthorities have not proven the harm to the general economicinterest, thereby revoking the fine. For instance, in April 2008, theFederal Court of Appeals of Posadas, in the province of Misiones,has recently revoked the US$80,000 fines imposed by the CNDCagainst Shell Gas S.A. and against Totalgaz Argentina S.A. for analleged collusive practice. The Court of Appeals held that theCNDC failed to: i) define a relevant market in order to determine ifthe parties had market power; ii) prove the existence of a cartel, andiii) prove the damage to the general economic interest. It alsoquestioned the use of testimony as the sole evidence of theexistence of a cartel.In the cases in which the Federal Courts of Appeals have reducedthe fines, the reduction has been drastic. In one case, the courtdecided to reduce the fines by 50% arguing that it was the firstantitrust violation by the defendants. Another court of appealsreduced a cartel fine by 75% arguing that the amount imposed bythe antitrust authorities was excessive and would result in theelimination of certain companies since they would not be able topay such amounts.However, in August 2008 when a Court of Appeals ratified the fineimposed to the cement companies for an alleged cartel practice.Previously, in 2007 the Supreme Court upheld a CNDC finepreviously revoked by a Court of Appeals.

9.2 Please mention any other issues of particular interest inArgentina not covered by the above.

The fight against cartels in Argentina has been treated as an anti-inflation instrument in recent years. The 2 most important cartelfines, imposed in 2005, have been announced by the Minister ofEconomy in press conferences amidst other anti-inflation measures.

Arg

entin

a

ALLENDE & BREA is one of the largest and most prestigious full-service law firms in Argentina. Through specialists inall branches of the law, the firm provides practical business solutions that are viable, innovative when required, andalways cost-effective. The firm was founded in 1957 under the concept of a modern law firm. This philosophy hasallowed it to renew and adapt itself throughout its history and to remain in the top rank in each one of the differentareas in which it specialises. A comprehensive network of correspondents throughout Argentina and a set of strategicalliances abroad allow the firm to advise and assist its clients anywhere in the world.

ALLENDE & BREA’s antitrust department is one of the leading ones in Argentina. It has advised a vast number of clientsin connection with merger control filings and in antitrust litigation cases before the antitrust authorities and/or antitrustcompliance work. The members of the antitrust department are very active in the local and international antitrustcommunity.

Julián Peña

Allende & Brea Maipú 1300 - 10th floor1006 Buenos AiresArgentina

Tel: +54 11 4318 9907Fax: +54 11 4318 9999Email: [email protected] URL: www.allendebrea.com.ar

Partner in charge of A&B’s antitrust and trade department.Professor of Competition Law at the Graduate Program of theUniversity of Buenos Aires. Visiting professor, University of Florida.Author of the book “Merger Control”. Legal framework and case law(Rubinzal-Culzoni, 2002, p.p. 600) and of numerous articles oncompetition and international trade law in various national andforeign legal journals and in newspapers. Founder and moderator ofForoCompetencia, a discussion-group on competition issues withmembers from the public, private and academic sectors of morethan 20 countries. Speaker in international conferences in variouscountries. Adviser of the Ministers of Economy (1998/99 and2001). Legal adviser of the Secretaries of Industry and Trade(2002/03) and of Coordination (1996/98) at the Ministry ofEconomy. Staff lawyer of the National Competition DefenseCommission (1999/2001). Stagiaire at the European Commission(1996). Studied in the United States and in Spain. Languages:English, Portuguese and Spanish.

14

Chapter 3

Allens Arthur Robinson

Australia



In Australia, cartel conduct is prohibited under provisions of Part IVof the Trade Practices Act 1974 (Cth) (TPA). A contravention ofthese provisions may attract civil pecuniary penalties as well asother court orders. At present, cartel conduct does not constitute acriminal offence. However, in late 2008 the Federal Governmentintroduced the Trade Practices Amendment (Cartel Conduct andOther Measures) Bill 2008 (Cth) (Cartel Bill) into FederalParliament. If passed in its current form, the Cartel Bill willintroduce criminal offences for cartel conduct as well as parallelcivil offences: see question 9.1.


“Cartel conduct” is prohibited by two provisions in the TPA whichstrictly prohibit price fixing and exclusionary arrangements. Price fixing conduct within section 45A is deemed to have thepurpose or effect of substantially lessening competition incontravention of section 45 of the TPA. Section 45A applies to aprovision of a contract, arrangement or understanding that has thepurpose or effect or likely effect of fixing, controlling ormaintaining the price for, or a discount, allowance, rebate or creditin relation to, goods or services supplied or acquired by the partiesto the arrangement or by any of them in competition with eachother. Exclusionary provisions are prohibited by section 45 of the TPA.Section 4D defines an exclusionary provision as a provision in acontract, arrangement or understanding between two or moreparties who are competitive with each other which has the purposeof preventing, restricting or limiting the supply of goods or servicesto, or acquisition of goods or services from, particular persons orclasses of persons by all or any of the parties to the arrangement.


The Australian Competition and Consumer Commission (ACCC)has responsibility for enforcing the provisions of the TPA.


During the course of an investigation, the ACCC usually obtainsinformation and documents from the party under investigation oneither a voluntary or compulsory basis, and may interviewemployees and officers, again on either a voluntary or compulsorybasis. The ACCC may also seek information from others about thealleged cartel conduct. Working with legal advisors, the ACCCstaff prepare a brief which is considered by the ACCCCommissioners, who decide whether the ACCC will issueproceedings in the Federal Court of Australia. Sanctions areimposed by the Federal Court if the ACCC successfully establishes,on the balance of probabilities, that there has been a contravention.


International liner cargo shipping conference agreements areexempt from the operation of the price fixing and exclusionaryarrangements prohibitions providing certain conditions are met:sections 10.16, 10.17 and section 10.17A in Part X of the TPA. Telecommunications carriers and carriage service providers aresubject to an additional regime under Part XIB of the TPA. Section151AK provides that a carrier or carriage service provider must notengage in anti-competitive conduct, which is defined by section151AJ to include contravening section 45 in relation to atelecommunications market. The ACCC may issue a competitionnotice which has the effect of reversing the onus of proof that thecarrier or carriage service provider is engaging in anti competitiveconduct in the manner in which the notice specifies.

1.6 Is cartel conduct outside Australia covered by theprohibition?

The operation of the cartel prohibitions extends to conduct outsideAustralia by bodies corporate incorporated or carrying on businessin Australia or by Australian citizens or persons ordinarily residentin Australia: see section 5.


Fiona Crosbie

Wendy Peter

WWW.ICLG.CO.UK15

Allens Arthur Robinson Australia







The ACCC has broad powers of investigation under section 155 ofthe TPA. This section allows a notice to be issued to a personrequiring production of information and documents, or that theperson appear before the Commission to give evidence if theCommission, the Chairperson or a Deputy Chairperson has reasonto believe that the person is capable of furnishing information,producing documents or giving evidence relating to a matter thatconstitutes or may constitute a contravention of the TPA. Similarpowers in respect of documents and information are given to theACCC by section 155A in respect of a possible contravention ofsection 46A (trans Tasman misuse of market power). The ACCC also has search and seizure powers under Part XID ofthe TPA, to enter premises with consent or under a search warrantand to search the premises, seize evidential material, make copiesof evidential material and operate electronic equipment to seewhether evidential material is accessible by doing so.


The ACCC does not have general surveillance powers. If the CartelBill is enacted, the ACCC will be able to request the AustralianFederal Police to intercept telephone calls.


No, there are not.


Searches are carried out pursuant to a search warrant by ACCCinspectors. They are not required to wait for legal advisors toarrive, but this can be requested. If the ACCC will not wait untillawyers arrive, a short delay to check the identity of inspectors andthe content of the warrant is a legal right of the occupier or theirrepresentative: see sections 154C(7), 154M and 154N.


Yes, but only if the in-house counsel is sufficiently independentfrom the corporation they are advising, and the advice is givensolely in their capacity as a lawyer.


Section 155 does not require a person to produce a document,furnish information or give evidence in respect of matters that arethe subject of legal professional privilege. It is likely that the searchand seizure powers are subject to the same restrictions, but there isno specific provision preserving legal professional privilege in PartXID and this issue has not yet been tested. A person is not excused from providing documents or informationor evidence to the ACCC during a search under warrant or inresponse to a notice issued under section 155 on the ground that theinformation may tend to incriminate the person. It is not a ground of objection that a notice under section 155 isburdensome or oppressive, unless the burden is such that therequirement to provide information or documents could not havebeen imposed in good faith or could only have been imposed for acollateral purpose or without regard to the burden imposed.


When responding to a notice issued under section 155 to produceinformation or documents, or appearing before the ACCC to giveevidence, failure to provide answers, documents or information; orknowingly providing information or giving evidence that is false ormisleading attracts a fine up to AU$2,200 or up to 12 months’imprisonment. A fine of up to AU$3,300 may be imposed for failing to provide allreasonable facilities and assistance during a search. A person maybe sentence to up to 12 months’ imprisonment for providing false ormisleading information or documents during a search or up to 2years’ imprisonment for obstructing, hindering, intimidating orresisting investigators. The provisions relating to searches under warrant are relativelynew, and have not yet been applied. However, there have beensome prosecutions for failure to comply with section 155 notices,although these cases are rare:

in 2002 a fine of AU$1,000 was imposed for giving false andmisleading evidence to the ACCC in 2000: ACCC v GIA PtyLtd (2002) ATPR 41-902; andin 2007 a fine of AU$2,156 and 200 hours of communityservice were imposed for two instances of giving falseevidence to the ACCC: ACCC v Neville (2007) ATPR 42-195.

Aus

tral

ia


Order the production of specific documents orinformation Yes Not

applicable

Carry out compulsory interviews with individuals Yes Not applicable

Carry out an unannounced search of businesspremises Yes* Not

applicable

Carry out an unannounced search of residentialpremises Yes* Not

applicable


Yes Not applicable

Right to retain original documents Yes Not applicable


Yes Not applicable


No but electronic equip-ment may be secured

Not applicable

16





Under the existing civil cartel provisions, a civil pecuniary penaltyof up to AU$10 million or three times the value of the benefit fromthe cartel or, where the value cannot be determined, 10 per cent ofannual turnover of the Australian corporate group, whichever isgreater, can be imposed on a corporation: see section 76(1A). Asimilar maximum corporate fine will be applicable under thecriminal cartel regime to be introduced by the Cartel Bill. In addition, the court may grant an injunction (section 80), awarddamages (section 82), make community service orders, probationorders, corrective advertising orders (section 86C) or adversepublicity orders (section 86D), or other remedial orders as the courtsees fit (section 87).


Under the existing civil cartel provisions, a civil pecuniary penaltyof up to AU$500,000 may be imposed on an individual: see section76(1B). Individuals may also be disqualified from managing acorporation: see section 86E. In addition, the court may grant an injunction (section 80), awarddamages (section 82), make community service orders, probationorders, corrective advertising orders (section 86C) or adversepublicity orders (section 86D), or other remedial orders as the courtsees fit (section 87). If the Cartel Bill is enacted, individuals who commit a criminalcartel offence may be sentenced to up to 10 years’ imprisonment.


A proceeding for a pecuniary penalty may be commenced by theACCC within six year of the contravention: section 77(2). Proceedings for damages remedial orders must be commencedwithin six years after the date on which the cause of action thatrelates to the conduct accrued: see sections 82, 87.


Companies are prohibited from indemnifying (directly orindirectly) officers of the corporation against a civil pecuniary andlegal costs incurred in defending proceedings in which a penalty isimposed on that individual: section 77A.



The ACCC has an immunity policy which applies to corporationsand individuals, as well as a cooperation policy under whichleniency is considered where an applicant cooperates with theACCC. Immunity is available to a corporation in respect of cartel conductwhere:

the corporation is or was a party to a cartel;the corporation admits that its conduct in respect of the cartel

may constitute a contravention of the TPA;the corporation is the first person to apply for immunity inrespect of the cartel;the corporation has not coerced others to participate in thecartel and was not the clear leader in the cartel;the corporation has either ceased its involvement in the cartelor indicates to the ACCC that it will cease its involvement inthe cartel;the corporation’s admissions are a truly corporate act (asopposed to isolated confessions of individualrepresentatives); and at the time the ACCC receives the immunity application, theACCC has not received written legal advice that it hassufficient evidence to commence proceedings in relation to atleast one contravention of the Act arising from the conduct inrespect of the cartel.

In addition, the corporation must provide full disclosure andcooperation to the ACCC and use its best efforts to secure thecooperation of current and former directors, officers andemployees. Initially the ACCC grants conditional immunity to an immunityapplicant who is eligible for immunity. Final immunity is usuallygranted after the resolution of any ACCC court proceedings againstcartel participants.


A person who proposes to make an application for immunity mayapproach the ACCC and request a marker. In order to obtain amarker the person must provide a description of the cartel conductin sufficient detail to allow the ACCC to confirm that no otherperson has applied for immunity or obtained a marker in respect ofthe cartel and that the ACCC has not received written legal advicethat it has sufficient evidence to commence proceedings in relationto conduct arising from the cartel. A marker is generally valid for amaximum of 28 days. The ACCC will answer hypothetical queries about the availabilityof a marker in relation to a particular cartel, but will not disclose theidentity of any marker holder.


Applications can be made orally on request to the ACCC. TheACCC makes its own records of the application, but will work withapplicants and their lawyers to ensure, as far as possible, that itsrecords do not prejudice the applicant’s interests. Such recordsmay, however, be discoverable in any subsequent civil damageslitigation: Cadbury Schweppes Pty Ltd v Amcor Limited (2008) 246ALR 137; [2008] FCA 88; and Cadbury Schweppes Pty Ltd vAmcor Limited (2008) ATPR 42-224; [2008] FCA 398.


The ACCC will not disclose the identity of an immunity applicant,and frequently seeks an undertaking that the applicant will not makeany announcement in respect of the grant of immunity. A grant ofimmunity may become public when the ACCC issues proceedingsagainst other cartel participants, or when officers of the immunityapplicant give evidence in such proceedings.

Aus

tral

ia

WWW.ICLG.CO.UK17




Usually the ACCC will grant final immunity only after theresolution of any ACCC proceedings against cartel participants.However, in certain circumstances and at its discretion, the ACCCmay grant final immunity at an earlier stage, although this may stillbe on condition that the immunity applicant continues to cooperatewith the ACCC.


The ACCC has an “Amnesty plus” policy. If a person cooperateswith the ACCC investigation into a cartel despite being ineligiblefor immunity, the ACCC may recommend a reduced penalty inrelation to their involvement in that cartel. If, in addition tocooperating with investigations into the first cartel, such a personreports a second cartel, and is granted conditional immunity inrelation to the second cartel, the ACCC will recommend theperson’s penalty in relation to the first cartel be further reduced.



Individuals may apply to the ACCC for immunity independently oftheir employer. The conditions which apply are the same as thosefor corporations outlined in question 4.1 above. To obtainimmunity the individual must be or have been a director, officer oremployee of a corporation that is or was party to a cartel.



A corporation or individual may agree with the ACCC to settle amatter where the person alleged to have engaged in cartel conductadmits a contravention of the TPA. In such circumstances, theACCC issues proceedings in the Federal Court and the partiessubmit a Statement of Agreed Facts to the court as well as jointlysubmitting that a particular agreed penalty should be imposed. Thecourt will only impose a different penalty if the court reaches theview that the agreed penalty is not within the permissible range.

7 Appeal Process


Proceedings in relation to cartel conduct are brought by the ACCCin the Federal Court. For a person to be found to have contravenedthe cartel prohibitions, the ACCC must establish the contraventionon the balance of probabilities. A person found to have contravened the cartel provisions by asingle Federal Court judge may apply to appeal to the Full Court ofthe Federal Court, which comprises three Federal Court judges. A party may seek leave to appeal to the High Court from a judgmentof the Full Court.


Cross-examination of witnesses occurs during the initialproceedings in the Federal Court. An appeal to the Full Courtusually is limited to the evidence adduced at the initial hearing, butthe Full Court has discretion to admit new evidence, in which casecross-examination may be permitted.

8 Damages Actions


A person who has suffered loss or damage by conduct incontravention of the cartel provisions may bring proceedings in theFederal Court to recover the amount of the loss or damage: seesection 82 of the TPA.


Yes, representative claims are permissible if:seven or more persons have claims against the same person; the claims of all those persons are in respect of, or arise outof, the same, similar or related circumstances; andthe claims of all those persons give rise to a substantialcommon issue of law or fact.


An action for damages may be brought by a private person at anytime within 6 years of the date on which the cause of action thatrelates to the conduct accrued: see section 82(2). A cause of actionwill only accrue when loss and damage resulting from the cartelconduct is discovered.


As a general rule, a party who is unsuccessful pays the costs of thesuccessful party.


Follow-on claims for damages resulting from cartel conduct arerelatively new in Australia, but have become common in recentyears. Class action proceedings are now often commenced soonafter successful ACCC proceedings or admissions made in Australiaor other jurisdictions. In 2006 settlement was reached in a representative proceeding thatfollowed the imposition of a AU$26 million fine on RocheVitamins, BASF Australia and Aventis Animal Nutrition for cartelconduct: ACCC v Roche Vitamins Australia Pty Ltd and Others[2001] FCA 150. An agreed amount of AU$30.5 million fordamages and AU$10.5 million for legal costs was ordered:Darwalla Milling Co Pty Ltd v F Hoffman-La Roche Ltd (No 2)(2006) 236 ALR 322; [2006] FCA 1388.

Aus

tral

ia

Wendy Peter

Allens Arthur Robinson Level 27, 530 Collins StreetMelbourne VIC 3000Australia

Tel: +61 3 9613 8953Fax: +61 3 9614 4661Email: [email protected]: www.aar.com.au

Wendy has had more than 20 years’ experience advising clients inrelation to the competition and consumer protection provisions ofthe Trade Practices Act. She specialises in working with the ACCCto obtain clearance for large commercial transactions and inrepresenting clients in investigations and proceedings by the ACCCand other regulators including ASIC, ASX, and the US SEC.Wendy provides strategic advice on high-profile merger clearancesand other complex commercial transactions. Wendy’s extensiveantitrust litigation experience is also apparent from her involvementover many years in major cartel investigations and prosecutions. Anactive commentator on cartel legislation, Wendy is regarded byclients and peers as one of Australia’s best and most respectedcompetition lawyers. As the lead competition partner on a numberof landmark mergers, Wendy has been involved in establishingimportant precedents in this area of law.

Fiona Crosbie

Allens Arthur Robinson Level 28, Deutsche Bank PlaceCorner of Hunter & Phillip StreetsSydney NSW 2000Australia

Tel: +61 2 9230 4383Fax: +61 2 9230 5333Email: [email protected]: www.aar.com.au

As the national leader of Allens Arthur Robinson’s competitionpractice, Fiona has extensive experience in all aspects ofcompetition and access law. She regularly acts in mergerclearances, investigations, immunity applications and specialistanti-trust litigation and access disputes. Fiona has conductedground-breaking competition cases, such as acting for a majorretailer challenging the ACCC’s information-gathering powers beforethe High Court, and subsequently acting for them in high-profileFederal Court proceedings in which the ACCC alleged collusionbetween retailers. Recognised as a leading practitioner in publications such asChambers Global, Fiona is an active commentator on antitrustissues. Fiona is the editor of the ‘Access to Services’ section of theTrade Practices Law Journal and a member of the Trade PracticesCommittee of the Law Council of Australia.

Allens Arthur Robinson (Allens) is an international law firm with 15 offices in Australia, South East Asia and China.One of the largest law firms in Asia, Allens has 890 lawyers, including 193 partners. We provide a full range ofcommercial legal services to many of the region’s leading corporations and government organisations, including morethan 70 of Australia’s, and more than 25 of the world’s, top 100 companies.

Our competition law team regularly advises on national and international mergers and investigations, representingclients in sectors including telecommunications, aviation, pharmaceuticals, financial services and manufacturing.

18



9 Miscellaneous


The Federal Government introduced the Cartel Bill into FederalParliament late last year. The Cartel Bill has been referred to aSenate Committee, but is still likely to be passed in the first half of2009. The Cartel Bill introduces two criminal cartel offences andtwo parallel civil cartel offences. The criminal cartel offencesinvolve making or giving effect to a contract, arrangement orunderstanding containing a cartel provision, where the relevantfault element is knowledge or belief. This fault element is notrequired for the civil cartel offences. A cartel provision is defined as a provision in a contract, arrangementor understanding between two or more competitors which has:

the purpose or effect of fixing, controlling or maintainingprices for goods or services supplied or acquired by any ofthe parties, or prices for goods or services re-supplied bycustomers of one or more of the parties to the cartel; orthe purpose of directly or indirectly preventing, restricting orlimiting the production of goods or the capacity to supplyservices, or of allocating customers or suppliers or territoriesor bid rigging.

The maximum fine which can be imposed on a corporation for acriminal cartel offence will be the same as under the current civil

regime, the greater of up to AU$10 million or three times the valueof the benefit from the cartel or 10 per cent of annual turnover ofthe Australian corporate group. Individuals found guilty of these new criminal offences will face upto ten years’ imprisonment and/or a fine of up to AU$220,000. Under proposed new immunity policies, which will come into effectwhen the Cartel Bill is enacted, the ACCC will coordinate immunityapplications in respect of civil and criminal cartel offences. In thecase of civil cartel offences, the ACCC will decide, on the basis of itsimmunity criteria, whether to grant immunity. If the matter alsoconcerns criminal investigation or prosecution, the ACCC willconsider whether to grant immunity and may then recommend thatthe CDPP also grant immunity. The CDPP will independently assessthe immunity request using the ACCC’s immunity criteria.

9.2 Please mention any other issues of particular interest inAustralia not covered by the above.

The Federal Government has recently released a discussion paperseeking submissions regarding the meaning and interpretation ofthe term ‘understanding’ in the TPA. This follows ACCC concernthat the courts have narrowed the conduct that is caught by thisterm, in particular in relation to the nature and content of thecommitment on the part of each party to the understanding,following a number of unsuccessful proceedings brought againstpetrol retailers who had discussed price increases.

Aus

tral

ia



Chapter 4

Preslmayr Rechtsanwälte OG

Austria



The legal basis for the Cartel Prohibition in Austria is the Cartel Act(Kartellgesetz 2005). Sec 1 Para 1 to 3 of the Cartel Actcorresponds to Art 81 para 1 and 2 of the EC Treaty. Sec 2 para 1of the Cartel Act corresponds to Art 81 para 3 of the EC Treaty.Furthermore, Sec 2 para 2 of the Cartel Act contains furtherexemptions of the Cartel Prohibition. Sec 3 of the Cartel Act empowers the Minister of Justice to issueordinances to except certain groups of cartels of the CartelProhibition. Those ordinances can refer to the ordinances issuedaccording to Art 81 para 3 of the EC Treaty. As Austria is an EUMember State, the Council Regulation 1/2003 allows the authoritiesto enforce the Cartel Prohibition under Art 81 of the EC Treaty.The Cartel Prohibition under the Cartel Act is addressed toentrepreneurs (companies and individuals); sanctions forinfringements are not regarded strictu sensu as criminal law.However, with regard to the specific area of tendering procedures,Sec 168b of the Austrian Criminal Code (Strafgesetzbuch) stillprovides for up to three years’ imprisonment (“bid-rigging”).


Sec 1 of the Cartel Act prohibits agreements between entrepreneurs,decisions by associations of undertakings and concerted practiceswhich have as their object or effect the prevention, restriction ordistortion of competition (i.e. cartels). Sec 1 para 2 of the CartelAct states typical cases which restrict competition, such as (i) pricefixing, (ii) limitation or control of production, markets, technicaldevelopment or investment, (iii) share markets or sources of supply,(iv) application of dissimilar conditions to equivalent transactionswith other trading parties, (v) the conclusion of contracts subject toacceptance by the other parties of supplementary obligations whichhave no connection with the subject of such contracts. Sec 1 para 3Cartel Act declares agreements or decision violating the CartelProhibition to be void. Sec 1 para 4 of the Cartel Act prohibits so-called “recommendationcartels” (Empfehlungskartelle), which are unilateral practicesproviding recommendations such as the usage of fixed prices.


The Higher Court of Vienna as Cartel Court (Kartellgericht) and insecond instance the Supreme Court as Higher Cartel Court(Kartellobergericht) are the competent courts to decide onviolations of the Cartel Act or other antitrust regulations. The Cartel Court does not decide ex officio. The FederalCompetition Authority (FCA), the Federal Cartel Prosecutor (FCP),regulators of certain economic branches, the Chamber ofCommerce, the Chamber of Labour, the Presidential Conference ofthe Austrian Chamber of Agriculture and any other undertaking orassociation of undertakings with legal or economic interest in adecision can file petitions to the Cartel Court. The FCA is Austria’s independent investigating authority and,therefore, files most of the petitions. The FCP represents the publicinterest in competition matters and is accountable to the Minister ofJustice. The FCA and the FCP together are referred to as “OfficialParties” in the law and in the Cartel Court’s proceedings. Onlythese Official Parties may move to the Court for fines to be imposedor a merger to be prohibited, these and the other bodies may moveto petition to stop infringements or to establish the existence of(past) infringements under certain circumstances.


The opening of an investigation is usually conducted by the FCA,Austria’s investigating authority. The FCA or any of the otherauthorised parties files a petition to the Cartel Court. This petitioncan aim towards a decision on the determination of an infringementor a judicial order to cease an infringement. The Cartel Court thenconducts the proceedings and files a judicial order or dismisses thepetition. Against this decision, parties may appeal to the HigherCartel Court.


Sec 2 para 2 of the Cartel Act lists sector specific exemptions fromthe cartel ban. Exempted from the cartel ban are: 1) agreementswith retailers of books, art prints, music, journals and newspapers,fixing the retail price; 2) certain restrictions of competition amongmembers of cooperative societies as well as between cooperativesocieties and their members; 3) certain restrictions of competitionamong members of a group of credit institutions (banks); and 4)certain agreements, decisions and attitudes between producers ofagricultural products or their interest groups.

Esther Hold

Dieter Hauck

20

Preslmayr Rechtsanwälte OG Austria


1.6 Is cartel conduct outside Austria covered by theprohibition?

The Austrian Cartel Act provides general rules for the Austrianmarket. The Austrian Courts decide on violations of the Cartel Actwith an impact on the Austrian market irrespectively whether theinfringement against the cartel ban was conducted in Austria orabroad.




Please Note: * indicates that the investigatory measure requires theauthorisation by a Court or another body independent of thecompetition authority


Referring to the summary table there are no specific or unusualfeatures of the investigating powers.


Surveillance powers are only foreseen for violations of criminaloffences. The Austrian Cartel Act contains no criminal lawprovisions. Apart from violations of Sec 168b of the AustrianCriminal Code (“bid-rigging”), that qualifies certain competitionviolations with regard to tendering procedures as criminal offences,

there are no competition related infringements legitimatingsurveillance powers.


The FCA is empowered to examine potential restraints oncompetition on a case by case basis and undertake generalexaminations of entire business sectors if it suspects thatcompetition is being threatened. In the course of its investigationsthe FCA may also call upon and question companies or individualsand examine relevant business documentation. The Cartel Court’spermission is needed to allow the FCA to carry out dawn raids.


Searches of business and/or residential premises are generallycarried out by employees of the FCA. If necessary, and requestedby the FCA, they are assisted by experts and/or the police.


No. The legal professional privilege only protects thecorrespondence between the client and his lawyer, when they haveno employment status. Therefore in-house legal advice is notprotected by rules of privilege. The protection of the confidentialityof the correspondence between a client and his lawyer is a Europeanstandard, obviously to be observed when Austrian Authorities actfor the European Commission. It is established under Austrian lawthat a lawyer need not give evidence against his client, unless soauthorised which includes the protection of any lawyer-clientcommunication in the lawyer’s office. However, it is doubtfulwhether legal advice would be privileged if found outside thelawyer’s office or otherwise not in his possession. The Europeanlaw may imply such protection also for Austrian cartel proceedings.


Apart from general limitations, such as domestic authority, that maybe ignored under certain circumstances, there are also no othermaterial limitations of the investigatory powers.


The Cartel Court upon request of the FCA can order an undertakingor an association of undertakings to present documents, provideinformation, and copy files for further investigations. In case ofdisobedience of such an order, the Cartel Court can impose penaltypayments at the maximum of 5% of the average daily turnover ofthe undertaking or the association of undertakings in the lastbusiness year for each day of delay with the ordered measures (Sec35 of the Cartel Act).



According to Sec 1 para 3 of the Cartel Act, agreements anddecisions that infringe the cartel ban and that are not exempted are

Aus

tria


Order the production of specific documents orinformation Yes*

partly appli-cable, seequestion1.1 “bid-rig-ging”

Carry out compulsory interviews with individuals Yes


Carry out an unannounced search of businesspremises Yes*


Carry out an unannounced search of residentialpremises Yes*



Yes*


Right to retain original documents Yes*



Yes*



Yes*


WWW.ICLG.CO.UK21



void. Apart from that, the Cartel Court can impose fines up to amaximum of 10% of the undertaking’s or the associations ofundertakings’ turnover of the last business year. Additionally, thirdparties can also claim compensation for damages incurred due tocartel ban infringements in Civil Courts.


If the individual is an entrepreneur violating cartel law, the Cartel Actis applicable for him, like for any other undertaking. If the individualis considered to be a representative of an undertaking, such as adirector or general manager, there is no specific sanction against theindividual according to the Cartel Act. Criminal sanctions againstindividuals are possible in case of “bid-rigging” (see question 1.1).


The Cartel Court can impose sanctions when applications referringto violations of the Cartel Act where filed within five years after thetermination of the violation. The end of a continuous infringementis considered when the last infringing action is completed.


As said above, costs/penalties imposed on employees can onlyoccur within the limited area of “bid-rigging”. In this respect, acompany may be able to pay those costs/penalties. However, an exante agreement to do so may be void and tax questions could arise.



In order to effectively implement the Cartel Law, Austria introducedregulations for a leniency programme in line with the Europeanmodel, which became effective as of January 1, 2006. Under thenew rule (Sec 11 para 3 of the Competition Act), the FCA canrefrain from demanding to impose a fine against enterprises which:(i) stopped their participation in an infringement of the cartel ban(violations of Art 81 para 1 of the EC Treaty or Sec 1 para 1 of theCartel Act); (ii) informed the FCA of the infringement before theFCA gained knowledge of it; (iii) cooperated with the FCA in orderto fully clarify the facts of the case; and (iv) have not forced anyother undertaking to participate in the infringement. If the facts ofthe case are already known to the FCA, it may demand a reducedfine, provided that the other prerequisites have been met.The FCA has set forth the procedure for gaining leniency in the so-called “leniency handbook”, according to which full reduction of afine will only be granted to the first applicant notifying a particularviolation which was unknown to the FCA prior to the respectivenotification. The extent of a potential reduction of fines thusdepends significantly on the time of the application. The timing ofa leniency application is therefore of the essence. If the FCAalready knows of the case it may grant a reduction of the fine:

between 30 and 50% for the first undertaking, which fulfilsthe other prerequisites; between 20 and 30% for the second undertaking, whichfulfils the other prerequisites; andup to 20% for each other undertaking, which fulfils the otherprerequisites.

Together with the leniency handbook the FCA has published a“notification form”.


No, there is no explicit marker system in Austria, respectivepractice had to evolve.


As mentioned above, leniency applications have been made byusing the notification form published by the FCA, which has to befiled with the FCA via fax or e-mail. Only in exceptional cases maythe information required in the notification form be provided orallyat the FCA (minutes will be taken by the FCA).


As the leniency application procedure is an administrativeprocedure, the respective administrative law principles apply.Based on these principles the FCA basically is obliged to keepinformation confidential to the extent access to such information bythird parties would interfere with the parties’ interests. In pastleniency cases the FCA has kept this confidentiality. As soon as theFCA has applied to the Cartel Court to fine the members of a cartel,the parties of the court proceeding (i.e. the FCA, the FCP and themembers of the cartel) will have access to the files of the CartelCourt. However, it is important to know that in case criminalbehaviour is suspected (e.g. bid-rigging) the Official Parties areobliged by law to notify the public criminal prosecutor of suchsuspicion. This notification and supporting documents may bequite easily accessible to third party victims in the court files duringa criminal investigation/procedure.


According to Sec 11 para 3 of the Competition Act and the leniencyhandbook, the entrepreneur or the association of undertakings hasto cooperate with the FCA until the end of its investigation.According to the letter of the law, this would mean that theobligation to cooperate ends with the beginning of the courtprocedure. However, since it is standard practice that the FCA onlystates the exact amount of the fine requested during a later stage ofthe court procedure, until then a certain amount of cooperationwould be required.


No, there is no ‘leniency plus’ or ‘penalty plus’ policy in Austria.



No, there are no procedures for individuals to report cartel conduct

Aus

tria

22



independently of their employer. There is no need for a separateapplication by employees because employees are not subject toindividual fines.



No, there are no early resolution, settlement or plea bargainingprocedures foreseen according to the Cartel Act and theCompetition Act. A different situation may occur in a criminalprocedure, where certain possibilities exist to close the procedurewithout a formal conviction by paying a fine proposed by the publiccriminal prosecutor (“Diversion”).

7 Appeal Process


Decisions of the Cartel Court can be appealed to the Supreme Courtas Higher Cartel Court. The Higher Cartel Court is the highestinstance in cartel matters and its decision is legally binding.


As the procedure at the Higher Cartel Court is a written procedure,the cross-examination of witnesses is not possible. Only if theHigher Cartel Court is of the opinion that the taking of evidence isincomplete and thus remands the procedure to the Cartel Court,(further) cross-examination of witnesses will be allowed.

8 Damages Actions


As there are no specific regulations for civil damages actions forloss suffered as a result of cartel conduct, the general principles oftort (in particular Sec 1295 and 1311 of the Austrian Civil Code)apply.Consequently, the plaintiff has to prove that the defendant hasviolated Austrian or EC Cartel Law, if this violation has causeddamage to the plaintiff, the violated law aims to protect the plaintifffrom such damage and the defendant has acted with intent ornegligently. One of the difficulties in such procedures is to proveexactly which damages the violation of the Cartel Law has caused.A further basis for civil damages actions for loss suffered as a resultof cartel conduct can be Sec 1 of the Act against Unfair Competition(UWG).


The Austrian procedural rules do not (yet) allow for class-action orrepresentative claims like, for example, US class proceedings.Respective proposals for laws are under discussion.However, the Austrian law knows in particular two ways by which

claims of more injured parties can be settled in one court proceeding:The injured parties can assign their individual claims to acollective plaintiff which then opens the court proceedingagainst one and the same defendant.Under certain preconditions the injured parties can join theirclaims for damages in one single court procedure. Aprecondition therefore is, amongst others, that the claims ofthe injured parties result from the same facts (e.g. the sameanticompetitive behaviour of the defendant) or the claims arebased on the same title (e.g. the injured parties entered intothe same contract).


The applicable limitation period is three years. The period starts torun as soon as the injured party has gained knowledge of thedamage and the injuring party.


The cost rules for civil damages follow-on claims in cartel cases arebased on the general cost rules of the Code of Civil Procedure.Thus the losing party to the civil procedure has to pay its own costsand the costs of the winning party. If one party is only partiallysuccessful such party’s legal costs will only be reimbursed by theother party in proportion to its success. The amount of the costs isbased on the lawyers’ tariff. The assessment base of the costs is theamount in dispute.


In Austria only one successful (very minor) follow-on civildamages claim for cartel conduct has taken place so far. In 2006 theAustrian Federal Chamber of Workers and Employees initiated aprivate enforcement proceeding against driving schools before theDistrict Court of Graz. Before this procedure the Cartel court identified those drivingschools as cartel members and imposed a total fine of EUR 75,000on them. The driving schools had identical prices for the mostdemanded driving courses. After the fines became final, carteldamage claims (very low, the individual claim not reaching EUR500) against the cartel members were assigned by potentiallyinjured parties to the Austrian Federal Chamber of Workers andEmployees.According to price observations of the Chamber, prices for drivingcourses in the area of Graz decreased after the breaking up of thecartel by 22%. Thus the Court stated that the damage can beequated with the price differential between the cartel price and theprice after breaking up the cartel. Hence the Court ruled that thedriving schools have to pay back course fees in that amount.

9 Miscellaneous


A bill for the Austrian variety of class actions has been underdiscussion for at least two years.

Aus

tria

WWW.ICLG.CO.UK23



9.2 Please mention any other issues of particular interest inAustria not covered by the above.

Only recently the highest fine ever in Austria was confirmed by theSupreme Court in the amount of EUR 75 million against elevatorcompanies. By the same date the Supreme Court confirmed adecision that the Cartel Court is not the right venue for actions toestablish infringements of the Cartel Act only as a basis for damageclaims.

Aus

tria

Mag. Dieter Hauck

Preslmayr Rechtsanwälte OG Dr. Karl Lueger-Ring 121010 WienAustria

Tel: +43 1 533 1695Fax: +43 1 535 5686Email: [email protected]: www.preslmayr.at

Dieter Hauck earned his master of laws from the University ofVienna in 1989. After completing a post graduate course forinternational studies at the University of Vienna in 1990 he haspractised as a lawyer and been a partner in our firm since May1995. Member of the Studienvereinigung Kartellrecht e.V. (CartelLaw Academic Society). He specialises in EU law, publicprocurement, merger and cartel law. In all these matters soundlegal and tactical advice - in and out-of court - for Dieter Hauck areas essential as a solution oriented direct approach, effective casemanagement and quick reactions to challenging situations.

Dr. Esther Hold

Preslmayr Rechtsanwälte OGDr. Karl Lueger-Ring 121010 WienAustria

Tel: +43 1 533 1695Fax: +43 1 535 5686Email: [email protected]: www.preslmayr.at

Esther Hold earned her master of laws in 2004 and her Ph.D. in2007 from the University of Vienna. She was associate at WolfTheiss Attorneys at Law from 2005 - 2007. In March 2007 shejoined Preslmayr Attorneys at Law as an associate and passed thebar exam in 2008. Her main practice areas are EU competition law,cartel law, distribution law and litigation.

PRESLMAYR RECHTSANWÄLTE are experts in business law. Our clients, both from Austria and around the world, areprimarily 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 tosolve their complex legal problems for many years. We regard this as a sign of our clients’ trust and satisfaction. Closecooperation 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 viewourselves as legal guides and problem solvers with a knack for business, who work together with experts from otherdisciplines whenever necessary. This synergy of legal expertise, business sense and service-oriented management willalso ensure the excellence of our services in the future.

24

Chapter 5

Crowell & Moring

Belgium



The cartel prohibition is contained in the Act on the protection ofeconomic competition (APEC) which was consolidated on 15September 2006. The prohibition is civil in nature. Criminalsanctions provided for in the APEC are only indirectly related to thecartel prohibition. They relate to issues such as the improper use ofinformation obtained in the context of an antitrust investigation orthe breaking of seals affixed by the competition authority during adawn raid.


Article 2 of the APEC prohibits agreements and concertedpractices, the aim or effect of which is to significantly prevent,restrict or distort competition in the relevant Belgian market or in asubstantial part thereof. Article 2 is substantively similar to article81 of the EC-Treaty.


The cartel prohibition is enforced by the Belgian CompetitionAuthority which is composed of the Directorate General forCompetition (Competition Service) and the Competition Council.The latter consists of the tribunal (hereafter the Council), theCollege of Prosecutors (Auditorat) and the Registry (Greffe).The cartel prohibition can also be enforced by the national courtswhich can impose injunctions and award damages in the context ofprivate enforcement. The national courts do not have comparableinvestigatory powers nor the possibility to impose fines on theinfringers.


Investigations can be opened following a complaint, a leniencyapplication, ex officio or following a request by the Minister forEconomic Affairs. The opening of the investigation supposes thedesignation of a Prosecutor and of an investigatory team composedof members of the Competition Service. The investigation isconducted by the Competition Service under the direction of the

designated Prosecutor. If - based on the investigation - the College of Prosecutor believesa complaint has no merit or is inadmissible, it will inform thecomplainant thereof. The complainant will be given theopportunity to file written observations and will be heard, ifnecessary. The decision of the College of Prosecutors to reject thecomplaint will be notified to the complainant. It can be appealedwith the Competition Council within 30 days following thenotification.If the complaint appears to be admissible and/or the investigationsuggests the existence of an infringement, the Prosecutor will drafta report which will be filed with the Registry and notified to theundertakings concerned. The report will contain the findings of theinvestigation, the statement of objections and a proposal for adecision. At this stage, the undertakings concerned are also givenaccess to a non-confidential version of the file. The complainant will not automatically have access to the file andthe Prosecutor’s report but the Council can grant such access to anon confidential version thereof. Third parties which demonstratea sufficient interest can also be granted a similar access to the fileand the Prosecutor’s report. The parties are invited to file written observations with the Councilwithin the time frames determined by the President of the relevantchamber. The Council can - if need be - order a further investigationand/or require the Prosecutor to submit a separate report oncommitments proposed by the undertakings concerned, if any. The Council will organise a hearing during which the undertakingsconcerned, the Prosecutor, the complainant and possible thirdparties will be heard. Following the hearing, the Council willrender its decision.


There are no national sector specific offences or exemptions.However, the European Commission’s sector specific blockexemption regulations also apply in the context of the APEC.

1.6 Is cartel conduct outside Belgium covered by theprohibition?

Cartel conduct outside Belgium will only be caught by article 2 ofthe APEC if and to the extent that it has a noticeable effect on theBelgian market concerned or on a substantial part thereof.Agreements between undertakings located in Belgium the effects ofwhich are exclusively felt outside of Belgium, will in principle notbe caught by the APEC.


Thomas De Meese

WWW.ICLG.CO.UK25

Crowell & Moring Belgium







A formal request for information can be made subject to a penaltypayment of up to 5% of daily turnover per day the response isdelayed.Dawn raids can only take place between 8 am and 6 pm.


No, there are not.


The Prosecutor can call upon external experts in the course of theperformance of his investigation.


The searches are carried out by the Prosecutor together withofficials from the Competition Service. The Prosecutor can ask forthe assistance of police forces.


In-house legal advice is protected by the rules of privilege ifprovided by a member of the Institute of In-House Counsel (Institutdes Juristes d’Entreprise).


Searching business premises requires prior authorisation by thePresident of the Competition Council. Searching residentialpremises requires prior authorisation by a judge (Juged’Instruction). The right to secure premises (seals) is limited intime to a maximum of 72 hours if the seals are affixed in premisesother than those of the undertakings or associations of undertakingsconcerned.


The Competition Council can impose a fine of up to 1% of theundertaking’s annual turnover for failure to respond within thetimeline determined in a formal request for information and/or as asanction for the supply of incorrect, inaccurate or incompleteinformation. We are not aware of any instance in which suchsanctions were applied in the context of a cartel investigation.However, the Council did impose a modest fine of €2,500 to acompany for lack of cooperation in merger proceedings. In thatcase, the company condemned had failed to supply documentaryevidence substantiating its turnover figures in Belgium.



The Council can impose a fine of up to 10% of the Belgian turnoverof the undertaking concerned for infringement of article 2 of theAPEC.


There are no sanctions for individuals who play a role in theinfringement of the cartel prohibition. Criminal sanctions mayhowever be imposed on individuals for offences such as theimproper use of information obtained in the context of an antitrustinvestigation or the breaking of seals applied by the competitionauthority.


The College of Prosecutors cannot open an investigation into factsthat are more than 5 years old. The Council cannot impose fines forfacts that are more than 5 years old. A new 5-year limitation periodstarts whenever the Competition Authority takes a procedural stepwith respect to the facts (e.g. a decision to open an investigation, arequest for information, a decision to conduct a search, and thefiling of a statement of objections). The total (extended) limitationperiod can, however, never exceed 10 years.


Yes. It should, however, be emphasised that agreements to do somade prior to the facts that give rise to the cost/penalty would runthe risk of being considered as running against public order andhence being null and void.

Bel

giumInvestigatory power Civil / administrative Criminal

Order the production of specific documents orinformation Yes N/A

Carry out compulsory interviews with individuals No N/A

Carry out an unannounced search of businesspremises Yes* N/A

Carry out an unannounced search of residentialpremises Yes* N/A


Yes N/A

Right to retain original documents Yes N/A


No N/A


Yes N/A

26





The leniency programme is based on article 49 of the APEC. It iscurrently embedded in a notice which was published in the BelgianOfficial Journal on October 22, 2007 (the Belgian LeniencyNotice). The Belgian Leniency Notice is based on the ModelLeniency Programme developed by the European CompetitionNetwork. It applies exclusively to cartels. The leniency applicant can obtain full immunity for fines if it is thefirst to provide evidence which enables the authority to carry outtargeted inspections in connection with the alleged cartel or whichenables the finding of an infringement of article 2 of the APEC inrespect of the alleged cartel.Applicants who do not qualify for immunity can obtain a reductionof fines if they provide the competition authority with evidence ofthe alleged cartel which represents significant added value relativeto the evidence already in the authority’s possession at the time ofthe application. The reduction will be in the range of 30 to 50% forthe first applicant for a reduction. Subsequent applicants can obtaina reduction of between 10 and 30%. Applications must be submitted to the College of Prosecutors. Theymust contain a description of the cartel and of the role played by theapplicant in the framework of the cartel and be substantiated withrelevant evidence. Before making a formal application, theapplicant may on an anonymous and informal basis approach theCollege of Prosecutors. Applicants that have or are in the processof filing an application for immunity with the EuropeanCommission may file summary applications with the College ofProsecutors. Summary applications can be filed withoutsubstantiating evidence. Following receipt of a leniency application the Prosecutor willsubmit a report requesting a leniency decision to the Council. Theleniency applicant can file written comments regarding this requestwith the Council. If the Council agrees that all conditions are metit will grant provisional leniency to the applicant. In its finaldecision on the merits, the Council will grant full or partial leniencyon condition that the applicant has continued to comply with theconditions for leniency.


A marker system is available for immunity applicants. In order toobtain a marker, the applicant will have to file a written or oralrequest providing the College of Prosecutors with its name andaddress as well as the reason for its request and serious and credibleinformation concerning the parties to the alleged cartel, the affectedproduct(s) and territory(ies), the estimated duration of the allegedcartel, the nature of the alleged cartel conduct and information on anypast or possible future leniency applications to any other competitionauthorities within or outside the EU in relation to the alleged cartel.


The Belgian Leniency Notice explicitly confirms that theProsecutor can (but is not obliged to) accept oral leniencyapplications.


The leniency applications will be treated confidentially. Access tothe leniency application is restricted to the addressees of thestatement of objections and granted subject to the undertaking thatit will not be used for any other purposes but the procedure in whichthe leniency application was made.


The requirement of continuous cooperation ends on the date ofissuance of the decision on the merits by the Competition Council.


No, there is not.



No, there are not.



No, there are not.

7 Appeal Process


An appeal can be lodged with the Brussels Court of Appeal within30 days of the notification of the Competition Council’s decision.The Court is entitled to decide on both the facts and the law.However, in the context of merger proceedings it has developed arestrictive view of its role as an appellate body. The Court will limititself to verifying compliance with procedural requirements,whether the facts have been correctly established and whether theCouncil has not made any manifest error of appreciation orexceeded its powers. If the Court eventually annuls the appealeddecision, it refers the case back to the Competition Council. Thereare reasons to believe that the Court will follow a similar restrictiveview in the context of appeals against decisions rendered in cartelcases.The Court can, in the course of the appeal request the College ofProsecutors to perform further investigations and submit a reportthereon. New facts and developments that occurred after theissuance of appealed decision can be taken into account, but cannotform a basis for “new” formal objections that were not raised beforethe Competition Council.The appeal does not suspend the decision against which it is made.The Court can nevertheless order such suspension pending theappeal provided (i) serious arguments are made with respect to the

Bel

gium

WWW.ICLG.CO.UK27



nullity of the appealed decision, and (ii) it is shown that theenforcement of the decision pending the appeal would be likely tocause a serious damage that is difficult to repair.


No, it does not.

8 Damages Actions


Plaintiffs can file a complaint with the national courts, typically thecommercial courts. They will need to establish the existence of afault, damage and causal link. The burden of proof primarily restson the plaintiffs and should primarily be met by documentaryevidence. The Court can however order the defendant and/or thirdparties to produce specific documents. The quantification ofdamages will typically be done by a court appointed expert basedon input provided by both parties. Only damages actually incurredwill be compensated. There are no double, treble or punitivedamages but interests will be awarded as from the date of the factsgiving rise to liability.


No, they do not.


The limitation period is 5 years as from the moment the plaintiffsknew or should have known of the facts giving rise to liability andthe identity of the person liable, without ever exceeding 20 years asfrom the facts giving rise to liability.


The losing party has to bear the legal costs (bailiff, registry, courtappointed expert, etc.). It also has to cover the legal fees of thewinning party. The amount to be paid for legal fees is howeverbased on a pre-determined scale and varies according to the amountof the claim without ever exceeding €30,000.


Several follow on civil damages claims are currently pending withthe national courts but we are not aware of any published decisionsin this respect.

9 Miscellaneous


The year 2008 was characterised by increased cartel enforcement inBelgium. Several professional bodies and trade associations(pharmacists, interior architects, bakers, driving schools, etc.) werefined for organising or favouring anticompetitive practices amongtheir members. The Council also adopted its first decision in a cartelcase following a leniency application. It fined several chemicalcompanies a total of €487,755 for operating a cartel regarding BBPs.It confirmed doing several dawn raids throughout the year.

9.2 Please mention any other issues of particular interest inBelgium not covered by the above.

N/A.

Bel

gium

Crowell & Moring LLP is a full-service law firm with over 450 lawyers practicing in antitrust, litigation, intellectualproperty and over 40 other practice areas. Based in Washington, D.C., the firm also has offices in New York, Irvine,Los Angeles, Brussels and London.

Crowell & Moring’s Antitrust Group is a top-tier global practice that represents Fortune 100 companies as well as start-up companies in a variety of industries, including telecommunications, energy, aerospace, chemicals, health care, andagriculture. A recognised leader in antitrust and competition law, the group’s lawyers represent clients on all aspectsof antitrust law in the U.S., Europe and around the world. Their work includes representing clients in multi billion dollartransactions, complex civil litigation, global cartel investigations, criminal defense litigation and antitrust/intellectualproperty matters. With a number of lawyers with experience working the Federal Trade Commission, the USDepartment of Justice, the European Commission and the UK Office of Fair Trading, the group boasts an activecompetition practice in its U.S. and European offices.

Thomas De Meese

Crowell & MoringRue Royale 711000 Brussels Belgium

Tel: +32 2282 4082Fax: +32 2230 6399Email: [email protected] URL: www.crowell.com

Thomas De Meese is a partner in the Brussels office of Crowell &Moring and has been a member of the Brussels bar since 1993. Hespecialises in competition, telecommunications, media andtechnology law. Thomas’ expertise includes day to day counsellingon distribution issues, technology licensing, patent pools, jointbidding, standard setting, pricing strategies by dominant companies,the activities of trade associations, etc. He has developed andimplemented pan-European antitrust compliance and trainingprogrammes for multinational companies. He representscomplainants and defendants in competition investigations withboth the Belgian Competition Council and the EC Commission.Thomas regularly litigates competition cases before national courts.He has also worked on several merger filings with the BelgianCompetition Council.

28

Chapter 6


Magalhães, Nery e Dias Advocacia

Brazil



The term cartel is not defined in the Brazilian Antitrust Law.However, the same law establishes as a competitive violation thecollusion between competitors to determine prices and conditions ordivide markets and clients regarding the commerce of products orservices (see question 1.2 below). In Brazil, cartels can be prosecutedcriminally and administratively. Concerning criminal procedures,cartels are punishable with two to five year’s imprisonment and fines;in administrative procedures only fines can be imposed.


Brazil’s Antitrust Law (Law 8.884/94) establishes (and prohibits)the following practices (article 21) as illegal agreements (cartels):(i) setting or offering in any way - in collusion with competitors

- prices and conditions for the sale of specific products orservices;

(ii) obtaining or otherwise procuring the adoption of uniform orconcerted business practices among competitors; and

(iii) apportioning markets for finished or semi-finished productsor services, or for supplying sources of raw materials orintermediary products.

Cartels are also considered a crime prosecuted in the FederalCourts. The prohibition in this case is provided by Law 8.137/90,article 4, II. Cartels can also be considered a civil violation - allowing therecovery of damages - as any other anticompetitive conductestablished under the Brazilian Antitrust Law.


The cartel prohibition is enforced by Brazilian antitrust authorities,which are the Secretariat of Economic Law of the Ministry ofJustice (Secretaria de Direito Econômico - SDE), Secretariat ofEconomic Monitoring of the Ministry of Finance (Secretaria deAcompanhamento Econômico - SEAE), and Administrative Councilof Economic Defense (Conselho Administrativo de DefesaEconômica - CADE).In the criminal field, the cartel prohibition is enforced by theFederal and State Attorney-General Offices.

Criminal and administrative authorities act jointly in many cartelinvestigations.


According to the Brazilian Antitrust Law, SDE may conductpreliminary investigations ex officio or upon reasonable request inwriting of interested parties. After the conclusion of preliminaryinvestigations within sixty days, SDE’s Secretary orders theinception of the corresponding administrative proceeding or itsdismissal, subject to ex officio appeal to CADE in this latter case(articles 30 and 31, Law 8.884/94).Administrative proceedings shall be instituted within eight daysafter cognizance of the underlying fact, formal complaint or end ofthe preliminary investigations, as per an order issued by SDE’sSecretary regarding the facts verified thereunder (article 32, Law8.884/94). Defendants shall be summoned to file a defence withinfifteen days and produce any evidence within forty-five days afterthe submission of their defence, and may introduce new documentsany time during discovery (articles 33 and 35, Law 8.884/94).Upon conclusion of discovery, defendants will be summoned topresent their final arguments within five days, after which SDE’sSecretary will issue an opinion about the forwarding the case toCADE for review or dismissal, subject to ex officio appeal to CADEin this latter case (articles 39 and 40, Law 8.884/94).Once the case is admitted, CADE’s President will randomlydistribute it to a Councillor who will act as Reporter, and will sendit to the Attorney General to issue an opinion within twenty days(article 42, Law 8.884/94). CADE has no deadline to adjudge thecase, although Brazilian procedural rules establish a prescriptiveperiod after three years without any relevant diligence related to theinvestigation, and, after that term, CADE is prevented fromrendering judgment (article 1(1) Law 9.873/99).No specific criminal prosecution is provided by law, but accordingto general Criminal Procedure rules the main steps are: (i) inceptionof a criminal investigation; (ii) indictment by the Public Prosecutor;(iii) inception of the legal procedure; and (iv) conviction of thecompanies involved in such illegal practice.


There are no formal sector-specific offences or exemptions inBrazil. CADE’s past decisions can be used as guidance on whichtypes of behaviour are allowed according to the specific sector ofactivities.

Gabriel Nogueira Dias

Carlos Francisco de Magalhães

WWW.ICLG.CO.UK29


Bra

zil

Magalhães, Nery e Dias Advocacia Brazil

1.6 Is cartel conduct outside Brazil covered by the prohibition?

Yes, but only if it affects the Brazilian market (article 22, Law8.884/94).






The investigatory powers always depend on the specific terms ofthe Warrant that authorises such investigation.


Both antitrust authorities and the Attorney-General’s Office mayrecord telephone conversations or telecommunications, but onlyunder judicial authorisation.


According to Law 8.884/94, SDE has a very wide range ofinvestigatory powers, including the right to:

Request information, documents and data from respondentsand third parties.Carry out inspections at the companies’ premises.Request judicial authorisation for the Federal Police to:record telephone conversations or telecommunications, andseize objects, documents and electronic files fromrespondents’ offices and plants (article 35-A, Law 8.884/94).

The investigatory powers concerning criminal procedures aresimilar to those above mentioned.


Searches of business or residential premises are carried out by SDEofficials, court officials and the Federal Police. Those searchesshall be limited to the terms of the Search and Seizure Warrant.


No. In-house counsel does not have any privilege.


The most important limitation is the mandatory authorisation fromJudiciary to allow the Federal Police to record telephoneconversations or telecommunications and seize objects, documentsand electronic files from respondents’ offices and plants.Otherwise, antitrust authorities are free to hear witnesses, or requestdocuments or any information.


Yes. Obstruction or non-cooperation with the authorities regardingquestions or the exhibition of documents is punishable with dailyfines from BRL 5,320.50 (about US$3,019) to BRL 106,410 (aboutUS$60,391). SDE and CADE have already imposed fines oncompanies that did not cooperate with administrative procedures.



According to the Antitrust Law, the sanction is an administrativefine from 1% to 30% of the gross domestic revenue in the lastfinancial year. The fine must not be less than the advantageobtained with the underlying violation, if assessable. In the eventof default, the administrative decision is judicially enforceable. For each manager directly or indirectly liable for a companyviolation, the sanction is an additional personal administrative finefrom 10% to 50% of the corporate fine. In the event of default, theadministrative decision is judicially enforceable. For any other third parties (whether individuals or public andprivate legal entities and their associates, including independentcontractors with or without legal identity that do not engage inbusiness activities), administrative fines vary from BRL 6,384.60(about US$3,617) to BRL 6,384 million (about US$ 3.6million) (ifit is not feasible to use a revenue fine). In the event of default, theadministrative decision is judicially enforceable. Moreover, CADE can impose the following penalties:

An order to publish a summary of the decision in anewspaper.A prohibition to participate in public bids.A restriction on public entities’ funding.Divestment orders, such as orders to sell assets and dissolvethe undertaking.The continuity of prohibited practices is punishable withdaily fines from BRL 5,320.50 (about US$3,019) to BRL106,410 (about US$60,391).



Carry out compulsory interviews with individuals Yes* Yes*

Carry out an unannounced search of businesspremises Yes* Yes*

Carry out an unannounced search of residentialpremises Yes* Yes*


Yes* Yes*

Right to retain original documents Yes* Yes*


Yes Yes


No No

30ICLG TO: CARTELS AND LENIENCY 2009WWW.ICLG.CO.UK


Bra

zil


According to Criminal Law, cartel practices are punishable withimprisonment of two to five years or fines (article 4, Law 8.137/90).


The Antitrust Law establishes for individuals who take part incartels, whether directly or indirectly liable for the company’sviolation, a fine from 10% to 50% of the amount applicable to thecompany under their personal and exclusive liability (article 23, I,Law 8.884/94).Individuals who participate in cartels are also punishable by aspecific criminal procedure with two to five year’s imprisonment orfines (article 4, Law 8.137/90).


If an investigation is carried out with regard to illegal conducts,there is no term for the authorities to conclude it. Although,Brazilian rules establish a prescriptive term that lapses after threeyears without any relevant diligence related to the investigation,and, after that term, CADE cannot render any judgement.The prescriptive term for the imposition of sanctions for cartelconducts when no procedure has been installed to investigate theillegal practice is twelve years. This is due to amendments toBrazilian Antitrust Law enacted in 1998 (Provisional Measure1708/1998), and since then the prescriptive term to investigate anillegal conduct that is also considered a crime is the same asprovided by the Criminal Law.In the event of continuity of such illegal practices, which effectsextend on the market a long time, there is no term for theinvestigation and related imposition of sanctions.


The Brazilian Law is silent about this subject.



It is possible to obtain a leniency agreement from theantitrust authorities. A leniency agreement gives immunityregarding administrative fines and prevent the inception of acriminal action (article 35-C, Law 8.884/94).

SDE may enter into leniency agreements that extinguish theadministrative action or reduce from one to two-thirds theapplicable penalty against individuals and corporations that violatethe economic order insofar as they effectively cooperate with theinvestigations and the administrative procedure, and that suchcooperation results (article 35-B, Law 8.884/94) in theidentification of other co-offenders and the gathering of informationand documents that evidence the notified or investigated violation.Leniency is not granted to individuals or corporations that are cartelleaders.The Brazilian Antitrust Law establishes the following requirementsfor the execution of leniency agreements (article 35-B(2), Law8.884/94): (i) the individual or corporation has to be the first toqualify with regard to the notified or investigated violation; (ii) theindividual or corporation has to completely cease and desist being

involved in the notified or investigated violation as from the date ofproposal of the agreement; (iii) SDE does not have sufficientevidence to warrant a judgment against the individual or corporationupon the proposal of the agreement; and (iv) the individual orcorporation acknowledges having participated in the violation, offersfull and permanent cooperation with the investigations and theadministrative procedure, and appears, at its own expenses, to allprocedural acts until their end whenever summoned.

The leniency agreement will determine the necessaryconditions to warrant effective cooperation and useful resultsto the procedure. The execution of the leniency agreement isnot subject to CADE’s approval; nonetheless, upon renderingits administrative decision and ascertaining the compliancewith the terms of the agreement, the Council shall: (i)determine the extinction of the administrative action onbehalf of the offender in the event the proposal was presentedto SDE before such agency had any previous knowledge ofthe notified violation; or (ii) in all other situations, reducefrom one to two-thirds the applicable sanctions and gradesuch sanctions, taking into account the offender’s effectivecooperation and good-faith in the compliance with theleniency agreement.

The effects of the leniency agreement are extendible to corporateofficers and managers involved in the violation as long as theyexecute the respective agreement jointly with the company.In the criminal area there is the so-called “rewarded cooperation”,whereby one of the criminal offenders may have its sentencereduced from one to two-thirds whenever such voluntarycooperation leads to the clarification of facts and the authorship ofunlawful practices (article 6, Law 9.034/95).


Yes. The Administrative Rule 04/2006 of the Ministry of Justiceprovides a “marker system”. According to such system, a LeniencyAgreement may be proposed orally or in writing. The proposalshall be made to SDE’s Secretary that will transcribe the Term inone single instrument as witnessed by an official of the Secretariatof Economic Law, which shall contain, among other things, theProponent’s full qualification, a summary of the facts known by theProponent regarding the investigation (including its involvementand co-authors’ identities), and the date, place and time to presentdocuments, information or oral explanations. The Term duly datedand executed will remain with the Proponent until further decisionof the Secretariat of Economic Law about the application (articles62 and 63 of MJ Administrative Rule 04/2006), and guarantees itsposition of First Proponent. The SDE’s Secretary may, however,refuse the oral proposal and condition its acceptance to the writtenform (article 63(6), MJ Administrative Rule 04/2006).


The proposal may be presented orally or in writing. However, toconclude a leniency agreement the execution of a formal andconfidential document with the SDE is required to establish thenecessary conditions under which the agreement will be made andguarantee the cooperation of the company with the investigation.The application must be in writing and be presented to SDE in asealed envelope. The rejection of the application by SDE neithershall imply admission of guilt regarding the findings of fact, norshall acknowledgment of the unlawful conduct under examinationbe disclosed.

WWW.ICLG.CO.UK31


Bra

zil



The application is always confidential. Exception is made when itis important for the investigation that the leniency agreement is notkept confidential.


This decision is submitted with a subjective criterion. The BrazilianAntitrust Law provides that a leniency agreement is possible only ifthe lenient company can provide sufficient information to concludethe cartel investigation. When authorities already have enoughproof of the illegal conduct, the leniency is not applicable.


Yes, there is a ‘leniency plus’ policy. An applicant that does notqualify for leniency for the initial matter under investigation, butdiscloses a second cartel, and meets the leniency programrequirements, will receive leniency for the second offence and a onethird reduction in fine with respect to the first offence.



No, there is not.



There is no equivalent to the plea bargaining in Brazil. HoweverCADE may, in any administrative procedure and at any step of theinvestigation, enter into a cease and desist commitment with theinvestigated company regarding the investigated practices whenever,upon a judgment of convenience and opportunity, it decides suchcommitment addresses the interests protected by law (article 53, Law8.884/94). The commitment constitutes solely a judgment debt. The administrative procedure is suspended while the commitment isbeing complied with and it is dismissed at the end of the establishedterm if all the conditions were met. The suspension of theprocedure regards solely the party that executed the commitment,and follows its regular course for all the other parties underinvestigation (article 53(4), (5) and (6) Law 8.884/94). The cease and desist agreement must be approved by CADE to beeffective. Since May 2007, parties under cartel investigation areallowed to have the administrative process suspended by executinga cease and desist agreement and paying a monetary contribution toa Fund for Diffuse Right Defence (article 53(2), Law 8.884/94).

7 Appeal Process


According to Law 8.884/94, CADE’s decisions are subject to full

judicial review by the federal courts (article 5, FederalConstitution). There is no deadline to request judicial review, butappeals can only be filed by the main parties to the originaldecision. In the criminal field, the appeal is similar to any other judicialprocedures.


Yes, according to the Civil Procedure Code, the judge, on its owninitiative or when requested by the parties, can determine the cross-examination of witnesses.

8 Damages Actions


It is possible to claim indemnification related to damages resultingfrom any illegal conduct. Third parties can file indemnity claimsfor losses suffered as a result of a prohibited agreement or practice(article 29, Law 8.884/94). The Civil Procedure Code and the Civil Law Code provide specialprocedures and rules for the inception of a lawsuit. The evidence ofanti-competitive agreements or practices established in theadministrative procedure can be used in private litigation.


Class actions are not possible. Public class actions are possible andmust be started under Consumer Protection and Criminal laws bythe Federal Attorney-General’s Office.


The limitation period is one of 10 (ten) years prescribed in the CivilCode, if not suspended or tolled.


There are no specific rules for civil damages follow-on claims incartel cases. The cost rules applicable are the ones prescribed in theCivil Procedure Code.


In Brazil, indemnity claims related to losses suffered as a result ofcartel conduct are not usual. Notwithstanding, there has beennoticeable interest in the subject and an increased number ofindemnity claims in the latter years. However, we know only of afew claims still being processed that regard a claim for damagesrelated losses resulting from cartel practices: (i) a lawsuit in theState of Minas Gerais (Brazil) regarding the steel rod market; (ii) alawsuit in the State of São Paulo in the orange juice productionmarket; and (iii) a lawsuit also in the State of São Paulo againstcredit card administrators.



Bra

zil


9 Miscellaneous


Since May 2007, the execution of a cease and desist agreement andpayment of a monetary contribution to a Fund for Diffuse RightDefence has allowed the suspension of the administrative procedureagainst the parties under investigation. Regulators can now acceptformal commitments from the parties during the administrativeprocess to suspend the restrictive agreement or practice without ajudgment against it and the parties can apply to sign a cease anddesist agreement at any stage of the investigation. The cease anddesist agreement must, however, be approved by CADE to beeffective.

9.2 Please mention any other issues of particular interest inBrazil not covered by the above.

Although the most important issues about Cartels and Leniencywere addressed above, it is worthy mentioning that in November2007 the first cease and desist agreement in a cartel case wasconcluded; and it was conducted by Magalhães, Nery e Dias -Advocacia. Our law firm was responsible for the defence of a

company accused of a cartel in the cement manufacturing industry.It was an important case involving major cement producers, and ourclient entered into Brazil’s first cease and desist agreement withantitrust authorities under Article 53 of Law 8.884/94, and so theinvestigation has been suspended during next year. After that time,if the agreement is fully complied with, the administrativeprocedure against our client will be dismissed. As agreed, thecompany will pay BRL 43 million (about US$ 24.3 million) to theBrazilian Fund for Diffuse Right Defence. Until today, only 2 ceaseand desist agreements were signed with Brazilian Antitrustauthorities. Regarding Antitrust Issues, our law firm also led the followingcartel cases:

Defence of one of the major Brazilian meatpackers in a cartelinvestigation concerning meat sales. This was an importantcase involving the most important Brazilian Meatpackers.Defence of an important Brazilian company in a cartelinvestigation concerning orange juice sales. This was animportant case involving one of Brazil’s major orange juiceproducers.

To prevent antitrust issues, we also provide regular and fullassistance to several companies. Another important area of ourwork is the creation of compliance programmes for our clients toprevent the practice of anticompetitive activities.

Carlos Francisco de Magalhães

Magalhães, Nery e Dias Advocacia Rua Armando Penteado, 304, Pacaembu01242-010 - São PauloBrazil

Tel: +55 11 3829 4411Fax: +55 11 3825 8695Email: [email protected]: www.maganery.com.br

Carlos Francisco de Magalhães, the Founding Partner of the firm, isa pioneer in competition law in Brazil. He became involved in thefield soon after the first Brazilian competition law was enacted(1964). Because of his reputation in the subject and greatintellectual skills, he has been appointed to take part in all relevantgovernmental commissions in the last 20 years related to theimprovement of competition statutory laws. Since then he has beenconsidered an authority in the area and has been asked to advisemany national and foreign companies on a variety of antitrustmatters, including the most notorious cases.

Gabriel Nogueira Dias

Magalhães, Nery e Dias Advocacia Rua Armando Penteado, 304, Pacaembu01242-010 - São PauloBrazil

Tel: +55 11 3829 4411Fax: +55 11 3825 8695Email: [email protected]: www.maganery.com.br

Gabriel Nogueira Dias is an equity partner of the firm. He has a lawdegree from the University of Sao Paulo (USP) (1998), a Master ofLaws (LLM) and a PhD degree in Law from the University of BonnLaw School, Germany (2003) (published by Mohr Paul Siebeck).As a former advisor CADE’s President (Brazil’s AdministrativeCouncil of Economic Defence) in 1998, he helped Brazilian antitrustauthorities to define some of its most important procedural rules(resolutions). He has worked in Competition Law with Magalhães,Nery e Dias - Advocacia since 1999.

MAGALHÃES, NERY E DIAS - ADVOCACIA is the largest and most traditional Brazilian law firm specialising inEconomic Law. Since its establishment in 1980 it has been Brazil’s leading law office specialising in economic Law.The firm has Brazil’s largest Antitrust expert group and provides its clients with expert advisory services in the majorityof the most important competition defence cases in recent years, being responsible for the first cease and desistagreement related to a cartel entered into in Brazil. The firm has its headquarters in the city of São Paulo and asubsidiary office in Brasilia (DF). Its organisation comprises 21 professionals including attorneys and economist, ofwhich 15 are dedicated to Economic Law matters. Its clients are large Brazilian and multinational conglomerates. Thefirm also has extensive experience in Consumer Law, Unfair Competition Law and Intellectual Property Law.



Chapter 7

Penkov, Markov & Partners

Bulgaria



The legal basis and general nature of the cartel prohibition isactually neither civil nor criminal. The prohibition isadministrative, i.e. the regulatory authority initiates investigationprocedures ex officio or if approached by affected persons or otherauthorities. The same regulatory authority is entitled to impose theenvisaged sanctions which in their part have also administrative oradministrative-penal nature.


The specific substantive regulation of cartel prohibition is in theProtection of Competition Act (PCA). According to Article 15 ofthe PCA, prohibited are all kinds of agreements between enterprisesor coordinated practices of two or more enterprises, aimed at orwith intended result to prevent, restrict or breach competition on therelevant market, such as for example:1. direct or indirect setting of prices or other commercial terms;2. allocation of markets or sources of supply;3. restriction or control of production, trade, technical

development or investment;4. application of different terms for the same type of contracts

in respect of certain partners, whereas they are set ininequitable position as competitors; and

5. setting the conclusion of contracts under condition forundertaking of additional obligations or conclusion ofadditional contracts by the counterparty, which by theirnature or according to commercial practices are not related tothe subject of the main contract or the execution thereof.


The competent authority is the Commission for Protection ofCompetition (“CPC” and/or “the Commission”).


An investigation procedure is opened on the grounds of a writtenapplication by the affected person, request by the prosecutor or

decision of the CPC. Pursuant to the current law, the investigationmust be completed within 90 days, while according to the new PCAit is not limited by time. After completion of the investigation thecommissioner in charge should present the whole file to thechairman of CPC. The chairman shall set a date for an open hearingwithin two weeks. The CPC shall announce its decision within 14days following the hearing at which the review of the file has beenconcluded. According to the new PCA, the chairman shall set adate for a closed session of the CPC. As a result of the closedsession the CPC may come out with a decision for lack of violationand prohibited agreement or with a ruling by virtue of which the fileis returned for new research. The CPC may also come out with aruling by which it gives opinion for committed violation and in thiscase a term of not less than 30 days is given to the enterprise underinvestigation to submit objections. Upon expiration of the term forsubmitting objections, the chairman sets a date for an open hearingand, after that, a closed session is scheduled in the course of whichthe CPC adopts its resolution.


The definition for prohibited agreements in Article 15 of the PCA,pointed in the above question 1.2, reflects the concept for prohibitedagreements (and cartels) of Article 81 of the European CommunityTreaty, including by pointing the general types of prohibitedagreements. The PCA provides for possibility such agreements tobe exempted from prohibition under certain terms and conditions.Along with the general possibility for exemption, there are somesector-specific exemptions which are established in the practice ofthe CPC and are applicable under certain terms and conditionsspecified in the respective decision for exemption. Suchexemptions concern agreements with the following subjects: 1)research and development of products or processes and jointexploitation of the results of that research and development; and 2)distribution of new motor vehicles, spare parts for motor vehiclesand provision of services for warranty and service maintenance ofmotor vehicles.

1.6 Is cartel conduct outside Bulgaria covered by theprohibition?

The cartel prohibition by the Bulgarian PCA is applicable toagreements which affect or might affect the competition inBulgaria. In this respect, the activity of companies within oroutside the country is covered by the prohibition only if this activityexplicitly or tacitly prevents, restricts, breaches, or may prevent,restrict or breach the competition in Bulgaria.

Elina Ruseva

Smilena Stoilova



Bul

garia

Penkov, Markov & Partners Bulgaria




Please Note: * indicates that the investigatory measure requires theauthorisation by a Court or another body independent of thecompetition authority.** The right to secure premises overnight is not explicitly providedfor by the current law but is acceptable in the practice of the CPC.On 14 November 2008 a new Protection of Competition Act wasadopted. It was promulgated in the State Gazette on 28 November2008 and enters into force on 02 December 2008. According to thenew act any proceedings pending before the CPC at the moment ofits entry into force shall be completed under the terms andconditions of the previous PCA. With respect to the right of theCPC to secure premises, the new act explicitly provides forpossibility of the CPC to seal premises of the investigated personsfor certain period of time (Article 50, para 2, item 7).


The PCA provides that no commercial, industrial, personal or otherprotected by law secret or confidentiality can be opposed to theCPC when conducting a “dawn raid”. This broad definition raisesa number of issues related to human rights such as the right ofprivacy, attorney-client privilege, etc. In fact, when conductingcompulsory search and collection of documents the CPC wouldrespect the attorney-client privilege.


The applicable legislation does not entitle CPC with surveillancepowers, including requesting phone tapping or printouts or recordingsof phone conversations of employees of the enterprise investigated.


The new PCA envisages opportunity for CPC to impose provisional

measures provided that there is sufficient information for aviolation of the competition law and serious damages to thecompetition are possible to occur. Such measures include ceasingthe activity of the subject of investigation. According to the newPCA, the persons authorised to carry out the investigation shall beentitled to assign conduct of expert appraisals to external experts aswell as to request information and assistance from other nationalbodies for protection of competition from EU Member States andthe European Commission.


Searches are carried out by the CPC member, appointed asrapporteur in the case supported by CPC experts. The rapporteur isthe person appointed by the Chairman of the CPC to carry out theinvestigation and all actions related therewith. Pursuant to the newPCA, the investigation shall be performed by a working team andsupervised by a member of the CPC, appointed by the Chairman ofthe CPC. In case of impediments, the investigators may seek theaid of the officers of the Ministry of Interior, i.e. the police. The applicable regulatory framework does not envisage an optionfor postponing action for coercive collection of evidence pendingarrival of the attorney of the subject of investigation.


No, there is no provision in this respect in the applicable law. Infact, there is no provision of privilege of legal documentation.However, as mentioned above, the CPC would respect the attorney-client privilege as regards documents and information exchangewith external counsel.


The search and confiscation are carried out in the presence of arepresentative of the legal entity under investigation. Absent thelatter, the investigating body must ensure the presence of arepresentative of the municipality or of the mayoralty (localadministrative authorities). The new PCA does not require presenceof a representative of the municipality or the mayoralty in case ofabsence of a representative of the enterprise.


Yes, according to the PCA, officials of the company underinvestigation are obliged to cooperate with the CPC in carrying outits duties by providing access to premises, providing verbal andwritten explanations, as well as providing documents and otherinformation media. The PCA provides for general sanction in theamount of BGN 1,000 (EUR 500) to BGN 10,000 (EUR 5,000) forpersons who breach its provisions, and therefore this sanction maybe imposed for obstruction of investigations by not rendering therequired cooperation. Besides, persons who fail to provide in timethe requested evidence or accurate information or who fail to appearin person to give explanation before the CPC, shall be fined to theamount from BGN 500 (EUR 250) to BGN 2,500 (EUR 1,250). Forrepeated violation, the person in default shall be fined to the amountfrom BGN 2,000 (EUR 1,000) to BGN 20,000 (EUR 10,000). According to the new PCA, applicable to proceedings starting from



Carry out compulsory interviews with individuals Yes* N/A


Carry out an unannounced search of residentialpremises No N/A


Yes* N/A

Right to retain original documents Yes* N/A


Yes N/A


Yes** N/A

WWW.ICLG.CO.UK35


Bul

garia


02 December 2008, a sanction in the amount of 1% of the totalturnover for the preceding financial year of the company or thegroup of companies is envisaged for the cases of non-performanceof an obligation to render assistance to the CPC; breaking theintegrity or destruction of seals affixed during on-spot inspections;untimely submissions or supply of incomplete, imprecise, untrue ormisleading information to the CPC in the process of investigation.Natural persons who do not provide any required evidence or do notprovide complete, accurate, true and not-misleading informationshall be subject to a fine within BGN 500 (EUR 250) to BGN25,000 (EUR 12,500).The CPC in its practice has imposed such sanctions in cases ofestablished violations.



Pursuant to the current PCA, companies who have participated inprohibited agreements (cartels) are subject to property sanction inthe amount from BGN 5,000 (EUR 2,500) to BGN 300,000 (EUR150,000). According to the new PCA, as of 02 December 2008 the amount ofthe sanction for offences related to existence of prohibitedagreements would be up to 10% of the total turnover for thepreceding financial year of the company or the grouping ofcompanies.


The general sanction pointed in the previous answer shall beapplicable. According to the new PCA, as of 02 December 2008 naturalpersons who have cooperated for breach of the PCA, if their actionsdo not represent crime, shall be subject to a fine in the range ofBGN 500 to BGN 50,000.


The applicable limitation period for initiating procedures is fiveyears since the perpetration of the violation. Should proceedings beinstituted and it turns out that the limitation period has expired, theprocedure shall be terminated. The new PCA differentiates the limitation periods: the legalprescription term for violation of the provisions, related to requestsfor providing information or to conducting inspections, is set atthree years, while for all other types of offences a five-year term isenvisaged.


There is no explicit legal provision in this respect. The financialpenalties may be imposed to and collected only from the persons(individuals) who have committed the respective violation. Thereis no particular obstacle for a company to pay the penalties onbehalf of an employee; however, taxation issues may arise.



Currently, there is no particular Leniency Programme available inBulgaria but there are particular law provisions in the PCAproviding for a procedure for release of administrative liability orreduction of the sanction in case of cartel conduct depending on thepresence/lack of particular circumstances and, in addition, some ofthe aspects thereto are developed in more details in the Guideline onthe determination of the size of the property sanction and finesunder the PCA adopted by the Commission. The new PCAgenerally does not change the situation whereas it provides for inaddition a Programme on release of sanctions or reduction of thesanctions and the rules for the application thereof to be adopted bythe Commission within 6-month period as of the effective date. Theregulation of the issue provided for in the Bulgarian legislationcomplies with the basic principles guiding the regulation of theissue given by the European legislationThe leniency procedure is applicable towards undertakings where,within the meaning of the PC, “the undertaking” is any individual andlegal entity or civil union, which performs economic activity on therespective market regardless of its legal and organisational form. Pursuant to the relevant provisions of the current PCA as well as thenew act, the granting of leniency always pertains to the judgment ofthe CPC whether the requirements provided for in the law arepresented in each particular case. In this respect, the requirement forprompt halt violation before/upon discovery and full disclosure andcooperation with the Commission during the whole procedure shouldalways be on hand, regardless whether the question is for completeresponsibility release or for sanction reduction. In this regard the newPCA provides for an exception in case when the Commission judgesthat for the purposes of the investigation the undertaking shouldcontinue its participation in the prohibited agreement.In case of subsequent application/s for leniency, the subsequentapplicants could get only reduction of the sanction, of course,taking into consideration the sequence of the applicants. There isno explicit law provision in law regarding the number of subsequentapplicants that could be granted leniency and the number dependson the assessment of the CPC. The current law provides only thesize of fine reduction applicable to the first applicant - from 30 to50 per cent from the envisaged property sanction, from 20 to 30 percent for the second one and from 10 to 20 per cent for anysubsequent applicant. The new PCA does not explicitly regulate theissue which most probably shall be done in the newly envisagedLeniency Programme.The leniency is granted on the basis of CPC assessment that therequirements for release or reduction of sanction provided for in thelaw are presented in the particular case. Upon CPC judgment that as of the moment, when the Commissionhas been initially contacted, there are grounds for release orreduction of sanction, the Commission signs with the applicant aProtocol for conditional release of sanction or reduction of finesubject to fulfilment by the applicant of the engagementsundertaken under the Protocol with respect to its further behaviourduring the investigation.The CPC final decision always contains Commission’s stand on thebehaviour of each of the undertakings participating in the prohibitedagreement or co-ordinated practice during the investigation as wellas the reasons grounding the release of responsibility, reduction ofsanction or the refusal such a privilege to be granted.



Bul

garia



Neither the current PCA nor the new act provides for a “marker”system. However, it is hardly predictable whether such a systemcould be introduced through the contemplated LeniencyProgramme.


The current PCA requires a written application. The new act doesnot explicitly regulate the issue.


Neither the current PCA nor the new act provides for any explicitrules for treatment of the leniency application as far as theconfidentiality thereof is concerned.However, pursuant to the legal provisions regulating theproceedings before the Commission, the documentation andinformation obtained by the Commission in the course of theinvestigation may be used by the Commission only for the purposesof the respective survey. All facts and circumstances collected inthe course of the investigation may not be made public if they aremarked as production, commercial or other secrets protected by lawor contain data that is classified information. Possibly during the investigation procedure, the other applicants forleniency and or the other participants in the particular procedureshall not be aware of the leniency application filed.Upon completion of the investigation, the parties are given theopportunity to get acquainted with the materials collected in the fileexcluding the ones marked as confidential.Further on, the decision of the CPC finalising the investigationshould state the reasons grounding the release of responsibility,reduce of fine or the refusal for granting such privilege to any of theparticipants in the prohibited agreement or co-ordinated practice.


Pursuant to the PCA, the undertaking applied for leniency has tocooperate effectively with the Commission throughout the entireperiod of the investigation.


Neither the current PCA nor the new act provides for a “leniencyplus” or “penalty plus” policy. However, it is hardly predictablewhether such policies could be introduced through thecontemplated Leniency Programme.



No.



The current PCA does not provide for such procedures but the newact does. In case the Commission presents the investigated party with aStatement of Objection, the party could propose to undertake certainobligations through which the behaviour in relation to which theinvestigation has been started is to be suspended. The Commissioncould approve through a decision the obligation in which case theprocedure shall be terminated without establishment of a violation. Inthis case the Commission in addition could determine a term in whichthe obligations have to be observed. However, the Commission couldnot adopt a decision allowing the undertaking of certain obligations incase of hardcore violation of the law.

7 Appeal Process


The decisions of the Commission shall be subject to appeal beforethe Supreme Administrative Court within 14 days following theirnotification to the parties under the terms of the Code of CivilProcedure. The appeal process is two instances - intermediateappellate review and cassation appellate review.


Yes (witness examination in Bulgarian litigation does not coincidewith the concept and structure of “cross-examination” in common lawlitigation), but only before the intermediate appellate instance. Beforethe cassation appellate instance, only written evidence is admissible.

8 Damages Actions


The plaintiff has to file a claim before the competent civil court.The plaintiff has to prove that he has suffered damages, that thedamages result from cartel conduct (the violation has to beestablished through a decision that has come into force), the directconnection between the cartel conduct and the damages and theamount of the damages. The Commission’s decision establishingthe violation which has come into force, respectively in case ofappeal - the decision of the Supreme Administrative Courtconfirming the Commission’s decision is binding on the civil courtbefore which the civil damages action is filed.


Yes. However, the concept has been introduced only recently andthere is no precedent whatsoever.

WWW.ICLG.CO.UK37


Bul

garia



Five years.


There are no particular cost rules for civil damages follow-onclaims in cartel cases and thus the general cost rules shall beapplicable. For each litigation procedure, state fee and court costsare collected. The state fee shall be calculated in the amount of 4%of the value of the claim but shall not be less than BGN 50 (EUR25). This state fee shall be paid by the plaintiff upon submission ofthe claim. With respect to the court costs, each party shall pay inadvance the costs for the court actions which the said party hasasked for. The amounts for costs for actions requested by bothparties or initiated by the court shall be deposited by both parties orby one party depending on the circumstances. In the course of thelitigation procedure, each party shall bear its costs for attorneyremuneration, experts’ appraisals it has moved for, etc. At the endof the court proceedings, in its decision the court shall award thecourt costs and state fees to the parties in accordance with theoutcome of the case. Thus, the losing party shall be obliged to paythe court costs and the state fee. In case of partial satisfaction of theclaim, the court costs shall be awarded to both parties accordingly,depending on the satisfied/rejected part of the claim. Should thedispute be solved and the case concluded by a settlement, half of thestate fee initially paid shall be refunded to the plaintiff. The costsof the proceeding and of the settlement shall be borne by the partieswho incurred the said costs, unless otherwise agreed.


There is no official statistic available in this regard; however, to thebest of our knowledge, there are no such cases.

9 Miscellaneous


The new Protection of Competition Act is purposed to ensure theapplication of the European law and the possibility the BulgarianCPC to take active part in the decentralised application of thecompetition rules within the European Union.In the field of cartels, the new act follows very closely theprovisions of Regulation of the Council No. 1/2003, namely:determination of prohibited agreements and concerted practices; theshare markets defining the agreements with insignificant effect;terms and conditions for block examption; procedures related to theinvestigation in case of cartel conduct, including a settlementprocedure; the amount of the sanctions in case of estblished cartelagreements; and civil damages claims for cartel conduct.In the field of leniency, the new act introduces a LeniencyProgramme that shall be adopted by the Commission and shallregulate, in detail, the conditions and the procedure for release ofadministrative responsibility or reduction of the sanctions in case ofcartel conduct.

9.2 Please mention any other issues of particular interest inBulgaria not covered by the above.

In the period upon the country’s accession to the EU, there has beenincreased activity of the CPC in investigating alleged cartelagreements. Some of these have already been concluded withcertain sanctions imposed. All of them are still under appeal, andtherefore not conclusive. Historically, as long as there isinformation publicly available (on the website of the CPC, thewebsite of the Supreme Administrative Court and public legalinformation data bases), most of the CPC’s decision establishingcartel agreements and imposing sanctions have been ultimatelyrepealed by the Supreme Administrative Court.



Bul

garia

Smilena Klimentova Stoilova

Penkov, Markov & Partners Iztok District, Block 221113 SofiaBulgaria

Tel: +359 2 971 3935Fax: +359 2 971 1191Email: [email protected]: www.penkov-markov.eu

Born in 1976, Ms. Stoilova received a Master in Law by the SofiaUniversity St. Kliment Ohridski (2000), Member of the Sofia BarAssociation since 2002, and currently a senior associate at Penkov,Markov & Partners. Competition and Antitrust, as well as Mergers and Acquisitions, areamong the main areas of Ms. Stoilova’s professional practice. As amember of Penkov, Markov & Partners competition group, she dealswith all areas of antitrust law, including merger control, prohibitionagreements, abuse of dominance and unfair competition. Ms.Stoilova is quite experienced in the notification and approvalprocedures for concentration of business activities both within theBulgarian market and concentrations arising from mergers andacquisitions on an international and global scale. Ms. Stoilova hassignificant experience in one of the most actively developed activitiesof the Bulgarian competition and antitrust authority, such as legaldefense in cases of investigations of unfair competition activities,including not only the protection of the clients’ interests ininvestigations by the regulator authority, but mostly to providepreventive consultancy services regarding the business practices ofthe clients in order to minimise the risk from initiation of suchinvestigations. Ms. Stoilova speaks native Bulgarian and fluentEnglish.

Elina Plamenova Ruseva

Penkov, Markov & Partners Iztok District, Block 221113 SofiaBulgaria

Tel: +359 2 971 3935Fax: +359 2 971 1191Email: [email protected]: www.penkov-markov.eu

Born in 1983, Mrs. Ruseva received Master in Law by the SofiaUniversity St. Kliment Ohrisdki (2006) with Specialisation in LegalPractice and Public Administration, is Member of the Sofia BarAssociation since February 2008, and currently an associate atPenkov, Markov & Partners. The experience of Mrs. Ruseva as corporate lawyer includesrendering of legal services with respect to various competition issuesand aspects of transactions and business transfers. She hasparticipated in extensive analyses of the competition related aspectsof the business policy of clients of Penkov, Markov & Partners andadvised them prior to and in the course of pending investigation orconcentration approval procedures. Mrs. Ruseva deals also with taxlaw, employment law and real estate. She speaks native Bulgarianand fluent English.

Penkov, Markov & Partners is one of the leading law firms providing the highest quality legal advice and representationto clients in the Republic of Bulgaria. Established in 1990 as Lega InterConsult - Penkov, Markov & Partners,consequently the legal service provision activities of the company were transferred to the law firm incorporated in 2007specifically to comply with the new Bar Act. The results we have achieved since the inception of the firm have madeus one of the leaders on the legal market and a model for many other Bulgarian law firms.

The team work of more than 50 attorneys-at-law and advisors ensures continuous commitment, high quality andeffectiveness of the legal service, provided in order to find the best innovative and practical solution together with theclient.

Through our offices in 9 major cities we cover the whole country.

For our clients and other interested persons we publish a newspaper of our own, containing updated legal informationand comments in more than 2,000 copies.

We are the first Bulgarian law firm certified with a Quality Management Certification ISO 9001:2000 issued by BureauVeritas Certification. The quality and the exceptional professionalism of the firm and its lawyers were acknowledgedby Business Superbrands Bulgaria.

Penkov, Markov & Partners is also the first Bulgarian law firm to have obtained collective professional risk insurance.

Penkov, Markov & Partners is Member of Lex Mundi (the World’s Leading Association of Independent Law Firms).

Our lawyers provide a wide range of legal services in the field of competition law, such as:

Drafting of notices to the regulatory authority for releasing from prohibition agreements, decisions, or practicesprohibited by the competition law, representation and defence with the frames of the procedures before the regulator.

Legal representation before the Supreme Administrative Court in appeals of decisions of the regulator.

Advice regarding the business operations of our clients in order to ensure compliance with the provisions of thecompetition legislation, respectively to minimise the risk from initiation for investigations into activities regarded asconcerned practices, as well as many others.




Chapter 8

Brigard & Urrutia Abogados S.A.

Colombia



Under Article 333 of the National Constitution, the governmentmust intervene in the economy to prevent practices such as unfaircompetition and anticompetitive conducts from taking place and inorder to ensure that free and fair competition exists in the market.Colombian law prohibits any agreement reached by competitors ina market with the purpose of fixing prices or manipulating marketconditions. Notwithstanding the fact that the Colombian Criminal Codepunishes certain conducts related to cartel prohibition, in Colombiacartel prohibition and regulation is more of an administrative ratherthan a criminal nature.


(i) Law 155 of 1959 (cartel prohibition) and (ii) Decree 2153 of1992 are the two main regulations with provisions related to (a)cartel prohibition and (b) abuse of a dominant position in the market(jointly denominated prácticas comerciales restrictivas). (i) Article 1 of Law 155 of 1959, forbids (a) the execution ofagreements which directly or indirectly intend to limit theproduction, supply, distribution or consumption of raw materials,products, merchandise or national or foreign services, and (b) alltype of conducts, procedures or business strategies which intend tolimit free trade in order to fix or maintain unfair prices, which affectnegatively consumers and/or producers of raw materials.As an exception, the Government is entitled to authorise theexecution of agreements limiting free trade, provided that suchagreements promote the stability of a relevant sector of theeconomy.Further, article 8 of Law 155 forbids the use of practices,procedures or business strategies which attempt to monopolise thedistribution of a product, and the performance of acts of unfaircompetition which may have a harmful result to competitors. Inaddition, article 10 defines unfair competition as any act contrary tothe practices of good faith, and the honest and normal developmentof industrial, mercantile, agricultural or craftsmanship activities. Thus, the following acts are considered to be unfair competitionconducts, among others:

a. The means or strategies used in order to create confusionamongst the public in relation with a competitor, itscommercial establishments, products or services.

b. The means or strategies used in order to discredit acompetitor, its commercial establishments, products orservices.

c. The means or strategies used for promoting internaldisorganization of a competitor company or for achieving theunlawful acquisition of its confidential information.

d. The means or strategies used in order to gain the clients of acompetitor, by means of acts different to the normal andloyal use of the laws of supply and demand.

e. The means or strategies which intend to disorganize orgenerate instability of the market as a whole.

f. The use of false references regarding the origin and qualityof the products, and the mention of inexistent or false honorsor prizes of such products.

(ii) Regarding Decree 2153 of 1992, its article 47 provides a non-exhaustive list of agreements that are considered to have thepurpose of or result in the manipulation of market conditions. Suchregulation provides that, among others, the following conducts areanticompetitive, and will be deemed to be illegal per se:a. Direct or indirect price fixing or determining discriminatory

sales conditions or commercialisation conditions with thirdparties.

b. Distribution of market shares between producers ordistributors, or any agreement with the purpose of blockingthe entrance of third parties into the market

c. Allocation of production quotas or suppliers’ market sharesor the distribution or limitation of any inputs or rawmaterials.

d. Limitations to the adoption or development of newtechnologies and techniques.

e. The inclusion of subsidiary or ancillary clauses for enteringinto an agreement or contractual provisions whereby anycompetitor is bound not to produce goods or render services.


Under Colombian law, the authority charged with the enforcementof the antitrust law is the Superintendence of Industry andCommerce (the “SIC”). The SIC is an executive agency which ispart of the executive branch of government, and is related to theMinistry of Commerce, Industry and Tourism.The SIC is invested with administrative and jurisdictional powers.The SIC acts as an administrative agency for purposes of mergercontrol and anticompetitive behaviour proceedings, whereby it

Camilo Enciso

Carlos Umaña



Col

ombi

a

Brigard & Urrutia Abogados S.A. Colombia

reviews proposed integration operations and the undertaking ofactions that may be contrary to free competition in the market. In specific sector other entities may have such powers as describedin question 1.5 below.


Article 52 of Decree 2153 of 1992 sets forth the proceedings thatmust take place in order to determine whether an infraction againstthe regulations concerning antitrust has occurred. Theseproceedings are characterised by an internal division of functionsbetween the investigator and the adjudicator. These proceedings are divided into three main parts: (i) thepreliminary inquiry; (ii) the formal investigation; and (iii) a rulingon the merits on the part of the SIC. The proceedings commence with a preliminary inquiry that may beinitiated ex-officio or upon request of any party that proves standing.The inquiry is undertaken by the Office of the DelegateSuperintendent for the Promotion of Competition (Superintendentedelegado para la promoción de la competencia) and its result shouldindicate whether there is merit to commence a formal investigation. Any formal investigation is carried out by the Office of the DelegateSuperintendent for the Promotion of Competition. Such investigationcommences with a resolution ordering the initiation of aninvestigation which must be notified to the party being investigated. During the investigation, evidence is collected. Based on suchevidence the Office of the Delegate Superintendent for the Promotionof Competition must issue a report stating whether the evidencecollected supports the fact that antitrust infractions were committed. The report has to be notified to the person being investigated whomay submit closing arguments in connection therewith. Based on the aforementioned reports and closing arguments, the SICrules on whether an infraction to antitrust regulations has taken place.It is worth noting that throughout the formal investigation stage theSIC may terminate the investigation if, in its judgment, the allegedinfractor provides sufficient guarantees that it will cease toundertake the acts subject to the investigation. Any such guaranteesmay be agreed between the alleged infractor and the SIC at any timeduring the formal investigation, i.e., before the Office of theDelegate Superintendent for the Promotion of Competition issuesits report.


Healthcare Sector: Currently, under the regulations of article 5 of Decree 2221 of 2008,the Healthcare Superintendence (Superintendencia Nacional deSalud) must remit to the SIC all the cases in which saidSuperintendence considers that there has been a violation of theantitrust regulations in the healthcare sector (Decree 1663, 1994),included those related to the abuse of a dominant position in themarket.The Healthcare Superintendence may, however, render the requiredsupport to the SIC in furtherance of the necessary administrativeactions. Financial Sector: The Superintendence of Finance (Superintendencia Financiera deColombia) is the entity charged with investigating infractions toantitrust regulations, including cartel activities and anticompetitiveconducts. In this sense, the Colombian Financial Statute merely

reinstates the general prohibitions on antitrust behaviours describedin question 1.1 above (Decree 633 of 1993, as amended). In addition, the Colombian Financial Statute establishes particularsanctions to the relevant antitrust regulations as applicable tofinancial institutions. Accordingly the Superintendence of Financemay impose among others, fines on infractor financial institutionsamounting up to COP$765,425,031 (c. USD$347,139.40 for theyear 2009). In addition, the Superintendence of Finance may impose sanctionson administrators and employees of the financial institution,including the suspension, prohibition from exercising positions inthe financial sector for up to 5 years, the removal of theadministrators of the financial institution, and fines amounting up toCOP$153,085,006 (c.USD$69,427.80 for the year 2009).Television: Pursuant to Law 182 of 1995 the National Television Commission(Comisión Nacional de Televisión) has the power to investigate andsanction operators, concessionaires, and contractors for antitrustinfractions or for agreements that are contrary to free competitionor which have the intent of concentrating information power intelevision services or establishing a dominant position in themarket. The National Television Commission may impose fines to theoperators, concessionaires, contractors and to their administrators,fiscal auditors and any person who authorises, performs or toleratessuch agreements or behaviours ranging from 600 MonthlyMinimum Wages (c. USD$125,581 for the year 2009) to 6,000Monthly Minimum Wages (c. USD$1,255,810 for the year 2009).Public Utilities:Pursuant to Law 142 of 1994 the Superintendence of Public Utilities(Superintendencia de Servicios Públicos Domiciliarios) mayinvestigate and sanction anticompetitive behaviour of public utilityproviders. The Superintendence may impose sanctions of up to 2000Monthly Minimum Wages (c. USD$418,603 in the year 2009). Among others in the public utility sector the following conducts aredeemed to be anticompetitive: a. Charging of tariffs not corresponding to an expense of the

operation.b. The rendering of services free of charge or with tariffs below

those contemplated under applicable regulations.c. The entering into agreements with other service providers

with the intent to distribute parts of a market or the renderingof different type of services among them or to set tariffs, orcreate restrictions in the offer of the services.

d. Any agreement entered into with competitors to influence theresult of a tender or request of proposals that is requiredunder applicable laws.

Technology transfer: Pursuant to Decision 291 of 1991, issued by the Commission of theCartagena Agreement, in the context of the Andean Community ofNations, which applies directly within Colombia, in order toregister agreements related to the transfer of technology, trademarkor patents, member countries may establish restrictions concerning:a. Provisions establishing reciprocity in exchange for the

supply of technology or the use of a trademark, such as tofurther acquire goods or technology or to hire any particularpersonnel.

b. Provisions by virtue of which the companies selling therelevant technology or granting the use of a trademarkreserve the right to set the sale or resale price of the relevantproducts.

c. Provisions that contain restrictions on production volumeand/or structure.

WWW.ICLG.CO.UK41


Col

ombi

a


d. Provisions that prevent the use of competing technologies.e. Provisions that establish a purchase option in favour of the

supplier of the relevant technology.f. Provisions that mandate the recipient of the technology to

transfer to the supplier any inventions or improvementsobtained through the use of such technology.

g. Provisions that require the payment of royalties to theholders of unused or expired patents or trademarks.

h. Other provisions having similar or equivalent effects.In addition provisions prohibiting or limiting in any way the exportof the products manufactured using the respective technology, shallnot be accepted.

1.6 Is cartel conduct outside Colombia covered by theprohibition?

Yes. The SIC has the power to investigate anticompetitive activitiessuch as cartels which have effects in the Colombian market.Accordingly, the SIC is empowered to investigate and sanction anyact with effects on the Colombian market, regardless the place inwhich the conduct was agreed or was taken.





There are no specific unusual features.


There are no general surveillance powers.


There are no other powers of investigation.


The SIC will carry out the searches of business and/or residentialpremises. Neither the SIC nor any other entity charged with investigatingviolations to antitrust regulations have police powers in carrying outthe searches mentioned above. Accordingly, the SIC has the authority to order any individual orentity who will be searched to provide information and documents,but it may not compel them physically to allow the relevant search.In case the search is not allowed, the SIC is empowered to imposefines or other sanctions.


There are no specific regulations in Colombia regarding theestablishment of an Attorney-Client Privilege in this case.However, the Colombian Constitution provides for a specialprotection for the so-called professional secret (secretoprofesional). Article 74 of the Constitution provides for a so-calledProfessional Secret that is inviolable. Apart from external counsel, professional secret applies to allpeople who, by virtue of a labour relationship and even if they arenot direct recipients of the information, have access to it.


Investigations carried out by administrative entities with thepurpose of investigating and sanctioning infractions must be carriedout in accordance with constitutional principles protecting theinvestigated party, in particular the right to a defence and dueprocess of law. Accordingly, entities or individuals being investigated may not bequestioned without the presence of an attorney, forced to declareunder oath in a manner that would be contrary to their interest,should not be allowed access to the dossier created by the SIC inconnection with the relevant investigation, or be sanctioned withouthaving had the opportunity to assess the evidence against them andallowed to present arguments in their defence.Aside from the stated above, it is relevant to note that Colombia isa part of the American Convention on Human Rights of 1969 (Pactode San José), and subsequently is obliged under articles 8 and 25 ofsuch Convention, which regulate the right to a fair trial, to dueprocess, and to judicial protection.


The obstruction of an investigation carried out by the SIC is not perse an administrative infraction, and therefore the SIC does not havethe power to sanction said conduct. Under the Colombian CriminalCode, however, the so-called procedural fraud (fraude procesal) issanctioned as a crime. The elements of this crime are to act in orderto induce any public official to take any wrongful decision.Prosecutions for this type of crime have occurred in severaloccasions, resulting in condemnatory decisions against theresponsible party.



Carry out compulsory interviews with individuals Yes N/A

Carry out an unannounced search of businesspremises Yes N/A

Carry out an unannounced search of residentialpremises Yes N/A


Yes N/A



Yes N/A


No N/A



Col

ombi

a




Pursuant to article 4 (15) of Decree 2153 of 1992, the SIC isempowered to impose fines upon each of the parties involved in thenon-compliance of the antitrust law, of up to 2,000 MonthlyMinimum Wages (c. USD$418,603 for the year 2009).


Pursuant to article 4 (16) of Decree 2153 of 1992 the SIC is entitledto impose fines upon the managers, directors, legal representativesand other officers of the parties involved in the non-compliance ofthe antitrust law, of up to 300 Monthly Minimum Wages (c.USD$62,790 for the year 2009) each.


Pursuant to article 52 of Decree 2153, 1992 in the matters notregulated by such decree, the Colombian Administrative Code(Código Contencioso Administrativo) will apply. Article 38 of suchCode sets out that the statute of limitations for the investigation andthe imposition of sanctions is 3 years from the performance of theexecution of the cartel conduct.


There are no specific legal restrictions on this regard.



If the SIC finds that antitrust regulations have been breached byentities or individuals it may order the cessation of the relevant anti-competitive conduct. In addition, the SIC may impose fines onsuch individuals or entities. Notwithstanding the above, the SIC may terminate theinvestigation, if in its judgment the alleged infractor providessufficient guarantees that it will cease to undertake the acts subjectto the investigation. As stated in several non binding opinions issued by the SIC(Superintendent of Industry and Commerce, Opinion 96027630,1996), the aforementioned guarantees may only be offered duringthe formal investigation part of the proceedings, i.e., before theOffice of the Delegate Superintendent for the Promotion ofCompetition renders its report.According to several opinions of the SIC, the guarantees offeredmust be sufficient. In order to determine when a guarantee issufficient, the SIC compares the relevant guarantee offer made bythe alleged infractor in light of the magnitude of the particularinfraction (Superintendent of Industry and Commerce, Opinion02111018, January 30, 2003, Opinion 9807593 of 1999, andResolution 17464 of 1999). Notwithstanding the foregoing, it isworth pointing out that the SIC has wide powers to establish whatthe appropriate guarantees would be in any particular case andaccordingly it is not possible to predict beforehand what suchguarantees would be.


All of the SIC’s powers related to the investigation and sanction ofinfractions to antitrust regulations may be exercised at the behest ofany person who files a petition before said authority in this regard,or ex-officio by the SIC.


Yes. Colombian law expressly allows the filing of oral petitions(applications). However, the Administrative Code provides thatpublic entities may establish forms for the presentation of requests.The SIC has not established such forms in connection with thepresentation of requests concerning antitrust infractions.


Under Colombian law, any person may request copies of any publicdocuments held by pubic authorities, as long as no reserve or duty ofconfidentiality is imposed by law. There is no duty of confidentialityregarding the applications concerning antitrust violations.


Under Colombian law, the marker does not have a continuouscooperation obligation. However, the SIC has ample powers torequest information from any market participant to ascertainwhether an anticompetitive conduct has taken place. Among thesemarket participants, the marker may be included.


No, there is not.



No. Under Colombian Law there are no specific regulationsregarding immunities for whistle-blowers who report antitrustinfractions. Furthermore, Colombian law does not provide forfinancial rewards that incentivise whistle blowing.



Under Colombian law it is possible to plea bargain or agree on afixed financial guarantee, in return for an anticipated termination ofthe investigation. These guarantees are offered and accepted in thecontext of administrative investigations, there are no similarprovisions for criminal investigations, when they may proceed asexplained above.

WWW.ICLG.CO.UK43


Col

ombi

a


7 Appeal Process


Any person who is subject to an administrative sanction due toinfractions to antitrust regulations may submit an annulment requestof the SIC’s decision to impose such measure. Said request must befiled before the administrative courts of Colombia. If theadministrative courts confirm the sanction, the affected party mayfile an appellate recourse before the Appellate Court (Consejo deEstado) requesting the first instance decision to be revoked,amended or clarified.The appellate recourse must be filed before the Appellate Court,within the 3 days following service of the relevant judgment.Upon acceptance of the recourse, the Appellate Court allows theparties 5 days each to submit their supporting arguments.


No, it does not.

8 Damages Actions


The subject of damages is governed by civil substantive law,contained mainly in the Civil Code and the judicial precedents ofthe Supreme Court of Justice - Civil Chamber. Only consequential damages of the antitrust acts are compensatedto the plaintiff. Indirect damages are not compensated. A causalconnection between the defendant acts and the damage is requiredto be proved by the plaintiff.Damages must be demonstrated in their existence (certainty) andextension (amount). Damages compensation includes thepatrimonial detriment (daño emergente) and the loss of profits(lucro cesante) of the plaintiff.


The Colombian legal system allows the use of class actions andpopular actions to obtain indemnification for damages caused dueto anticompetitive behaviour. Class actions:Class actions are the procedural device used in litigation todetermine the rights of and remedies -if any- for large numbers ofpeople whose cases involve common questions of law and fact.According to Law 472 of 1998, class actions can be filed by a groupof claimers no smaller than 20 people in order to obtain an awardfor individual and concrete damages that have a common cause.Popular actions: According to Law 472 of 1998 popular actions are proceduraldevices used for the protection of collective rights and interests.Popular actions are designed only for the protection of collectiverights, and not of subjective or individual interests. Collective rightsare the rights of the community as a whole. Please be advised that popular actions are not remedies for privatedamages.

The Constitution and Law 472 of 1998 define the following rightsas collective rights, among others:a) The enjoyment of a healthy environment.b) The administrative morality.c) The preservation of ecology.d) The defence of the national patrimony.e) The rights of the consumers and users.Moreover, antitrust claims against cartels may be brought to seekrelief for damages to free competition. This claim may be broughtby any citizen, regardless of whether it suffered damages or not.This is not a remedy for personal damages, but for damages causedto free competition in the Colombian economy in general. Any person has legal standing to bring this claim.


The statute of limitations for the commencement of anadministrative proceeding before the Superintendence of Industryand Commerce with the purpose of sanctioning the anticompetitiveagreements reached or executed by the cartel is of three (3) yearsafter the illegal act is performed.When the conduct is ongoing, for this type of investigation, thestatute of limitations only runs as of the day the conduct ceases.Nonetheless, the statute of limitations for the declaration that theagreement in violation for free competition provision is void is ten(10) years counted as of the execution of the agreement. The statute of limitations for a civil action for tort liability is of ten(10) years as of the occurrence of the anticompetitive agreement(cartel behaviour).Law 472 of 1998 states that Popular Actions may be filed while thethreat or danger to the collective right(s) subsists. As long as the unlawful behaviour is still underway, popular actionsmay be brought at any time. Also, as long as the damages to thecollective rights have not been indemnified, the action maysuccessfully be brought at any time. In other words, if damages arenot indemnified, there is no statute of limitations.Class actions’ statute of limitations is two (2) years as of the datethe damage was caused or as of the date the action which causes thedamages ceases. For ongoing conducts, the statute of limitations iscounted as of the date the anticompetitive agreement ceases.


According to the Code of Civil Procedure, the party that is favouredwith the ruling is entitled to reasonable attorney fees at a maximumrate of 20% of the amount claimed within the complaint (for civilordinary proceedings). The sentenced party must also pay the coststhat are evidenced in the dockets, including, for example, the costsof expert witnesses.


We are not aware of any successful stand alone or follow-on civildamages claim.



Col

ombi

a


9 Miscellaneous


As of December 4 of 2008, by means of Resolution 051694, the SICimposed sanctions over three major cement companies and its legalrepresentatives, for performing infractions to free trade regulations.The sanctions were the result of an investigation which had beganin 2005. According to the SIC the companies participated in anagreement which intended to fix the price of the type of cement

Gray Portland Class 1, and to distribute the market of such productthroughout the national territory. The sanctions to the companiesadd up to USD1,255,810, overall, and the sanctions to the legalrepresentatives add up to USD187,759, overall. Resolution 051694 is not final, and is being reviewed by the SICdue to a recourse known as recurso de reposición.

9.2 Please mention any other issues of particular interest inColombia not covered by the above.

On April of 2008 the Government submitted to the Congress a newBill of Fair Competition, which is currently under its review.

Carlos Umaña

Brigard & Urrutia Abogados S.A.Carrera 7 # 71 - 21 Torre B - Piso 4Calle 70 # 4 - 60 BogotáColombia

Tel: +571 540 5433 Fax: +571 310 0609 Email: [email protected]: www.bu.com.co

Born in 1960 in Bogota, Colombia. Admitted to the legal practice inColombia in 1983. Education: Universidad del Rosario, Bogota, Colombia. Lawyer,1983. New York University School of Law, New York , UnitedStates. Master in Compared Jurisprudence, 1985.Memberships: International Bar Association. Colegio de AbogadosRosaristas. Member of the Executive Committee de The BomchilGroup. 2000 - 2002. Member of the Board of Directors of LexMundi. 2002 - 2006. Colegio de Abogados Rosaristas. RegionalVice-Chairman of Lex Mundi’s Latin-American-CaribbeanAgrobusiness Practice Group. 2002 - 2006. Chair Elect of LexMundi’s Agribusiness Practice Group.Distinctions: Highly recommended lawyer in Corporate Law andMergers & Acquisitions in accordance with PLC Which Lawyer2006. Recommended lawyer in Competition and Mergers &Acquisitions in accordance with Who´s Who Legal. 2006.Recommended lawyer in Corporate and Commercial Law inaccordance with Chambers Global, The World’s Leading Lawyers forBusiness. 2007. Languages: Spanish and English.

Camilo Alberto Enciso Vanegas

Brigard & Urrutia Abogados S.A.Carrera 7 # 71 - 21 Torre B - Piso 4Calle 70 # 4 - 60 BogotáColombia

Tel: +571 540 5433 Fax: +571 310 0609Email: [email protected]: www.bu.com.co

Born in 1980 in Bogota, Colombia. Admitted to the legal practice inColombia in 2006. Education: Colegio Mayor de Nuestra Señora del Rosario, LawSchool. LLB. Bogotá, Colombia, 2006. Colegio Mayor de NuestraSeñora del Rosario, Law School. Specialist in Criminal Law. Bogotá,Colombia. 2007. Universidad Carlos III de Madrid. Specialist inGlobalization and Crisis of the Integration Processes of Europe andAmerica. Madrid, Spain. 2007. Columbia University School of Law.LLM. Admitted for the term 2009-2010. New York, United Statesof America. Languages: Spanish and English.

Founded in 1934, Brigard & Urrutia provides legal advice and assistance in all relevant areas of business law andrepresents clients before the government and the courts, as well as before national and international arbitration panels.

The firm serves a global clientele formed by industrial, commercial and service companies, banks and other financialinstitutions, including private equity funds, insurance companies, as well as national and foreign government agenciesand companies.

In 2005, Brigard & Urrutia associated with Brigard & Castro, leader in the area of Intellectual Property, with apreeminent position in assisting clients in matters related with trademarks, patents, health registrations and transfer oftechnology. The two firms are now fully integrated and recently moved to new premises. The combined practices allowboth firms to complement and support each other to provide to their clients a truly integral service.



Chapter 9

Andreas Neocleous & Co. LLC

Cyprus


1.1 What is the legal basis and general nature of the cartelprohibition e.g. is it civil and/or criminal?

The legal basis of cartel prohibition in Cyprus is formed by thefollowing three pieces of legislation:

The Protection of Competition Law 13(I)/2008;The Control of Concentrations between Enterprises Law22(1) of 1999 (as amended); andEuropean Council Regulation (EC) 139/2004.

The general nature of the prohibition is both civil and legal.


Competition Lawa) Section 3 provides that any agreement or enterprise practicewhich is capable or likely to be capable, of:

restricting free access in the market; orrestricting competition to a substantial degree; orprejudicing the interests of consumers,

is subject to control in accordance with the provisions of theCompetition Law. b) Section 4 prohibits any agreement made by an enterprise whichhas as its object or effect the elimination, restriction or distortion ofcompetition. It also lists examples of forms of agreement whichwould automatically be deemed to fall into this category. These areagreements which:

fix, directly or indirectly, the purchase or reselling prices orother terms of transaction;restrict or control production, supply, technologicaldevelopment or investments;allocate (geographically or otherwise) markets or otherresources of supply;apply different terms for identical transactions so that certainenterprises are placed at a disadvantageous positionregarding competition; ormake the entering into of contracts conditional upon theacceptance by the other parties of additional obligationswhich by their nature or according to commercial usage haveno connection with the subject-matter of these contracts.

Agreements which are prohibited under section 4 are considered tobe void ab initio.

Section 6 prohibits the abuse of a dominant position of an enterprisein any product market. Abuse of a dominant position is defined asany act of one or more enterprises which possess a dominantposition in the aggregate or part of the domestic market of aproduct, if this act has as its object or effect or probable effect aninfringement of competition in the market similar to the effect ofagreements specifically prohibited under section 4.Mergers between enterprises are exempt from section 6 subject totheir being notified to the CPC within three months of their cominginto effect. This exemption arises solely because they are subject tothe Concentrations Law rather than the Competition Law. Concentrations LawSection 13 states that participating undertakings formingconcentrations of major importance on the basis of the statisticalcriteria set out in section 3 of the law must notify the CPC of theconcentration and seek clearance for it to proceed. The criteria areas follows:

at least two of the undertakings merging must have a totalturnover of €3,417,203 each;at least one of them engages in commercial activities withinthe Republic of Cyprus; and at least €3,417,203 of the aggregate turnover of all theparticipating undertakings derives from the supply of goodsor services within Cyprus.

Even if a proposed concentration does not satisfy the criteria set outin section 3, the Minister of Commerce, Tourism and Industry maydeclare by a Reasoned Order that the concentration is neverthelessof major importance and should be subject to a clearanceinvestigation. Such an order will be made when the Ministerconsiders the concentration is of major public interest as regards theeffect it may have on any of the following:

economic and social development; technical progress;employment; orthe supply of goods and services necessary for the publicsecurity of the Republic as a whole or of its territories.

Clearance will be given only if the concentration is compatible withthe requirements of a competitive market. A concentration whichstrengthens or creates a dominant market position in Cyprus willnot ordinarily be deemed to be compatible.


The Commission for the Protection of Competition (“CPC”)The CPC has prime responsibility for the implementation andenforcement of both the Competition Law and the Concentrations

Eleana Spyris

Elias Neocleous



Cyp

rus

Andreas Neocleous & Co. LLC Cyprus

Law. It is an independent entity which was established under theCompetition Law. The CPC’s powers are extensive and include:

investigating possible infringements of the Competition Law(either as a result of a complaint or on its own initiative);issuing injunctive measures to halt actual or suspected anti-competitive practices;issuing individual competition clearances for up to five yearswhere an apparently “non-competitive” practice is viewed asbeing justifiable in the public interest, where the restrictionsare minimal and the practice does not allow for anelimination of competition in a substantial part of the market;investigating proposed concentrations to ensure that they donot strengthen or create a dominant position in the Cyprusmarket;imposing of administrative fines on participants in aconcentration who breach the provisions of theConcentrations Law;issuing of temporary approvals to proposed concentrationspending completion of investigations; andgranting remedies to restore a competitive market includinga discretionary power to order a divestment where aconcentration is judged to be anti-competitive.

The Council of Ministers approves the appointment of the CPC. Italso has the power to provide general category exemptions fromsection 4 of the Competition Law. The Competition and Consumer Protection Service (“Service”)The Service provides administrative and investigative support to theCPC. It is an independent body, and specific duties assigned to itinclude:

preliminary evaluation of and report to the CPC in respect ofproposed concentrations;preliminary evaluation of and report to the CPC in respect ofapplications for leniency from cartel participants; andinvestigation of concentrations and suspected anti-competitive practices as directed by the CPC.

The Minister of Commerce, Industry and Tourism (“Minister”)The Minister has the power to initiate an investigation by the CPCas a backstop against concentrations which do not meet thestatistical thresholds set out in the Concentrations law but whichmay still raise concerns in respect of their impact on the competitivemarket in Cyprus. The Supreme Court of Cyprus (“Court”)The Court is responsible for hearing appeals against decisions madeby the CPC.


Investigations under Competition LawOn receiving a complaint the CPC will consider it and form aninitial opinion as to whether or not there is a prima facie case ofinfringement worthy of further investigation. If the CPC believesthat the case has merit it will instruct the Service to conduct aninvestigation.The Service will inform the relevant parties that they are underinvestigation. It will then seek to collect all information it considersnecessary for proper evaluation of the case. The Service hassignificant powers to gain the information that it requires. Theparties concerned must be given a “reasonable” time in which toproduce any information requested. The Service is under a duty toprotect the rights of the parties regarding secrecy andconfidentiality.

On completion of the investigation a report is submitted to the CPCfor review. If the CPC finds prima facie that anti-competitivebehaviour has taken place it will communicate a statement ofobjections to both parties. This will include the documents and allother information on which it intends to base its case. Onlydisclosed information may be used by the CPC against the party.The right of the accused to a fair hearing is safeguarded as follows:

All parties are given adequate time to make writtensubmissions defending their position. They may request anextension to the initial timetable given, and, if there isjustifiable cause for the delay in submission, this will begranted.A hearing of the case will take place after the writtensubmissions have been considered. All parties have the rightto legal representation throughout the proceedings.

There is no set procedure laid down for the hearing by the CPC.The applicable procedural rules are identical to those of a court oflaw. Minutes of the oral hearing are kept and made available to theparties for summation purposes. The decision reached by the CPCon the case must be fully reasoned and based on fact and law. The reasoned decision of the CPC will be communicated to theparties and published in the Gazette. The decision itself is effectivefrom the date of such communication even if the communication isdefective in some manner.Investigations under the Concentrations LawPhase one commences when the Service is in possession of thenotification of a concentration and all the supporting documentsrequired by the law. The Service conducts a preliminaryinvestigation of the concentration and then submits a report to theCPC in which it records its reasoned opinion as to whether or notthe concentration is capable of being declared compatible with thedemands of a competitive market.The CPC is obliged to consider the report promptly and threeoptions available to it, namely, to declare that the proposedconcentration:

does not fall within the ambit of the law and hence mayproceed;does not raise serious doubts as to its compatibility with thecompetitive market. It is therefore declared “compatible”and may proceed; ordoes raise serious doubt as to its compatibility with thecompetitive market, and should be subject to a “phase two”investigation.

The CPC must reach its decision in time for the Service to conveyit to the concentration within one month of the day on which theService received the complete notification. If it fails to do this, theconcentration is automatically deemed to be compatible with thedemands of the market. If the CPC expects to be unable to meet thistimetable, it must immediately inform the Service and theapplicants of that fact. It may then extend the time scale by 14 days,provided that it gives notice to the parties at least seven days beforethe expiry of the original deadline.Where a phase two investigation is required, the Service mustcomplete its investigation and submit its report to the CPC withinthree months of the later of:

the date when notification was originally received; or when all information required to support the initialnotification and any other information requested wasreceived.

During a phase two investigation the Service may invite the partiesto the concentration and third parties which have a legitimateinterest in the concerned market to give evidence to it.

WWW.ICLG.CO.UK47


Cyp

rus


If the phase two investigation fails to alleviate the CPC’s concerns,the Service will consider which, if any, of the circumstances givingrise to the concern may be removed. It will make suggestions to theCPC and the parties concerned and undertake negotiations withthem to try to resolve the outstanding issues.The CPC must declare the concentration to be either compatiblewith the market or not within four months of receipt of the originalnotification or, if later, of the receipt of all requested information. Ifit fails to meet this deadline the concentration will automatically bedesignated as compatible. The CPC may impose specificconditions on the concentration before allowing it to proceed.When a phase two investigation is initiated, the parties to theconcentration may make a reasoned submission to the CPC thatdelay in the commencement of the concentration may cause themserious commercial damage. If the CPC is satisfied with thesubmission it may approve, in writing, all or part of theconcentration on a temporary basis.


a) Competition LawSection 5 allows “block” exemptions covering a category ofagreements rather than one specific agreement. Block exemptionsmay be made only under an Order of the Council of Ministersissued by the Council on the basis of a reasoned opinion of the CPCpublished in the official Gazette. In addition, this section states thatEuropean Union block exemption regulations are appliedaccordingly with regard to agreements subject to this legislation,unless they conflict with orders previously issued by the Council.Block exemptions granted to date include vertical agreements andthose relating to the following sectors:

liner shipping companies and consortia;liner shipping conferences;insurance;road transport;air transport;agricultural products; andmotor vehicles.

Section 7 sets out the following as being exempt from section 6:businesses with activities that involve the administration ofservices of general economic interest, or that have a financialmonopoly character, to the extent that the implementation ofsection 6 would legally or practically prohibit the specificactivity appointed to them by the Government; andagreements relating to wages and terms of employment andworking conditions.

b) Concentrations LawSection 5 of the Law creates several categories of exemption bydeclaring that the following are not deemed to give rise to aconcentration and hence not subject to notification procedures:

purchases by credit institutions or other financial institutionsor insurance companies, the normal activities of whichinclude transactions and dealing in securities for their ownaccount or for the account of third parties; an enterprise over which control is exercised by a personauthorised under the legislation relating to liquidation,bankruptcy or any other similar procedure; the concentration of enterprises between one or more personsalready controlling at least one or more enterprises where thegrouping together is carried out by investment companies; anda situation in which property is transferred under a will or byintestate devolution due to death.

The Law does not apply to a concentration of two or moreenterprises, both of which are subsidiaries of the same entity.

1.6 Is cartel conduct outside Cyprus covered by theprohibition?

Cyprus cartel regulatory controls apply only when at least one ofthe undertakings concerned engages in commercial activity withinthe Republic of Cyprus. However, there is no firm definition of thisterm, and in practice the CPC has treated cases as subject to itsjurisdiction even though none of the parties has an active branch orsubsidiary in Cyprus. It is therefore prudent to register foreigncompany agreements if the Cyprus turnover threshold is met.Concentrations which have a European Community dimension asper EC Regulation 139/2004 must be notified to the EuropeanCommission for assessment.




Please Note: * indicates that the investigatory measure requires theauthorisation by a Court


The Law provides explicitly that during a business or residentialpremises search, the competent officers of the Service may:

inspect accounting records and other business documents;make copies of or extracts from accounting records andbusiness documents;demand on the spot oral clarifications of informationreceived by them; and/orenter all and any offices, premises and transportation meansof the enterprises.


The enforcement bodies do not have general surveillance powers.




Carry out an unannounced search of businesspremises Yes Yes



Yes Yes

Right to retain original documents No No


Yes Yes


Yes Yes



Cyp

rus


Approval of such activities is reserved to the courts and subject tostrict criteria and scrutiny.


The Protection of Competition Law 13(I)/2008 has given greaterpowers to the CPC with regard to “dawn raids” that is, for example,the ability to seal premises for the period and to the degree requiredfor the inspection of the premises, take statements from anymember of staff of the enterprise under investigation, and the abilityto obtain assistance from the police for such raids.


Searches of the business or residential premises are carried out bythe officers of the Service. If deemed appropriate by the CPC, otherofficials or civil servants may accompany them. Whereappropriate, the officers will enlist persons with specific expertiseto assist them. In addition the CPC is entitled to request assistancefrom the police in searching business premises. The enterpriseunder investigation is entitled to consult with legal advisers duringthe search, and officials will most likely allow a reasonable time forlegal advisers to arrive before the search commences. During thisperiod, the investigating officers may impose certain conditions,such as the suspension of activities, and may enter and remain inoffices of their choosing. It should be noted however that thepresence or absence of a legal advisor does not affect the validity ofthe search.


In house legal advice is not protected by the rules of privilege.


A material limitation of the investigatory powers is the inability tosearch residential premises without a court order. For the court toissue such order it must be persuaded that there are reasonablegrounds to believe that relevant documents, accounts or data of thebusiness activities of the enterprise investigated are held at theresidential premises.


Any person who, knowingly and with intent to mislead the CPC,supplies it or the Service with false, inaccurate or incompleteinformation or withholds relevant information is guilty of a criminaloffence. This is punishable by imprisonment of up to one year, apecuniary penalty of up to €85,000 or both.Under the Concentrations Law, the following sanctions oncompanies also exist:

Provision of false or misleading information: a fine of up to€85,430; andFailure to provide information requested by the CPC or theService: a fine of up to €51,258.

Fines have been levied on companies failing to provide requestedinformation in a timely fashion.



Where the CPC finds an infringement of the provisions of sections4 or 6 of the Competition Law it has the power to:

order the enterprise concerned to terminate the infringementwithin a stipulated time limit and avoid any repetition of it inthe future or, in case the infringement was terminated beforethe making of the decision of the CPC, to convict theinfringement by a decision of reconnaissance;impose a fine of up to €85,000 for each day the infringementcontinues after the decision has been communicated; andimpose a fine of an amount, not exceeding 10% of thecombined annual revenue in the year within which theinfringement took place or in the year which immediatelypreceded the infringement of the enterprise or of eachenterprise involved in a cartel.

It should also be noted that where a criminal offence is committedby a legal person in accordance with the provisions of the law,liability for the offence may extend to all members of the board ofdirectors of the enterprise as well as the general director or manager. In urgent cases the CPC may also order temporary measuresincluding injunctions and impose such terms on market participantsas it deems necessary. Concentrations which fail to comply with the provisions of theConcentrations Law may have the following administrativepenalties imposed on them by the CPC:

failure to notify: a fine of up to €85,430 plus €8,543 for eachday the infringement continues;provision of false or misleading information: a fine of up to€85,430;failure to provide information requested by the CPC or theService: a fine of up to €51,258;putting a concentration into effect ahead of the decision ofthe CPC: a fine of up to 10% of the combined turnover of theenterprises concerned based on the most recent financialstatements prior to commencement of the concentration;failure to adhere to the specific terms and relevantcommitments made by the participants in the concentrationin order to obtain clearance for the period stipulated by theCPC: a fine of up to 10% of the total turnover of theparticipating enterprises in the financial year immediatelypreceding the concentration, together with an additional fineof up to €8,543 for each day the infringement persists; andfailure to comply with a measure ordered by the CPC undersection 42 to return the market to a competitive state withinthe prescribed timescale: a fine of up to 10% of the totalturnover of the participating enterprises in the financial yearimmediately preceding the concentration, together with anadditional fine of up to €8,543 for each day the infringementpersists.

The fines so imposed are collected as fines imposed by a Court inthe exercise of its criminal jurisdiction.


Competition LawThe following sanctions can be imposed on individuals:

failure to comply with a decision of the CPC or with aninterim judgement is a criminal offence punishable byimprisonment for up to two years, a fine of up to €340,000 orboth.

WWW.ICLG.CO.UK49


Cyp

rus


an individual who intentionally and, for the purpose ofgaining an unlawful benefit, contravenes the duty to keepsecret information revealed during the course of aninvestigation or hearing of the CPC commits a criminaloffence punishable by imprisonment for up to one year, afine of up to €3,500 or both. withholding information or providing false information is acriminal offence punishable by imprisonment for up to oneyear, a fine of up to €85,000 or both.


Limitation periods are:within three years in case of applications for negativeclearance (under Competition Law), collection ofinformation and orders of the Commission for the conduct ofan unannounced visit; orwithin five years in the case of all other infringements of theCompetition or Concentrations laws.

The time limits begin from the date the infringement took place or,where the infringement continues or is repeated, from the date theinfringement ended.


There is no prohibition on such payments.



For some years the CPC has published a Cartel Immunity andReduction of a Fine Programme (“the programme”) which closelymirrors the European Commission Leniency Notice. Prior to theenactment of the new Protection of Competition Legislation, thepublished rules and guidelines were not enshrined in legislativeprovisions and were therefore not binding on the CPC, but merelygave an indication of how the CPC would most likely deal withcartel and leniency issues. With the enactment of the newProtection of Competition law 13(I)/2008, section 24(a) states thatthe CPC has the authority to not impose or to reduce fines levied ona enterprise or a group of enterprises, depending on the criteria andcircumstances to be set out in a further Regulation, if the enterpriseor group of enterprises cooperates or submits of its own accord suchmaterial or information that assists the Commission in establishinga violation of the law. Thus, any leniency programme that will beput into place on the basis of this section will be legally binding, incontrast to the programme that existed prior to this legislation.This further regulation mentioned has not yet been enacted by therelevant authorities; although, we have unofficial confirmationfrom the CPC that it is currently being formulated. In the following paragraphs of this question we outline the “old”programme as an indication of the main principles followed by theCPC. However, the CPC has given no indication of how closely, ifat all, the new programme will reflect earlier practice.Full immunityThe programme provided immunity from a fine which wouldotherwise be levied on a party for breach of section 4 of theCompetition Law if the party concerned approached the CPC andproactively provided information making a decisive contribution to

the opening of an investigation into a cartel, the finding of aninfringement of competition law or both.In order to obtain full immunity, the applicant:

must not have acted as the instigator or played a lead role inthe infringement, nor must it have coerced anotherundertaking to participate in the illegal activity;must have approached the CPC before the CPC hadsufficient evidence to reach a preliminary finding that section4 had been infringed;was required to take effective steps as approved by the CPCto terminate its role in the illegal activity;was not allowed to alert its former co-participants that it hadapplied for immunity under the programme; andwas required to co-operate fully and promptly with the CPCthroughout its investigation and any subsequent hearings.

Partial leniencyThe partial leniency programme offered the reduction of any finewhich would otherwise be levied for breach of section 4 of theCompetition Law as a quid pro quo for co-operation with the CPC.The reduction was:

linked to the quality and timing of the co-operation; granted only to undertakings which provided the CPC withevidence that added significant value to that already in theCPC’s possession; and conditional on the undertaking terminating its involvementin the infringement under investigation according to theterms set by the CPC.

The amount of the reduction was determined according to thefollowing scale:

first undertaking to co-operate - between 50% and 70%;second undertaking to co-operate - between 30% and 50%;andsubsequent undertakings to co-operate - up to 30%.


The CPC’s practice to date has been that it will not considersubsequent applications for immunity in respect of the sameinfringement until it has made a preliminary decision on an existingapplication. The relevant time marker is the time of the initialcontact. It is not yet clear whether this practice will be followedunder the new system when it is introduced.


The previous programme allowed the initial approach may be madeorally, in hypothetical terms and via the applicant’s legalconsultants, with details of identities being disclosed once theapplication proceeded.


The previous programme included strict confidentiality provisionsand information obtained by the CPC could be used only to supportactions under the Competition Law. The fact that an undertaking co-operated with the CPC wasindicated in any decisions made by the CPC. This served a dualpurpose: it provided an explanation for any immunity or reduction



Cyp

rus


of fines granted to participants in the cartel and protected the CPCfrom allegations of bias or corruption.


The applicant was required to co-operate fully, on a continuousbasis, throughout the investigation and the hearing stage.


There was no ‘leniency plus’ or ‘penalty plus policy’ under thepreviously published guidelines.



There are no whistle-blowing procedures for individuals.



There are no formal procedures. However, the CPC will takeaccount of mitigating factors when deciding what level of sanctionto impose.

7 Appeal Process


Any decision made by the CPC is considered to be anadministrative decision which has been issued by a public authority.Article 146 of the Constitution of the Republic of Cyprus gives anaggrieved party seeking review of a CPC decision the right to filean administrative recourse to the Supreme Court. The time limit forseeking such recourse is 75 days from the receipt of notification ofthe CPC decision. The Court’s decision is final and, to date, it hasupheld all of the decisions of the CPC.


The appeal process does not allow for the cross examination ofwitnesses.

8 Damages Actions


Any person who suffers damage as consequence of cartel activityhas the right to bring an action against the cartel for damages

suffered. Subject to the normal rules governing the granting ofinjunction orders the claimant may request the District Court tomake an injunction order to halt the unlawful activities giving riseto the damages.


Representative claims are permissible.


Six years from the date on which the cause of action occurred.


There are no cost rules; civil damages are assessed on the basis ofthe claim made.


We are not aware of any such claims to date.

9 Miscellaneous


The current legislative and regulatory regime is viewed as robustand it is well regarded internationally. Consequently, there are noimmediate plans to reform it in any significant way.

9.2 Please mention any other issues of particular interest inCyprus not covered by the above.

The Protection of Competition Law 13(I)/2008 has only recentlycome into effect and has repealed previous competition lawlegislation to bring competition law into line with EU regulations,directives and policy. The system of individual negativecertification by which the CPC could permit and declare legal, onan individual basis only, an enterprise agreement or a category ofagreements that would otherwise be illegal under the provisions ofsection 4, has now been abolished. The CPC will only examineagreements in the course of other proceedings. This effectivelymeans that firms are now responsible for assessing their ownbehaviour and ensuring that it is in line with the relevant provisionsof the Competition Law. The recent law has also increased theCPC’s powers to search premises and allows police assistance insuch cases. In addition, it has also introduced the concept of leniency into itslegislation, directly referring to the CPC’s power to reduce or to notimpose fines on companies that cooperate and provide importantand relevant information on infringements of competition law.Prior to this legislation, leniency was only offered throughregulations issued by the CPC, not through legislative provisions.

WWW.ICLG.CO.UK51


Cyp

rus

Elias Neocleous

Andreas Neocleous & Co. LLC Neocleous House195 Archbishop Makarios III AvenueP O Box 50613, Limassol, CY-3608Cyprus

Tel: +357 25 110 000Fax: +357 25 110 001Email: [email protected]: www.neocleous.com

Elias Neocleous is a partner in Andreas Neocleous & Co. LLC andhead of the firm’s company and commercial department. Hespecialises in large cross-border investment projects and hasextensive experience of advising clients and representing thembefore the Commission for the Protection of Competition. Eliasgraduated in law from Oxford University in 1991 and is a barristerof the Inner Temple. He was admitted to the Cyprus Bar in 1993.

Eleana Spyris

Andreas Neocleous & Co. LLC Xenios Business Center Office 603 Archbishop Makarios III AvenueP.O. Box 26821, Nicosia, CY-1648Cyprus

Tel: +357 22 376 868Fax: +357 22 376 644Email: [email protected]: www.neocleous.com

Eleana Spyris is an associate in the Nicosia office of AndreasNeocleous & Co. LLC. Born in Australia, she graduated in law fromthe University of Sheffield in 2002 and obtained an LL.M inInternational Law from the University of Bristol in 2005. She wasadmitted to the Cyprus Bar in 2006.Eleana’s main areas of practice are competition and intellectualproperty law, and she has successfully dealt with many applicationsto, and negotiations with, the Commission for the Protection ofCompetition on behalf of clients of Andreas Neocleous & Co.

Andreas Neocleous & Co. LLC is among the largest law firms in the South-East Mediterranean region, and is generallyregarded as the leading law firm in Cyprus.

Headquartered in Limassol, Cyprus’s commercial and shipping centre, it has offices in Nicosia and Paphos in Cyprusand overseas offices in Russia, Belgium, Hungary, Ukraine and the Czech Republic. Its network of more than 100 toplawyers and tax consultants, all of whom are fluent in English as well as at least one other language, has extensiveglobal experience, making Andreas Neocleous & Co. a full-service firm capable of advising on all aspects of internationallaw.

Andreas Neocleous & Co has a specialist department dealing with competition law and has successfully dealt withmany applications to, and negotiations with, the Commission for the Protection of Competition on behalf of clients ofthe firm.


52

Chapter 10


bpv Braun Haskovcova s.r.o.

Czech Republic



Being a Member State of the European Union, in the CzechRepublic besides national law, one must always consider theprovisions of the EC Treaty (Art. 81), the relevant regulations,softlaw and the case law of the European courts. Since 2001, Czech Antitrust law is regulated by Act No 143/2001Coll. (hereinafter the “Act”) which, besides the prohibition ofcartels, is the basis for fines. The new Criminal Code probably tobe voted for by the Czech Parliament in 2009 and to enter into forcein course of 2010 provides in addition for criminal sanctions forvarious forms of horizontal hard core cartels. Private enforcementwould be governed by civil law, in particular the Civil Code and theCommercial Code.


The Act contains in Sects. 3-7 the material provisions for cartels.Sect. 3 para 1 is almost identical to part of Art. 81 EC Treaty,declaring agreements between competitors, decisions of theirassociations as well as concerted practices to be prohibited andinvalid unless an exemption exists in the law or is granted by theCzech Office for the Protection of Economic Competition (the“Office”). Para. 2 contains a non-exhaustive list of six areas ofarrangements, para. 4 excludes some agreements such as leading toimprovements of the production, etc.Block exemptions are provided for in Sect. 4, at present only theEU-exemptions apply. The distinction between vertical andhorizontal agreements is provided for in Sect. 5, de minimisregulations are contained in Sect. 6 but do not apply to hard corecartels.


The Office with its seat in Brno is the competent authority forenforcing the Act but with no competences under civil or criminallaw. Besides, private enforcement in front of civil courts is still arather theoretic possibility. The future will tell to what degreecriminal enforcement will play a role.


The Office may start proceedings at its own motion, for instanceinformation received through a sector enquiry, through the ECN orat the motion of third parties. The Office regularly performs dawnraids, both for violation of European, as well as for violation ofCzech antitrust law.Most cases would, however, be started with a letter from the office,at a later phase summing up results in a more formal as statementof objections. The parties concerned usually have sufficient time toanswer; extension of terms is usually granted. During this phase,the Czech Office has a long standing practice of competitionadvocacy and the possibility to agree on a settlement (applied forthe first time in Summer 2008). The parties also have thepossibility to offer commitments during this phase.The proceedings will end with a decision, possibly imposing a fine,prohibiting performance of an agreement or continuation of apractice, the latter is also possible during the procedure. It ispossible to appeal; the first review will be done by the Chairman ofthe Office. The last years have shown a comparatively high numberof successful administrative complaints, even in the mostspectacular antitrust cases.


A certain exemption for agreements in the agricultural sector iscontained in Section 6.

1.6 Is cartel conduct outside the Czech Republic covered bythe prohibition?

Czech antitrust law follows the effects principle meaning that it coversforeign country circumstances only if they lead to an actual orpotential disturbance of the Czech market, sect. 1 para. 5 of the Act.




Dagmar Bicková

Arthur Braun


Order the production of specific documents orinformation Yes Not yet

applicable

WWW.ICLG.CO.UK53


Cze

ch R

epub

lic

bpv Braun Haskovcova s.r.o. Czech Republic



The new criminal provisions, should they enter into effect in 2010,will show how they are to be used parallel to the Office’s powers.At the beginning we assume that criminal proceedings will only beled subsequently, once a cartel has been established by the Office.


In criminal proceedings general surveillance powers would beallowed under certain circumstances.


There are no other significant powers of investigation.


Teams from the Office (possibly together with EU investigators)will carry out the investigation; a short waiting period might begranted.


In-house legal advice is not protected; communication with externallawyers is protected. Nevertheless we recommend having themsufficiently marked.


There are no other material limitations.


Fines of up to CZK 300,000 (about EUR 12,000) or 1% of the lastannual worldwide turnover may be imposed, also repeatedly (Sect.22 para a)). The Office has announced the intention to increase useof these fines.



The maximum fines imposed for cartels may be up to CZK 10 Mil.(EUR 400,000) or 10% of the last annual worldwide turnover of theundertaking involved. In the last years, the amount of fines hasbecome quite high but by far not all fines stayed after courtinvestigation.


Until now, criminal liability of individuals breaching the Act hasbeen a merely theoretical issue. Should the new Criminal Act withthe wording as of the draft approved in the first reading byParliament in 2008 enter into force, price fixing, market sharing orentering into another agreement distorting the competition will be acriminal act with a maximum jail penalty of 8 years, Sect. 246Criminal Code. Nevertheless, in addition, one would have to consider the unlimitedcivil law liability, both of board members as well as employeesacting with intent towards their companies/employer.


An objective limitation period of 10 years from the breach is to beconsidered together with a subjective limitation period of threeyears following awareness of the breach by the office.


With the possibility of criminal prosecution for individuals, it couldbe a successful tactic in order to obtain better cooperation to offersuch reimbursement of legal costs to the employee, nevertheless,both under Czech corporate governance rules as well as the tax law,it would be a doubtful act and not tax-deducible. Bearing ofpenalties is not possible (unless a gentlemen’s agreement pays apremium to the employee).



A prior leniency programme dating from 2001 and covering alsovertical agreements has been considered to be largely unsuccessful.In June 2007, the Office announced a new leniency programmelargely drawing from the ECN Model Leniency Programme forhorizontal agreements only, including distinction between Type Iand Type II leniency and providing for full immunity or finereductions of up to 50%. Most features are very similar to theEuropean Programme, for instance the ringleader exemption, the


Carry out compulsory interviews with individuals Yes Not yetapplicable

Carry out an unannounced search of businesspremises Yes Not yet

applicable

Carry out an unannounced search of residentialpremises Yes* Not yet

applicable


Yes Not yetapplicable

Right to retain original documentsYes (but not the prac-tice)

Not yetapplicable







Cze

ch R

epub

lic


obligation to cooperate fully and to terminate the participation inthe cartel unless otherwise agreed with the Office.Several applications have been filed in the meantime and leniencyis becoming a more common consideration among the Czechantitrust community.The application may be filed electronically with qualified signature,in writing or orally. Fax applications must be confirmed in writingwithin 5 days from the filing in order to have the desired effect. Thedate and time of the received application is confirmed by the Office.Should there be aspects of cartels reaching beyond the CzechRepublic into other EU countries, a summary application(“souhrnná zádost”) is sufficient if the applicant for Type IAleniency files a full application with the European Commission.


Yes (2.2.4 of the programme), but the decision to grant a “marker”lies fully at the discretion of the Office, as does the duration givento the applicant for providing information and proofs.The Office also allows for a no-name discussion of a cartel and forthe proofs and information to be provided by the potential applicantin hypothetical form (usually with a lawyer) without disclosing thename of the applicant (2.2.3 of the programme); this discussion willnot grant a marker. Moreover, the information that must beprovided is already so extensive that usually one would recommenda fast application for obtaining a marker.


The Office is fully aware of Discovery problems and will acceptoral deposits to be recorded.


As soon as the statement of objections is issued to the other partiesof the cartel, they will learn about the application. They will alsohave access to the files once proceedings have been officiallystarted but not to the degree the information has been marked as abusiness secret. The Office will also inform the other members ofthe ECN about the ongoing proceedings.The Office states clearly that it cannot protect its files if they are tobe handed over to a court of investigators in criminal and civilprocedures.


Cooperation must be provided through the entire proceedings untillegal force of the final decision.


There is no official policy.



Even though many international companies have some procedures,the law does not provide for them.



As described in question 1.4 above, a long practice of competitionadvocacy as well as settlement procedure exists.

7 Appeal Process


It is possible to appeal; the first review will be done by theChairman of the Office if the appeal is filed within 15 days fromdelivery of the decision to the undertaking concerned. Such appealhas a suspensive effect. In the last years, there were several casesof fines being reduced already in this phase. Fines must be paidafter the appeal decision by the Chairman.The last years have also shown a comparatively high number ofsuccessful administrative complaints, even in the most spectacularantitrust cases. Such complaint must be filed within two monthsfrom delivery of the Chairman’s decision.The court decision itself can be challenged by so-called “kasacnístiznost” to the Supreme Administrative Court in Brno within 2weeks from the delivery of the court decision. Finally, also in antitrust cases, constitutional complaints have beenfiled to the Constitutional Court; the term would be 60 days fromdelivery of the decision by the Supreme Administrative Court.


Witnesses will be heard, even though cross-examination, as inAmerican procedural law, is rare.

8 Damages Actions


As there are no rules yet in civil procedure law for civil damageactions as proposed by the European Commission’s White Book,nor specialist courts for such issues, the general rules will apply.The plaintiff will have to pay the court fee in the amount of 4% ofthe value as well as his lawyers’ costs. Generally, the court fee willbe fully reimbursed by the losing party to the extent it lost the case.Costs for legal representation, only to the amount provided by theexisting legislation, usually considerably lower than the feescharged by international law firms, will also be borne by the losingparty.

WWW.ICLG.CO.UK55


Cze

ch R

epub

lic



Consumer organisations may also file for representative claims inunfair competition and some consumer claims.


In Commercial relations, an objective prescription period of 10years and a subjective period of four years apply.


The general rules are described in question 8.1.


As of December 2008, no successful cases of private enforcementof civil damages for cartel conduct in Czech courts have beenreported.

9 Miscellaneous


Major changes may be expected in private enforcement, followingthe discussions after the European Commission’s White Book. Forthe time being, private enforcement is not a strong deterrant forapplying under the Czech programme. Mention has already beenmade above of the probable introduction on certain hard core cartelconduct as a criminal act.

9.2 Please mention any other issues of particular interest inthe Czech Republic not covered by the above.

The recent introduction of criminal liability for certain hard corecartels will certainly change the tactics in cartel cases. The nextyears will show - provided that the Criminal Act will be passed asit stands in December 2008 - how the complex issues involved willbe dealt with.

Arthur Braun

bpv Braun Haskovcova s.r.o.Palác Myslbek, Ovocný trh 8CZ-110 00 Prague 1Czech Republic

Tel: +420 224 490 000Fax: +420 224 490 033Email: [email protected]: www.bpv-bh.com

Arthur Braun studied law and political sciences at the University ofPassau, Germany, (graduation 1992, admitted as lawyer 1995); hewas also the first Western student after the revolution at CharlesUniversity in Prague. Since 1999, he has been lecturing on CentralEuropean business law at a university in Germany, and since 2001also at a Czech MBA School.Prior to founding bpv BRAUN HAŠKOVCOVÁ as part of bpv LEGALfocusing on the CEE region, he was a partner in one of the mostreputable international law firms, based in Prague and Munich.Apart from competition law (focusing in particular on merger controland compliance issues), his practice covers M&A and commercialcontracts in a wide field of industries. Arthur has published andappeared as a speaker on many occasions, not only in competitionlaw. He is a member of the IBA Antitrust committee (countryrapporteur for the Czech Republic). His working languages areEnglish, German, Czech and French.

Dagmar Bickova

bpv Braun Haskovcova s.r.o.Palác Myslbek, Ovocný trh 8CZ-110 00 Prague 1Czech Republic

Tel: +420 224 490 000Fax: +420 224 490 033Email: [email protected]: www.bpv-bh.com

Dagmar Bickova studied law at University Palackeho, CR, where shegraduated in 2002.She not only focused on law but she also started economic studiesat the School of Economics Prague in 2002. Her strong interest ineconomic/business matters combined with a legal background leadto her being an advisor to a merger of two major Czech banks thattook place in 2001/2002.Later she took part in various international projects underPricewaterhouseCoopers. In 2006 she joined a local law firmfocusing on pharmaceutical and competition law. Since then shehas appeared on numerous occasions at various counsellingconferences and established cooperation with professional journalsas an external editor. In 2008 she joined bpv BRAUNHAŠKOVCOVÁ where she continues to practice the abovementioned legal fields from a variety of legal perspectives.Her working languages are English, German and Czech.

bpv BRAUN HAŠKOVCOVÁ is a full service law firm founded in 2006 by two former partners of an international lawfirm with, at present, more than 22 advisors. bpv Braun Haškovcová provides its clients with the solutions that theyneed in cross-border and domestic transactions alike, and covers a range of activities from acquiring a business andmarket entry to regular support in everyday business life. Advice is also given on Slovak law. Key practice areas includeM&A, real estate law, competition law, banking & finance, European law and tax advice. Thanks to the closecooperation and intensive training within bpv LEGAL, with offices in Brussels, Bucharest, Budapest, Prague, andVienna, we are able to provide seamless service throughout the entire Central and Eastern European region with astrong focus on EU law, in particular competition matters.

56

Chapter 11


Plesner

Denmark



Section 6 and Section 23a of the Danish Competition Act is thebasis of cartel prohibition.


According to Section 6 any conclusions of agreements betweenundertakings etc., which have as their direct, or indirect object oreffect to restrict competition shall be prohibited. The prohibition applies correspondingly to decisions made by anassociation of undertakings and to concerted practices betweenundertakings.


The Competition Authority and the Public Prosecutor enforce cartelprohibition. The Danish Competition Authority (“DCA”) candecide that an infringement has occurred and can then issuebehavioural orders. The DCA consists of the Directorate and theCouncil. Investigations are carried out by the Directorate; whiledecisions are taken by the Council. The DCA cannot imposeadministrative fines or any other penal sanction. Sanctions areimposed by the court acting upon a charge brought by the publicprosecutor for serious economic crimes. However, the matter maybe settled out of court by either the public prosecutor or the DCAwith the explicit authorisation of the public prosecutor imposing afine, provided that the infringer pleads guilty and accepts this fine.The public prosecutor will often be requested by the DCA to bringcharges subsequent to a decision by the Competition Councilfinding that an infringement has taken place. However, the DCAmay decide to alert the public prosecutor without bringing thematter before the Council.


The Directorate can, on behalf of the Council, initiate aninvestigation ex officio, on the basis of a notification or acomplaint, or at the request of the European Commission or othercompetition authorities in the European Union.

Once an investigation is initiated the Directorate may demand allthe information that it believes necessary for deciding whether theprovisions of the Danish Competition Act or the EC Treaty’s Article81 apply to a certain situation. The Directorate may also, on thebasis of a previously obtained court order, carry out dawn raids.Before a final decision is made, an undertaking involved in aspecific case may have a right to be heard with regard to factual andlegal issues concerning the Directorate’s draft decision.The Council decides on major and principal cases on the basis ofthe draft decisions made by the Directorate. The undertakingconcerned in a specific case has a right to participate in a short oralhearing at the meeting where the Council decides whether the Actor eventually the EC Treaty’s Article 81 has been infringed.As mentioned above, the DCA cannot - by itself - imposeadministrative fines or any other penal sanctions. If the DCA decidesthat the Act or the EC Treaty’s article 81 have been infringed to anextent that requires penal sanction, the public prosecutor will berequested by the Directorate to bring charges following a decision bythe DCA. The public prosecutor or the DCA if authorised by thepublic prosecutor may subsequently propose a settlement whereby theinfringer pleads guilty and accepts to pay the fine. Otherwise thesecond step after an administrative decision is a penal case before thecourts initiated by the public prosecutor.


No, there are no sector-specific offences or exemptions.

1.6 Is cartel conduct outside Denmark covered by theprohibition?

Yes, if it has an impact on the territory of Denmark.




Gitte Holtsø

Christian Karhula Lauridsen


Order the production of specific documents orinformation Yes Yes*

Carry out compulsory interviews with individuals Yes* Yes*


WWW.ICLG.CO.UK57


Den

mar

k

Plesner Denmark



There are no unusual features of the investigatory powers referredto in the summary table.


No, there are no general surveillance powers in Denmark.


In connection with the investigation, the Competition Authoritymay request that individuals subject to the investigation present thecontents of their pockets, bags, etc. with a view to enabling theCompetition Authority to acquaint itself with the contents and ifnecessary to take copies of it. The investigation may extend to thebusiness premises of the entity including means of transportation,but not to private homes.


The Danish Competition Authority carries out searches on businesspremises. Under current practice the Authority does not have towait for the legal advisors to arrive. In criminal cases the police carry out searches. Subject to a courtorder, the police may search residential premises. The police arenot unwilling to wait for the legal advisor to arrive.


No, in-house legal advice is not protected by the rules of privilege.


There are no other material limitations of the investigatory powersto safeguard the rights of defence of companies and/or individuals.


If the investigation is obstructed, the police will be called. If thecompany continues to obstruct the investigation, criminal sanctionsmay be imposed. However, criminal sanctions have never beenused in practice.



The sanctions for companies are criminal fines.


The sanctions for individuals are criminal fines.


The DCA cannot impose administrative fines or any other penalsanctions. Sanctions are imposed by the court acting upon a chargebrought by the public prosecutor for economic crimes. Thelimitation period for penal sanctions is 5 years from the day theconduct has ceased.


The fines are imposed on individuals; there is no further regulation.



Yes, according to Section 23a anyone acting in breach of Section 6or Article 81 (1) of the EC Treaty by entering into a cartelagreement shall upon application be granted immunity/reduction ofthe fine that would otherwise have been imposed for theirparticipation in the cartel.The following conditions must be complied with to qualify forimmunity from fines:

The applicant must be the first to approach the authoritiesabout the cartel.The applicant shall provide information about the cartel notpreviously in the possession of the authorities.The information shall give the authorities occasion either toundertake an inspection or to confirm that there has been aninfringement of the Danish Competition Act in form of acartel.The applicant shall cooperate with the authorities throughoutthe procedure.The applicant shall cease participating in the cartel at thetime of the application for leniency.The applicant must not have taken steps to coerce one ormore undertakings to join the cartel.

The following conditions must be complied with for a reduction offines to be granted:

The information provided must contain significant added


Carry out an unannounced search of residentialpremises No Yes*


Yes* Yes*

Right to retain original documents No Yes*


Yes* Yes*


Yes* Yes*



Den

mar

k

Plesner Denmark

value for the authorities as compared to the informationalready in the possession of the authorities. The applicant shall cooperate with the authorities throughoutthe procedure.The applicant shall cease participation in the cartel at thetime of the application for leniency.The applicant must not have taken steps to coerce one ormore undertakings to join the cartel.


No, there is no “marker” system in Denmark.


Yes, applications can be made orally.


The application will be treated confidentially during the handling ofthe case. However according to the Danish Competition Act theDanish Competition Authority is obliged to publish a summary ofcases in which an undertaking has accepted a fine.


The continuous cooperation requirement ceases to apply whenleniency (immunity and reduction of fines) is no longer available toundertakings/persons.


No, there is no ‘leniency plus’ or ‘penalty plus’ policy in Denmark.



Application from a previous employee: the application only appliesto the person concerned.Application from a present employee: the application only appliesto the person concerned unless the employee has an authorisation tosign for the undertaking and this authorised person must expresslystate that it is the undertaking applying for leniency.An application from an undertaking: automatically covers allpresent and previous members of the board, managing directors andother employees.



There are no specific PB-procedures. However, The DanishCompetition Act, Section 23b and the Danish Administration ofJustice Act, Section 936 contain certain provisions on settlementprocedures.

7 Appeal Process


A decision by the Competition Council can be appealed to theCompetition Appeal Board, and thereupon be brought before thenormal courts for juridical review. The Maritime and CommercialCourt has jurisdiction to hear competition cases. There are no(other) special rules regarding the Appeal Procedure. The Maritimeand Commercial Court’s judgments can be appealed to the SupremeCourt, on both facts and law.


Yes, if the matter is brought before the courts. There is no traditionfor witness statements at the Competition Appeals Tribunal

8 Damages Actions


There are no specific procedures. A case will follow the normalrules of a civil procedure.


Yes, class-actions were introduced in Denmark as of 1 January2008.


The limitation period is three years from the date of theinfringement (formally five years and the five-year period remainsapplicable in a transitory period) provided, however, that thelimitation period does not start to run before the infringementbecomes known to the claimant. Furthermore, a special ruleprovides that the limitation period is suspended during anadministrative procedure related to the same infringement, allowinga claimant in an administrative procedure to await the outcome ofthe administrative procedure before deciding to bring a privateaction for damages without risking of finding the claim barred bylimitation. This special provision is recently enacted and has thedeclared purpose of easing private antitrust actions by victims of acompetition law infringement, revealing the private claimant to leanon the prior administrative procedure.

WWW.ICLG.CO.UK59


Den

mar

k

Plesner Denmark


The main rule is that the losing party reimburses the winning partyfor legal costs; however, the costs are not based on the actualexpenses, rather by a norm set by the court. Typically the winningparty will not recover his full costs.


Yes, but only one reported case on cartels. However, some caseshave been settled, successfully for the plaintiff.

9 Miscellaneous


Leniency has just been introduced as of July 2007. Furthermore, aspecial rule on suspension of time bar of civil actions for damageswhile the DCA investigates a matter has been introduced. Finally,class-actions have been made possible by a revision of theprocedural code.

9.2 Please mention any other issues of particular interest inDenmark not covered by the above.

There are no other issues of particular interest in Denmark withrespect to cartels and leniency.

AcknowledgmentThe authors would like to acknowledge the assistance of theircolleague, Jacob Borum, in the preparation of this chapter.

Christian Karhula Lauridsen

Plesner Amerika Plads 37DK-2100 Copenhagen ØDenmark

Tel: +45 3312 1133Fax: +45 3312 0014Email: [email protected]: www.plesner.com

Christian Karhula Lauridsen’s experience in competition lawincludes all relevant areas like public procurement, merger control,strategic advice and compliance (advice on agreements andconduct), dawn raids, complaints, cases involving damages,criminal cases as well as state aid and liberalisation. ChristianKarhula Lauridsen represents clients in cases involving the DanishCompetition Authority, the Danish Competition Council and theDanish Competition Appeals Tribunal as well as before the Danishcourts and the courts of the European Community (the EuropeanCourt of Justice and the Court of First Instance).From 1996 to 1997 Christian Karhula Lauridsen was stationed atthe group secretariat of Carlsberg where his primary area of workwas competition law. In addition, from 1997 to 2002 ChristianKarhula Lauridsen was a part-time lecturer in Competition law atthe Law Department of the Copenhagen Business School. ChristianKarhula Lauridsen also manages the secretariat function of theDanish Competition Law Society (www.konkurrenceretsforeningen.dk). Christian Karhula Lauridsen lectures regularly atnational and international conferences on the above subjects.

Gitte Holtsø

Plesner Amerika Plads 37DK-2100 Copenhagen ØDenmark

Tel: +45 3312 1133Fax: +45 3312 0014Email: [email protected]: www.plesner.com

Gitte Holtsø is an EU and competition law specialist. Competitionlaw is a particular focus area and her experience includes advice onmerger control, strategic advice and compliance, dawn raids,complaints, damages, criminal cases, state aid and liberalisation.Gitte Holtsø represents clients in cases involving the EuropeanCommission and the Danish competition authorities as well as theDanish courts. Gitte Holtsø has lectured in Competition Law at theUniversity of Copenhagen. Another area of expertise is publicprocurement. Gitte Holtsø renders advice to contracting entities,consultants and suppliers within all fields of the EU directives andDanish tender rules. Gitte Holtsø has represented clients in casesinvolving complaints before the Danish Complaint Board for PublicProcurement, the Danish courts and the Competition Authority. Gitte Holtsø was educated at the Danish Ministry of Justice. Shewent on to study EU law and competition law at the University ofCambridge. She has qualified as an English solicitor.

With a total staff of 330, including 190 lawyers, Plesner is one of Denmark’s leading international law firms withexpertise in all areas of commercial and public law. Plesner’s vision is to be the best law firm in Denmark - the naturalchoice for any Danish or foreign business needing legal advice on commercial matters. Therefore, we constantly focuson quality, specialisation and constant development of know-how, continuity, enhancement of international relations,improvement of our working environment and recruitment.

60

Chapter 12


Attorneys at law Luiga Mody Hääl Borenius

Estonia



In general, the cartel prohibition is criminal. Punishment for acartel is stated in Article 400 of Estonian Penal Code (hereinafter“Penal Code”). However, the legal definition and prohibition of a“cartel” is stated in Estonian Competition Act (hereinafter“Competition Act”) Article 4.


Competition Act Article 4 states the following - Agreementsbetween undertakings, concerted practices and decisions byassociations of undertakings which have as their object or affect therestriction of competition are prohibited, including those which:1) directly or indirectly fix prices or any other trading

conditions, including prices of goods, tariffs, fees, mark-ups,discounts, rebates, basic fees, premiums, additional fees,interest rates, rent or lease payments applicable to thirdparties;

2) limit production, service, goods markets, technicaldevelopment or investment;

3) share goods markets or sources of supply, includingrestriction of access by a third party to a goods market or anyattempt to exclude the person from the market;

4) exchange information which restricts competition;5) agree on the application of dissimilar conditions to

equivalent agreements, thereby placing other trading partiesat a competitive disadvantage; and

6) make entry into an agreement subject to acceptance by theother parties of supplementary obligations which have noconnection with the subject of such agreement.

Penal Code Article 400 states the following - Agreements, decisionsand concerted practices prejudicing free competition, whichdirectly or indirectly determine price or other trading terms withrespect to third persons, or restrict production, provision ofservices, the goods market, technical progress or investment, dividea goods market or source of supply, as well as other agreements,decisions and concerted practices which damage competition, arepunishable by a pecuniary punishment or up to three years ofimprisonment. The same act, if committed by a legal person, ispunishable by a pecuniary punishment.


The cartel prohibition is enforced by the court.


First of all, the Competition Board starts an administrativeprocedure on its own initiative or by an application from a thirdparty. The Competition Board may ask for documents from theconcerned parties, ask the representatives for an interview, and/orsearch through the place of business. In case the CompetitionBoard comes to a conclusion that there are aspects of a cartel, thenthe information is forwarded to the Prosecutor’s Office who thenstarts a criminal procedure. However, in the criminal procedure, theProsecutor leads the procedure while the Competition Board is stillthe body conducting the procedure. When the Prosecutor has cometo a conclusion that there are traces of a cartel and it has evidencesto prove it, it shall forward the file to the court and the criminalcourt procedure shall be commenced. The court procedure endswith a criminal conviction or with a judgment of acquittal.


There are no sector-specific offences or exemptions.

1.6 Is cartel conduct outside Estonia covered by theprohibition?

In case a cartel conduct affects competition in Estonia, it shall becovered by the Estonian cartel prohibition.




Kätlin Kiudsoo

Kaja Leiger





WWW.ICLG.CO.UK61


Esto

nia

Attorneys at law Luiga Mody Hääl Borenius Estonia


There are no specific or unusual features of the investigatorypowers referred to in the summary table.


The Prosecutor may use certain surveillance powers (bugging,overhearing phone conversations, imitation of a crime) by courtauthorisation.


There are no other significant powers of authorisation.


An official or representative of the Competition Board has the rightto inspect the seat and place of business of an undertaking,including the enterprises, territory, buildings, rooms and means oftransport of the undertaking, both during working hours and at anytime the place of business is used. With the consent of theundertaking, the seat, place of business or enterprises of theundertaking may also be inspected at any other time.An inspection shall be conducted with the knowledge of theundertaking, or a representative or employee thereof, and they havethe right to be present during the inspection. Although a companymay have a legal counsel during the inspection, there is norequirement by law that a Competition Board’s official must waitfor the legal counsel of the company to arrive.


In-house legal advice is not protected by the rules of privilege.


The Competition Board does not have the power to investigateprivate residential places or other private entities of employees of acompany under investigation.


The Competition Board may prescribe an injunction for theobstruction of investigations. In case the injunction is not followed,the Competition Board has a right to impose a penalty payment for aphysical person in the sum of up to EEK 50,000 (approx. EUR 3,196)and for a legal person up to EEK 100,000 (approx. EUR 6,391).However, it has not been reported that such sanction possibilitieshave been used by the Competition Board so far.



The sanction for a legal person for concluding/participating in acartel is a pecuniary punishment in the sum of up to EEK250,000,000 (approx. EUR 15,977,912).


The sanction for an individual for concluding/participating in acartel is either a pecuniary punishment of up to 500 daily rates or upto three years of imprisonment. The court shall calculate the dailyrate of a pecuniary punishment on the basis of the average dailyincome of the convicted offender. Please note that the court mayreduce the daily rate due to special circumstances or increase it onthe basis of the standard of living of the convicted offender.


The general rule is that no one shall be convicted of or punished forthe commission of a criminal offence of the second degree if theterm of five years has expired between the commission of thecriminal offence and the entry into force of the corresponding courtjudgment. However, the term may be prolonged in case thelimitation is interrupted. In case the basis of interruption of thelimitation period falls off, the limitation period starts again with anexception that not more than 10 years have passed between thecommission of the offence and the entry into force of thecorresponding court judgment.


A company may pay the legal costs and/or financial penaltiesimposed on a former or current employee in case such an action isacquired to the company itself, not only to the employee as aphysical person.



First of all, conclusion of/participation in a cartel is punishable undercriminal law in Estonia, and there is no such leniency programme asknown in European Commission’s practice and in some otherEuropean Union Member States. Thus, the Estonian CompetitionBoard has not developed a clearly defined leniency policy with regardto information provided by participants of cartels.


Carry out an unannounced search of residentialpremises No Yes


Yes Yes

Right to retain original documents No Yes


Yes Yes


No No



Esto

nia


However, Estonian Code of Criminal Procedure (hereinafter“CCP”) contains provisions allowing the Prosecutor’s Office, thePublic Prosecutor’s Office or the court (at the application of theProsecutor’s Office) to terminate the criminal proceedings initiatedagainst the suspect (this procedure is hereinafter also referred to asthe “so-called ‘leniency’”).Under Article 202 CCP, the Prosecutor’s Office or the court at therequest of the Prosecutor’s Office (depending on the gravity of theviolation) may terminate the criminal proceedings regarding acrime of the second degree against the suspect provided that:i) the guilt of the suspect is negligible;ii) the suspect has remedied/started to remedy the damage

caused by the offence and has paid/assumed an obligation topay the costs relating to the criminal proceedings;

iii) there is no public interest in the continuation of the criminalproceedings; and

iv) the suspect consents to the termination.Alternatively, under Article 205 CCP, the Public Prosecutor’sOffice may terminate the criminal proceedings if the suspect hassignificantly facilitated the ascertaining of facts relating to a subjectof proof of a criminal offence which is important from the point ofview of public interest in the proceedings and if, without theassistance, detection of the criminal offence and collection ofevidence would have been precluded or especially complicated.There is also a Chief Public Prosecutor’s formal guidance nr RP-1-4/05/8 dated 20 December 2005 (hereinafter the “Guidance”) onhow to apply Articles 202 and 205 CCP. At present there are no articles or guidelines which state clearly thata suspect who is first to turn in a cartel receives immunity or thecriminal proceeding in terms of the suspect are terminated. TheGuidance only states that there is no public interest if the suspectinforms the authorities of the other participants of a cartel, but itdoes not say explicitly that the criminal proceeding towards thatperson is terminated.Under Article 205 CCP, a suspect reporting the cartel to theauthorities after the initiation of an investigation is eligible, at thediscretion of the Prosecutor, for termination of criminal proceedingsif the suspect has significantly facilitated the ascertaining of factsrelating to a subject of proof of a criminal offence, which isimportant from the point of view of public interest in theproceedings and if, without his/her assistance, detection of thecriminal offence and collection of evidence would have beenprecluded or especially complicated. Under Article 205 CCP, thecontent and quality of the information provided is more importantthan the time of its delivery.One of the conditions for the so-called “leniency” as per theGuidance (i.e., relating to Article 205 CCP), is that the suspect is thefirst to come forward to the authorities, thus providing theauthorities with information not previously obtained from othersources. “Other sources” implies also information obtained throughthe authorities’ own investigation. Under Article 205 CCP, thecontent and quality of the information provided and the extent ofthe suspect’s cooperation is more important than the time of theinitial contact with the authorities.It is important to note one more time that the so-called “leniency”programme offered by the Estonian legislation is not the same aspracticed in other Member States of the European Union becauseEstonia has not incorporated the European Union leniency programmeinto its legislation. In fact, the above-mentioned possibilities oftermination of criminal proceedings have, to date, never been used byparticipants of a cartel to inform the authorities in exchange fortermination of criminal proceedings, making the practicalities ofobtaining the so-called “leniency” in Estonia quite unclear.


There is no “marker” system in Estonia.


No formalities are required for the application for the so-called“leniency”, except that the application must be in Estonian.At present, the Estonian law does not provide for any security thatif the application for the so-called “leniency” is filed, then thesuspect shall receive it. It remains in the discretion of theProsecutor whether he decides to give “leniency” by terminating thecriminal proceeding against the suspect or not. While in theEuropean Union leniency programme, the applicant is insured thatif he fulfils the leniency conditions, he receives the immunity orreduction of fines, then the Estonian law does not give any suchsecurities to the suspect. Thus, it is difficult to give any informalguidance on submitting the application as it is not guaranteed thatthe “leniency” is applied by the Prosecutor.The procedures surrounding the current so-called “leniency”programme under Estonian law have not been described in detail bythe authorities. However, it appears as if once the authorities havebeen approached by the suspect, full cooperation must be provided,starting with the suspect revealing the identity of the otherparticipants of the cartel and including handing over of allinformation at his disposal.


Principally, cooperating suspects can demand confidentiality withregard to their cooperation. However, since the suspect hascommitted the same criminal offence as the offence that is beingreported, procedures for protecting the identity of the witness wouldnot be applicable until the suspect has had the criminal proceedingsagainst him terminated. Also, since involvement in a cartel is acriminal offence in Estonia, other suspects would have the right toaccess the evidence provided against them.However, as the procedures surrounding the current so-called“leniency” programme under Estonian law have not been describedin detail by the authorities, it is not stated explicitly in any legal actthat there is an obligation to treat a so-called “leniency” applicationconfidentially.


According to the Guidance, as part of one of the requirements forobtaining the so-called “leniency” on the grounds of Article 202 CCP,the suspect must deliver all available information to the authoritiesand cooperate fully during the entire proceedings of the cartel.The requirement of “full co-operation” under Article 205 CCP isthought to be even more demanding for the suspect. Providedinformation must have significantly assisted the authorities,meaning that without the help of the suspect the criminal offence aswell as the collection of evidence would have been madeimpossible or significantly more difficult.According to the Guidance, under Article 205 CCP the suspect mustimmediately cease with any involvement in the cartel, unless it isrequired by the interest of the proceedings and then only with the

WWW.ICLG.CO.UK63


Esto

nia


permission of the authorities. Since the conditions for the so-called“leniency” under Article 205 CCP are much more difficult tosatisfy, as part of the cooperation requirement, one is led to believethat the suspect must end any involvement in the cartel immediatelyas a sign of good faith and willingness to cooperate with theauthorities.However, it appears as if once the authorities have been approachedby the suspect, full cooperation must be provided, starting with thesuspect revealing the identity of the other participants of the carteland including the handing over of all information at his disposal.


There is no “leniency plus” or “penalty plus” policy in Estonia.



In general, the employees or the company could benefit from theapplication for the so-called “leniency” in terms of termination ofthe criminal proceeding against the employee/company. Still, it hasto be kept in mind that at present the Estonian law does not providefor any security that if the application for “leniency” (termination ofcriminal proceedings) is filed, then the employee/company shallreceive it. It remains in the discretion of the Prosecutor whether hedecides to give “leniency” by terminating the criminal proceedingagainst the suspect or not. While in the European Union leniencyprogramme, the applicant is ensured that if he fulfils the leniencyconditions, he receives the immunity or reduction of fines, then theEstonian law does not give any such securities to the suspect.Under Penal Code, both legal and natural persons may be subject tocriminal sanctions for their involvement in a cartel. Thetermination of criminal proceedings against a legal person does notresult in the termination of criminal proceedings for a naturalpersons connected to it and vice versa.Since the so-called Estonian “leniency” policy does not distinguishbetween legal and natural persons, under Penal Code both groupsmay be subject to sanctions and the process for termination ofcriminal proceedings is the same with regard to both. In order forthe application provided by a natural person to cover also the legalperson to which he is connected, he/she must apply on behalf ofhimself as well as on the behalf of the legal person.



Article 2031 CCP states that if facts relating to a criminal offence inthe second degree which is the object of criminal proceedings areobvious and there is no public interest in the continuation of thecriminal proceedings and the suspect or the accused has reconciledwith the victim pursuant to the procedure provided for in Article2032 CCP, the Prosecutor’s Office may request termination of thecriminal proceedings by a court with the consent of the suspect oraccused and the victim. Article 2032 CCP stated that theProsecutor’s Office or court may, on the basis provided for in 2031

CCP, send the suspect or accused and the victim to conciliationproceedings with the objective of achieving conciliation betweenthe suspect or accused and the victim and remedying of the damagecaused by the criminal offence. The consent of the suspect oraccused and the victim is necessary for application of conciliationproceedings.There are no rules stating when the authorities should terminate thecriminal proceedings against the suspect who has satisfied theconditions under Article 202 or 205 CCP. The decision on thetermination of criminal proceedings with regard to the involvementin a cartel lies within the discretionary power of the relevantProsecutor.

7 Appeal Process


In criminal proceedings, if a party does not consent to the judgmentof the court of first instance, he has the right to file an appeal to thecircuit court (court of second instance).It is arguable whether it is possible to appeal the Prosecutor’sdiscretion not to terminate the criminal proceeding even though thesuspect has presented to the Prosecutor the necessary information,because the Prosecutor does not issue a special regulation forcontinuing the criminal proceeding, it only does a regulation forcommencing/terminating the criminal proceeding. If a suspect applies for the applicability of Article 205 CCP, then theProsecutor may do a written regulation for not applying Article 205CCP. Thus, it could be a possibility to appeal that decision inprocedural matters under Article 228 CCP.If a suspect applies for the applicability of Article 202 CCP, then theProsecutor may ask from the court to terminate the criminalproceedings under Article 202 CCP and, if the court then decidesnot to terminate the criminal proceeding, it could possibly appealsuch a court decision under Article 383 CCP. However, as therehave not been any Supreme Court decisions in regards of the above-mentioned situation, then it could be arguable whether it is possiblein practice to appeal the non-termination decision of the court.


The appeal process mentioned in question 7.1 does not allow for thecross-examination of witnesses.

8 Damages Actions


A person suffering losses as a result of cartel conduct has a right tofile a civil action before the termination of the examination by thecourt in the criminal procedure in the county court. If a court makesa judgment of conviction, the court shall satisfy the civil action infull or in part or dismiss or refuse to hear the action. If a courtmakes a judgment of acquittal, the court shall refuse to hear the civilaction. If the hearing of a civil action is refused, the victim shallhave a right to file the same action in the court in a civil procedurepursuant to Estonian Code of Civil Procedure.



Esto

nia



The procedural rules do not allow for class action or representativeclaims.


As for the civil action filed in a criminal procedure, the rule is thatit has to be submitted before the termination of the examination bythe court. In case the civil action is filed in a civil procedure, thelimitation period is three years as of the moment the entitled personbecame or should have become aware of the damage and of theperson obligated to compensate for the damage. However, a claimarising from unlawfully caused damage expires not later than 10years after performance of the act or occurrence of the event whichcaused the damage.


In general, the rule of the criminal procedure is that the costs offiling a civil damages action shall be paid in accordance withEstonian Code of Civil Procedure (except that no state fee has to bepaid on a civil action in criminal proceedings). According toEstonian Code of Civil Procedure, if the plaintiff’s action issatisfied in full or partially, the defendant shall be obliged to pay forthe plaintiff’s costs either in full or partially.


No such cases in regards of cartel conduct have been reported.

9 Miscellaneous


It can be noted that there are no specific developments in theimplementation of the European Union leniency programme inEstonia. Even more, the present so called “leniency” programmeoffered by the Estonian legislation is not used at all by theaccused/suspects because it does not give clarity if upon co-operation with the authority, the person receives immunity orreduction of sanctions.

9.2 Please mention any other issues of particular interest inEstonia not covered by the above.

No one has been reported to have informed the authorities of theexistence of a cartel in exchange for the so-called “leniency”(termination of criminal proceedings) under Estonian legislation. However, there was a case where a person informed the authoritiesof a bribe offer which proceeding instead turned into aninvestigation of a cartel. In the end, only the other party to theaccused cartel was accused of concluding a cartel while criminalproceedings were not started against the informer, another party ofthe accused cartel. Thus, it could be argued whether the informerwas relieved from criminal proceedings under the so-calledEstonian “leniency” policy or not or if the criminal proceedingsagainst the informer were ever started.

WWW.ICLG.CO.UK65


Esto

nia

Kaja Leiger

Attorneys at law Luiga Mody Hääl BoreniusKawe Plaza, Pärnu mnt 15Tallinn 10141Estonia

Tel: +372 6651 888Fax: +372 6651 899Email: [email protected]: www.lmh.ee

Senior associate Kaja Leiger is an expert on Estonian and Europeancompetition law. She is heading the firm’s Competition and Energypractice. Kaja Leiger has provided legal advice to variousenterprises that have a dominant market position and has acted asa legal counsel to companies on their transactions from thecompetition law perspective. Kaja Leiger has been engaged in mostof the well-known antitrust cases commenced and concluded inEstonia. In addition, she has organised competition compliancetraining programmes aimed at the firm’s clients. Kaja Leiger has also extensive expertise in counselling the clients onenergy matters. She has participated in most of the leading andprecedent renewable energy projects run in Estonia and acted aslegal counsel to various energy projects in disputes. Kaja Leiger hasbeen engaged in drafting legislation for regulating different aspectsof energy generation.

Kätlin Kiudsoo

Attorneys at law Luiga Mody Hääl BoreniusKawe Plaza, Pärnu mnt 15Tallinn 10141Estonia

Tel: +372 6651 888Fax: +372 6651 899Email: [email protected]: www.lmh.ee

Associate of the Office’s Transactions and Competition practiceKätlin Kiudsoo has specialised mainly in competition law, while alsopracticing corporate and contract law. She has acted as a legalcounsel to transactions related to mergers, divisions and possiblecompetition restricting. Kätlin Kiudsoo also advises renewableenergy companies in issues related to construction permits anddetail plans.Kätlin Kiudsoo holds a Master’s degree from University ofMaastricht in European Law and, prior to joining the firm, practicedlaw in Ministry of Foreign Affairs and Ministry of Justice.

Luiga Mody Hääl Borenius is one of the largest law firms on Estonian legal market with more than 35 top-tierprofessionals serving mainly corporate clients. The office provides a full range of legal assistance based on local lawas well as focusing on international transactions and contentious litigation. Founded in 1998, the firm has gained wide-ranging expertise counselling entrepreneurs operating in various activity areas including banking, media, agriculture,biotechnology, Internet, transit and industrial manufacture. The office’s membership in Borenius Group has profitedclients through easy access to Finnish, Latvian and Lithuanian know-how and integrated high-level legal services offeredby the Group’s 150 professionals in the offices of Helsinki, Tallinn, Riga and Vilnius.

English is the main working language of the office in addition to Estonian, Russian, and German.


66

Chapter 13


SJ Berwin LLP

European Union



Article 81 of the EC Treaty prohibits anti-competitive agreementsand arrangements between companies (such as cartel conduct)which may affect trade between EU member states. The prohibitioncovers both horizontal and vertical conduct. Article 81 onlyprovides for civil sanctions and not criminal sanctions and appliesonly to companies and not to individuals. However, nationallegislation may provide for parallel criminal sanctions forindividuals who participated in the cartel conduct (see, for example,the chapter on the UK).The concept of a company (or ‘undertaking’) for the purposes ofarticle 81 is defined broadly and can in principle cover any legal ornatural person engaged in economic or commercial activity. Also,the alleged activities do not necessarily have to involve cross-border trade. The Community Courts i.e. the Court of First Instance(the ‘CFI’) and the European Court of Justice (the ‘ECJ’) have heldin the past that activities which cover the whole territory of oneMember State are in principle capable of effecting trade betweenMember States.


Article 81(1) of the EC Treaty prohibits “all agreements betweenundertakings, decisions by associations of undertakings andconcerted practices which may affect trade between Member Statesand which have as their object or effect the prevention, restrictionor distortion of competition within the common market”. Article81(1) provides a non-exhaustive list of practices caught by theabove provision that includes:

price-fixing;output restrictions; andmarket-sharing;

Article 81(2) provides that any agreements or decisions prohibitedpursuant to article 81(1) shall be automatically void andunenforceable without the need for any act or finding of theEuropean Commission (the ‘Commission’) or any otherenforcement agency or court.Article 81(3) sets out certain exemption criteria from the generalprohibition under article 81(1). Agreements or arrangements,which may prima facie restrict competition, may be compatible

with the EC Treaty provisions and enforceable if they fulfil thefollowing three cumulative criteria:

they improve the production or distribution of goods orservices or promote technical or economic progress, whileallowing consumers a fair share of the resulting benefits; they do not impose on the companies concerned restrictionswhich are not absolutely necessary for the attainment of theabove consumer welfare enhancing objectives; andthey do not afford the undertakings concerned the possibilityof eliminating competition in respect of substantial part ofthe relevant products or services.

Article 1(2) of Council Regulation 1/2003 (‘Regulation 1/2003’)removes the old monopoly by the Commission to rule on whetherthe exemption criteria of article 81(3) apply. Instead, it establishesa system of ‘self-assessment’ under which companies and theirlegal advisors must now determine for themselves (and on the basisof Commission’s Guidelines on the application of Article 81(3))whether the exemption criteria apply. Where they apply, no priordecision to that effect by the Commission is required.However, price-fixing and market-sharing cartels and bid-riggingactivities (conduct the Commission refers to as ‘hard core’ cartelconduct) will never qualify for the above exemption. Further, theCommunity Courts have established that the Commission does notusually have to prove any actual anti-competitive effects toestablish an infringement of the cartel prohibition under article 81of the EC Treaty where it has evidence that the conduct had an anti-competitive ‘object’.


Regulation 1/2003 implements the general rules governing theenforcement of EC competition law in general and of article 81 inparticular. The principal body charged with the responsibility toenforce the cartel prohibition under article 81 of the EC Treaty isthe Commission and, more specifically, the Directorate-General forCompetition (‘DG COMP’). However, Regulation 1/2003 alsocreates enforcement rights for the national competition authoritiesof the EU member states (the ‘NCAs’). In particular, Regulation1/2003 establishes the following principal jurisdictional rules:

the Commission only applies EC competition law whereasthe NCAs can apply both EC and national competition law(subject to the rules set out below);where an NCA investigates cartel conduct which may affecttrade between EU member states under national competitionlaw, it must also apply article 81 in parallel or instead ofnational law (article 3(1)); andNCAs may not prohibit any alleged cartel conduct under

Philipp Girardet

Simon Holmes

WWW.ICLG.CO.UK67


Euro

pean

Uni

on

SJ Berwin LLP European Union

national laws, which may affect trade between EU memberstates (i.e. to which article 81 applies in principle), and whichwould not be prohibited under article 81 itself (article 3(2)).

As a result, there is the possibility of parallel investigations ofalleged cartel conduct, which may affect trade between EU memberstates by the Commission and one or more NCAs. Regulation1/2003 therefore creates a multilateral forum consisting of theCommission and all NCAs (the ‘European Competition Network’or ‘ECN’) to coordinate article 81 enforcement activities across theEU and contains a requirement on the Commission and NCAs toinform one another of their respective investigative activitiesthrough the ECN. In addition, the Commission’s Notice oncooperation within the Network of Competition Authorities (the‘Network Notice’) contains guidance on which competitionauthority is ‘well placed’ to investigate cross-border EU cartelconduct. The Network Notice specifies, among other things, thatthe Commission is ‘particularly well placed’ to investigate cartelconduct which may have effects in more than three EU memberstates. Where the Commission takes the formal step of ‘initiatingproceedings’ prior to the issue of a statement of objections (seequestion 1.4 below), NCAs which may be investigating the sameconduct in parallel national investigations must terminate theirnational proceedings (article 11(6) of Regulation 1/2003). Decisions of the Commission in competition matters are subject tojudicial review under article 230(1) of the EC Treaty and appealsare made in the first instance to the CFI and then subsequently tothe ECJ. The Community Courts can annul the Commission’sdecision or review the fines imposed by the Commission, i.e. theyhave the power to both reduce and increase the level of finesimposed by the Commission.


The Commission can start an investigation on the basis of one ormore of the following four grounds: (i) its own market intelligence;(ii) following a complaint; (iii) following a reference from an NCA;and/or (iv) a leniency application. However, over the past few yearsmost EC cartel cases were triggered by leniency applications. Oncealleged anti-competitive conduct has come to the Commission’sattention and the Commission has internally decided to pursue thematter, it will collect further information, either informally or usingits formal powers of investigation. The Commission does notrequire any external authorisation for the use of its wide formalinvestigatory powers and has a wide margin of discretion as towhen to use its powers. The exercise of the relevant power must be‘necessary’ for the effective enforcement of the Communitycompetition rules and must be proportionate. In practice, in cartelcases the Commission will almost invariably adopt inspectiondecisions for a series of unannounced parallel searches or ‘dawnraids’ of businesses and, if required, private homes at which theCommission has reason to believe that incriminating informationmay be held. See Section 2 below for further details on theCommission’s investigatory powers.Where after its initial fact-finding exercise the Commissionbelieves it has sufficient grounds to establish an infringement, itwill formally ‘initiate proceedings’ in accordance with article 2 ofRegulation 773/2004 (the “Implementing Regulation”). This isessentially an internal administrative step. The Commission maymake public the initiation of proceedings, in any way it deemsappropriate. The Commission case team then informs the partiesunder investigation of the objections raised against them in writingin a ‘statement of objections’. The statement of objections sets outthe facts the Commission relies on, the conclusions it draws and the

actions it proposes to take, e.g. impose fines. The parties are thenallowed to review the documents on the Commission’sinvestigation file (the ‘access to file’ stage) before they are given anopportunity to make known their views on the Commission’sallegations contained in the statement of objections in writing (inthe ‘written response’) and orally (at an ‘Oral Hearing’). Together,these three rights of defence are referred to as the parties’ right ‘tobe heard’. The Commission has created the office of the HearingOfficer that is charged with ensuring that the parties can exercisetheir right to be heard effectively. In practice, this allows parties torefer matters concerning, for example, time limits for their writtenand oral submissions and concerns that the Commission case teammay have unduly restricted access to its file to the Hearing Officerfor review and a decision. The Hearing Officer also arranges andpresides over the Oral Hearing. After the right to be heard has beenexercised, the Commission must assess the evidence and thesubmission in the round. Where it concludes that its original casestill stands it will prepare a draft decision setting out theinfringement it has found and the action it will take (e.g. the amountof fines it will impose on the parties). Before the Commission takes its final decision it must consult theAdvisory Committee on Restrictive Practices and DominantPositions that consists of representatives of the NCAs. The finaldecision is taken by the full College of Commissioners and thennotified to the concerned parties. The length of the administrativeprocedure from the date of the first formal investigatory measuresto a final decision varies from case to case and will depend, amongother things, on whether there is a leniency applicant that supportsthe Commission’s case. In practice, the time period normally variesbetween two and half and three and a half years but can besignificantly longer. The Commission is currently seeking toreduce this period.


There are no sector specific offences or exemptions but there arespecial rules governing the application of article 81 to the followingsectors: agriculture, transport, insurance, professional services andtelecommunications. Further, the Commission has adopted anumber of so-called block exemptions that set out guidelinesassisting parties that wish to self-assess whether their commercialarrangements fall foul of article 81. These guidelines cover certaintypes of horizontal arrangements between companies operating atthe same level of the supply chain and certain types of verticalarrangements, between for example, manufacturers andwholesalers. However, they are unlikely to be relevant to classiccartel cases.

1.6 Is cartel conduct outside the EU covered by theprohibition?

Article 81 applies to agreements concluded between companieslocated outside the EU but which have an effect on competitionwithin the EU. It is established Community case-law that it is notnecessary that companies involved in the cartel conduct have theirseat inside the EU or that the restrictive agreement was entered intoinside the EU or that the alleged acts were committed in the EU.The Community Courts ruled in the past that the crucial element indetermining whether EU competition rules apply is whether theagreement, decision or concerned practice was ‘implemented’. Inpractice, the implementation test is an ‘effect on trade’ test, whichis met where parties established in non-EU countries sell theirproducts directly into the EU. The Commission has in the pastinvestigated and fined cartel conduct where all cartel members were



Euro

pean

Uni

on


exclusively based outside the EU but where there were relevantsales into the EU.




2.2 Specific or unusual features of the investigatory powersreferred to in the summary table

The Commission’s powers are set out in Regulation 1/2003 and theImplementing Regulation. In contrast to many NCAs, theCommission can exercise all of its powers of investigation on thebasis of internal administrative decisions alone: this means that nocourt warrants are required (but see below regarding the role ofnational law search warrants in Commission investigations).The Commission does not have any power to compel a person to givea statement, i.e. it does not have any compulsory interview powers.The Commission, however, has the power to ‘take statements’ withthe consent of the person interviewed. The Commission also has thepower to ask ‘oral questions’ during an inspection or dawn raid ‘onfacts or documents relating to the subject-matter and purpose of theinspection’ and to record those answers.Regulation 1/2003 also gives the Commission a new power toinspect residential premises (and private cars) where it suspects thatrelevant business records are kept at those premises. This powerwas used for the first time by the Commission in May 2007 whenthe Commission jointly with the UK’s OFT carried out inspectionsof a residential premise in its investigation into cartel conduct in theMarine Hoses sector.Also, while the Commission does not have a formal power to‘image’ the hard drive of computers, it is now common practice forthe Commission investigation team to contain at least one forensicIT specialist which will search the company’s computer systems forrelevant electronic data (including files which may have beendeleted by a user but which may still be stored on the company’smain server).

Finally, the Commission does not have the power to force entry.This would need to be effected under national search warrants thatthe local NCA would normally apply for as a precautionary measurebefore the Commission inspection. Where an NCA applies for asearch warrant on the basis of an existing Commission inspectiondecision, Regulation 1/2003 sets out the scope of the nationalcourt’s review (codifying the ECJ’s well-established RoquetteFrères judgment). In such a case, the national court is entitled toverify that the Commission’s decision to conduct an inspection is‘authentic’ and that the coercive measures are neither ‘arbitrary’ nor‘excessive’. The national court may also ask the Commission fordetailed explanations on those elements that are necessary to allowits control of the proportionality of the coercive measures.However, the national court may not call into question the necessityof the investigation nor demand that it be provided with informationin the Commission’s file. The Commission’s decision is, however,subject to a full review by the Community Courts at a later stage.


The Commission does not have any formal surveillance powers, i.e.powers to observe individuals from a public place and/or to observeor record activities in non-public places (such as business orresidential premises).


There are no other powers of investigation.


The Commission team for ‘dawn raids’ in cartel investigationsunder article 81 usually consists of between five and tenCommission officials for each business address, of whom at leastone is likely to be a forensic IT expert trained in searching forelectronic data. The other team members are usually Commissioncase officers and/or specialist Commission investigators. Thenumbers can be smaller for residential addresses.In addition, the Commission case team is always assisted by severalofficials from the NCA in whose country the searches are takingplace. Further, in some countries (such as Germany) the NCAofficials will also be accompanied by the police. Where a companyor person opposes or obstructs the Commission’s inspection, thelocal NCA must afford the Commission ‘the necessary assistance’to conduct its inspection. For example, in the UK, this means inpractice that the OFT will have obtained a precautionary searchwarrant from the High Court, allowing the OFT officials to executethe warrant in the case of an obstruction of the Commission’sinspection and to take over the investigation under its nationalsearch powers.The Commission can also ask an NCA to carry out the inspectionson its behalf under article 22(2) of Regulation 1/2003. Suchinspections would then be carried out by the NCA under its ownnational investigatory powers. This is, however, relatively rare.It is normal practice, for the Commission to wait for between 30minutes to an hour for a company’s external legal advisors to arrivebefore commencing the search. The Commission will, however,usually secure relevant offices, etc. to ensure that no potentiallyrelevant material is interfered with during this period (normally byplacing a Commission official in that office, etc.).





Carry out an unannounced search of residentialpremises Yes N/A


No N/A

Right to retain original documents No N/A


Yes N/A


Yes N/A

WWW.ICLG.CO.UK69


Euro

pean

Uni

on



The EC privilege rules were originally established by the ECJ in theAM&S case in which the court established that privilege onlyattached to written communications between lawyers and clients ifthe following two conditions were met: (i) the communications inquestion were made for the purposes and in the interests of theclient’s rights of defence; and (ii) the communications emanatefrom independent lawyers, that is, those not bound to the client bya relationship of employment. In practice, this means that adviceprovided by in-house lawyers is not privileged under EC law. TheCFI has recently applied and clarified the AM&S position in itsAkzo Nobel judgment which is now itself on appeal to the ECJ. Inparticular, the CFI clarified that when claiming legal privilege overa document the company cannot be compelled to allow theCommission investigators a ‘cursory glance’ to verify the claimduring the inspection. A company can insist that any disputes overlegal privilege must be resolved subsequently and any Commissiondecision on the issue is subject to the possibility of an appeal to theCFI.Where an investigation of an alleged article 81 infringement iscarried out by an NCA on behalf of the Commission (i.e. theinvestigation is carried on under national powers) national rules ofprivilege apply. For example, the English rules of privilege arewider and in principle cover in-house legal advice. By contrast, theGerman rules of privilege are considerably narrower, coveringneither in-house legal advice nor most external legal advice kept atthe company’s premises. See the UK and Germany chapters fordetails.


There is no absolute right to silence under EC law. However, theCommunity Courts recognise a limited privilege against self-incrimination that can apply both in relation to requests forinformation and inspections. The Courts have accepted that theCommunity law principle of respect for the rights of defenceprevents the Commission from compelling a company “to provideit with answers which might involve an admission on its part of theexistence of an infringement which it is incumbent on theCommission to prove” (Orkem). However, companies must answerrequests for information, which are aimed at establishing merelycertain factual circumstances. It is, for example, permissible for theCommission to ask who attended a specific meeting but it may notbe permissible for the Commission to ask what the purpose of themeeting was if the Commission alleges that, the purpose of themeeting was to fix prices or share markets. Further, the CommunityCourts have confirmed that the Commission is entitled to requestthe production of relevant pre-existing documents even if theycontain incriminating information.


Regulation 1/2003 provides for one-off financial penalties of up to1% of the total turnover of a company where the companyintentionally or negligently fails to comply with a formalinvestigatory measure by the Commission. Regulation 1/2003 alsogives the Commission the power to impose periodic penaltypayments of up to 5% of the average daily turnover of a companywhere the Commission seeks to compel the company to answer aformal request for information fully or to submit to an inspection.

The Commission has recently started to make use of its powers toimpose the above penalties for obstruction. For example, theCommission increased the fines for Sony it its ProfessionalVideotape price-fixing decision of November 2007 for obstruction.According to the Commission, during the inspections, a Sonyemployee refused to answer oral questions asked by theCommission’s inspectors and another employee was found to haveshredded documents during the inspection. In January 2008, itimposed a record fine of €38 million on E.ON for breaking a seal,which had been affixed by officials during a dawn raid (thisdecision is currently under appeal).



Regulation 1/2003 specifies that the Commission may imposefinancial penalties on a company, which has either intentionally, ornegligently infringed article 81 of the EC Treaty of up to 10% of itsglobal turnover in the preceding business year. In fixing the amountof the fine the Commission must have regard both to the ‘gravity’and the ‘duration’ of the infringement. The Community Courtshave confirmed that within this legislative framework theCommission has wide discretion in setting the level of fines.The Commission exercises its discretion in accordance with theprinciples set out in its fining guidelines. The Commission adoptedrevised fining guidelines in September 2006, which state, amongother things, that the Commission will have regard to the followingaggravating circumstances:

where the company is a ‘repeat offender’ (i.e. has previouslybeen found guilty by the Commission or an NCA of a similarinfringement under article 81);where there has been a refusal to cooperate with, or anobstruction of, the Commission’s investigatory measures;andwhere the company has been the leader or instigator of thealleged infringement or has ‘coerced’ another company intoparticipating in the alleged infringement.

The 2006 fining guidelines also list the following mitigatingcircumstances:

the infringement was terminated as soon as the Commissionintervened;the company committed the infringement as a result ofnegligence;the company’s involvement was ‘substantially limited’;the company’s effectively cooperated with the Commissionoutside the scope of the Commission’s leniency notice; and the infringement was authorised or encouraged by publicauthorities or by legislation.

In each case, the Commission will also pay particular attention tothe need to ensure that fines have a sufficient deterrent effect (bothon the company being fined and on other companies in a similarposition). In exceptional cases, the Commission will also haveregard to a company’s inability to pay a fine ‘in a specific social andeconomic context’. The threshold for a reduction on this basis is,however, extremely high.The Commission’s current fining practice indicates that there is aclear trend to raise the level of fines for cartel conduct further andthe Commission’s 2006 fining guidelines are generally perceived asallowing the Commission to impose higher fines than under itsprevious fining guidelines. In 2007, the Commission issued eightcartel decision, resulting in total fines of over €3.3 billion, the



Euro

pean

Uni

on


highest ever imposed in a single year. As at 1 October 2008, theCommission has issued five cartel decisions in 2008 resulting infines of around €827 million. In January 2008, Commission finedsynthetic rubber producers €34.2 million for a price fixing cartel; inMarch providers of international removal services in Belgium werefined over €32.7 million for a complex cartel; in June members ofa cartel concerning sodium chlorate paper bleach producers werefined €79 million for market sharing and price fixing; also in Junea number of aluminium fluoride producers have been subject to afine of €4.97 million for a price fixing cartel; and on 1 October theCommission fined nine companies €676 million for theirparticipation in a price fixing and market sharing cartel for paraffinwax. It is likely that further significant fines will be imposed by theCommission before the end of 2008.EC law also gives the Commission the power to require a companyto bring an infringement to an end. For this purpose, it may imposeon the company any behavioural or structural remedy, such as adivestment, which are proportionate to the infringement committedand necessary to bring the infringement effectively to an end.However, these additional sanctions are in practice not relevant to‘hard core’ cartel conduct and are mainly aimed at infringements ofarticle 82 of the EC Treaty (abuse of a dominant position).


EC law does not contain any sanctions for individuals in cartelcases. However, where the investigation was carried out by anNCA on behalf of the Commission under the NCA’s nationalpowers or where there is a parallel administrative and/or criminalcase at national level, national law may provide for sanctions onindividuals for the same alleged cartel conduct.


The power of the Commission to impose fines for an infringementof article 81 is subject to a limitation period of five years from (forcartel cases characterised by continuous conduct rather than a singleand isolated act) the day on which the infringement ceased. Further,any action taken by the Commission or by an NCA for the purposeof the investigation or proceedings in respect of the allegedinfringement interrupts the limitation period.


This is not applicable (see question 3.2 above).


4.1 Is there a leniency programme for companies? If so,please provide brief details.

In December 2006, the Commission adopted a revised leniencynotice on immunity from fines and reduction of fines in relation to‘secret’ cartel cases which amended its earlier 2002 notice (the‘2002 Leniency Notice’ and ‘2006 Leniency Notice’ respectively).The 2006 Leniency Notice introduces, among other things, thefollowing significant changes to the Commission’s leniency policy:

it introduces a discretionary ‘marker’ procedure forimmunity applicants;it clarifies the information which must be provided to qualifyfor immunity;

it allows immunity applicants to limit their initial evidencesubmissions with the Commission’s consent to protect theelement of surprise of any subsequent Commissioninspections;it introduces flexibility as to the point in time whenapplicants should terminate their participation in the allegedcartel activities to protect the element of surprise of anysubsequent Commission inspections;it extends the obligation not to destroy, falsify or concealinformation to cover the period when the applicantcontemplates making an application; andit expressly imposes an obligation of continuous cooperationon applicants for a ‘reduction of fines’ (rather than just onapplicants for immunity from fines).

Under the 2006 Leniency Notice, conditional immunity from finesis available to only one company. That company must be the firstto come forward with information of ‘secret’ cartel activity that, inthe Commission’s view, will enable it to:

carry out a ‘targeted inspection’ in connection with thealleged cartel (‘Point 8(a) Immunity’); orfind an infringement of article 81 in connection with thealleged cartel (‘Point 8(b) Immunity’).

To obtain Point 8(a) Immunity (which generally has a significantlylower evidential threshold), an applicant must approach theCommission before the Commission has sufficient evidence toadopt an inspection decision or already has carried out an inspectionin relation to the reported conduct and must provide theCommission with information which allows the Commission tocarry out a ‘targeted inspection’ which will normally involve,among other things, the following:

A corporate statement containing, among other things, thefollowing:

a detailed description of the alleged secret cartelarrangement, e.g. information about the participants, the rel-evant markets and products/services, the objectives and theduration;

details of the exact location of the offices and, whereapplicable, homes of the alleged cartel participants (bothcompanies and individuals); and

information on which other competition authoritieshave been or will be approached by the applicant in additionto the Commission.All evidence relating to the alleged cartel in the possession ofthe applicant or available to it at the time of the application.

Point 8(b) Immunity is available in cases where the Commissionhas started a cartel investigation on its own initiative (i.e. without aPoint 8(a) Immunity applicant) and the first company to apply forimmunity after the inspections can provide the Commission withcontemporaneous, incriminating evidence, which proves the cartelconduct. This is a high evidential threshold (and much higher thanfor Point 8(a) Immunity). Any immunity applicant must also satisfy the following cumulativeconditions (in broadly chronological order):

The applicant must not have ‘coerced’ another company tojoin the cartel or remain in it.When contemplating making an application, the applicantmust not have destroyed, falsified or concealed evidence ofthe alleged cartel.The applicant must have terminated its involvement in thealleged cartel no later than the time at which it reported thecartel to the Commission, except for what would, in theCommission’s view, be reasonably necessary to protect thesurprise element of the Commission’ subsequent inspections.(The extent of any continued participation by the applicantwill always need to be agreed with the Commission.)

WWW.ICLG.CO.UK71


Euro

pean

Uni

on


The applicant must cooperate genuinely, fully and on acontinued basis with the Commission’s investigation (whichincludes, among other things, providing the Commissionwith all relevant information and evidence, makingindividuals available for interview and not disclosing theapplication before the statement of objections has beenissued, unless otherwise agreed).

A potential immunity applicant can also choose to approach theCommission with an anonymous ‘hypothetical application’ toestablish whether the evidence in its possession is sufficient for thegrant of immunity. In practice, this type of approach is relativelyrare in ‘hard core’ cartel cases.Any company which is not the first to come forward or which mayhave ‘coerced’ another company during the life of the cartel intoparticipation, may still be able to obtain a reduction in fines fromthe Commission under the 2006 Leniency Notice where thecompany provides the Commission with evidence which ‘addssignificant value’ to what the Commission already has in itspossession at the time of the submission. In such a case the abovecumulative conditions also apply (save for the ‘coercer’ condition).The first undertaking to provide ‘significant added value’ willobtain a reduction of 30-50%, the second a reduction of 20-30% andany subsequent undertakings a reduction of up to 20%. TheCommission’s final determination of the exact reduction will be setout in the final decision.


Yes. The 2006 Leniency Notice introduces a ‘discretionary’ markersystem for immunity applicants. The Commission will decidewhether to grant a marker on a case-by-case basis, taking intoaccount the specificities of each situation and the justifications thatthe applicant presents for its request to obtain a marker.An applicant for a marker must provide information about theparties to the alleged cartel, the affected products and territories, theduration of the cartel, the alleged illegal conduct and any parallelleniency applications the applicant is in the process of making inother jurisdictions. If granted, the applicant will be given aspecified (relatively short) period of time in which to ‘perfect’ themarker, i.e. provide the Commission with the evidence andinformation required to obtain Point 8(a) or Point 8(b) Immunity.


Yes. The Commission accepts that potential applicants should notbe discouraged from making leniency applications by the risk ofdiscovery orders issued in civil litigation (in particular, in the US)for corporate admissions made in support of a leniency application.As a result, the 2006 Leniency Notice allows the submission of oralcorporate statements and contains detailed provisions for therelevant procedures. Pre-existing documents must, however, besubmitted in the usual way.


The fact that an application has been made must be keptconfidential by the applicant itself until the issuance of thestatement of objection, unless otherwise agreed with theCommission. The Commission will disclose the identity ofleniency applicants in the statement of objections to the other

parties and will disclose that information publicly in its non-confidential version of any final infringement decision at the end ofits administrative procedure. Further, corporate statements made insupport of a leniency application are given particular protection (seequestion 4.3 above). Otherwise, the Commission’s general ‘accessto file’ rules apply, i.e. access to the Commission’s file is onlygranted to parties to whom the Commission has addressed thestatement of objections and only for the purpose of allowing suchparties to defend themselves in the Commission’s proceedings.


The continuous cooperation requirement under the 2006 LeniencyNotice ceases with the completion of the Commission’sadministrative proceedings, i.e. the adoption of a final decision or,less frequently in cartel cases, an administrative case closuredecision.


There is neither a leniency plus nor a penalty plus policy in the EU.The latter is a US concept which, to date has not been replicated inthe EU.



Individuals are free to provide the Commission with information orevidence of cartel conduct at any time, either on a named basis oranonymously. To the extent that the information so provided issufficient to allow the Commission to adopt an inspection decision,Point 8(a) Immunity (see question 4.1 above) would no longer beavailable to the first company to report the same cartel conduct.



On 1 July 2008, the European Commission’s procedure for thesettlement of cartel cases entered into force, contained inRegulation 622/2008 and Notice 2008/C 167/01. The aim of thisprocedure is to achieve “procedural economies” in adopting carteldecisions. This is achieved by a streamlined procedure with no oralhearing and limited access to the file. Once (confidential)settlement discussions start, leniency will no longer be available tothe settling party. In principle, settlement agreements can bereached with one, some or all of the parties to a cartel.There is no right or duty to settle, with the Commission benefitingfrom a broad discretion in deciding which cases are suitable forsettlement and defendants having the right to enough time andadequate access to counsel to make an informed settlementdecision. A party may state in writing that it is interested in enteringinto a settlement without such a written declaration implying anadmission of illegal behaviour. A fixed 10% settlement discount is available for parties that reach asettlement with the Commission. This is an important difference



Euro

pean

Uni

on


from leniency where the reductions in fines are higher and can vary,reflecting the specific circumstances of each case. Similarly, intheory, there is no negotiation or plea bargaining over whether therehas been an infringement or not. Defendants have to acknowledgethe infringement and their liability. However, to protect the rightsof defence, defendants are heard on the potential objections and onthe range of likely fines during settlement discussions. Although settlement must take place before the SO is issued (whichwill endorse the settlement submission), the Commission will notbe bound until a final decision has been adopted. If the settlementis abandoned, the settlement submission will be withdrawn and theright to appeal remains intact.Further details and discussion of settlements can be found in thearticle at the beginning of this publication.

7 Appeal Process


Commission decisions can be appealed (in the first instance) to theCFI which has jurisdiction to review the legality of theCommission’s substantive decisions, the propriety of itsadministrative procedure and the appropriateness of the finesimposed. As a general rule, appeals to the CFI must be made withintwo months of the ‘notification’ of the decision. The CFI has in thepast provided detailed scrutiny of the Commission’s factual andlegal assessments, with hearings in complex competition casesfrequently lasting several days. The CFI has been less willing tointerfere with the Commission’s exercise of its discretion todetermine the appropriate amount of a penalty (in the absence of aprevious manifest error of assessment of fact or law). From theCFI, appeals lie on points of law only to the ECJ.


Yes, cross examination of witnesses is allowed both in the CFI andthe ECJ. In Henri de Compte v European Parliament the ECJexpressly acknowledged how such cross-examination may bringnew facts to light and may also compel a witness to explain orrectify an inadequate or erroneous statement. That said, theprocedures followed by the Community Courts do not allow for thetesting of witnesses to the extent that many national courts do.

8 Damages Actions


Third parties such as competitors and customers who have sufferedloss as a result of cartel conduct in breach of article 81 may bring acivil claim for damages before the national courts of the EUMember States.The Community Courts have confirmed that the national courts ofEU Member States must ensure that they provide effective remediesfor redress concerning infringements of article 81 (e.g. Manfredi).The Community Courts themselves do not have jurisdiction to hearsuch cases. Generally, such actions can be brought regardless of whether theCommission has already adopted an infringement decision inrespect of the relevant conduct. However, where the Commission’s

proceedings are ongoing or where the Commission decision hasbeen appealed to the Community Courts, national court proceedingsare likely to be stayed. In practice, most actions for civil damageswill tend to follow a Commission finding of an infringement ofarticle 81 as these findings will be binding on the national courtsand the infringement will therefore not have to be re-established inthe national proceedings (Masterfoods case law and article 16(1) ofRegulation 1/2003) where the key issues will usually be those ofcausation and quantum.In 2008, the Commission adopted and published a White Paper onDamages Actions for breach of articles 81 and 82 EC (the “WhitePaper”). The purpose of this is to establish a minimum level ofprotection for parties who suffer damages as a result of anti-competitive practises and who want to bring actions forcompensation. In line with the compensatory approach taken by the Commission,a party can obtain full damages (actual loss, loss of profit andinterest). Contrary to what had been suggested in the Green Paperof 2005 and US anti-trust laws (where cartelists can see themselvespaying damages three times over), the White Paper establishes aprinciple of single damages. Damages may be awarded withoutthese being reduced to take into account the Commission fine.The public consultation on the White Paper ended in July 2008.The Commission is now deciding whether a legislative proposalought to be submitted or not. In the meantime, in July 2008, theCommission itself started proceedings in front of a Belgian court, toclaim damages from a lift and escalator cartel that it had previouslyfined a record €992 million.


This is a matter of national law (see the national chapters for the EUMember States).Whilst ECJ case law has established that any victim of anti-competitive conduct can claim compensation for harm suffered,individual indirect purchasers are unlikely to bring such a claimwhen the value of their claim is insignificant. The White Paper laysout several ways in which such parties might be able to bring theirclaims jointly and envisages a system of collective redressconsisting of either representative actions brought on behalf ofvictims by qualified entities, or opt-in collective actions.


This is a matter of national law (see the national chapters for the EUMember States).


This is a matter of national law (see the national chapters for the EUMember States). In its 2008 White Paper (see question 8.1) the Commission, statingthat it does not want to be overly prescriptive in this area of nationalprocedural law, explains how it hopes to avoid situations arising inwhich high costs prevent parties bringing claims. Although ingeneral the Commission wishes to uphold the “loser pays”principle, it also recognises that cost capping orders can help makecosts more predictable and thus reduce one factor which inhibitsvictims of cartels suing for damages.

WWW.ICLG.CO.UK73


Euro

pean

Uni

on



This is a matter of national law (see the national chapters for the EUMember States). Also, the Commission maintains a register on its website of certainrelevant judicial decisions by the Community Courts (on generalprinciples) and by national courts of EU Member States on themerits of particular damages actions: http://ec.europa.eu/comm/competition/antitrust/actionsdamages/documents.html.In 2008/09, it will be interesting to monitor the progress of theclaim of the Commission against the lift and elevator cartelcurrently filed with the Brussels commercial court (see question8.1).

9 Miscellaneous


In July, the Commission launched a public consultation on thefunctioning of Council Regulation 1/2003 that sets out the generalrules for the enforcement of the EC Treaty competition rules (seequestion 1.3 above). Regulation 1/2003 was the most comprehensivereform of anti-trust procedures in Europe since 1962 and theCommission invited views on the practical implementation of thenew regime. The consultation period has now closed and theCommission will report on its findings by 1 May 2009.

9.2 Please mention any other issues of particular interest inthe EU not covered by the above.

None.



Euro

pean

Uni

on


Simon Holmes



Simon Holmes is head of EU & Competition at SJ Berwin in Londonand is an experienced competition and trade lawyer. He isrecognised as a ‘Leading Lawyer’ in Chambers and as a ‘legal expert’in Legal 500, as well as featuring in the Guide to the World’sLeading Competition and Anti-Trust Lawyers and Who’s Who ofCompetition Lawyers.Although based primarily in London, Simon has spent severalextensive periods in Brussels and continues to work there on aregular basis. For over 25 years, Simon has had a broad diet ofcontentious and non-contentious competition law and (unusuallyamong London-based lawyers) international trade and customswork. His competition law work also involves advising clients on abroad range of issues including bringing, defending and settling alltypes of competition disputes, cartels, dawn raids, complianceprogrammes, whistle-blowing and leniency applications,dominance, pricing, discounts, promotions, parallel trade, refusalsto supply, state aid and the application of competition law to a widerange of commercial agreements - both online and offline. Heregularly advises on mergers under UK and EU law, acting for eitherone of the merging parties or third parties, such as complainants orinvestors. Through this latter work, he has advised on a very highproportion of the largest deals. His trade work covers a wide range,from anti-dumping through to customs issues and other forms oftrade protectionism.Simon won scholarships to both Cambridge and BrusselsUniversities. At Cambridge, he obtained a first class honours degreein Economics and Law. In Brussels, he obtained a GrandeDistinction in European Law. He is fluent in French, has written anumber of articles on competition and international trade, and hasspoken in these areas in London, Brussels, Washington DC, Tokyo,France, Italy and Brazil. From 1983 to 1986, he taught EU Law atthe London School of Economics. He is also a former chairman ofthe Law Society’s European Group.

Philipp Girardet



Philipp Girardet is a senior associate in the firm’s EU & Competitiondepartment. Philipp advises on a broad range of competition law and regulatoryissues in a wide range of industry sectors, including telecoms, water,music and film. He has particular expertise in cartel and leniencyissues. Philipp also has experience of advising on complex licensingand merger issues both at EU and national level and has advised oncontentious matters before the Competition Appeal Tribunal, theHigh Court and the Court of Appeal.Prior to joining SJ Berwin LLP, Philipp was the deputy director of theCartel Group at the OFT where he was responsible for the OFT’s civilcartel cases and for developing and operating the OFT’s leniencypolicy. He also worked on criminal cartel offence investigations.Philipp chaired the ECN Leniency Working Group for two years andis the co-author of the ECN Model Leniency Programme. Herepresented the OFT on cartel issues both nationally andinternationally and worked closely with the European Commissionand the US Department of Justice on a broad range of competitionpolicy issues. He frequently publishes and speaks on cartel andleniency issues.






Chapter 14

LMR Attorneys Ltd.

Finland



The national cartel prohibition is prescribed in law. The statutorybasis for the prohibition is Article 4 of the Act on CompetitionRestrictions (laki kilpailunrajoituksista 27.5.1992/480, asamended; hereinafter the “Act”). The regime is civil and it onlycovers undertakings.According to Article 1a of the Act, when a cartel may affect tradebetween the EU Member States, Article 81 of the EC Treaty will beapplied.


Article 4 of the Act provides for the following prohibition (Englishtranslation by the Finnish Competition Authority; hereinafter the“FCA”):“(1) All agreements between business undertakings, decisions byassociations of business undertakings and concerted practices bybusiness undertakings which have as their object the significantprevention, restriction or distortion of competition or which resultin the prevention, restriction or distortion of competition shall beprohibited.(2) In particular, agreements, decisions or practices which:1. directly or indirectly fix purchase or selling prices or any

other trading conditions;2. limit or control production, markets, technical development,

or investment;3. share markets or sources of supply:4. apply dissimilar conditions to equivalent transactions with

other trading parties, thereby placing them at a competitivedisadvantage; or

5. make the conclusion of contracts subject to acceptance by theother parties of supplementary obligations which, by theirnature or according to commercial usage, have noconnections with the subject of such contracts shall beprohibited.”

As can be seen, the national cartel prohibition is basically the sameas the prohibition in Article 81(1) of the EC Treaty, althoughnaturally there is no condition regarding the effect on trade betweenthe EU Member States in it.


The FCA enforces the cartel prohibition. The FCA investigates thematter and if a cartel is found, it can take the matter to the MarketCourt by making the Market Court a reasoned proposal for theimposition of fines on the infringing undertakings. The amount offines is included in the proposal. The FCA itself is only aninvestigative authority which lacks the power to impose fines. TheMarket Court is the first instance that can impose fines. Itsdecisions can be appealed to the Supreme Administrative Court.


After the opening of an investigation the FCA investigates thematter, e.g. the documents and other material it has obtained fromsurprise inspections and from a leniency applicant, if any. Theinvestigation normally involves also e.g. information requests andinterviews.The next concrete procedural step after the opening of aninvestigation is the FCA’s draft proposal to the Market Court for theimposition of fines (a kind of draft Statement of Objections), if any.The addressees of the draft proposal for the imposition of fines willbe given a possibility to make known in writing their views on theFCA’s objections. The FCA will peruse the replies and conductfurther investigations if needed. The FCA’s investigation will end with a proposal to the MarketCourt for the imposition of fines (a kind of Statement ofObjections), if any, and, in the case of an application for immunityfrom fines, with a separate decision regarding immunity.The Market Court will give the addressees of the FCA’s proposal apossibility to make known in writing their views on the proposal.Subsequently, there may be several submissions by the parties. TheMarket Court proceeding may involve a hearing. As said in theanswer to question 1.3 above, the Market Court is the first instanceempowered to impose fines, and its decisions can be appealed to theSupreme Administrative Court (see Section 7 below for the appealprocess).


There are no sector-specific offences in the Act.According to Article 2 of the Act, the Act does not apply toagreements or arrangements which concern the labour market. Alsoaccording to Article 2, the Act does not apply to “agreements,decisions or corresponding practices by agricultural producers or

Ilkka Leppihalme



Finl

and

LMR Attorneys Ltd. Finland

associations of producers concerning the primary production ofagricultural products when they promote an increase in theproductivity of agriculture, the effective operations of the market,the availability of foodstuffs and the achievement of reasonableconsumer prices and a lower cost level” (English translation by theFCA), unless, however, such practices, to a significant extent,prevent sound and effective competition in the agricultural productmarket, or lead to an abuse of a dominant position.

1.6 Is cartel conduct outside Finland covered by theprohibition?

The Act does not apply to competition restrictions outside Finlandwhich do not have effects in Finland.According to the Act, the Finnish Government may pass a decreethat the Act be extended to cover a competition restriction thataffects foreign states, if so required by an agreement made with aforeign state, or if the interest of Finland’s foreign trade so requires.In practice the government has not passed such decrees.





The FCA can carry out compulsory interviews with individuals onlyin the course of an unannounced search of business premises (it hasthe right to require oral explanations on the spot).The FCA can carry out an unannounced search of residentialpremises only when it is assisting the European Commission. Anadvance authorisation by the Market Court is required.


No, there are no general surveillance powers in a cartelinvestigation.


The most important investigatory powers are mentioned in theanswer to question 2.1 above.


Searches of business premises will be carried out by the FCA. TheFCA may ask the State Provincial Offices to help carry out searchesof business premises. It can carry out searches of residentialpremises only when acting for the European Commission(authorisation of the Market Court required).Although not under any specific obligation to do so, normally theFCA will wait for a while for legal advisors to arrive.


The question of legal privilege is not exhaustively dealt with innational law. With regard to in-house legal advice, the FCA wouldfollow the EU practice, e.g. the judgment of the Court of FirstInstance of the European Communities in September 2007 in AkzoNobel (joined cases T-125/03 and T-253/03, Akzo Nobel ChemicalsLtd and Akcros Chemicals Ltd v Commission of the EuropeanCommunities; appeal pending in the Court of Justice of theEuropean Communities, Case C-550/07 P). Consequently, in-houselegal advice is not privileged.


There are no other material limitations of this kind.


If an undertaking does not allow the FCA e.g. to enter its premises,warehouses, land and vehicles or to examine e.g. its books,financial accounts, computer files or other relevant documentswhen the FCA is carrying out an inspection, the FCA may impose aconditional fine to enforce these obligations. The Market Court,and not the FCA itself, is empowered to order the conditional fineto be paid. In practice, a conditional fine has never been used inconnection with a cartel investigation. Providing the FCA with false information is a criminal offencepunishable with fines or imprisonment.



The maximum penalty allowed in the Act is an administrative fineof 10% of the total turnover in the preceding year. So far finesimposed in Finland have been far from the maximum.With regard to the amount of the fine, the Act only provides that thegravity, extent and duration of the competition restriction beconsidered. The government bill about the Act adds some furtherguidance in this respect, but there are no detailed guidelinesregarding the amount of the fine.Other sanctions provided in the Act include conditional fines (see







Yes N/A



Yes N/A


Yes N/A

WWW.ICLG.CO.UK77


Finl

and


the answer to question 2.8 above regarding conditional finesconnected to a search by the FCA).


There are no sanctions in the Act for individuals for cartel behaviour.


According to Article 22 of the Act, a fine cannot be imposed if theFCA has not made its proposal for the imposition of fines to theMarket Court within five years of the cessation of the cartel conductor of the cartel having come to the knowledge of the FCA.


As there are no sanctions in Finland for individuals (e.g. former orcurrent employees) for cartel behaviour, this issue does not arise innational cases. If an employee is involved in a cartel investigationin another jurisdiction, Finnish law does not prevent a Finnishcompany from paying the legal costs and/or financial penaltiesimposed on the employee.



Yes, the Act provides for a leniency programme. The programmeconsists of immunity from and reduction of any fine which wouldotherwise have been imposed. Immunity is available only in thecontext of cartels whereas reductions are available also with regardto other types of restrictions of competition. Immunity is availableonly for one undertaking.Immunity will be granted to the leniency applicant if theundertaking:1. provides the FCA with information on a competition

restriction which allows the FCA to intervene in therestriction;

2. provides the information before the FCA has obtained it fromelsewhere;

3. delivers to the FCA all cartel-related information anddocuments in its possession;

4. co-operates with the FCA during the whole investigation; and5. has ended or immediately ends involvement in the restriction

after having provided the FCA with the information in point1 above.

Reductions of fines may be given if an undertaking hasconsiderably assisted the FCA in the investigation of a competitionrestriction. The Act does not provide for any percentages or rangesregarding the level of possible reductions of fines.In the case of an immunity application, the FCA itself issues adecision whether the above conditions for immunity are fulfilled ornot. This decision cannot be appealed. In the case of reductions,the FCA states its view in its proposal for the imposition of fines tothe Market Court but it is the Market Court which will decideindependently whether fines will be imposed and what theappropriate level of reductions, if any, is to be. Thus, at least intheory, there is much more uncertainty with regard to reductionsthan to immunity.


A marker system is not explicitly provided in the Act. Nevertheless,the FCA may secure a company’s position in the queue for a shortperiod of time in order for the company to gather and provide all theinformation in its possession on the suspected cartel.


Yes, leniency applications can be made orally. Whether this willactually minimise any possible subsequent disclosure risks in thecontext of civil damages follow-on litigation is somewhat uncertaindue to the nature of the current Finnish law on access to informationand lack of court precedents.Other implicated parties will subsequently be given access to theoral application by providing them with a transcript of it, made bythe FCA. The treatment of oral applications in Finland is stilldeveloping.


Naturally, the FCA does not reveal the fact that it has received anapplication (or applications) before its surprise inspections (dawnraids). After the surprise inspection, as a general rule, the FCA doesnot make public the fact that an inspection was conducted.However, if any of the implicated parties make it public, e.g. due tothe Stock Exchange rules in case of a publicly listed company, alsothe FCA will normally confirm in a statement that surpriseinspections have taken place. In this statement the FCA will alsoreveal the fact that a leniency application has been received and theidentity of the applicant. It is at the discretion of the FCA whetherit issues a statement regarding any subsequent application forreduction of fines. So far such statements regarding subsequentapplications have not been issued.In case the inspections, the leniency application and the identity ofthe leniency applicant do not become public in the ways statedabove at approximately the time of the inspection, they will becomepublic at the latest when the FCA makes a proposal to the MarketCourt for the imposition of fines. This is also when an applicationfor the reduction of fines subsequent to any immunity applicationbecomes public, if it has not become public earlier.The application itself will be treated as confidential by the FCA andno access to it will be granted. The FCA has an interest inprotecting the leniency programme and it can protect theprogramme, e.g. by treating the applications as confidential.However, the other implicated parties will be given access to theapplications. This will happen at the latest when the FCA providesthem with its draft proposal to the Market Court for the impositionof fines. In the case of an oral application, however, the otherimplicated parties will not be given the FCA’s recording of theapplication but instead a transcript of it, made by the FCA, as statedin the answer to question 4.3 above. Naturally, access to anybusiness secrets and other confidential information in an applicationis never granted to anyone.Note that the treatment of leniency applications is still developingin Finland and that there are no court precedents regarding theFCA’s view and practice that, apart from other implicated parties,no access to applications will be granted. Although it is in theinterest of the FCA to protect the leniency programme, e.g. by



Finl

and


limiting access to applications, the current Finnish law on access toinformation does not make this an easy task.


In the case of an immunity application, the continuous cooperationrequirement applies until the decision of the FCA regarding theimmunity. This decision, which deals only with the granting of theimmunity and which cannot be appealed, will be given at the sametime as the FCA makes its proposal for the imposition of fines to theMarket Court regarding the other implicated parties. See also theanswer to question 4.1 above.In the case of an application for a reduction of fines, there is nocontinuous cooperation requirement.


There is no “leniency plus” policy, which allows a company, underinvestigation for one cartel, to potentially gain substantial leniencyas to that cartel if it uncovers a second cartel. Neither is there a“penalty plus” policy, where companies that do not uncover asecond cartel they know of, risk possible harsh sanctions if the othercartel is discovered and prosecuted.



Anyone (including natural persons) can report cartel conduct to theFCA or ask the FCA to investigate certain anticompetitive conduct,but only undertakings can apply for leniency. As explained in Section3 above, there are no sanctions in the Act for individuals for cartelbehaviour. Individuals who report cartel conduct would not have anydirect personal benefit from doing so. An employee’s prior contactwith the FCA in this respect could adversely affect the employer-company’s chance of subsequently obtaining immunity, as one of theconditions for immunity is that the undertaking provides theinformation before the FCA has obtained it from elsewhere (see theanswer to question 4.1 above for conditions for immunity).



No, there are no such procedures at the moment in Finland.

7 Appeal Process


The FCA is an investigative authority which investigates cartels butlacks the power to impose fines. Instead of being able to imposefines, the FCA makes its reasoned proposals for the imposition offines to the Market Court. The Market Court - a Helsinki-basedspecialist court dealing with e.g. competition law matters - isempowered to impose fines as the first instance.

The decisions of the Market Court can be appealed to the SupremeAdministrative Court within 30 days of the decision. Nopermission is required for an appeal to the Supreme AdministrativeCourt. The decisions of the Supreme Administrative Court cannotbe appealed.


The Market Court and the Supreme Administrative Courtproceedings in competition cases are generally conducted inwriting, but the courts can hold an oral hearing if necessary in orderto clarify the case. The oral hearing can be limited e.g. to hearingwitnesses. As a general rule, the examination of a witness is started by theparty who named the witness. Following this, the opposing partyhas the right to examine the witness. Subsequently, the court andthe parties concerned may put questions to the witness.

8 Damages Actions


In principle, anyone can bring a civil damages action against acartel member (also independently of any finding of aninfringement by the FCA or the courts). In practice, however,bringing a damages action on the basis of national law is mademuch easier for an undertaking than for a non-undertaking (e.g. aconsumer). This is because of a specific article of the Act (Article18a), which explicitly provides that undertakings which infringe thecartel prohibition are obliged to compensate other undertakings forthe damage caused. A non-undertaking would have to try to bringa damages action e.g. on the basis of the general act on damages(vahingonkorvauslaki 31.5.1974/412, as amended), the conditionsof which are stricter.Any damages granted will consist of single damages only.Normally the successful party in civil court proceedings can haveits legal costs compensated by the unsuccessful party.


Yes, a new act (ryhmäkannelaki 13.4.2007/444) regarding a certainkind of class-action entered into force on 1 October 2007. Beforethis, class-actions were not possible in Finland.The application of the new act has been remarkably limited in twoways. First, it allows an action to be brought only with regard tocases between consumers and undertakings. Thus, e.g.undertakings cannot benefit from this new act in bringing damages(or any other) claims. Second, consumers are always representedby the Consumer Ombudsman. No-one else has the standing tobring a class-action.As a general rule a member of the class cannot be held responsiblefor costs.The class-actions will be dealt with in one of the six district courtsnamed in the act. So far, no class-actions have been brought.In practice, it is somewhat uncertain to what extent the new act willincrease consumers’ chances for bringing a damages action againsta cartel member (see also the answer to question 8.1 above).

WWW.ICLG.CO.UK79


Finl

and



According to Article 18a of the Act on Competition Restrictions,the right to claim damages expires if the damages action has notbeen brought within five years of the damage having come to theknowledge (or presumed knowledge) of the undertaking.


According to the Code of Judicial Procedure (Oikeuden-käymiskaari), as a principal rule, the unsuccessful party is liable tocompensate all reasonable legal costs incurred by the necessarymeasures of the successful party. The Code of Judicial Procedure lists as compensable legal costs thecosts of the preparation for the trial, the costs of the participation inthe proceedings, the fees of an attorney, compensation for the workcaused by the trial to the party concerned, and compensation for theloss directly linked to the trial.


So far civil damages claims for cartel conduct are very rare inFinland. There are many reasons for this, and they are not allparticularly specific to Finland. In general, the reasons can perhapsbest be found in the European Commission’s Green and WhitePapers “Damages actions for breach of the EC antitrust rules”,dated 19 December 2005 and 2 April 2008 respectively, andCommission Staff Working Papers accompanying the Green andWhite Papers (see: http://ec.europa.eu/comm/competition/antitrust/actionsdamages /documents.html).

9 Miscellaneous


After the major amendments to the Act, like the introduction ofleniency, in May 2004, there have not been statutory changesdirectly in the field of cartels and leniency. However, some cases -especially the two largest cartel cases so far in Finland, i.e. the so-called asphalt case and the so-called wood procurement case - havecontributed to the practical application of the Act in many ways,although e.g. both of the cases mentioned are still pending, in theSupreme Administrative Court and the Market Court respectively,at the time of writing. See also the answer to question 8.2 aboveregarding the new act on class-actions.Looking ahead, it can be mentioned that the working group, whichwas set up by the government in 2007 to review the need foramendments to the Act, will give its proposals by the end of 2008.However, any possible amendments to the Act are not expected toenter into force before 2010.

9.2 Please mention any other issues of particular interest inFinland not covered by the above.

There are no such issues specific to Finland.



Finl

and

llkka Leppihalme

LMR Attorneys Ltd.Mannerheimintie 14 A, 9th floorFI-00100 HelsinkiFinland

Tel: +358 9 5860 100Fax: +358 9 5860 1060Email: [email protected]: www.lmr.fi

The more than 10-year practice of Ilkka Leppihalme includes mainlyEU and national competition law but also e.g. mergers andacquisitions and dispute resolution. Leppihalme obtained hisnational Master’s degree in law in Helsinki University and his LL.M.at King’s College London. He was an associate at FreshfieldsBruckhaus Deringer in Brussels in 2001-2004. His career includesalso a year as a trainee judge in a District Court in the HelsinkiMetropolitan area. At LMR Leppihalme has e.g. submitted the firstever leniency application in Finland. This was done on behalf ofFinland’s fourth largest company, UPM-Kymmene Corporation, inthe above-mentioned wood procurement case. He represents theconstruction giant NCC in the asphalt case, so far the largest cartelcase in Finland, also mentioned above. Leppihalme has advisedalso e.g. The Nielsen Company, Viasat/Modern Times Group,Powerwave Technologies, Inc., Outokumpu, SOK, VR Group(National Railways), Luvata, Amer Sports Corporation and Danisco.He has taken part (by invitation) in the work of the working groupof the Ministry of Employment and the Economy on amendmentsneeded to the Act on Competition Restrictions. Leppihalme speaksFinnish, English, French and Swedish.

LMR is a business law firm focusing on competition law, corporate and commercial law, mergers and acquisitions,banking and finance, capital markets and general business law including dispute resolution. The firm’s aim is to providelegal services of the highest quality in a practical and cost-efficient manner. Leading international directories rank LMRvery high in its core practice areas. The lawyers of LMR have gained extensive experience both in Finland andinternationally. The nationally unique international experience includes e.g. the Competition DG of the EuropeanCommission, the competition directorate of the EFTA Surveillance Authority, the World Bank in Washington, theEuropean Bank for Reconstruction and Development (EBRD) in London, the Brussels office of Freshfields BruckhausDeringer, the London office of Clifford Chance, King’s College London, Columbia University in New York and GeorgetownUniversity in Washington DC, etc. The international as well as the extensive in-house experience provides an excellentbasis for LMR to effectively and successfully provide superior legal services to domestic and international clients.Because of the in-house experience, LMR understands perhaps better than average what the client wants to achieveas we have been clients ourselves.




Chapter 15

SJ Berwin

France



Anticompetitive agreements and practices are prohibited by ArticleL. 420-1 of the French Commercial Code (the “Code”). It appliesto any undertakings, in the form of either companies or individuals,and may lead to civil/administrative and, in certain cases, tocriminal sanctions (see the answer to question 3.2).


The cartel prohibition applies to any concerted practices,agreements and alliances, express or tacit, which have as theirobject or may have as their effect to prevent, restrict or distortcompetition in a market, and in particular with the aim to:

limit access to markets by, or competition from, other firms;interfere with price setting by market forces, by artificiallyincreasing or decreasing prices;limit or control production, markets, investment or technicaldevelopment; orshare markets or sources of supply.

However, under the so-called “de minimis” rules, the Frenchcompetition authority may decide not to instruct cases concerningagreements or practices:

between actual or potential competitors (“horizontalagreements”) whose combined market share does not exceed10 per cent; orbetween companies that are not actual or potentialcompetitors (“vertical agreements”) whose respective marketshares do not exceed 15 per cent.


The competition authority in charge of generally enforcing anti-cartel measures is now the French Competition Authority (Autoritéde la concurrence) (the “Competition Authority”).The law on the modernisation of the economy (the “LME”),enacted on 4 August 2008 and implemented by an ordinance of 13November 2008, creates the Competition Authority to replace theCompetition Council (Conseil de la Concurrence) (the “Council”),an independent authority set up in 1986.

Investigations may be carried out either by the CompetitionAuthority or by the Directorate General for Competition, ConsumerPolicy and Repression of Fraud (Direction Générale de laConcurrence, de la Consommation et de la Répression des Fraudes)(“DGCCRF”), an administrative agency under the authority of theMinistry of Economy.The Competition Authority has wider means and powers than theCouncil, in particular as regards investigations, while the Ministerof Economy is now entitled to settle and order measures as to so-called “micro anticompetitive practices” (see the answer to question6.1).The members of the Competition Authority have not beenappointed yet and the Competition Authority is thus not yet activeat the time of drafting this article. The first meeting is planned to beheld at the very beginning of January 2009.


The Competition Authority may be in charge of a case followingeither a referral from the Minister of Economy, or a complaint froma company or even acting ex officio, at the instigation of the headreporting officer (rapporteur général).Pursuant to Article L. 463-2 of the Code, if it results from theinvestigation that the practices at stake may be anticompetitive, thehead reporting officer issues a statement of objections, by letterwith acknowledgment of receipt, to the complainant, the ministersconcerned by the affected sector of activity, the concerned partiesand the State Commissioner (Commissaire du Gouvernement). Thenotified parties can then consult the file and present anyobservations within two months.An official report is then sent to all notified parties, along with thedocuments which the head reporting officer relies on and theobservations, if any, made by said parties. Each party can in turnsubmit its observations in reply within two months.Finally, the matter is brought before the Competition Authoritywhich will issue:

a decision declaring that there are no grounds forprosecution; a decision adjourning the proceedings in case anothernational competition authority is dealing with the same facts;ora decision pronouncing on the anticompetitive nature of thefacts and possibly imposing a sanction.

Delphine Cohen

Natasha Assadi-Tardif



Fran

ce

SJ Berwin France


Article L. 420-4 of the Code provides for a specific exemption in theagricultural sector. Practices consisting for undertakings inorganising agricultural or agriculturally-based products under asingle trademark or trade name, setting common production volumesand quality as well as common business policy, including agreementson a common sale price, may be exempted, provided they (i) ensureeconomic progress, (ii) provide users a fair share in the resultingprofit, (iii) do not allow the undertakings involved to eliminatecompetition for a substantial part of the products concerned, and (iv)are indispensable to achieve said economic progress.In addition, certain agreements, especially when their purpose is toimprove the management of small or medium-sized enterprises maybe exempted by decree, upon obtaining the Competition Authority’sapproval.Finally, pursuant to Article 90 of Act No. 82-652 of 29 July 1982,agreements between cinema enterprises to ensure programming offilms in cinema houses can be allowed by the director of theNational Cinematographic Industry (Centre National de laCinématographie) under certain conditions.

1.6 Is cartel conduct outside France covered by theprohibition?

The French cartel prohibition covers any anticompetitiveagreements and practices which may distort competition in a marketlocated in France, regardless of the place of signature of theagreement, the head office of the parties, or even their nationality.In addition, in decision No. 04-D-45 of 16 September 2004, theCouncil held jurisdiction to examine anticompetitive agreementsentered into by French firms acting in France, but with effectsoutside of France.




Please Note: * indicates that the civil/administrative investigatorymeasure requires the authorisation by a court or another bodyindependent of the competition authority.


French civil/administrative procedure comprises ordinary andjudicial investigations.In ordinary investigations, the officers of the Competition Authorityor the DGCCRF may access business premises to request copies ofbusiness documents, while judicial investigations enable saidofficers to conduct searches and seize any documents from eitherbusiness or domestic premises under the warrant of a judge.


This is not applicable under French civil/administrative procedurerules.


The investigators may ask the authority to which they areanswerable (i.e. either the Competition Authority or the DGCCRF)to appoint an expert to conduct any necessary expert assessmentinvolving all the parties, such as an analysis of the relevant marketor a study of documents.


Ordinary searches inside business premises are carried out by (i)investigators of the Competition Authority, or (ii) by authorisedpublic officers under the supervision of the Ministry of Economy,while judicial investigation inside residential premises may beperformed by both types of officers under the supervision of thejudge who authorises such measures.The ordinance implementing the LME (see the answer to question1.3) allows companies subject to unannounced investigations to callan external lawyer, whose presence was previously merelytolerated. However, investigators remain under no obligation towait for legal advisors to arrive.


Only communications between a member of the Bar and its client,such as legal opinions sent by an attorney to its client or exchangesof correspondence between them, are covered by attorney-clientprivilege, and do not thus have to be surrendered to investigators.Therefore, in-house legal advice is not protected by the rules ofprivilege, even if an internal memorandum merely restates anadvice given by the company’s attorney.


Investigators are subject to a duty of loyalty. First of all, investigatorsmust indicate the subject of the investigation to the company and/orthe individual(s) concerned. Investigators cannot force any person totestify against him or herself or even to plead guilty.In addition, investigators must not use unfair means to obtain evidenceof the alleged anticompetitive agreement or practice. For instance, ina decision issued on 3 June 2008, the French Court of Cassation heldthat sound recordings made by the claimant without the participant’sknowledge amount to disloyal evidence which are not admissible





Carry out an unannounced search of residentialpremises Yes* Yes


Yes* Yes



Yes Yes


Yes* Yes

WWW.ICLG.CO.UK83


Fran

ce

SJ Berwin France

before courts, even if they have not been made by an investigator or areporting officer and each party is given access to them.


Obstruction of investigations, such as refusal to submit certaindocuments, destruction of documents, or provision of false and/ormisleading information, may be subject to fines of up to €7,500 andup to six months’ imprisonment. These sanctions have already beenused in connection with cartel investigations.In addition, the ordinance implementing the LME (see the answerto question 1.3) gives the Competition Authority, at the instigationof the head reporting officer, the power to impose a fine, afterhearing the undertaking concerned and the State Commissioner.The maximum fine may amount to 1 per cent of the highestworldwide turnover realised by the undertaking concerned in anyfinancial year during the period in which the practices took place.



Penalties: pursuant to Article L. 464-2 I and II of the Code, themain penalties for breach of the cartel prohibition are fines of up to10 per cent of the highest worldwide turnover realised by theundertakings that took part in the anticompetitive practice in anyfinancial year during the period in which the practices took place,bearing in mind that the notion of undertaking extends to all groupundertakings regardless of their actual participation in theanticompetitive practice.In addition, the Competition Authority may impose periodic penaltypayments of up to 5 per cent of the daily average turnover,generated during the latest closed financial year, for every day ofdelay in the implementation of either a decision of the CompetitionAuthority or an injunction imposed by the Competition Authority. As a result, the total amount of fines imposed by the Council inanticompetitive agreement or practice cases has been as follows forthe last three years:

2005: €662.69 million (22 decisions).2006: €128.24 million (11 decisions).2007: €221 million (24 decisions).

The Council has not issued any sentencing guidelines, but generallyapplies the European Commission notice on immunity from finesand reduction of fines in cartel cases of 8 December 2006. Inaddition, the Council has published a non-binding documentreflecting the general principles shared by the EuropeanCompetition Authorities for the determination of pecuniarysanctions imposed on undertakings for infringements of substantiveantitrust provisions.Other sanctions: the Competition Authority may also order that itsdecision be posted in whole or in part at locations it specifies, andthat the decision or an extract thereof be inserted in the report drawnup by the managers, the board of directors or the managing board ofthe company concerned. The related publication costs are borne bythe company in question.


The Competition Authority may impose fines on individualsengaged in economic activities amounting to a maximum of €3

million for breach of Article L. 420-1 of the Code. This provisionis designed to cover sole traders who engage in cartel-typebehaviour.In addition, according to Article L. 420-6 of the Code, individualsmay be subject to criminal penalties amounting to fines of up to€75,000 and terms of imprisonment of up to four years where theyhave fraudulently taken a personal and decisive action in theconception, organisation and/or implementation of theanticompetitive practices. These penalties are not imposed by theCompetition Authority itself, but by criminal courts followingreferral by the Competition Authority to the Public Prosecutor(Procureur de la République) for further investigation.While the criminal provisions are rarely applied, guidance wasgiven in decision No. 04-D-07 of 11 March 2004 of the Councilrequesting the Public Prosecutor to examine the possibility ofbringing a criminal prosecution against the chairman of the bakeriestrade association in the Marne region of France, as a result of hisactive and decisive role in the establishment and implementation ofa cartel among members of the association.In its decision, the Council explained the content of the threecumulative elements to be proven to impose criminal charges:

Personal participation: it is not sufficient for the purposesof the criminal offence that the accused is a director of theundertaking concerned. There must be an active andpersonal role on the part of the accused in the conception,planning and implementation of the cartel.Decisive participation: the behaviour of the accused mustbe shown to have been decisive, and a causal link establishedin putting the anticompetitive behaviour into practice.Fraudulent participation: the accused must haveintentionally breached the relevant competition rules, whichmay be inferred as a result of a breach of other criminalpractices, such as breach of trust, corruption, etc.


Pursuant to Article L. 462-7 of the Code, facts or circumstancesdating back more than five years may not be referred to theCompetition Authority, unless steps were taken to investigate,establish or sanction them during that period of time.However, no anticompetitive agreement or practice can be referredto the Competition Authority, after a ten-year period of time fromthe end of such anticompetitive agreement or practice has elapsedwith no ruling by the Competition Authority on said agreement orpractice.


French criminal law provides for the principle of personality ofpenalties, i.e. the sanctions can only be imposed on their author andin particular the payment of fines can only be made by theconvicted person. However, this does not prevent employees fromnegotiating compensation with their company of any fines paid.



The French leniency programme is governed by Articles L. 464-2IV and R. 464-5 of the Code. Further guidance on the practical



Fran

ce

SJ Berwin France

implementation of the programme can be found in the CouncilProcedural Notice of 17 April 2007.Undertakings may be exempted from financial penalties either infull or in part where they have contributed to the establishment ofthe reality of a prohibited practice and helped to determine itsauthors, by providing elements which the Competition Authority orthe DGCCRF were previously unaware of.(i) Full immunity from finesIn cases where the Competition Authority or the DGCCRF (the“Authorities”) have no information about the allegedanticompetitive agreement or practice, the Competition Authoritycan grant total immunity from fines to any firm that is the first tosubmit information enabling the Authorities to carry outinvestigations and establish the existence of the anticompetitiveagreement or practice.In practice, in addition to its name and address, the applicant must,at least, provide the following information:

the names and addresses of the other alleged members of theanticompetitive agreement or practice;a detailed description of the markets concerned and theanticompetitive arrangement;information about any leniency application relating to thealleged anticompetitive agreement or practice which it hassubmitted or intends to submit to other competitionauthorities; andany evidence in its possession at the time of its application.

If the Authorities already have certain information on the allegedanticompetitive agreement or practice, full immunity can be grantedif the three following conditions are met:

the applicant is the first to submit evidence which, in theCompetition Authority’s view, is sufficient to establish theexistence of the anticompetitive agreement or practice;at the time of the application, the Authorities did not havesufficient evidence to establish the existence of aninfringement; and no other firm has obtained a conditional opinion granting fullimmunity with respect to its participation in the allegedanticompetitive agreement or practice.

(ii) Partial immunity from finesUndertakings that do not meet the basic conditions for fullimmunity can benefit from reduced fines by providing theAuthorities with evidence of the alleged breach. Such evidencemust represent significant added value taking into account theevidence already in the Authorities’ possession.In order to determine the level of reductions in fines from which afirm may benefit, the Competition Authority will take intoconsideration the chronological order in which leniencyapplications were filed, the time when the evidence was submitted,as well as the extent to which the information submitted by the firmbrought significant added value to the case against the cartelmembers.In addition, if the undertaking applying for leniency providessubstantial or material evidence which enables the CompetitionAuthority to establish additional facts having a direct link with theamount of the fine to be imposed on the participants to theanticompetitive agreement or practice, this additional contributionwill be taken into account in setting said undertaking’s fine and maygive rise to partial immunity.In principle, partial immunity cannot exceed a fine reduction ofmore than 50%.(iii) Additional conditions attached to leniencyWhen an application for leniency is made, a hearing is held during

which the State Commissioner and the applicant present their viewsto the Competition Authority. If the Competition Authority isprepared to consider granting leniency, it sets out conditions for thegrant in a leniency notice, which is not published and is notifiedonly to the company concerned and the Minister of Economy.These conditions usually require that the applicant:

cooperates fully and throughout the investigation byproviding the Authorities with all evidence in its possession;stops participating in the anticompetitive practice at the latestfrom the notification of the leniency notice, although theCompetition Authority can decide to postpone this date;did not coerce other members of the anticompetitive practiceto take part in that practice; anddoes not inform other members of its application for leniencyor of investigations conducted by the Authorities.

The Authorities are not obliged to accept an application for leniencyand can reject it, in particular if they already possess theinformation offered. After the publication of its Procedural Noticeof 17 April 2007, the Council indicated that only 25% out ofapproximately 30 leniency applications were refused since theintroduction of the French leniency programme. However, there areno provisions for withdrawing leniency once it has been granted.In principle, a corporate leniency application does not preventcurrent and former employees and directors from any personalsanctions, especially criminal ones. However, in its ProceduralNotice of 17 April 2007, the Council undertakes not to refer to thePublic Prosecutor a matter involving an employee or a director ofan undertaking that has been granted leniency.


The French marker system, which did not exist when the leniencyprogramme was initiated, was implemented under the CouncilProcedural Notice of 17 April 2007. It consists in assigning a number to a leniency applicant uponreceipt of its application to guarantee that its order of application ismaintained until the end of the procedure, provided that theapplicant produces all the necessary information and evidencesupporting its application during the specific timeframe set by theAuthorities.


The undertaking can require that its application be filed entirelyorally so as to minimise any possible subsequent disclosure ordiscovery risks under foreign laws, given that such type ofprocedure does not exist under French law. The date when astatement is made is electronically recorded by the relevantauthority to ensure that applications are considered in the order thatthey were submitted.


Subject to the Competition Authority’s national and Europeanobligations, the identity of an applicant under the leniencyprocedure and the information provided may remain confidentialduring the investigation period, until the statement of objections isissued to all the parties concerned.

WWW.ICLG.CO.UK85


Fran

ce

SJ Berwin France


Once the application for leniency has been submitted, the applicantmust fully, continually and promptly cooperate with the Authoritiesthroughout the enquiry and the investigative procedure. TheCompetition Authority will verify that all the specifiedrequirements set out in the leniency notice have been observed andwill then issue its final decision to give full or partial immunity. Atthat point, the continuous cooperation process comes to an end.


French law does not provide for a “leniency plus” or a “penaltyplus” system. It can nevertheless not be excluded that, in practice,the Competition Authority grants further fine reductions to aleniency applicant that allows the discovery of another cartel.



Under French law, there is no procedure for individuals to reportcartel conduct independently of their employer.Nevertheless, in the recent decision No. 08-D-13 of 11 June 2008,the Council approved, for the second time, the implementation of awhistle-blowing procedure to enable employees to report acts orbehaviours in breach of any competition rules. Two undertakingsundertook such commitment to put an end to the procedure beforethe notification of the statement of objections (see the answer toquestion 6.1 below). The Council acknowledged that the French Data Protection Agency(Commission Nationale de l’Informatique et des Libertés) (the“CNIL”) does not object, in principle, that anticompetitive practicesbe covered by whistle-blowing procedures, but companies wishingto implement a whistle-blowing system must nonetheless file acompany-specific request seeking the CNIL’s authorisation.



(i) In addition to leniency, before the notification to the parties of thestatement of objections, undertakings can offer commitments toremedy the situation and avoid a decision ruling on the existence ofan infringement. Once said commitments are considered sufficientby the Competition Authority, and after receiving the observations ofinterested third parties, if any, the commitments will form part of thebinding decision of acceptance issued by the Competition Authority.On 3 April 2008, the Council published a procedural noticeintended to provide guidelines to undertakings on how to use thecommitment procedure. It states that this mechanism should not beapplied to the most serious infringements such as cartels. Inaddition, the commitments submitted have to be relevant, credibleand verifiable. They, furthermore, have to be necessary andsufficient to address the competition concerns.(ii) After the notification of the statement of objections,undertakings may also benefit from fine reductions, as a result of a

party’s not contesting the existence of the alleged practices. Themaximum fine which may be imposed is reduced by half and, underthis reduced fine ceiling, the Competition Authority may grant afurther reduction of the actual fine. A further reduction could alsobe granted if commitments are offered.(iii) The ordinance implementing the LME (see the answer toquestion 1.3) also provides for the right of the Minister of Economyto settle or order measures as regards so-called “microanticompetitive practices”. The Minister will have jurisdiction oversuch practices where (i) the combined turnover in France of all theundertakings involved does not exceed €100 million, (ii) theturnover of each of the undertakings in France does not exceed €50million and (iii) the practices do not fall within the scope of Articles81 and 82 of the EC Treaty. If the parties agree to a settlement, theamount of fine imposed will not exceed €75 million or 5 per cent ofthe parties’ latest turnover achieved in France, if this amount is oflesser importance. A decree relating to the Minister’s powers in thisarea is to be published at the time of drafting this article.

7 Appeal Process


Article L. 464-8 of the Code provides that appeals of theCompetition Authority’s decisions should be brought before theParis Court of Appeal, within one month after the decision has beenserved on the concerned parties.


Cross-examination, consisting of the parties directly askingquestions to the witness, is prohibited by French civil proceedingrules. The judge can, however, ask questions, submitted to him bythe parties, after examination of the witness.

8 Damages Actions


Any undertaking party to an anticompetitive agreement, anycompetitor of those engaged in anticompetitive practices, or anyother party who suffered a loss such as customers, can claimdamages on grounds of civil liability rules before civil orcommercial courts. Since decree No. 2005-1756 of 30 December2005, only the courts of Marseille, Bordeaux, Lille, Fort-de-France,Lyon, Nancy, Paris or Rennes have jurisdiction.


French law does not recognise class-action claims for the timebeing, despite the Council’s opinion of 21 September 2006 relatingto the introduction of group actions as regards anticompetitivepractices and the recent French parliamentary debates on thatsubject.Consumer associations are, nevertheless, entitled to claim damages,under certain conditions, for any damage caused to the collectiveinterest of consumers they defend and not on behalf of allconsumers.



Fran

ce

SJ Berwin France


Since Act No. 2008-561 of 17 June 2008, the limitation period hasbeen generally reduced to a five-year period that runs from the daythe holder of a right knows or should have known the facts enablinghim or her to exercise such right.


The French Civil Proceeding Code lists a number of legal costs thatwill be borne by the unsuccessful party. However, the judge can, bya reasoned decision, impose all or part of such costs to anotherparty. As regards the sums disbursed for lawyers’ fees, the judgecan take into account fairness and the financial situation of theparties to order the unsuccessful party to pay an amount that thejudge will determine.


There have been successful civil damages claims. For instance, ina decision of 28 June 2002, the Paris Court of Appeal granteddamages amounting to about €300,000 to a company sponsoringsports events, which had been victim of an anticompetitiveagreement between the sports events manager and its maincommercial partner, on grounds of the company’s eviction from theevent, and all the related pecuniary and non-pecuniary damage.Another interesting decision in this regard, which however resultedin an unsuccessful claim, should be noted. In a decision of 26January 2007, the Paris Commercial Court dismissed the claim ofthe pharmaceutical companies Juva Santé and Juva Production fordamages resulting from the anticompetitive behaviours of theirsuppliers, the company Hoffmann La Roche and its subsidiaries.

The plaintiffs argued that they could not have passed the vitamins’price increase on to their customers since such an increase wouldhave resulted in a loss of their market shares. The court rejectedtheir argument, on the basis of a broad interpretation of the passing-on defence, and ruled that they could have passed the raw materialincrease on their own price on the grounds that, as the raw materialconstituted a small part of the final products sold, a slight increasein their selling price would have been sufficient to balance thesignificant increase in the vitamins’ price.

9 Miscellaneous


The LME, enacted on 4 August 2008, has significantly modifiedFrench rules on anticompetitive practices and agreements (see theanswer to question 1.3).

9.2 Please mention any other issues of particular interest inFrance not covered by the above.

There is a set of competition rules specific to French law calledunfair trade rules. Such rules apply to all commercial relationsbetween professionals and do not require competition to beadversely affected.Infringement of these rules is sanctioned by civil or commercialcourts and the Competition Authority has no jurisdiction over thesequestions. However, if the Competition Authority observes theexistence of such practices within the framework of a case broughtbefore it, its president is entitled to bring an action before therelevant court. This power has been used in the past.

WWW.ICLG.CO.UK87


Natasha Assadi-Tardif

SJ Berwin64, avenue Kléber75 116 ParisFrance

Tel: +33 1 44 346 346Fax: +33 1 44 346 347Email: [email protected]: www.sjberwin.com

Natasha Assadi-Tardif is a senior associate in the EU, Competitionand Distribution department of the Paris office of SJ Berwin. Shejoined SJ Berwin in January 2005, after having worked with aleading US law firm for three years. Natasha focuses on national, EU and cross border merger controlregulations. She has experience in merger notifications to theFrench Minister of Economy and the European Commission as wellas the coordination of multi-jurisdictional merger filings. Natasha is also involved in advising domestic and internationalgroups with regard to cartels and abuse of dominant positionmatters. She also represents corporate clients before EU and Frenchcompetition authorities and courts in this respect. In addition,Natasha deals with commercial contract issues, consumer law aswell as French unfair trade practices, both in contentious and non-contentious matters.Natasha regularly contributes articles to trade journals and lawreviews. She also speaks at conferences on various points of herexpertise.Natasha was born in England and having also studied law in Londonand worked in a law firm in New York, she is bilingual in bothFrench and English. She also speaks Persian fluently and isproficient in German.

Delphine Cohen

SJ Berwin64, avenue Kléber75 116 ParisFrance

Tel: +33 1 44 346 346Fax: +33 1 44 346 347Email: [email protected]: www.sjberwin.com

Delphine Cohen is an associate in the EU, Competition andDistribution department of the Paris office of SJ Berwin. Delphinebegan her career in an international law firm in Paris in January2006 before joining SJ Berwin Paris in September 2007.Delphine specialises mainly in French and cross-border mergercontrol filings, anti-competitive practices as well as distribution andconsumer law issues. She also advises corporate clients oncompliance matters with regard to both Articles 81 and 82 of theEC Treaty and their French equivalents.Delphine contributes regular articles to trade journals andspecialised reviews. She also participates in working groups forpotential amendments to competition law.Having studied law in both Paris and Edinburgh, and holding anInternational Business Translator Degree in English and Germanfrom the ISIT, Delphine is bilingual in French and English andproficient in German.

SJ Berwin’s EU & Competition department has extensive experience of advising on and defending alleged cartel casesbefore the European competition authorities, including the European Commission and the French Conseil de laconcurrence. This includes advising on compliance programmes, fines, leniency applications and strategy, handling on-site inspections and subsequent investigations by the authorities. It also has extensive experience in EU and MemberState level competition-related litigation, including judicial review, as well as applications for injunctions and damagesand defending such applications. SJ Berwin represents clients in a number of significant cases before the EuropeanCourt of Justice as well as French courts.

SJ Berwin’s EU and competition department has been a core practice area of the firm since its establishment. Thedepartment is widely recognised as one of the leading practices in EU regulatory and competition law, operating fromParis, Brussels, London, Madrid, Milan and Munich. Three times voted ‘Competition Team of the Year’ in the UK LegalBusiness Awards, the team regularly features in Global Competition Review’s GCR 100, a survey of the world’s leadingcompetition practices.

Unlike many other European law firms, SJ Berwin’s EU and competition practice spans not only competition law butalso a broad range of other areas of EU law, which includes an active regulatory practice in pharmaceuticals, telecoms,energy and chemicals, an established trade law practice and a cutting edge EU and competition law litigation practicebefore both French and EU courts.

SJ Berwin France

Fran

ce

88

Chapter 16


SJ Berwin LLP

Germany



The legal basis for cartel enforcement in Germany is the Act againstRestrictions of Competition (ARC). Section 1 ARC corresponds toarticle 81(1) of the EC Treaty and broadly prohibits agreements orconcerted practices between undertakings that have as their objector effect the prevention, restriction or distortion of competition. The substantive law - which applies both to companies andindividuals - can be enforced by the Bundeskartellamt (FederalCartel Office, FCO) on the basis of two different proceedings.Minor infringements which only require a cease and desist order aredealt with in an administrative process which is governed by theARC. However, where the authority intends to impose fines, theproceedings are governed by the Code on Administrative Offences(Ordnungswidrigkeitengesetz) and the Code on Criminal Procedure(Strafprozessordnung).


Practices that are prohibited under section 1 ARC include pricefixing, bid rigging, allocation of customers, quotas or territories,limiting production or distribution and the exchange of sensitivemarket data (e.g., prices).


The cartel prohibition is enforced primarily by the FCO in Bonn.The authority has 11 independent divisions that are responsible fordifferent industry sectors and product markets. Infringements withregional effects are dealt with by the State Cartel Offices(Landeskartellbehörden) only. However, the majority of cartelcases are dealt with by the FCO, which is in charge both of theinvestigation of potential violations and the enforcement of thecartel prohibition.For the purpose of enforcing the cartel prohibition, theBundeskartellamt has set up a special unit for combating cartels(SKK) to help it increase the number of secret cartel agreements ituncovers, and to speed up its investigations and proceedings. TheSKK’s task is to assist the relevant divisions in the FCO in

uncovering cartel agreements by deploying specialised personnel.Since June 2005, the FCO’s 11th division has concentratedexclusively on the enforcement of the ban on cartels, assisted by theSKK.


Where the FCO discovers anti-competitive conduct (through third-party complaints or a leniency application by one of the companiesinvolved), it normally gathers further information and evidenceregarding the infringement. To collect this further information andevidence, the FCO has a broad range of investigative powers, whichare described in more detail below.Once the FCO has completed its fact finding, it will issue astatement of objections setting out the underlying facts of the case,the alleged infringements and the FCO’s legal assessment. Aroundthe same time, the targets of the FCO’s investigation will be givenaccess to the FCO’s file and have the opportunity to comment onthe allegations.The final step in the process is the adoption of a formal decision bythe FCO. In administrative proceedings, a non-confidential versionof the decision will be published on the FCO website(www.bundeskartellamt.de), whereas fining decisions adoptedunder the Code on Administrative Offences are not normallypublished.


Section 1 ARC does not apply to certain restrictions of competitionin the agricultural sector and to resale price maintenance in themagazines and newspaper sector.

1.6 Is cartel conduct outside Germany covered by theprohibition?

Cartel conduct outside of Germany is covered by the prohibitioninsofar as the conduct has appreciable effects in Germany. TheFCO has a tendency to interpret this rule broadly and assertsjurisdiction even in cases with little or indirect effects in Germany.Agreements made in Germany with effects only outside ofGermany are not covered, although export cartels may under certainconditions have at least potential effects in Germany and maytherefore be covered by the prohibition.

Tilman Siebert

Alexander Rinne

WWW.ICLG.CO.UK89


Ger

man

y

SJ Berwin LLP Germany






The investigatory powers described under question 2.1 aboveexclusively relate to companies and individuals who are the subjectof the FCO’s investigations. To the extent they are obliged tocooperate, they are not under an obligation to produce documents orto respond to questions which would expose them to the risk ofprosecution.Third parties are not obliged to produce documents inadministrative proceedings, whereas they have to producedocuments or information in criminal proceedings. Compulsoryinterviews with third parties are possible both in administrative andcriminal proceedings. However, third parties can withholddocuments and do not have to respond to questions which wouldexpose them or a member of their family to the risk of prosecution.


Competition authorities do not have general surveillance powers.Bugging is restricted to severe criminal offences and the cartelprohibition does not fall into this category.


There are no other powers of investigation beyond those listedunder question 2.1 above.


The searches are carried out by FCO officials, who are often

accompanied by police staff and IT experts to support the FCOofficials in their searches. The FCO will normally be prepared towait for approximately 30 minutes for external legal counsel toarrive before starting the inspection.


In-house legal advice is not protected by the German rules ofprivilege. It should be noted that the concept of legal privilege inGermany is not as broad as under the EU rules. External counseladmin kept at the premises of the undertaking under investigation isonly protected by legal privilege if the communication specificallyrelates to the ongoing investigation (defence correspondence) andwas created after the initiation of proceedings relating to theconduct under investigation.


During the investigation, the company and the individualsconcerned are, of course, protected by fundamental rights ofdefence. Individuals, therefore, do not have to respond to anyquestions asked by FCO officials if they have been accused of aviolation of the competition rules or if the answer would exposethem or a member of their family to the risk of criminal prosecutionor prosecution under the Code on Administrative Offences. Thefundamental rights of defence also include the right to legal advice.


The FCO can impose fines if formal requests for information arenot answered, answered incorrectly or misleadingly or notanswered within the time limit set. The same applies if formalrequests for documents are not complied with or complied with lateor incompletely. Fines can also be imposed where dawn raids orother investigatory measures are obstructed. So far, the FCO hasnot used these powers in cartel investigations.



Similar to Article 23(2) Regulation 1/2003, fines can be imposed oncompanies up to a maximum amount of 10 per cent of worldwideturnover in the last completed business year. This calculation hasreplaced the previous method of fining up to three times theproceeds gained from the infringement. However, in determiningthe amount of the fine, the FCO can still take into account theproceeds gained from the infringement. In order to establish a minimum level of legal certainty, the FCOpublished fining guidelines in September 2006 which are similar tothe European Commission’s fining guidelines. The FCO uses atwo-step procedure to calculate fines. First, it determines a basicamount which will then be adjusted in a second step. Depending onthe gravity of the infringement, the basic amount will represent upto 30 per cent of the turnover achieved during and from theinfringement. The turnover achieved from the infringement is thedomestic turnover achieved by the undertaking concerned with theproducts or services connected with the infringement. In the caseof price-fixing and quota cartels and other severe horizontal


Order the production of specific documents orinformation Yes No

Carry out compulsory interviews with individuals Yes No




Yes Yes

Right to retain original documents Yes Yes


Yes Yes


Yes Yes



Ger

man

y


restrictions of competition, the basic amount is generally set in theupper range of the maximum possible basic amount. The basicamount can in a second step be increased in order to achieve asufficient level of deterrence or to take into account aggravatingcircumstances. However, it can also be lowered if there areattenuating circumstances. In any event, the fine is capped at 10 percent of the company’s worldwide turnover.There are no additional sanctions on companies (e.g., no black-listing from bidding for government contracts or similar measures).


The level of fines for individuals has been increased by the SeventhAmendment from €500,000 to €1 million for participation in severeinfringements (i.e. hard-core cartel activity such as price fixing, bidrigging, allocation of quotas, customers or territories) and from€25,000 to €100,000 for less severe infringements.It should be noted that German law generally does not provide forcriminal sanctions for violations of the ARC. The notable exceptionto this rule is section 298 of the German Criminal Code, whichprovides for a prison sentence of up to five years for bid rigging intender proceedings. According to a recent Federal Supreme Courtdecision, bid rigging could, depending on the circumstances of theindividual case, also be regarded as a special form of fraud (prisonsentence of up to five years). If the FCO discovers cases involvingbid rigging, it must refer the proceedings against individuals to thepublic prosecutor. The corresponding proceedings againstcompanies stay with the FCO.There are no additional sanctions on individuals (e.g., directordisqualification).


The statute of limitation is generally five years for severeinfringements and three years for less severe infringements.However, investigatory measures undertaken by the FCO, theEuropean Commission or competition authorities of other MemberStates will suspend the limitation period.


Yes, companies frequently cover the legal costs and fines imposedon company employees or directors (including former employeesand directors).



In order to provide companies engaged in cartel activity with anincentive to end their involvement and to inform the FCO about theinfringement, the FCO introduced a leniency programme in 2000,which was revised in 2006. The revised programme largely reflectsthe European Commission’s 2002 leniency notice. However, due tothe liability of individuals, the FCO’s leniency programme isavailable both to companies and individuals. According to the FCO’s revised leniency programme, companiesinvolved in an illegal agreement can be entirely or partly exemptedfrom a fine if they make a decisive contribution to uncovering acartel and cease their anti-competitive behaviour.

In particular, a fine will not be imposed if the offender:is the first applicant to contact the FCO before it hassufficient evidence to obtain a search warrant;provides the FCO with verbal and written information and,where available, evidence that enables it to obtain a searchwarrant;was not the only ringleader of the cartel nor did it coerceothers to participate in the cartel; andcooperates fully and on a continuous basis with the FCO.

At the point at which it is in a position to obtain a search warrant, theFCO will still grant a cartel participant immunity from a fine if it:

is the first applicant to contact the FCO before it hassufficient evidence to prove the offence;provides the FCO with verbal and written information and,where available, evidence which enables it to prove theoffence;was not the only ringleader of the cartel nor did it coerceothers to participate in the cartel; andcooperates fully and on a continuous basis with the FCO.

Even where the conditions for full immunity are not fulfilled, thefine may also be reduced if the offender makes a significantcontribution to proving the offence by voluntarily revealing itsknowledge and discontinues its participation in the cartel. To theextent that the above conditions are fulfilled, they will be taken intoaccount by the FCO in setting the amount of the fine. The submission of all relevant documents, together with anexplanation of the information given will be deemed to helpcontribute to detection. Undertakings are also expected toencourage their members of staff to cooperate. Individuals from aparticular company will not be subject to individual fines if thecompany immediately and unreservedly cooperates with the FCOand contributes to uncovering cartel activity. It should be noted that the FCO’s leniency programme has no effecton civil antitrust litigation or on criminal investigations conductedby the public prosecution. Whistleblowers can therefore still besubject to damage claims and individuals could face criminalprosecution where the case at hand involves bid rigging.


The revised 2006 leniency programme introduced a marker system,under which applicants can place a marker with the FCO bydeclaring their willingness to cooperate. The timing of theplacement of the marker is decisive for the status of the applicationto obtain a marker certain basic information about the cartel needsto be provided. After having placed the marker, the applicant willbe set a time limit of up to eight weeks for the submission of acomplete leniency application.The FCO will confirm immediately that a marker has been placedand that the application has been received. Once the application hasbeen filed and the requirements for immunity are satisfied, the FCOwill assure the applicant in writing that he will be grantedconditional immunity.


Marker placements and leniency applications can be made orally.The FCO accepts marker placements and leniency applications inEnglish, provided that the parties submit a convenience translationshortly afterwards.

WWW.ICLG.CO.UK91


Ger

man

y



According to the FCO, cooperation with the authority can, inprinciple, be treated as confidential. In particular, the authority iscommitted to protect the identity of a ‘whistleblower’ to the extentthat this is possible. Disclosure in the fining decision is not an issuesince decisions are company-specific. However, there are certainlimits to this as the other cartel members will necessarily haveaccess to the non-confidential part of the FCO’s file once astatement of objections is issued and could, in certain cases, be ableto draw conclusions from the content of the file. In addition, wherethe FCO has no other evidence, it may have to rely on the testimonyof the whistleblower and will have to disclose this evidence to theother companies.


The applicant is required to cooperate with the FCO throughout theentire duration of the proceedings, i.e. until a formal decision hasbeen adopted. The obligation on the applicant to keep hiscooperation with the FCO confidential applies until the FCOrelieves the applicant of this obligation (normally after dawn raidshave been conducted).


There is no ‘leniency plus’ or ‘penalty plus’ policy in Germany.



Leniency applications can be made independently of theiremployers. However, there is no need for a separate application byan individual if the company has applied for leniency since theapplication of a company automatically covers all of its employeesinvolved in the reported conduct. However, an independentleniency application by an employee can compromise the positionof its employer since the employer can at best come in second withits application (with the consequence that immunity is no longeravailable). There are no financial rewards to incentivise whistle-blowing by individuals.



There are no formal settlement or plea bargaining proceduresoutside of the leniency process. However, the FCO has in the pastrewarded parties for not contesting facts and not appealing finingdecisions with lower fines. None of these informal arrangementshas so far been tested by an appeal.

7 Appeal Process


The FCO’s decisions are subject to appeal to the Higher RegionalCourt (Oberlandesgericht) in Düsseldorf. A further appeal against thedecision of the Higher Regional Court is only permitted on questionsof law to the Federal Supreme Court (Bundesgerichtshof).


German procedural rules do not allow for a cross-examination ofwitnesses.

8 Damages Actions


Under German procedural law, designated courts have jurisdictionto rule on damages actions for the compensation of loss suffered asa result of cartel conduct. Legal basis for damages actionsDamages claims are based on section 33 ARC. In addition, claimsfor damages may under certain circumstances be based on section 8and section 9 respectively of the German Act against UnfairCompetition. A further legal basis can be found in general tort law,section 823 et seq. of the German Civil Code. Potential claimants and passing-on defencePotential claimants are both direct (e.g. wholesaler of cartelisedgoods) and indirect parties (e.g. end-distributors or end-customersof cartelised goods) affected by the respective cartel agreement. Incase a directly affected party claims damages the question arises asto whether the so-called passing-on defence is admissible.According to the German legislator, the passing-on defence is notexcluded as such. However, the defendant cannot rely on the mereallegation that the direct purchaser has managed to pass on thecartel damage to the next trader or the consumer. Rather, thecalculation of damages has to be based on the principle ofVorteilsausgleichung (“adjustment of damages by benefitsreceived”). As a result, this leads to a reversal of the burden ofproof, i.e., the party in breach of competition law has to provide fullevidence that the purchaser of goods or services managed to reduceits loss by passing on the excessive prices to its own customers. Inaddition, even if the defendant is able to demonstrate that thepurchaser passed on the excessive purchase price, the passing-ondefence is not available if it leads to an unjustified benefit for thedefendant. Burden of proofIn principle, the claimant has to demonstrate and provide evidencefor the facts forming the basis of the competition law infringementas well as of the loss incurred. However, the claimant may benefitfrom a shift in the burden of proof in certain situations. Binding effect of decisions taken by competition authoritiesTo compensate the difficulties a potential claimant might have indemonstrating the facts of a competition law infringement, Germancompetition law provides for far reaching binding effect ofdecisions adopted by competition authorities. Final decisionsadopted by the German Federal Cartel Office, the European



Ger

man

y


Commission or by competition authorities of other EU MemberStates have a binding effect on the German civil courts bothregarding facts and liability. The intention of this provision is tofacilitate private follow-on actions, as national courts will not takefurther evidence on the competition law infringement after a finalformal decision has been made by a European competitionauthority. Estimation of the loss incurred by the competent cartel courtsIn relation to the amount of loss incurred by the claimant, thestandard of proof is considerably reduced. According to section287 Civil Procedure Code, the court responsible for the case canestimate whether and if so how much loss the claimant has suffered.It is only necessary that the claimant provides a reliable factualbasis for such an estimate. In cartel cases, the court can in particularbase its estimate concerning the amount of loss incurred on thebasis of the profits earned by the defendants through the illegalcartel activities. Pre-trial discoveryEven though there is no discovery proceeding as such, German lawprovides for various possibilities to gain access to the informationnecessary to found a damages claim. In particular, potentialclaimants can access the records of the FCO in accordance withSection 406 (e) of the German Code of Criminal Procedure. Thespecific aim of this right to access records is to enable victims ofcartel conduct to substantiate potential damages claims.


German civil procedure law does not provide for a class actionlawsuit in competition law matters. However, customers cansubmit damages claims via third parties. In relation to the cementcartel which has been fined by the FCO in April 2003, the RegionalCourt of Düsseldorf recently admitted a damages claim which wassubmitted by the Belgian company Cartel Damages Claims S.A.(CDC). The Court accepted that the cartel victims could assigntheir individual claims to CDC which can now seek to enforce therespective claims on its own behalf. However, the decision of theCourt has not become final and binding yet.


Statute of limitation for damages actions is 3 years from the pointin time when the claimant is aware of the defendant’s infringement.However, according to Section 33(5) of the ARC, the statute oflimitation is suspended as soon as the FCO institutes proceedingsbased on an infringement of the ARC or Articles 81 and 82 of theEC Treaty. The same applies if the European Commission or thecompetition authority of another Member State initiatesproceedings based on Articles 81 or 82 of the EC Treaty. Therelevant suspensions expire six months after termination of suchproceedings (e.g., by a decision).


The claimant will have to make an advance payment to cover thecosts of the proceedings (including court fees and the defendant’scounsel fees) and ultimately, costs will have to be borne by thelosing party (although the opponent’s legal fees will only have to beborne in the amount of the statutory legal fees (which are usuallylower than actual agreed fees).


The Regional Court of Dortmund has ordered the participants of thevitamins cartel to pay compensation for damages suffered bypurchasers of the cartelised vitamins. However, a final and bindingdecision of a German High Court or the German Federal SupremeCourt on private antitrust damages actions is still outstanding.

9 Miscellaneous


Nothing to report.

9.2 Please mention any other issues of particular interest inGermany not covered by the above.

Nothing to report.

WWW.ICLG.CO.UK93


Ger

man

y

Dr. Alexander Rinne

SJ Berwin LLPKarolinen Karree, Karlstraße 12 80333 MunichGermany

Tel: +49 89 8908 1340Fax: +49 89 8908 1114Email: [email protected] URL: www.sjberwin.com

Alexander Rinne joined SJ Berwin’s Munich office as a partner in2001. He specialises in both German and European competition lawincluding related regulatory areas, such as energy, recycling andtelecommunication. He has extensive experience in contentiouscompetition cases, cartel investigations and proceedings dealingwith the abuse of dominant positions in which he has representedGerman and international clients before the Bundeskartellamt, theEuropean Commission as well as the European Court of Justice andnational courts. Alexander is also widely involved in EU andGerman mergers and joint ventures. His practice includes inparticular the application of the merger provisions to complexprivate equity transactions, advising in close conjunction with thefirm’s Private Equity Group. Alexander received his doctorate in EU Competition Law in 1997.He lectures and publishes regularly on various subjects relating tocompetition law. He is a member of the German competition lawassociation and the Association of Intellectual Property andCopyright Law.

Tilman Siebert

SJ Berwin LLPKarolinen Karree, Karlstraße 12 80333 MunichGermany

Tel: +49 89 8908 1342Fax: +49 89 8908 1114Email: [email protected] URL: www.sjberwin.com

Tilman Siebert is a partner in the Munich office of SJ Berwin andspecialises in antitrust and competition law.His work includes merger control proceedings at the EuropeanCommission and the German Bundeskartellamt, multi-jurisdictionalfilings, cartel investigations and general competition law advice(including advice on compliance issues, joint ventures, licensing anddistribution agreements). Prior to joining SJ Berwin in 2005, Tilman worked for more than 5years for another major law firm in Berlin and Brussels. He is amember of the German competition law association and regularlylectures and publishes on competition law topics.

SJ Berwin’s EU & Competition department has extensive experience of advising on and defending alleged cartel casesbefore the European competition authorities, including the European Commission and the national competitionauthorities of the Member States. This includes advising on compliance programmes, fines, leniency applications andstrategy, handling on-site inspections and subsequent investigations by the authorities. It also has extensive experiencein EU and Member State level competition-related litigation, including judicial review, as well as applications forinjunctions and damages and defending such applications. SJ Berwin represents clients in a number of significant casesbefore the European Court of Justice as well as the national courts of the Member States.




94

Chapter 17


PI Partners

Greece



Cartel conduct is prohibited by Law 703/77, which prohibits anti-competitive agreements and arrangements between undertakings.The concept of “undertaking” is defined broadly and can beextended to include any legal or natural person engaged ineconomic activity.The general nature of the cartel prohibition is civil andadministrative, but criminal sanctions are provided for as well.Article 9 of Law 703/77 provides for administrative sanctions onthe undertakings engaged in cartel conduct. On the other hand,article 29 imposes criminal sanctions (fines of Euro 3,000-30,000but not imprisonment) to individuals who participated in cartelconduct.


Article 1(1) of Law 703/77 prohibits all agreements betweenundertakings, decisions by associations of undertakings andconcerted practices, which have as their object or effect theprevention, restriction or distortion of competition. Article 1(1),provides an indicative list of anti-competitive practices, includingthose which:

directly or indirectly fix purchase or selling prices or anyother trading conditions;limit or control production, markets, technical development,or investment;share markets or sources of supply;apply dissimilar conditions to equivalent transactions withother trading parties, thereby placing them at a competitivedisadvantage; andmake the conclusion of contracts subject to acceptance by theother parties of supplementary obligations which, by theirnature or according to commercial usage, have no connectionwith the subject of such contracts.

Article 1(2) provides that agreements or decisions prohibitedpursuant to article 1(1) shall be automatically null and void.According to article 1(3), agreements, decisions and concertedpractices caught by article 1(1) may be assessed by the HellenicCompetition Commission (“HCC”) as compatible with Law 703/77provisions, if they fulfill the following three cumulative criteria:

they contribute to improving the production or distribution ofgoods or to promoting technical or economic progress, whileallowing consumers a fair share of the resulting benefit;they do not impose on the undertakings concernedrestrictions which are not indispensable to the attainment ofthese objectives; andthey do not afford such undertakings the possibility ofeliminating competition in a substantial part of the pertinentmarket.

It is notable that the system of “self-assessment” introduced byarticle 1(2) of Council Regulation 1/2003 in the European regimehas not been implemented in the Greek regime and, therefore, theHCC is exclusively competent to rule on whether the criteria ofarticle 1(3) apply.However, “hard core” cartel conduct such as price-fixing andmarket-sharing cartels will never qualify for the above exemption.


The competent body authorised to enforce the cartel prohibition isthe HCC, which consists of eleven members.Its Chairman is appointed by the Council of Ministers, upon aproposition by the Minister of Development and an opinion of theParliamentary Committee for transparency. Its members areappointed by the Minister of Development. The Chairman, themembers (and deputies) are appointed for a three-year term.The body assisting the HCC in its duties is the Directorate Generalfor Competition (“DG”).Decisions of the HCC in competition matters are subject to judicialreview under articles 14-17 of Law 703/77. Appeals (in the firstinstance) are filed to the Athens Administrative Court of Appeals.The latter’s judgments may be further appealed on points of lawonly, in front of the Supreme Administrative Court (Conseil d’Etat).It should be noted that the Hellenic Telecommunications & PostCommission (EETT) is exercising the competence of the HCC inthe telecommunications and the postal services market. EETT hasthe discretion either to ask for the assistance of the HCC or to referthe case to the HCC.


An investigation can be opened on the basis of one or more of thefollowing grounds: (a) HCC own market intelligence (ex officio);(b) following a complaint; and/or (c) following a leniencyapplication.

Vassilis Stergiou

WWW.ICLG.CO.UK95


Gre

ece

PI Partners Greece

The DG performs a fact-finding exercise in order to collect datanecessary for the establishment of an infringement. For this reasonit may perform dawn-raids, send questionnaires and takestatements. The duration of the investigation varies from case tocase, while Law 703/77 does not provide for a specific deadline. Inpractice, the duration of an investigation can be significantly long.When the DG believes that it has sufficient grounds to establish aninfringement, it will send to the parties under investigation a“statement of objections”. The statement of objections has to benotified to the parties at least 60 days before the hearing, unless thecase under examination is urgent. It sets out the facts on which theDG relies, the legal basis of the infringement and the actionsproposed.Subsequently, the parties are allowed to have access to the file inorder to review the investigation documents.The parties have to submit their written response to the HCC at least30 days before the hearing. In the written response, the parties mayask to exercise their right for an oral hearing. At least 15 daysbefore the hearing, the parties may submit a supplementary writtenresponse. Third parties may submit their statements at least 15 daysbefore the hearing.After the right to be heard has been exercised and upon theapplication of the parties, the Chairman may grant to the parties theright to submit a supplementary written response.The HCC is obliged to issue a decision within 30 days from its lastmeeting regarding the case at hand. This last meeting has to be heldwithin 30 days from the last hearing of the case. In practice, theabove deadlines are not observed.


Under article 6 of Law 703/77:undertakings of general importance for the nationaleconomy;undertakings and association of undertakings engaged inagriculture, farming, forestal products and fishery; andtransport undertakings and their associations,

may be exempted from the application of Law 703/77, by means ofa joint-ministerial decision issued by the Minister of Developmentand the competent minister.Article 7 of Law 703/77 provides that, subject to the internationalobligations of Greece, Law 703/77 does not apply to agreements,decisions and concerted practices which exclusively intend tosecure, promote or strengthen exports.

1.6 Is cartel conduct outside Greece covered by theprohibition?

Article 1 applies as well to conduct outside Greece, which has aneffect on competition within Greece.






There are none.


There are no formal general surveillance powers, although the listwith the investigatory powers is indicative and not exhaustive. Onthis ground, the surveillance cannot be excluded, provided thatconstitutional rights are not violated.


The officers of the DG have the authority not only to require anexplanation of documents or information supplied, but also to takestatements (sworn or not).


The officers of the DG carry out the searches of business and/orresidential premises. The officers may ask the assistance of anycompetent authority (such as the Public Prosecutor). Investigationsof residential premises have to be performed under the presence ofthe judicial authority.The DG officers normally wait for a reasonable time (30-60minutes) for the external legal advisors to arrive before theycommence the investigation.


There is no specific provision. While the theory is currentlybifurcated, the officers of the HCC have in the past seizedcommunication between the in-house legal counsel and thecompany under investigation, but the existence of an in-houselawyer/client privilege has not been yet addressed by the courts.








Yes N/A



Yes N/A


Yes N/A



Gre

ece

PI Partners Greece


There are none.


A fine of Euro 15,000-100,000 may be imposed on personsobstructing the investigations. No decisions have been issued so farimposing such sanctions.



According to article 9 of Law 703/79, the HCC has the power toimpose penalties on a company violating article 1 of up to 15% ofits turnover for the current financial year or the financial yearpreceding the violation. Fines up to Euro 10,000 are imposed foreach day of non-compliance to HCC decisions.On 12 May 2006, the HCC published guidelines on the method ofsetting fines. Fines should have a sufficiently deterrent effect, notonly in order to sanction the company concerned (specificdeterrence) but also in order to deter other companies fromengaging in, or continuing, behavior that is contrary to article 1 ofLaw 703/77. The HCC will use the following two-stepmethodology when setting the fine to be imposed on companies:1. Basic amount of the fineFirst, the HCC will determine a basic amount for each company.The basic amount of the fine will be set at a level of up to 30% ofthe value of sales of goods or services to which the infringementdirectly or indirectly relates, depending on the degree of gravity ofthe infringement, multiplied by the number of years ofinfringement.2. Adjustments to the basic amountA. Aggravating circumstancesThe basic amount may be increased where the HCC finds that thereare aggravating circumstances, such as:

where the company is a “repeat offender’ (100% increase forthe same or similar violation);refusal to cooperate with or obstruction of the HCC incarrying out its investigations; orrole of leader in, or instigator of, the infringement.

B. Mitigating circumstancesThe basic amount may be reduced where the HCC finds thatmitigating circumstances exist, such as:

the infringement was terminated as soon as the HCCintervened;the company committed the violation as a result ofnegligence;the company’s involvement was substantially limited; andthe company has effectively cooperated with the HCCoutside the scope of the leniency programme.

In exceptional cases, the HCC may take account of the company’sinability to pay in a specific social and economic context.Additionally, the HCC has the power to require a company to bringan infringement to an end, to order interim measures and to imposeany structural or behavioral remedy.


Any person, who executes agreements, takes decisions or performsconcerted practices, prohibited by article 1 of Law 703/77 and article81 of the EC Treaty, shall be punished by a fine of Euro 3,000-30,000.These thresholds are doubled in case of a repeated offence.Additionally, any person obstructing the investigations of the HCCis punishable by a fine of Euro 15,000-100,000.Finally, any person:

obstructing the application of the provisions of law 703/77;delaying the provision of information to the HCC;providing false information or concealing true information; ordenying to provide affidavits or witnessing false statementsor concealing true information,

is threatened with imprisonment (at least for 3 months) and ispunishable by a fine of Euro 5,000-15,000. These thresholds aredoubled in case of a repeated offence.


Greek law does not provide for a limitation period. Existingliterature deems a 5-year limitation period as applicable by analogyto the European law.


Neither is there any relevant provision in the Greek law nor haveany financial penalties been imposed to companies’ employees sofar. Nevertheless, there is no provision prohibiting a company toreimburse such costs to its employees.



In March 2006, the HCC adopted a leniency programme onimmunity from fines and reduction of fines in cartel cases.1. Immunity from finesThe HCC will grant immunity from any fine which wouldotherwise have been imposed to a company disclosing itsparticipation in an alleged cartel if that company:(a) is the first to submit information and evidence which in the

HCC’s view will enable it to: (i) carry out a targetedinspection in connection with the alleged cartel; or (ii) findan infringement in connection with the alleged cartel;

(b) cooperates genuinely, fully, on a continuous basis andexpeditiously from the time it submits its applicationthroughout the HCC’s administrative procedure;

(c) stopped its involvement in the alleged cartel immediatelyfollowing the submission of the evidence;

(d) has not induced other companies to participate in the allegedcartel;

(e) has treated as confidential its application for leniency untilthe issuance of the statement of objections; and

(f) has not been found in the past by the HCC or the EUCommission to have participated in a prohibited agreement.

2. Reduction of a fineCompanies that do not meet the conditions under 1 above may be

WWW.ICLG.CO.UK97


Gre

ece

PI Partners Greece

eligible to benefit from a reduction of any fine that would otherwisehave been imposed.In order to qualify, a company must provide the HCC with evidenceof the alleged infringement which represents significant addedvalue with respect to the evidence already in the possession of theHCC. Also, the company has to stop its involvement in the allegedcartel immediately following the submission of the evidence.The first company to provide significant added value gets areduction of 30-50%, the second 20-30% and the following 15-20%.


No, the Greek leniency programme does not provide for a markersystem.


No, the Greek leniency programme does not provide for oralapplications.


A leniency application has to be treated confidentially by theapplicant until the issuance of the statement of objection.


The ‘continuous cooperation’ requirement ceases to apply with thecompletion of the administrative procedure.


No there is not.



There are no formal procedures for individuals to report cartelconduct independently of their employer. Nevertheless, employeesmay always provide to the HCC information regarding cartelconduct as any third party.



No there is not.

7 Appeal Process


HCC decisions can be appealed (in the first instance) in front of theAthens Administrative Court of Appeals within 60 days of thenotification of the decision.Decisions issued by the Athens Administrative Court of Appealsmay be challenged before the Administrative Supreme Court(Conseil d’Etat) on points of law only.


Yes it does.

8 Damages Actions


Third parties who have suffered a loss as a result of cartel conduct maybring a civil claim for damages in the Greek courts. There is nospecific statutory basis for such claims. The basis of such claim wouldbe article 914 of the Civil Code, which establishes tort liability.Such actions can be brought regardless of whether the HCC hasalready issued an infringement decision in respect of the relevantconduct.


No. However, the Greek Civil Procedure Code provides that anaction for damages may be brought jointly by more than one party if:a) the plaintiffs’ right for damages arises from the same factual

and legal basis; orb) the object of the dispute consists of similar claims based on

similar factual and legal basis.


The limitation period is 5 years form the day the plaintiff becameaware of the damage and the identity of the responsible person. Inany case, the limitation period cannot exceed 20 years from therelevant action.


There are no special provisions for costs regarding civil damagesfollow-on claims in cartel cases. The general rule is that the losingparty is responsible to pay the costs. This rule has severalexceptions and limitations, which depend on the specific facts ofeach case.


There have not been any civil damages claims for cartel conduct inthe Greek courts so far.



Gre

ece

PI Partners Greece

9 Miscellaneous


There have been no recent developments in the field of cartels andleniency.

9.2 Please mention any other issues of particular interest inGreece not covered by the above.

None.

Vassilis Stergiou

PI Partners 11th km Athens-Lamia National RoadMetamorfosi 14451, AthensGreece

Tel: +30 210 2886 512Fax: +30 210 2886 910Email: [email protected]: www.pipartners.eu

Vassilis is a senior associate with PI Partners working in its EU andcompetition department in Athens. His work involves advisingclients on a broad range of competition law issues, including mergercontrol, cartel and leniency issues, abuse of dominant position,vertical/horizontal agreements, sector inquiries and dawn raids.During the last year he has focused his practice on the applicationof competition rules in the area of mass media, which, since theintroduction of the new mass media law in August 2007, isregulated by special competition provisions, and he has handledseveral filings before the Hellenic Competition Commission underthe new law. Vassilis received his LL.B. from the University ofAthens in 2003, and an LL.M. in 2005 from University ofPennsylvania (Upenn) Law School.

PI Partners EU and Competition law practice has extensive experience in advising on all aspects of competition law,including cartels, abuse of dominant position, merger control, vertical agreements, cooperation agreements as well ashandling on site-inspections and subsequent investigations by the authorities. PI Partners’ Bucharest and Sofia officesare actively engaged in advising on the effects of Romania and Bulgaria joining the European Union in 2007. Lawyersin our Istanbul office have built an extensive track record in advising on the compatibility of all types of commercialagreements with competition regulations. We represent our clients in their applications before the European Court ofJustice and active contestations against the Competition Commission’s decisions. Our team is highly specialised:Xenophon Paparrigopoulos is the Head of the Department of EU Studies of the Scientific Service of the HellenicParliament, with responsibility for the briefing of Parliament on important developments in EU law and for the reviewof national bills to ensure conformity with EU legislation.



Chapter 18

Szecskay Attorneys at Law

Hungary



The cartel prohibition is provided for in Act LVII of 1996 on theProhibition of Unfair and Restrictive Market Practices(“Competition Act”). The consequences of the breach of thisprovision may be threefold:

regulatory sanctions (including the impositions of fines onthe undertaking involved);civil law sanction, i.e., damages action; and/orcriminal sanction, if the cartel relates to public procurementor concession bidding procedures.

Although the rules of the EC competition law apply in Hungary,being also an EU Member State, in this summary, we presentexclusively Hungarian national rules.


Under Chapter IV of the Competition Act relating to restrictiveagreements, any agreements or concerted practices betweenunrelated undertakings, as well as the decisions of socialorganisations of undertakings, public corporations, unions and othersimilar organisations, which are aimed at the prevention, restrictionor distortion of economic competition, or which have or may havesuch an effect, are prohibited. This provision corresponds to Art. 81of the EC Treaty. The Competition Act gives a non-exhaustive list of behaviour towhich the prohibition of restrictive agreements applies, inparticular:

Fixing the purchase or sale price and defining other businessconditions directly or indirectly. Restricting or controlling manufacturing, distribution,technical development or investment. Sharing the sources of available goods or restricting thefreedom to choose from them, as well as excluding certainconsumers, business partner from the option to purchasecertain goods. Sharing the market, excluding anyone from selling, orrestricting the choice of sales opportunities. Preventing anyone from entering the market. Discriminating against certain business partners.

Making the conclusion of an agreement dependent on theacceptance of obligations which, due to their nature or withregard to the usual contractual practice, do not relate to thesubject of the agreement.


It is the Hungarian Competition Office (HCO) which enforces thecartel prohibition. The HCO is an administrative authority havingjurisdiction for the whole territory of Hungary.


The procedure when the HCO decides to investigate an agreementbegins with an investigation phase. When the HCO starts aninvestigation it may only take place within a procedure commencedex officio. The HCO has the right to publish the opening of aninvestigation, and in practice it does so; nevertheless the partiesalways obtain a notice on the opening of the investigation and thepublication only takes place following the due notification of theparties. The investigation is carried out by an investigator. Theinvestigator terminates the procedure, if the investigation is foundto be unjustified. If the procedure is justified, the investigatorsummarises his findings of fact. Those findings, as well as theinvestigator’s proposals for further actions (e.g. interim measures),are sent to the competition council in a report (investigation report). On the basis of the investigation report, the competition councilcan:

Terminate the procedure. Order a further investigation. Impose interim measures.

If interim measures are imposed, and neither termination nor afurther investigation is ordered, the competition council:

Prepares a preliminary opinion on the proposed remedies. Announces that a hearing will be held.

The competition council sends to the parties the investigationreport, together with the preliminary opinion of the council toenable the parties to prepare a defence and be able to respond beforeor at the hearing.The HCO has 180 days to issue its final decision from the date theinvestigator ordered the investigation and this deadline can beextended twice (by up to 180 days per extension) where it isjustifiable to do so.

Gusztáv Bacher

Judit Budai



Hun

gary

Szecskay Attorneys at Law Hungary


Certain agreements in the following groups of restrictiveagreements are exempted by government decrees from the generalprohibition:

Vertical agreements (Government Decree 55/2002 (III 26)). Insurance agreements (Government Decree 18/2004 (II 13)). Motor vehicle distribution and servicing agreements(Government Decree 19/2004 (II 13)). Research and development agreements (Government Decree54/2002 (III 26)). Specialisation agreements (Government Decree 53/2002 (III26)).Technology transfer agreements (Government Decree86/1999 (VI 11)).

These exemptions reflect the respective EC Block ExemptionRegulations. They do not apply where there is a cumulative effectof similar agreements at the relevant market.

1.6 Is cartel conduct outside Hungary covered by theprohibition?

The Competition Act applies to the market conduct of undertakings,carried out in the territory of the Republic of Hungary. The marketconduct of undertakings carried out abroad shall also fall under thescope of the Competition Act, if the effect of such conduct maymanifest itself within the Republic of Hungary.






The HCO is authorised to use the documents, data and other

information or means of evidence it has legitimately obtained in anyother competition control proceedings as well.


As far as the administrative proceedings carried out by the HCO areconcerned, the HCO does not have such powers.As to the criminal proceedings initiated on the grounds of analleged crime (Agreement in Restraint of Competition in PublicProcurement and Concession Procedures, see questions 1.1 and 3.2)is concerned, the investigating authority (police, prosecutor) mayexercise surveillance powers after receiving an authorisation fromthe competent court.


In case the HCO is carrying out an investigation in the course of adawn raid in business or residential premises, the investigator shallbe empowered to make copies of or seize any means of evidencesuggesting any conduct in violation of the cartel prohibition, even ifsuch evidence is not directly related to the subject of theinvestigation and even if it is not covered by the court order(“fishing”). In the case of such means of evidence the court ordershall be obtained subsequently, for which the request shall besubmitted within thirty days following the date when theinvestigative measure was carried out. In the absence of asubsequent court order the means of evidence shall be inadmissible.


In case of an administrative proceeding carried out by the HCO, itis the investigator (being a representative of the HCO) who willcarry out the search. The investigator may request police assistancewhen carrying out the search, in the course of which the police areentitled to take measures and use force in a manner permissible inaccordance with the legal regulations governing the police.The person carrying out the search is not obliged to wait for thelegal representative to arrive. It is the matter of the individualsituation how an investigator reacts and what tolerance may bebargained. In case of the criminal proceedings, the investigation is carried outby the police. However, the public prosecutor may be present atany search, moreover it is entitled to carry out investigations itself,instead of the police.


No. Only advice given by the attorney-at-law mandated by theundertaking enjoys privilege. According to the Act on Attorneys,in-house lawyers do not qualify as attorneys.


Searches in a residential premise (including cars) may be carriedout only if it is in the use of any former or current executive officer,employee or representative of the undertaking which have allegedlyparticipated in the cartel, or any other person who effectivelyexercises control or who used to exercise control over thisundertaking.







Yes Yes



Yes Yes


Yes Yes

WWW.ICLG.CO.UK101


Hun

gary


The documents considered as legal privilege are not admissible asthey may not be examined. Legal privilege covers any documentcreated in the interest or in the process of the client exercising hisfundamental right to defence, during or for the purpose ofcommunications between the client and his external attorney, or thatis a record of the contents of such communications, provided in allcases that the nature of these documents is readily apparent from thedocument itself. In practical terms it means that the document hasto indicate the following: “Privileged client-attorneycommunication”.If the investigator makes an attempt to compel the client to present adocument under legal privilege, or if the investigator wishes toinspect, take possession or make copies of such document in thecourse of an inspection or the dawn raid, the client has the right torefuse. However, the investigator - in due respect of the rights relatingto the legal privilege - is entitled to inspect the document to ascertainwhether relying upon the protection afforded by legal privilege ismanifestly unfounded or not. If, contrary to the assertion of the personconcerned, the investigator is of the opinion that the document inquestion should not enjoy the protection, the document (or the hardmirror image made on the data medium) shall be deposited in acontainer that is capable to prevent access to the document. Thesealing of the container shall be witnessed and signed by the personconcerned and the investigator, where the seal shall be affixed toprevent opening the container without tampering with the seal. As towhether a document should enjoy the protection under legal privilegeshall be decided, upon the request of the HCO by the court.


In the course of the proceedings and at any stage, the HCO canimpose a procedural fine on the undertaking and any other naturalor legal person that is required to cooperate in the HCO’sproceedings, if that person:

engages in conduct aimed at or resulting in: the delay of the proceedings; ormaking it impossible to reveal the relevant facts;

disturbs the hearing seriously or repeatedly; orfails to meet deadlines.

The penalty is at least HUF50,000 (about US$270), and can be upto a maximum of:

for natural persons: HUF500,000 (about US$2,700); and HUF50,000, in the case of failures to meet deadlines,

for each day of delay; and for legal persons:

1% of its net sales revenue for the previous financialyear; and

1% of its net sales revenue for the previous financialyear, in the case of failure to meet deadlines, for each day ofdelay.

There are no available published statistics of the HCO on whetherat all or how frequently such sanctions may have been used.



In its decision, the competition council can: declare that a conduct is illegal;

determine that a block exemption (see question 1.5) will notapply to an agreement;order the termination of illegal conduct; prohibit the continuation of an illegal conduct; order certain conditions or commitments in connection withan illegal conduct; orimpose a fine.

In its decision, the competition council can impose a fine of up to10% of the undertaking’s annual net turnover. The method ofsetting fines in anti-trust cases is set out in Notice 2/2003 of thePresident of the HCO and the President of the competition council.The HCO first establishes a basic amount from the turnover of theundertaking on the relevant market. This amount is based on:

the threat to competition; the impact of the infringement on the market;the attitude of the offender towards the infringement; andother considerations arising from the overall circumstancesof the case.

The first three conditions are accorded an equal weight of 30%each, while the fourth receives a lower weighting of 10%.


Individuals can be liable for a procedural fine (see question 2.8).In addition, a person (including any person in a decision makingposition) commits a crime which can be punishable byimprisonment for up to five years, when he:

influences public procurement or concession biddingprocedures by way of:

price-fixing;fixing other contractual terms; market sharing;engaging in other conduct in concert with other com-

petitors; orparticipating in making a decision of an association of

undertakings, public body, society or other similar organisa-tion in order to influence the result of the public procurementor concession bidding procedure; andas a result of this conduct, market competition is actuallyrestricted.

The punishment is up to two years, if the value of the publicprocurement or concession bidding procedures is not more thanHUF50 million (USD 270,000).Finally, under Act IV of 2006 on business associations (CompanyAct), executive officers are liable to an undertaking under thegeneral rules of civil law for damage caused to the undertaking byviolating the law (e.g. the cartel prohibition). This means thattheoretically, the company which was held liable for participating ina cartel may bring a damages action against its management andclaim the damage caused by the management (e.g. fines,depreciation of goodwill, defamation).


The limitation period relating to the cartel prohibition is 5 years. Incase of the criminal liability, the limitation period is the upper limitof the term of imprisonment (2 or 5 years, depending on the valueof the public procurement or concession bidding procedures).In both cases, the limitation period shall commence at the time theinfringement is terminated.



Hun

gary



There is no specific rule which would prohibit such payment.



An undertaking can obtain immunity or leniency by cooperating inthe investigation (Notice 3/2003 as amended by Notice 1/2006 ofthe President of the HCO and the President of the competitioncouncil on the application of a leniency policy to promote thedetection of cartels). An undertaking that participates in a carteldoes not pay a fine if it is the first to provide to the HCO:

information relating to a cartel unknown to the HCO; ornew evidence and information which may serve as groundsto establish a legal breach.

The HCO may reduce the fines on other undertakings that providesuch information (but that are not the first). Immunity or leniencyis only available if the undertaking:

did not force other undertakings to take part in theinfringement; co-operated with the HCO during the entire process; orfinished its activities in the cartel.

These conditions are examined at the end of the process.


The HCO specifies in its Notice 3/2003 a marker available to animmunity applicant providing on an anonymous basis the keyelements of the cartel (e.g. price-fixing, market-sharing) and a listof the evidence in its possession accurately, reflecting the content ofthe evidence, whilst not disclosing the participants in and thespecific details of the infringement.If the application and the list meet the conditions for grantingimmunity, the HCO will inform the cooperating undertakingaccordingly within 8 days and at the same time set a deadline for thesubmission of evidence.Following the submission of the information and evidence, theHCO will check that they correspond to the preliminary list,examine their content and will declare in writing, within 15 days,whether the cooperating undertaking qualifies for conditionalimmunity. A company that does not receive conditional immunitymay withdraw the evidence; evidence not withdrawn will bereclassified by the HCO as an application for fine reduction.


Yes, this is possible.


The parties to the proceedings can only access the case file once theinvestigation phase is completed (see question 1.4) at the timespecified by the HCO. However, the competition council may rule

that a party and its representative can inspect certain specificdocuments before the conclusion of the investigation phase, if thisis unlikely to adversely influence the outcome of the proceedings.In the course of the HCO’s proceedings, the following are alwaysconfidential if not used as evidence when establishing the facts ofthe case:

the internal documents of the HCO, the EuropeanCommission (Commission) and the competition authoritiesof the EU Member States (including documents specified inArticles 11 and 14 of Regulation (EC) No. 1/2003 on theimplementation of the rules on competition laid down inArticles 81 and 82 of the EC Treaty); andcorrespondence between the HCO and other authorities.

The parties to the proceedings can, in order to protect businesssecrets, request restrictions on access to, and the making of copiesor notes on, documents that they have submitted (either voluntarilyor on the basis of an order) to the HCO. The HCO (or itsinvestigator) can order the parties to submit a redacted version ofthe documents where the confidential information is deleted.As there are no specific rules on separate treatment of leniencydocuments from the investigation file, in case of a follow-on privateenforcement case, it may not be excluded that at least the redactedversion of the leniency application is handed over to the court, incase the plaintiff submits motions for requesting the court to obtainthe competition office files in the course of the fact findingprocedure.


The requirement of continuous cooperation applies in the course ofthe whole proceeding, i.e., until the final decision is made by theCompetition Office.


There is no “leniency plus” policy.According to its Notice No. 2/2003 on the method of setting finesin antitrust cases (as amended by Notice no. 2/2005), the HCOimposes more severe sanctions on repeated infringements. It willconsider practices to be repeated infringements in particular wherethe object or effect of the conduct is essentially identical with thatof a previous unlawful conduct even if the subsisting facts of thecase are different from those previously subsisting. Repeatedinfringements may have as a consequence (depending on thenumber of repetitions) a significant increase in, and even a doublingof, the amount of the fine.



For investigations started because of a third party notification orcomplaint (e.g. employee), the notifier or complainant can requestanonymity or that it be unidentifiable as having notified orcomplained.

WWW.ICLG.CO.UK103


Hun

gary




When the HCO makes an ex officio investigation of a restrictiveagreement or practice the parties may undertake to proceed in aspecific way to comply with the Competition Act and with Articles81 and 82 of the EC Treaty, the competition council can decide toterminate the proceedings, to protect the public interest. The HCOcan, through this decision, make the commitments binding on theundertaking, without reaching an infringement decision.The HCO can, however, reopen the proceedings if there is anymaterial change in the circumstances or if its decision was based onmisleading information.The investigators conduct a follow-up investigation to establishwhether the parties have satisfied their commitments. Based on theinvestigator’s follow-up report, the competition council adopts adecision to impose a penalty if the undertaking failed to carry outthe commitment, unless it was not fulfilled because of changes inthe relevant circumstances. The investigation is terminated if therewere changes in the relevant circumstances or the undertakingfulfilled the commitment.

7 Appeal Process


The decision of the competition council on the merits of the casecan be appealed before the Metropolitan Court. The parties orpersons whose interests are affected by the decision must file astatement of claim within 30 days of the decision being delivered.The Metropolitan Court of Appeals hears appeals from theMetropolitan Court. The party who has filed an appeal against thefinal judgment of the Metropolitan Court of Appeals may ask thereview of this judgment by the Supreme Court.


As a general rule, it is the court that hears witnesses and questionsthem. Under Hungarian law, the litigating parties can proposecertain questions to be asked of the witness. The court can also, onrequest, allow the parties to directly ask the witness questions.Ultimately though, it is the court that decides on the permissibilityof questions proposed or asked.

8 Damages Actions


The HCO’s public enforcement powers do not preclude court fromdirectly applying the cartel prohibition contained in theCompetition Act.Individuals can therefore bring damages actions before theHungarian civil courts for losses resulting from breaches of theCompetition Act, even if the HCO has not reached a priorinfringement decision. In such litigation, the court shall notifyHCO which may present its opinion. The argument presented byHCO may be used as evidence.

If the HCO notifies a civil court addressing a civil law claim that ithas started competition law proceedings in the same matter then thecourt must stay the proceedings until the HCO makes a decision andthat decision becomes final and binding (either with or withoutjudicial review).If there is a final and enforceable decision of the HCO for theprohibited restrictive agreement or practice, the party claimingcompensation for damages must prove both the:

Amount of damage suffered. Causal link between the damages suffered and the prohibitedrestrictive agreement or practice.

There are no special rules governing third party competitiondamages actions and the general rules of Hungarian civil law apply.


There is a so-called public interest action that can be used, amongother things, in connection with the breach of competition laws.The HCO can bring a civil law claim on behalf of consumersagainst anyone who harms a large number of (individuallyunknown) consumers as a result of an activity that breaches theCompetition Act.In addition, a joint action is the only collective action that allows anaward of damages in an antitrust case. Two or more claimants caninitiate a joint action if any of the following apply:

The subject matter of the claim is a joint right or obligationthat can only be judged uniformly, or the judgment will affectthe claimants jointly irrespective of one of the claimants’absence from the procedure. The claimants’ claims are based on the same legalrelationship.The claimants’ claims have similar legal and factual basesand the same court has jurisdiction for all defendants.


The general limitation period for damages actions is 5 years.However, if the damage is resulting from a criminal offence, thelimitation period does not expire as long as the limitation period forthe crime does not expire. If the HCO brings a civil law claim onbehalf of the consumers, the statutory limitation period is one yearfrom the date of the infringement excluding the period for thecompetition control procedure.


There are no special rules for bearing costs in civil damages follow-on claims in cartel cases.According to the general procedural rules, the unsuccessful partypays the successful party’s costs, including its lawyers’ fees.However, the court can decide to take into account only part of thesuccessful party’s legal expenses, if it considers those expensesexcessive. The courts usually set these fees at about 5% of theamount of the claim.The court can also deny the successful party’s costs if, for example,there was no reason to initiate the proceedings or if the other partyacknowledged the claim at the first hearing. Similarly, costsincurred unnecessarily cannot be recovered. If one party is partiallysuccessful, the court splits the costs among the parties.



Hun

gary



We are not aware of any such claims. However, please note that thepending amendment of the Competition Act (see question 9.1)would make it much easier to bring successful damages actionsagainst cartel members.

9 Miscellaneous


In Summer 2008, the Parliament passed an Act significantlyamending the Competition Act. However, the promulgation of thisAct is still pending because the President of the Republic requestedthe review of the amendment by the Constitutional Court.The pending Act contains, inter alia, the following importantamendments:1. LeniencyCurrently the detailed rules on leniency are contained in Notice3/2003 of the HCO (the “Notice”), i.e., in a non-binding instrument.The consequence of this is that theoretically, the HCO may lawfullydeviate from the rules contained in its own Notice. Moreover, thecourt to which an appeal was filed against a resolution of the HCOis not bound by the Notice either. The pending Act would thereforeincorporate the rules on leniency in the Competition Act.The main novelties regarding leniency would be the followingrules:

total release of the fines would be possible not only in casethe applicant provides evidence on the basis of which aninvestigation may be initiated, but also in case this evidenceenables the HCO to obtain a judicial permit to carry outinvestigating measures (e.g. searching premises) even beforeany investigation is formally opened;the new Act would require undertakings to present theirapplication on the form to be made available on the websiteof the HCO, which provision seems to exclude the possibilityto make oral leniency applications;the new Act, contrary to the Notice, would not allow for amarker to be made on an anonym basis;the new Act would not require the leniency applicant tototally cease with the participation in the cartel to the extentthat the participation is necessary for the HCO to carry out itsinvestigation successfully;

if a leniency applicant forced, or tried to force, anotherundertaking to participate in a cartel, such an applicant maybe granted partial release from the fines (which is notpossible under the Notice); andthe new Act would not contain the strict deadlines for theHCO to decide on the preliminary (and conditional) leniencypromise.

2. Damages actionsIn order to ensure that undertakings are not refrained from revealingunknown cartels, the new Act provides that an undertaking that hasbeen granted immunity from fines may refuse to reimburse thedamages caused by the cartel as long as the claim can be collectedfrom other undertakings being held liable for the sameinfringement. This provision does not prevent the claimant fromcommencing a lawsuit jointly against the infringing undertakingscausing the damages, however, the proceedings shall be suspendeduntil the final closing of the administrative lawsuit commenced toreview the HCO’s decision establishing the infringement. As regards the calculation of damages, the new Act establishes areversible presumption relating to the effect of cartel restrictions onprices: in the course of evidencing the effect of the infringement onthe level of price applied by the infringer in lawsuits to enforce anycivil law claim against a party of an agreement among competitorsviolating the cartel prohibition (restricting the competition, aimed atfixing the prices directly or indirectly, sharing markets, fixingproduction or sales quotas) it shall be deemed that the infringementaffected the price by 10% unless the contrary is evidenced.As regards the liability of individual, the new Act would introducethat the member of the management of the company thatparticipated in the cartel would be prohibited from engaging in themanagement of any business association for 2 years. However, thePresident of Hungary requested the Constitutional Court to reviewthe provisions on the rules establishing such liability.

9.2 Please mention any other issues of particular interest inHungary not covered by the above.

There are no other issues other than those already mentioned above.

AcknowledgmentThe authors would like to acknowledge the assistance of theircolleague, Dr. Miklós Boronkay, in the preparation of this chapter.

WWW.ICLG.CO.UK105


Dr. Judit Budai

Szecskay Attorneys at LawKossuth tér 16-17H-1055 BudapestHungary

Tel: +36 1 472 3000Fax: +36 1 472 3001Email: [email protected]: www.szecskay.com

Dr. Judit Budai is a Hungarian attorney admitted to the BudapestBar (1994). She received her JD, cum laude, from Eötvös LorándFaculty of State and Legal Science in Budapest in 1991 and anMBA from the Budapest Economic University (BEU) in 1996 in ajoint BEU/London Business School programme and participated inan EC Law Post Graduate Program of the Center of European Law,School of Law, King’s College London in 2004. She is a member ofvarious professional organisations (UIA/President of the BankingLaw Commission and Standing Member for Hungary of the M&A,Corporate and Financial Services Committees, Chairman of theEducation Committee of the Hungarian Venture Capital Association,active member in LIDC and IBA). She is author of several articlesand frequent speaker at conferences in M&A, corporate finance,competition law and capital markets areas. She was an associateat Weil, Gotshal & Manges before associating with the Firm in1992. She currently specialises in M&A, competition law, finance,including project finance, capital markets and banking law and IP.She is fluent in English.

Dr. Gusztáv Bacher

Szecskay Attorneys at LawKossuth tér 16-17H-1055 BudapestHungary

Tel: +36 1 472 3000Fax: +36 1 472 3001Email: [email protected]: www.szecskay.com

Dr. Gusztáv Bacher is a Hungarian attorney admitted to theBudapest Bar. He received his JD, summa cum laude, from EötvösLoránd Faculty of State and Legal Science in 1998. Dr. Bacher isexternal lecturer at the University at the Department of Civil Law.He studied at the Faculty of Law in Vienna in 1997 and participatedin the Post-Graduate Course on International Trade Law organisedby the Asser Instituut, The Hague in 1999. He received his Masterof Laws (LL.M.) degree in International Business Law at the CentralEuropean University (CEU) in 2001. Dr. Bacher is SecretaryGeneral of the Ligue Internationale du Droit de la Concurrence(LIDC) and in 2004 took the role as international rapporteur of LIDCon comparative advertising. Dr. Bacher is member of theIntellectual Property Expert Committee attached to the HungarianPatent Office, the National Board Against Counterfeiting and Piracy(governmental advisory body), the board of the HungarianAssociation for the Protection of Industrial Property and Copyright(MIE) as well as the Executive Committee of the Hungarian Groupof the International Association for the Protection of IntellectualProperty (AIPPI). Dr. Bacher has published various articles in thefield of intellectual property, competition law, and advertising law,and is head of several working groups which prepare nationalreports for AIPPI and LIDC. Dr. Bacher associated with the Firm in1999 and specialises in civil, competition, advertising and IP lawand litigation. Dr. Bacher is fluent in German and English.

Our Firm is member of a number of local and international organisations [e.g.: Ligue Internationale du Droit de laConcurrence (LIDC), Competition Law Commission of Union International des Avocats, UIA)]. Our attorneys regularlylecture at local and international conferences and participate in international research projects. Active participation inthe above mentioned programmes of international organisations provide up-to-date information and knowledge to ourcolleagues on the most accurate stage of the development of competition laws and enables our attorneys to liaise withcolleagues from all over the word on various aspects of competition laws and practices.

Dr. András Szecskay is the Hungarian contributor to “Global Competition Litigation” on competition litigation and privateenforcement. Dr. Judit Budai is the Hungarian contributor to The ICLG to: Merger Control, published by Global LegalGroup providing a practical international comparative law overview on antitrust and merger control rules. Dr. GusztávBacher is the Secretary of LIDC and a member of the Competition Law Research Institute, Budapest.

Our Firm’s involvement in domestic and cross-border transactions has allowed it to develop wide-ranging experience incompetition and antitrust law matters, merger control procedures, and negotiations with the Hungarian competitionauthorities.

Our Firm is recognised for its expertise and practice in competition and antitrust (cartel and abuse of dominance),primarily with respect to pharmaceuticals, chemical, oil and gas, electricity, alcohol, tobacco production anddistribution, beverages, cosmetics, financial services, coffee, sugar and other consumer products. We also frequentlyrepresent or advise clients in merger control proceedings.

In the past five years, we have been increasingly involved in defending or contesting, before the courts, alleged unfairmarket practices and, before the Hungarian competition authorities, misleading or prohibited comparative advertisingand consumer deception.


Hun

gary

106

Chapter 19


J Sagar Associates, Advocates and Solicitors

India



The legal basis and general nature of the cartel prohibition is civil.


Cartels have not been expressly defined under the current competitionlegislation of India, the Monopolies and Restrictive Trade PracticesAct, 1969 (MRTPA). The MRTPA at clause (j) of sub-section (1) ofsection 33 says that “any agreement to sell goods at such prices aswould have the effect of eliminating competition or competitor” shallbe deemed to be restrictive trade practice and shall be liable to beregistered with the Director General of the MRTP Commission.MRTPA is likely to be repealed and the modern Competition Act,2002 (as amended in 2007) [CA] shall come into effect as soon as theold law is repealed in terms of provisions of section 66 of the CA. Thenew law i.e., the CA, has an express definition of “cartel” whichincludes an association of producers, sellers, distributors, traders orservice providers who, by agreement amongst themselves, limit,control or attempt to control production, distribution, sale or price of,or, trade in goods or provision of services.Section 3 of the CA prohibits anti-competitive agreementsincluding cartels. It says under sub-section (1) section 3 that:“no enterprise or association of enterprises or person orassociation of persons shall enter into any agreement in respect ofproduction, storage, acquisition or control of goods or provision ofservices, which causes or likely to cause an appreciable adverseeffect on competition within India.” Sub-section (3) of section 3stipulates that “any agreement entered into between enterprises orassociations of enterprises or persons or associations of personsbetween any person and enterprise or practice carried on, ordecision taken by, any association of enterprise or association ofpersons, including cartels, engaged in identical or similar trade ofgoods or provision of services, which:(a) directly or indirectly determines purchase or sale prices;(b) limits or controls production, supply, markets, technical

development, investment or provision of services;(c) shares the market or source of production or provision of

services by way of allocation of geographical area of market,or type of goods or services, or number of customers in themarket or any other similar way; or

(d) directly or indirectly results in bid rigging or collusivebidding,

shall be presumed to have an appreciable adverse effect oncompetition.”On perusal of the aforesaid legal provisions it appears that theIndian competition law does not condemn allegation of cartel as“per se illegal” but on the contrary appears to adhere to a strict “ruleof reason” process.


The current authority i.e. MRTP Commission established under theMRTPA enforces cartels . The Government of India is yet to notifythe appointment of one Chairperson and six other Members of theCompetition Commission of India (CCI), the new and future regimeunder the CA. As such, as of the time of writing this Chapter, theCCI has not been formally constituted. It is reiterated that once theCCI gets fully empowered it would enforce ‘cartels’ morevigorously than the MRTPC. The procedure under the CA wouldbe as below:On receipt of information, a reference or complaint against allegedbreach of any provision of the CA, the CCI would form the primafacie opinion and thereafter send the matter for investigation by theDirector General (the “DG”). On receipt of the detailedinvestigation report from the DG, the CCI would take a finaldecision in the matter [section 26 of the Act]. Every decision and/ororder of the CCI including the “prima facie” opinion is appealableunder the CA.


In terms of current legislation, inquiry and investigation against asuspected act of cartel may be initiated suo motu by the MRTPCommission or on receipt of a complaint. Additionally, theDirector General (Investigation & Registration) [DGIR] may alsoon its own motion investigate a cartel and on conclusion of the saidinvestigation it may submit the preliminary investigation report(PIR) and/or an application to the MRTPC for a decision. However,the DGIR may also not send either and close the matter. But oncethe matter reaches the MRTP Commission, then the Commissionfollows quasi-judicial processes, nearly identical to adjudicatoryfunction, and passes the final order. This law does not provide anypecuniary penalties but provides only power to the Commission todirect the offender to discontinue the practice and not to repeat thesame in future.

Mansoor Ali Shoket

Manas Kumar Chaudhuri

WWW.ICLG.CO.UK107


Indi

a

J Sagar Associates, Advocates and Solicitors India

Under the new legislation [CA], on receipt of information, areference or complaint, the CCI is to form a prima facie view on thematter and thereafter shall send the matter to the DG for a detailedinvestigation. The CCI will, while determining whether anagreement has an appreciable adverse effect on competition undersection 3 of the CA, have due regard to all of any of the factors, asare provided under sub-section (3) of section 19 of the CA. If thereport of the DG and the CCI’s opinion indicate prima facie breachof the relevant provisions CA, notice to the respondent would besent to answer the charges arising out of the alleged breach of theprovisions of the CA by the respondent(s). On the other hand if thereport of the DG and the prima facie view of the CCI arecontradictory then the issues shall be dealt with in accordance withthe relevant provisions of the section 26 of the CA. The DG underthe new law can neither, on its own, investigate a suspected cartelnor can it close the matter suo motu. Penalties under the new lawcould be as high as equivalent to triple damages or 10% of turnoverfor each year of continuance of the cartel, whichever is higheragainst the cartel members individually.


The existing legislation exempts undertakings owned by thegovernment from being inquired into and investigated. Businessagreements for export of goods and/or services are exempted.But the CA does not provide such exemption. The sovereignfunctions relatable to the Government are not included. Besides,the CA specifically provides that all sovereign activities carried onby the departments of the Central Government dealing with atomicenergy, currency, defence and space are also exempted from beinginquired into under the CA [section 2(h) of the Act]. Butcommercial activities of government-owned undertakings are notexempted. In addition to above, intellectual property rights whichare registered in India and continues to remain within the statutoryperiods of such registration would be exempted reasonably.Business agreements for export of goods and/or services out ofIndia are also exempted.

1.6 Is cartel conduct outside India covered by the prohibition?

In terms of the current legislation, the MRTPC may make an orderwith respect to that part of the business practice which is carried onin India. However, this provision did not succeed on account of theMRTPC’s inability to obtain cross-border information and/orevidences or enforce attendance of witnesses. The MRTPA doesnot provide any statutory obligation upon the MRTPC to enter intointernational co-operation arrangements or understanding withoverseas competition agencies and/or other foreign agencies.But in terms of section 32 of the CA, anti-competitive acts takingplace outside India but having an effect on competition in India arecovered. The CCI shall have the power to inquire into anti-competitive agreements or abuse of dominant position orcombination if such agreement or dominant position or combinationhas, or is likely to have, an appreciable adverse effect oncompetition in the relevant market in India even if the acts takingplace outside India and pass such orders as it may deem fit inaccordance with the provisions of the CA. In order to implement the aforesaid provision [effects doctrine], theCCI is statutorily empowered in terms of proviso to section 18 ofthe CA to enter into memorandum of understanding and/orarrangements with competition agencies and/or other foreignagencies with the prior approval of the Central Government.






There are no specific or unusual features except for the following:The DG’s power to cause the search and seizure of documents interms of section 41(3) of the CA, shall have to have a priorauthorisation of the Chief Metropolitan Magistrate, Delhi, in termsof sections 240 and 240A of the Companies Act, 1956. This featureis identical to what the DGIR has been empowered under the


Order the production of specific documents orinformation Yes (Civil) N/A

Carry out compulsory interviews with individuals

MRTPA provides neithera statutory provision inthe principal law nordoes it provide anyclause in its statutoryRegulations to interviewindividuals for gatheringevidences.CA too does not provideany specific enablingstatutory provisions butCCI may include thisunder statutoryRegulations commensu-rate with internationalpractice.

N/A

Carry out an unannounced search of businesspremises

Yes * (partially)Unannounced search isnot provided in the oldas well as in the newlaw.MRTPC and CCI arenot empowered to carryout “dawn raids”, how-ever, civil actionempowers the DGIRand the DG to carry outsearch & seizure ofpremises of delinquent /respondent with priorapproval of theMagistrate I Class andChief MetropolitanMagistrate, Delhirespectively.

N/A

Carry out an unannounced search of residentialpremises

Subject to above,“Dawn raids” are notpart of the MRTPA andthe CA.

N/A


May be prescribedunder the statutoryRegulations of the CCI.MRPTA does not anysuch procedure.

N/A

Right to retain original documentsYes, till the matter issub-judice. N/A


Yes N/A


May be prescribedunder the statutoryRegulations of the CCI.

N/A



Indi

a


MRTPA except for the fact that the prior authorisation under currentregime is that of Magistrate I Class and not of the ChiefMetropolitan Magistrate, New Delhi.


General surveillance including ‘bugging’ is a process ofinvestigation especially against an offence of alleged ‘cartel’, assuch even though no specific statutory provision is provided underthe CA, the CCI may include suitable measures commensurate withinternational practice in this behalf in its statutory Regulations.The MRTPA does not provide any enabling provision either in thelaw or in the Regulations.


While determining as to whether or not any allegation of cartelagainst any respondent exists, the CCI may investigate, inter alia,the following statutory economic factors provided under sub-section (3) of section 19 of the CA:(a) creation of barriers to new entrants in the market;(b) driving existing competitors out of the market; (c) foreclosure of competition by hindering entry into the

market;(d) accrual of benefits to consumers;(e) improvements in production or distribution of goods or

provision of services; or(f) promotion of technical, scientific and economic development

by means of production, distribution of goods or provision ofservices

Factors provided from (a) to (c) prima facie indicate anti-competitive conduct, whereas those from (d) to (f) indicate pro-competitive benefits to consumers and markets. Depending onfacts and circumstances of any given case, the CCI and the DGwould be at liberty to apply these factors suitably and reasonably.Under the MRTPA no specific factors for investigation has beenprovided either to the DGIR or the Commission except for someprocedural formalities which both complainant and the respondenthave to abide by.


Under the MRTPA the Central Government is empowered toappoint Inspectors for making investigation into the affairs ofundertaking.On the contrary, the CCI has been empowered to authorise personsunder its authority including the DG to carry out searches ofbusiness and/or residential premises of the alleged chargedrespondent(s). In doing so, the CCI and the other functionariesunder authority of the CCI shall abide by the principles of naturaljustice which may include the arrival of legal advisors, if occasionso arises in some given cases and circumstances.


The CA does not prohibit application of other Indian laws andspecifically provides in terms of section 62, that the provisions ofthe CA shall be in addition to, and not in derogation of, theprovisions of any other law for the time being in force.The Indian Evidence Act, 1872 protects professional

communications made by barristers, attorneys, pleaders etc. andsection 126 of this Act specifically provides that ‘no barrister,attorney, pleader or vakil (Indian equivalent of lawyer) shall at anytime be permitted, unless with his client’s express consent, todisclose any communication made to him in the course and for thepurpose of his employment as such barrister, pleader, attorney orvakil, by or on behalf of his client, or to state the contents orcondition of any document with which he has become acquainted inthe course and for the purpose of his professional employment, orto disclose any advice given by him to his client in the course andfor the purpose of such employment:Provided that nothing in this section shall protect from disclosure:(1) Any such communication made in furtherance of any illegal

purpose.(2) Any fact observed by any barrister, pleader, attorney or vakil,

in the course of his employment as such, showing that anycrime or fraud has been committed since the commencementof this employment.’

It is immaterial whether the attention of such barrister, pleader,attorney or vakil was or was not directed to such fact by or onbehalf of his client.Explanation - The obligation state in this section continues after theemployment has ceased.However, whether or not the in-house legal advice would beprotected - would depend on the fact that if the said advice isprovided by a legal adviser who is on the regular pay rolls of theenterprise or by an external lawyer, attorney or advocate. In casethe same is rendered by a regular employee of the enterprise who isa qualified legal adviser and such advice is made during theordinary course of his employment, in our view, it may not beprotected. The latter category gets protected in terms of provisionof section 126 of the Evidence Act, 1872.The MRTPA too does not bar application of any other Indian lawfrom being made applicable to the Commission while the saidCommission is conducting its functions under the law in ordinarycourse of its mandate.


Principles of Natural Justice and Rule of Reasons are two basicmaterial limitations of the investigatory powers to safeguard therights of defence of companies and/or individuals underinvestigation and more specifically whenever any contravention ofthe CA can be shown to have been committed without theknowledge of the alleged defaulter or that the defaulter hadexercised all due diligence to prevent the commission of suchcontravention - proviso to section 48(1) of the CA gives protectionto such persons.


If any person fails to comply, without reasonable cause, withdirections given by the CCI and/or the DG either in terms of section36 or section 41 of the CA, such person shall be punishable with afine which may extend to Indian Rupees one lakh (0.1 million) foreach day during which such failure continues subject to a maximumof Indian Rupees one crores (10 million), as may be determined bythe CCI. Further, in terms of section 45 of the CA, if a person, whofurnishes or is required to furnish under the CA any particulars,documents or any information, (a) makes any statement or furnishes

WWW.ICLG.CO.UK109


Indi

a


any document which he knows or has reason to believe to be falsein any material particular; (b) omits to state any material factknowing it to be material; or (c) wilfully alters, suppresses ordestroys any document which is required to be furnished asaforesaid - such person shall be punishable with a fine which mayextend to India Rupees one crore (10 million) as may be determinedby the CCI. The CCI may also pass such other order as it deems fitwithout prejudice to (a), (b) and (c) as above. The CCI though hasbeen established but due to some litigation challenging someprovisions of the CA before the Supreme Court of India, all theprovisions of the CA could not be notified till date. As such, noprecedent under this law is available as of now. All the provisionsof the CA are expected to be fully notified by the CentralGovernment in the near future since the litigation has been disposedof and necessary amendments to the principal legislation have beencarried out during September 2007.Persons who have been directed by the MRTP Commission tocomply with or abide by the directions or orders of the Commissionbut fails, contravenes or makes false statements etc. shall bepunishable with a fine as well as imprisonment term which mayextend up to three months as the Court of Session may decide. Thispower has very rarely been made use of successfully till date.



In terms of section 27 of the CA, where, after an inquiry, the CCIfinds that any agreement referred to in section 3 is in contraventionof that section, it may pass all or any of the following orders: (a) direct the defaulting respondent involved in such agreement

to discontinue and not to re-enter such agreement;(b) impose such penalty, as it may deem fit which shall be not

more than 10% of the average of the turnover for the lastthree preceding financial years, upon each of such person orenterprises which are parties to such agreements:Provided that in case any agreement referred to in section 3has been entered into by a cartel, the Commission mayimpose upon each producer, seller, distributor, trader orservice provider included in that cartel, a penalty of up tothree times of its profit for each year of the continuance ofsuch agreement or ten per cent of its turnover for each yearof the continuance of such agreement whichever is higher;

(c) direct that the agreements shall stand modified to the extentand in the manner as may be specified in the order by theCommission;

(d) direct the enterprises concerned to abide by such other ordersas the Commission may pass and comply with the directions,including payment of costs, if any; and/or

(e) pass such other order or issue such directions as it may deemfit:Provided that while passing orders under the CA, if the CCIcomes to a finding that an enterprise in contravention tosection 3 is a member of a group and other members of suchgroup are also responsible for, or have contributed to suchcontravention, then it may pass orders against such membersof the group also. Group has been expressly defined belowsection 5 of the CA which means two or more enterpriseswhich directly or indirectly are in a position to exercise 26%or more of the voting rights in other enterprise or appointmore than 50% of the members of the board of directors inthe other enterprise or control the management or affairs ofthe other enterprise.No past precedent is available as on date on the grounds thatthe CA has not yet been fully notified.

In terms of section 48(1) of the CA, where a personcommitting contravention of any of the provisions of the CAor any rule, regulation, order made or direction issuedthereunder is a company, every person who, at the time thecontravention was committed, was in charge of, and wasresponsible to the company, shall be deemed to be guilty ofthe contravention and shall be liable to be proceeded againstand punished accordingly.

Provided that nothing contained in this section shall render any suchperson liable to any punishment if he proves that the contraventionwas committed without his knowledge or that he had exercised alldue diligence to prevent the commission of such contravention.Section 48 (2) says that notwithstanding anything contained in sub-section (1), where contravention of any of the provisions of the CA,or of any rule, regulation, order made or direction issued thereunderhas been committed by a company and it is proved that thecontravention has taken place with the consent or connivance of, oris attributable to any neglect on the part of, any director, manager,secretary or other officer shall also be deemed to be guilty of thatcontravention and shall be liable to be proceeded against andpunished accordingly.The MRTPA only provides for passing of “cease and desist” ordersand does not have any enabling provision to impose pecuniary finesand/or penalties.


Sanctions for individuals and those against an enterprise in terms ofsection 27 of the CA are identical since the definition of ‘enterprise’includes ‘person’. However, in addition to payment of pecuniaryfines up to a sum of Indian Rupees 25 crores (250 million),individuals may, in terms of section 42 of the CA, also be punishedwith imprisonment for a term which may extend to three years asthe Chief Metropolitan Magistrate of Delhi may deem fit.


Except for merger control, the CA does not have retrospectiveapplication in respect of anti-competitive agreements including‘cartels’ and ‘abuse of dominance’. However, once all theprovisions of the law are fully notified, on and from the date of suchnotification any breach of the law either ‘cartel’ or other anti-competitive conduct all shall come within the ambit of the CCI’spower to cause inquiry and investigation. Both anti-competitiveagreements including cartels and abuse of dominance are “ex postfacto” processes, therefore, inquiry against violations of these twoaspects may be taken up anytime after the law becomes fullyoperational. The MRTPA does not expressly provide for any period of limitationbut over the years the basic principles of a period of limitationshave been applied to the satisfaction of parties as well as theappellate authority.


Question 3.1 above shows that in terms of section 48(1), theindividuals who were in charge of, and were responsible to thecompany at the time of contravention of provisions of the CA, shallbe jointly liable along with the company in cases ofcontravention/default. The law indicates that the company and theindividuals are jointly and severally liable.The provisions under the MRTPA are nearly similar to the above.



Indi

a




Yes. The Leniency programme under the CA is called ‘lesserpenalty provisions’ and the same are available under section 46 ofthe law. Briefly, the provision says that if any member of the cartelhas made a full and true disclosure in respect of alleged violationsand such disclosure is vital, the CCI may impose lesser penaltyupon such informer. The informer, in order get the benefit of thisprovision, has to co-operate with the CCI till the completion of theproceedings. However, the informer has to make the disclosuresbefore the completion of the investigation by the Director General(DG). The law also provides that the informer shall, in addition toco-operating with the CCI, also comply with all orders/directions ofthe CCI and should not have made false evidence during theproceedings.The MRTPA does not provide for any provision relating to aleniency programme.


A “marker” system is not provided in the law. However, the CCI,in exercise of powers conferred upon it by the CA, is empowered toformulate statutory Regulations to deal with the procedural stagesto implement Leniency Programme. In the draft Regulations todeal with Leniency Programme, the CCI has defined and has alsoprovided the processes to be followed for a “marker” system. Thesaid draft Regulations of the CCI may be seen on their officialwebsite www.cci.gov.in. The applicant who wishes to be a “marker” shall have to enter intoan agreement with the CCI and has to make an application in termsof the Regulations of Lesser Penalty and also has to make thedisclosure before the conclusion of the investigation by the DG.The Draft Regulations of the CCI shall not become fully operationalimmediately on the day the Chairperson and other Members of theCCI are appointed; on the contrary these Regulations have to beadopted in accordance with the provisions of the CA to make itlegally effective.


The draft Regulations of the CCI in this sense does not, as of now,provide any mechanism of making an oral application.


Draft Regulations provide that the Commission shall treat asconfidential the identity of the applicant or the information obtainedfrom it and shall not disclose the identity or the informationobtained. However, there are certain exceptions to this which are(a) when the disclosure is required by law; (b) when the applicanthas agreed to such disclosure in writing; (c) when there is a publicdisclosure by the applicant; and (d) whether the disclosure is incompliance with or for the purposes of the CA.It may remain confidential till the completion of the proceedings.


The continuous co-operation of the member of the cartel disclosingthe true and vital information to the CCI would be required till thecompletion of the proceedings before the CCI.


The law provides for “lesser penalty” for a member of a cartel butthe draft Regulations as firmed up by the CCI provides for “fullleniency” and “partial leniency” meaning thereby that the statutoryprovision of granting “lesser penalty” has been enhanced to “fullleniency” under the draft Regulations. This may be termed as‘leniency plus’. However, no mention has been given in theRegulations which imposes additional penalty beyond what hasbeen prescribed in the law - as such there appears no ‘penalty plus’situation.



Section 46 provides for lesser penalties to individuals as well as toenterprises involved in a cartel agreement. It is silent aboutindividuals not involved in the cartel getting immunities under theCA. As of now no procedure exists for individuals unconnectedwith the cartel to disclose true and vital information relating to thealleged cartel of his/her employer or for them to get legal protectionfrom the CCI in disregard to internal rules and regulations of theorganisation/enterprise to which he/she is employedThe draft Regulations too do not provide for any mechanismwhereby an individual and/or an employee of an enterprise ispermitted to inform the CCI about a cartel to which his/her ownenterprise is suspected to be involved. However, the procedure forinquiry as provided for at section 19 of the CA empowers the CCIto institute an inquiry against any anti-competitive agreementincluding cartel on its own motion or on receipt of an informationor a reference, which may with the evolution of the law in India,lead to a situation that an individual employed in a company can actas an informer against a cartel - a la - ‘whistle blower’. Since the MRTPC also commences an inquiry into any complainteither on its own motion or on receipt of an application from theDGIR or a private complainant, the processes identical to “whistleblower” cannot be statutorily ruled out.



The Lesser Penalty provision in terms of section 46 of the CA hasthe element of “plea bargaining”. Any member of a cartel beforeconclusion of investigation by the DG, if they decide to disclosevoluntarily true and vital information about the cartel and continuesto co-operate with the CCI during the continuance of theproceedings, becomes entitled to full or partial leniency from theCCI.

WWW.ICLG.CO.UK111


Indi

a


7 Appeal Process


In terms of section 53A of the CA, the Central Government of India iscompetent to notify the establishment of the Competition AppellateTribunal (the “CAT”). The CAT shall hear and dispose of appealsagainst any direction issued or decision made or order passed by theCCI under various provisions of the CA. It shall also adjudicate onclaims for compensation that may arise from the findings of the CCI.Any person aggrieved by any decision or order of the CAT may file anappeal to the Supreme Court of India. The time to file the first appealto the CAT or the second appeal to the Supreme Court of India is 60days from the date the orders/ decisions are communicated to the partyaggrieved by the CCI or the CAT, as the case may be.All orders passed by the MRTPC may be taken up by the parties(party) aggrieved by such orders to the Supreme Court of India inappeal.


The relevant provision, in terms of section 53-O of the CA spellsout the procedure and powers that the CAT will have - it does notprovide the application of the India Evidence Act, 1872 - as suchcross-examination of witnesses during this stage of appeal appearsgenerally not within the mandate of the law. However, this sectionalso empowers the CAT to regulate its own procedure which willguide it to conclude an appeal. Further, in terms of section 62 of theCA, provisions of the CA are in addition to and not in derogationof, the provisions of any other law for the time in force. Thisprovision may enable the CAT to apply Indian Evidence Act, 1872and also “cross-examination” of witnesses since the appellatetribunal would be headed by a judicial member and such memberwill have many years of experience in applying relevant provisionsof the Evidence Act reasonably.The (first) appeals from the MRTPC and the second appeal from theCAT before the Supreme Court are/would be normally on points oflaw as such question of “cross-examination” may not arise.

8 Damages Actions


In terms of section 53N of the CA, any person or enterprise ispermitted to make an application to the CAT to adjudicate on aclaim for compensation that may arise from the findings of the CCI.In doing so, the applicant needs to attach an authentic copy of thefindings of the CCI.


Yes, class action is permissible in terms of sub-section (4) of section53N of the CA. It stipulates that where any loss or damage, asreferred to in question 8.1 above, is caused to numerous personshaving the same interest, one or more of such persons may, with thepermission of the CAT, make an application under sub-section53N(1) of the CA for and on behalf of, or for the benefit of, thepersons so interested to the CAT for suitable order thereon.


The law does not provide any express limitation period. As soon asall the provisions of the CA are notified by the Government ofIndia, every existing business agreement including a cartel comewithin the jurisdiction of the CCI.


Please see responses given at questions 8.1 and 8.2 above. It isnoteworthy that in terms of section 61 of the CA, jurisdiction ofcivil courts has been excluded in respect of any matter which theCCI or the CAT is empowered by or under this law to determine andno injunction shall be granted by any court or other authority inrespect of any action taken or to be taken in pursuance of any powerconferred by or under the CA. In view of this, cost rules for civildamages follow-on claims in cartel cases would be the one whichthe CCI and/or the CAT may prescribe in their respective statutoryregulations in accordance with the provisions of the CA.Consumer Courts of India and the MRTP Commission have beenconcurrently adjudicating matters relating to Unfair TradePractices. At times these authorities with concurrent jurisdictionslead to unforeseen “forum shopping” tactics against litigatingparties.


The CA and the CCI are to be made functional by Governmentnotifications. As such, as of now, no precedent exists in this behalf.The MRTP Commission did pass some orders against CementCartel but the impact of the same has not been felt either in themarket or amongst the consumers.

9 Miscellaneous


With the price of crude oil going up to USD 149 per barrel, privatepetrol pumps in India faced a serious crisis in competing with thestate-owned petrol pumps and were forced to shut down theiroperations as they were not economically viable. With internationalprice of crude oil coming down as low as USD 38 per barrel, theprivate operators may perhaps renew their commercial activitiessoon and renew competition with the state-owned petrol pumps.We may not term these developments as cartel-like activities butnonetheless with the availability of state-aid to public sector units,the sale prices of petroleum products are identical in all such state-owned units. The private operators, being not within the domain ofreceiving state-aid, had to exit the market in the wake of hike ininternational petroleum prices. Forced exit of competitors andlessening of choice to end consumers are significant issues ofcompetition law - hence it is noteworthy to highlight. Similarly inthe wake international economic recession, some private airlinecompanies of India have started making joint marketing strategiesto avert more crises.



Indi

a


9.2 Please mention any other issues of particular interest inIndia not covered by the above.

Prohibition of state-aid is not part of the CA, rightly so since Indiais an economy in transition, and the Government as well as the CCIhave been contemplating developing a national competition policyso as to ensure implementation of the principles of market economyas well as provisions of the CA and other sector regulatory laws insuitable directions and help all stakeholders to benefit from theoverall economic growth and competitive domestic markets.

Manas Kumar Chaudhuri

J Sagar Associates 84-E, C - 6 Street, Sainik FarmsNew DelhiIndia - 110062

Tel: +91 1129 5527 1416Fax: +91 1129 5527 17Email: [email protected]: www.jsalaw.com

Manas Kumar Chaudhuri [Manas] heads the Firm’s CompetitionLaw Practice and advises clients on Competition Law & Policy andrelated legal/regulatory issues. He has worked closely with theIndian Institute of Management, Bangalore [IIM-B] in drawing up anappropriate Organisational Structure for the CCI under a World Bank[IDF] Project. Manas has extensive experience in legal practice. He has served asa Judicial Services Officer and worked as a Civil Judge and aMagistrate I Class in one of the States of India. He subsequentlyworked as Legal Adviser in a Department of Government of India,Joint Director (Legal) and Additional Registrar (Legal) in variousQuasi Judicial Bodies including the CCI. He has been a guestfaculty representing India in three international Competition Law &Policy workshops at Mauritius, Malawi and Botswana and sharedthe position with other international experts on the subject fromRepublic of South Africa, Zambia and Kenya. He has recently beeninvited by the NERA (Economic Consulting Group of the UK) toparticipate in their 4th International Symposium at Oxford onapplication of micro-economic principles in the investigation ofcompetition law practice.He is a member of the Bar Council of West Bengal (State BarCouncil) and also a Member of the Bar Association of High Court ofDelhi.

Mansoor Ali Shoket

J Sagar Associates 84-E, C - 6 Street, Sainik FarmsNew DelhiIndia - 110062

Tel: +91 1129 5527 1416Fax: +91 1129 5527 17Email: [email protected]: www.jsalaw.com

Mansoor Ali Shoket [Mansoor] is a Partner in the Firm and is amember of Delhi High Court Bar Association as well as of SupremeCourt Bar Association.Mansoor specialises in commercial, regulatory and constitutionaldispute resolution in diverse fora including Supreme Court of India,High Courts of various States of India, District Courts, the AppellateTribunal for Electricity Regulatory Commission, Company LawBoard, Monopolies and Restrictive Trade Practices Commission(MRTPC), Arbitral Tribunals, conciliation boards and other ADRmechanisms.Mansoor has acquired special heights in handling regulatory andcommercial matters related to the electricity sector; mergers andamalgamation petitions; arbitration and ADR relating to pipelinecontracts and hydroelectric projects; disputes arising from JVs, realestate transactions etc. He has also advised private utilities in theelectricity sector on diverse legal regulatory issues and moreparticularly on diverse aspects of electricity reform and restructuring.

J Sagar Associates [JSA] has assisted the Competition Commission of India [CCI] in drafting the statutory regulationsthat would determine the procedure of conducting the day-to-day business of the CCI when it becomes formallyfunctional. We continue to advise the CCI on a regular basis in its competition advocacy and public awarenesscampaigns has been one of the main focus areas of the Firm.

JSA has also been actively advising assisting a leading civil society organisation of India to firm up a NationalCompetition Policy of India. The said policy has recently been released for public information. JSA has adequatecapacity in investigating trade related competition issues ranging from participating in such investigations from the legalcompliance and regulatory perspective to assisting authorities on complex issues.

The Firm’s head of this practice area has been associated in investigating and assisting the MRTP Commission oncompetition issues and has assisted the CCI in setting up of the said Commission and carrying out the statutory capacitybuilding projects for the commission under World Bank (IDF), US AID and DfID programmes.



Chapter 20

Meitar Liquornik Geva & Leshem Brandwein

Israel



Israel law addressing cartels is found in the Restrictive TradePractices Law 5748 - 1988 (the “Law”). The Law confers both civiland criminal jurisdiction on the Israel Antitrust Authority (“IAA”)to investigate and pursue prohibited “restrictive arrangements”,among other antitrust violations. Its General Director has authorityto determine whether an arrangement violates the Law and topursue an administrative remedy including sanctions such as ordersto cease and desist, or a criminal complaint with penalties includingup to five years’ imprisonment for violations that include certainaggravating circumstances. The Law also provides that its breachgives rise to a private remedy that anyone affected may pursue.


The Law prohibits arrangements among parties who managebusinesses whereby at least one of them imposes a restriction onitself in a manner liable to eliminate or reduce competition amongit and all or some parties to the arrangement or among it and a thirdparty. No distinction is made between vertical or horizontalrestraints. Unless the arrangement falls under certain exemptions oris granted approval, it is an offence both for a business entity to bea party to such arrangement or for any person who acts inaccordance therewith. Although the IAA would normally need to prove that anarrangement had an effect on competition, the Law provides a listof arrangements that are irrefutably “deemed” restrictive withouteither the need to show effect or regard to whether it is horizontalor vertical, so long as the prosecution can prove the underlyingfacts: agreements on the price to be asked, offered or paid; the profitto be derived; division of all or of part of the market, geographicallyor by the people or categories of people with whom business is tobe transacted; or, the quantity, quality or type of assets or servicesin the business. The Law contains both substantive exceptions(discussed in question 1.5) as well as mechanisms to enable partiesto seek prior approval of their proposed dealings. For instance,approval of a restrictive arrangement may be sought from theAntitrust Tribunal, a forum comprised of a judge and two publicrepresentatives such as those affiliated with consumer or businessorganisations as well as civil servants (the “Tribunal”). Theapplication is subject to public notice and a hearing including the

IAA. In making its decision to approve an arrangement, theTribunal weighs against possible harms various countervailingpublic interest considerations. On recommendation of the DirectorGeneral, the President of the Tribunal may grant temporary permitspending the Tribunal’s decision. The Director General may also exempt a would-be applicant fromseeking Tribunal Approval, so long as the arrangement does notconsiderably reduce competition (or reduce competition in aconsiderable share of the market), and the restrictions are narrowlytailored and do not have an anticompetitive motive. Overarching “block” exemptions have also been established, mostnotably for vertical or horizontal arrangements representing minimalmarket shares and that would cause immaterial harm to competition.Other block exemptions have been enacted for joint ventures ofcompetitors as well as competitors who enter into research anddevelopment agreements, in both cases subject to certain criteria andso long as they constitute less than a certain combined percentage ofthe market, depending on whether the venture is in a field in whichthey compete or not. Further exemptions include vertical exclusivedealing arrangements or purchase or supply contracts. All of theseexemptions too are subject to specific conditions.


As a general matter, the investigative and legal staff of the IAAenforces the Law. The Law grants extensive investigative powers,such as interrogation of witnesses and search of premises, as well asauthority to seek administrative sanctions by consent orproceedings, in either case before the Tribunal. The GeneralDirector may also make declarative “Determinations” of violations,which provide prima facie evidence in any future litigationincluding for the benefit of a private litigant. For criminal matters,Israel’s Attorney General has deputized the IAA’s staff to indict andbring cases against suspected violators in the name of the State.Criminal cases are heard by the District Court of Jerusalem.


Investigations are typically initiated by the IAA’s investigative staffand begin confidentially. After enough intelligence is collected thestaff will generally open a public investigation. Depending on thetype of investigative tools sought (search of a home or office,seizure of evidence, arrest of individuals, etc.), a court order may berequired. See section 2 below. Once adequate evidence isdeveloped, the matter is transferred to the legal Staff, whichexercises the IAA’s prosecutorial role. It may bring a civil suit to

Yuval Sasson

Michal Halperin



Isra

el

Meitar Liquornik Geva & Leshem Brandwein Israel

the Tribunal or proceed criminally before the District Court. Shortof such proceedings, there are opportunities to settle or announcethe IAA’s Determination regarding illegal conduct. The Determination may be employed for civil matters. The IAAGeneral Director determines (and announces) that a restrictivearrangement has occurred. The parties may appeal and request ahearing before the Tribunal, which may reaffirm, revoke, or amendthe Determination. The holding may be used as prima facie proofagainst the violating parties in any subsequent legal procedure. TheTribunal’s decisions may be appealed to the Supreme Court. The General Director may also negotiate an administrative consentdecree with the parties to the restrictive arrangement. The decree isreached without admission of liability and may include, amongother things, an obligation to pay money to the State treasury or acommitment to do or refrain from doing specific actions. TheGeneral Director presents the grounds for the decree to the Tribunal(or District Court), which may “take it or leave it” but is not free toalter it without the assent of both sides. The decree will, ifapproved, be treated with the force of an order. If not approved,there is no estoppel. A case may be brought on the same facts. Butnone of the decree, testimony during the proceedings to considerthe decree, nor documents prepared for the hearings at the behest ofthe General Director, is admissible in such subsequent case.Given that violations of the Law give rise to potential criminalliability, the IAA is equipped with an arsenal of tools to pursuealleged misconduct accordingly. Staff receive police training andare empowered to conduct investigations, search premises, seizeevidence, and make arrests, in a manner similar to police officers.See section 2 below.For criminal matters, a preliminary hearing before indictment isconducted by the IAA’s chief legal counsel. (It is technicallyrequired only to indict for conduct that might include aggravatingcircumstances (see question 3.2)). Plea bargains may be negotiatedat any point in the process and are subject to approval and/ormodification by the District Court.Following indictment, the District Court of Jerusalem would hearthe case. For convictions, separate proceedings are convened tohear arguments on sanctions. After their imposition, the case maybe appealed by either party to the Supreme Court.


Sector-specific restraints that are permitted include the followingarrangements:

Restraints approved by law.Those which relate to the right to use patents, designs,trademarks, copyrights, performers’ rights, or developers’rights, so long as the arrangement is between the proprietorof the asset and the party receiving the right to use it and, ifthe asset is subject to legal registration, it is registered.Those entered into between a person assigning a right to realproperty and the person acquiring such right, where therestraint involves the type of assets or services in which theacquirer may deal with or engage on such property.Those involving the growing or marketing of fruits,vegetables, crops, milk, eggs, honey, cattle, sheep, poultry, orfish, in all cases as between or among growers and wholesalesellers of such produce. This provision does not apply togoods manufactured from the produce.Those entered into between a company and its subsidiary.Those involving a sole supply and sole purchase agreement,provided that both parties do not engage in production of thesame goods or services.

Those involving companies that provide maritime and/oraviation services under certain circumstances. A recentamendment limited the exemption and carved outarrangements between Israeli air carriers, Israeli and non-Israeli air carriers, or non-Israeli air carriers with operationsor representatives in Israel and involving carriage to Israel,unless the arrangement was approved by the relevantministries in consultation with the IAA for, among otherpurposes, protecting foreign relations or ensuring air serviceto Israel. In addition, a new block exemption was enacted toallow a few types of arrangements among air carriersfollowing such amendment.Those involving a non-competition covenant by the seller ofa business, in accordance with reasonable and establishedpractices.Those entered between an employee organisation and anemployer organisation, relating to employment and workingconditions.

1.6 Is cartel conduct outside Israel covered by the prohibition?

The IAA General Director once addressed such a matter publicly inhis Determination in the case of James Richardson PTY Israelrelating to selling foreign-manufactured perfume within Israel.According to its Determination, the Law will apply on foreigncommerce when the unlawful conduct impacts competition inIsrael. There have, to date, been no relevant judicial cases affirmingsuch a test or applying a different standard. The general rules ofIsrael’s penal law regarding such provisions as territorial, personalor protective liability also apply to cartels.







Carry out compulsory interviews with individuals No Yes

Carry out an unannounced search of businesspremises No Yes



No Yes*



Yes Yes


No No

WWW.ICLG.CO.UK115


Isra

el



IAA staff is empowered to detain individuals for questioning forthree hours or, by approval of a supervising investigative official ordeputy, an additional three hours. During such period, theindividual is not considered under arrest and therefore right tocounsel would not yet be triggered. However, if the questioningcontinues past such period and the individual refuses to remainvoluntarily, this may result in arrest. Arrest is also permitted if anindividual refuses to be detained or if the IAA has adequate groundsto believe that an offence has or will be committed, or if there is aconcern of obstruction of justice or flight. Arrestees have a right tocounsel and a hearing before a Magistrate Judge within 24 hours.It should be noted that as a matter of practice, arrests in line withthe Law have been limited to several hours. It should also be noted that the right of the IAA to retain originaldocuments for more than six months requires a court order.


Surveillance may only be conducted after seeking authority fromthe president or deputy of the District Court, on applicationshowing sufficient grounds that an offence including aggravatingcircumstances has occurred (see question 3.2).


No there are not.


IAA investigative Staff and, if more are required, other staffmembers may be deputised by the IAA General Director for thispurpose and they need not wait for counsel.


There is no specific precedent on this point. As such, in-house legaladvice remains privileged. According to IAA policy, privilegeclaims are, as a general matter, addressed to the Israel BarAssociation, which will send a representative to the place of thesearch. Arrangements between the government and the barassociation provide that all documents for which the parties claimprivilege be sealed and brought before a judge to decide what theprosecution may use.


Israeli law affords a right against self-incrimination for individuals,right to counsel if an individual is under arrest, right to a hearingbefore the Magistrate Court if the arrest lasts for at least 24 hours,and limitations on the period during which an individual may beheld without prosecution. More generally, an individual may contest each of the investigativepowers employed by the IAA by filing a motion with the MagistrateCourt.


Although the IAA has authority to investigate obstruction and hasdone so on numerous occasions, it does not have general authorityto prosecute such obstruction. Prosecution is within the jurisdictionof the Attorney General.



As a general matter, the Law provides for fines in an amount equalto twice those that might apply to individuals that are deemed to beparties to the conspiracy. The fine for an individual is two millionand twenty-thousand NIS (approximately $532,000) and thirteenthousand NIS (approximately $3,400) for every day during whichthe violation continued. The General Director also has the power to publish a Determination(see question 1.4 above) and to seek orders to cease and desist.


Individuals may be fined or incarcerated. Being a party to arestrictive arrangement not involving aggravating circumstances, orfailing to comply with conditions of an IAA approval for arestrictive arrangement, could result in fines or up to three years’imprisonment. The presence of aggravating circumstances elevates the offence toa felony-level crime and the concomitant penalty to up to fiveyears’ imprisonment. Aggravating circumstances exist when therehas been significant damage to competition, because of one or moreof the following factors: the share and standing of the accused in themarket affected by the offence; the length of the period duringwhich the offence continued; the damage caused or expected to becaused to the public because of the offence; or the benefit derivedby the accused. However, allegations of aggravating circumstancesare rarely pursued, or if they are, are not necessarily successful.The only such prosecution to date was the case of the envelopeproducers’ cartel, indicted in 2004 (CF 377/04 the State of Israel v.Yaron Woll et. al). Although the parties were convicted of the cartelactivities, they were acquitted as to the aggravating circumstances.This ruling is currently pending appeal by the IAA before theSupreme Court. Company employees and directors may be implicated in an actionagainst such company. Specifically, an officer that was involved inconspiratorial conduct of the company is considered a separateparty to the cartel and could be liable for fines and a three-yearprison sentence. In addition, simply as a function of her or hisgeneral responsibility to oversee company affairs, any officer that isresponsible for the activity that is under prosecution can also befound liable for the conduct of the company even if not involved insuch conduct unless he or she can show that the offence wascommitted without her or his knowledge and that she/he otherwisetook reasonable steps to ensure antitrust compliance.


The statute of limitations is based on the general criminal code andis a function of the severity of the offence. Being a party to a cartelor failing to comply with conditions of an exemption order have alimitation of five years while felony-level crimes, meaning, those



Isra

el


involving aggravating circumstances, have a limitation of ten years.If the sanctions or category for an offence were to be elevated, thelimitation period would be increased accordingly. The existence ofany investigative activity on the part of IAA tolls the limitationperiod. The periods restart in their entirety on completion of aninvestigation or indictment, whichever is earlier.


A company may not pay financial penalties imposed on a former orcurrent employee. Generally speaking, if the company’s articles ofincorporation or by-laws so provide, an employee may beindemnified for reasonable legal and court costs incurred so long asshe or he has either been found not guilty in a criminal matter, orsanctioned only with respect to offences not requiring mens rea.



Any person, including a corporation or a director or employeethereof who is first to approach the IAA and provide all informationknown or to become known about an illegal cartel is granted fullimmunity from criminal prosecution, so long as the party is not theclear leader of the cartel, has not been involved in prior antitrustoffences, and the IAA has not yet opened an investigation.Overtures by a corporation must be in line with an official corporateact, and will benefit all directors and employees.


There is no formal quantitative system to reduce penalties in thecontext of the leniency programme but, as a general policy, one ofthe considerations in approving plea bargains is the degree ofcooperation received from the accused and the stage at which itapproaches the IAA or enters negotiations. See question 4.6.


Initial applications may be made orally, but ultimately a leniencyagreement is reduced to writing with numerous conditions, for thepurpose of enforcing the party’s obligations (or, upon a breach, torevoke the immunity and use any information obtained against suchparty).


Although no guarantees are made, applications will be treatedconfidentially as long as plausible. The IAA offers the additionalprotection that information provided in line with applications thatwere made in good faith but subsequently rejected cannot be usedto prosecute the provider. Once an indictment is handed down, therelevant documentation is subject to discovery unless suchapplication is subject to a confidentiality certificate granted by therelevant Ministry for the purpose of protecting an important publicinterest. Such certificate may be challenged by the accused.


According to the IAA’s leniency programme, cooperation in avariety of respects is expected on a continuous basis. First, theapplicant may not without IAA consent expose the essence of theapplication to any third party (except counsel). Second, the IAAmay dictate the manner in which the applicant should terminate itspart in the cartel. Third, immunity is conditioned on providing fulland continuing cooperation with the IAA, including providinginformation that is (or may come to be) either in the possession orwithin the reach of the applicant, in truthful and detailed statements.Fourth, the applicant should act according to the IAA’s directionsduring and after the investigation, to assist the IAA in theinvestigation and testify fully in connection with the cartel, if andwhen required. There is no case law and very little experience withsuch applications generally, and a cessation of immunity inparticular.


There is no formal policy on plus factors. However, short of fullimmunity (or prosecution for the entirety of an alleged violation),the prosecution may use its discretion in crediting various factorstoward reaching plea bargains and making agreements with a co-conspirator to become state’s witness against other parties to thecartel. Considerations in fashioning plea bargains include the degree ofcooperation received from the accused and the stage of theinvestigation in which it enters into a negotiated settlement. In awell-known prosecution of a cartel among four providers of homecooking gas, the court explicitly enumerated various factors, suchas economizing judicial resources necessitated by prosecution andtrials, which warranted going easier on parties that cooperatedsooner. Indeed, although sentences always depend on the particularcircumstances, there were discernable differences in penalties.Three current and former executives of prominent co-conspiratorPazgaz paid fines of between 55,000 and 1,250,000 NIS but weresubject to prison sentences to be served only by performingcommunity service ranging from between two weeks and sixmonths. By comparison, a steeper punishment of four months’ jailtime plus a fine of 950,000 NIS was later meted out to the formerhead of Dorgaz, the smallest co-conspirator and prior marketmaverick. This was due, among other considerations, to the factthat he initiated plea bargaining later.



When a company does not itself seek leniency, a director oremployee thereof may come forward to the IAA and providecomplete information without the consent of the company. He orshe would receive personal immunity, provided that all otherconditions for receiving immunity are met. There are no provisions that would protect a whistle-blower fromtermination of employment.

WWW.ICLG.CO.UK117


Isra

el




A substantial number of matters are resolved in some sort ofsettlement, such as a consent decree or a plea bargain (see question1.4), procedures for both of which there is considerable precedent.

7 Appeal Process


In civil proceedings, interim orders and final decisions of theTribunal are appealable to the Supreme Court. Decisions of theDistrict Court of Jerusalem, which has exclusive jurisdiction overcriminal antitrust matters, are also appealable to the Supreme Courtby either a party found guilty or, in the case of an acquittal, by theIAA. Appeals must be filed within 45 days.


Appeals are generally based on legal arguments and as a generalmatter the Supreme Court will not interfere in the fact-finding of alower court. Exceptions are quite rare. Nonetheless, the SupremeCourt may for the purposes of rendering an accurate ruling chargethe lower court to take additional evidence. The lower court willthen come back with its findings. In addition, the Supreme Courtitself may accept additional evidence or hear witnesses. Inparticular, in circumstances in which a lower court has refused tohear evidence that it should have, or if the Supreme Court believesthat it is necessary to enable a ruling, or for any other importantreason, the Court may convene fact-finding proceedings inwhatever format it determines, the procedures for which wouldpresumably entail cross-examination.

8 Damages Actions


An act or omission contrary to the provisions of the Law constitutesa tort under Israel’s civil wrongs ordinances. As such, a privatelitigant may invoke the normal procedures for filing a suit,conducting discovery, and acting as a plaintiff in a trial. Findings in line with a Determination by the General Director, orfindings and the conclusions of a verdict in criminal proceedingsthat resulted in a conviction of the defendant, are admissible in aprivate claim against such defendant and can be relied upon in civilclaims as prima facie evidence. If such a verdict is filed with thecourt in connection with a civil claim, the convicted person will notbe allowed to file contradicting or any other evidence that wassubmitted during the criminal proceedings, unless it receivesspecific permission from the court. The evidentiary standard is akin to a “balance of probabilities”.However, according to judicial precedents, where the conduct atissue in a tort claim is fraud, the court may determine that thestandard of proof is higher. In light of the criminal consequences ofbreaches of the Law, one can assume that the courts will wish toapply a standard that lies between the balance of probabilities and

the criminal standard “beyond a reasonable doubt”. The Law doesnot provide for punitive or exemplary damages.


Yes. In 2006, Israel enacted new procedures for class actions.


For civil damages claims, the applicable statute of limitations isgenerally measured such that cases may only be brought within sevenyears following the circumstances giving rise to the claim. However,the period is lengthened considerably for fraudulent or deceitfulconduct. Specifically, suit must be brought within seven years fromthe date in which the fraud or deceit was discovered by the plaintiffany such delay not owing to reasons of his or her own making.


Courts have the authority to charge the losing party with costsincurred by the prevailing party but, as a matter of practice, suchamounts are determined to be far less than the actual costs incurredby the prevailing party.


Yes. For example, in 2004, Israeli telecommunications carrierBezeq seized on a violation of the Law among a cartel of conduitmanufacturers. In its private litigation, Bezeq, as a primaryconsumer of the piping through which it pulls telephone wires,claimed that it was harmed by the market division. The case wassettled for over 28 million NIS.

9 Miscellaneous


Until several years ago there was a clear tendency by the IAA to usemore criminal tools in the struggle against cartels. In the late 90’sand early 2000’s the IAA pushed for more severe punishments forcorporations and their executives. The courts gradually increasedthe punishments and in a few cases sent executives to prison forperiods longer than six months, which cannot be served bycommunity service. However, in the last few years the IAAinitiated very few criminal proceedings. For their part, courts arenot always willing to indulge the prosecution by handing downoverly tough punishments on cartel offences. The leniency programme was introduced in 2005. Since then, onlytwo applications for leniency were brought to the IAA which,accordingly, has little experience addressing such requests.

9.2 Please mention any other issues of particular interest inIsrael not covered by the above.

In 2005, the IAA prepared a proposal to amend the Law’s definitionof restrictive arrangements. According to the proposal, there would



Isra

el


be a distinction between horizontal and vertical restraints and theirrefutable presumption of harm to competition would apply only tohorizontal arrangements. Legislative proceedings have not yetbegun. However, such an amendment would bring about a majorchange in cartel enforcement.

Acknowledgment:The authors wish to thank their colleague Jonathan Draluck forassisting in the preparation of this chapter.

Michal Halperin

Meitar Liquornik Geva & Leshem Brandwein 16 Abba Hillel Silver Rd.Ramat Gan 52506Israel

Tel: +972 3 610 3186Fax: +972 3 610 3782Email: [email protected]: www.meitar.com

Michal Halperin is the head of Meitar’s Antitrust Group, and hasextensive experience in both criminal and civil aspects of antitrustlaw. Michal advises on mergers, monopoly cases, cartel cases andrestrictive arrangement cases.Michal previously served as General Counsel of the Israel AntitrustAuthority (IAA), where she headed a team of 25 attorneys andinterns. As chief legal counsel of the IAA, Michal was responsiblefor the prosecution of antitrust charges. Michal also handled allmergers that presented competition issues and was in charge of theenforcement of antitrust law against monopolies. Michalrepresented the IAA before the Supreme Court and the AntitrustTribunal. Michal represented the IAA in the OECD and in the ICN -International Competition Network. Prior to her work at the IAA, Michal was a partner in another Tel Avivfirm and legal advisor to Mintz, Levin, Cohn, Ferris, Glovski andPopeo PC in Boston.

Yuval Sasson

Meitar Liquornik Geva & Leshem Brandwein 16 Abba Hillel Silver Rd.Ramat Gan 52506Israel

Tel: +972 3 610 3811Fax: +972 3 610 3682Email: [email protected]: www.meitar.com

Yuval Sasson is a partner in Meitar’s Litigation and CommercialGroups, specialising in commercial and corporate litigation andwhite-collar litigation, as well as commercial transactions. Yuvalrepresents Israeli and international clients in court and arbitration.Yuval regularly handles complex international litigation and has vastexperience in cases involving antitrust law, corporate law,commercial law, insurance law, class actions, product liability andadministrative law. Yuval also advises clients in the course ofcriminal investigations and in connection with white-collar offenses,including antitrust offenses, securities related offenses, extraditionsand executives’ responsibility. Prior to joining the firm, Yuval was Deputy to the State Attorney ofIsrael handling primarily high profile international law matters.

Meitar Liquornik Geva & Leshem Brandwein is Israel’s leading international law firm. The firm represents some of theworld’s largest multinational corporations in corporate, commercial and litigation matters, in Israel and abroad.

Meitar is a full-service firm, representing clients in corporate transactions, including mergers and acquisitions,international and domestic capital markets, banking, finance and derivatives, corporate and commercial litigation,licensing, hi-tech, energy and infrastructure, real estate, antitrust and taxation and other regulatory matters. Meitar hasrepresented clients in Israel’s largest M&A transactions and international public offerings, and has represented some ofthe world’s leading companies in corporate and class-action litigation. Meitar consistently receives the highest rankingsfrom independent guides, such as Chambers & Partners, Legal 500 and PLC Which lawyer? Yearbook.



Chapter 21


Italy



In the Italian legal system, cartels are prohibited pursuant to Article81 EC and Article 2 of Law No. 287 of October 10, 1990, layingdown “Rules for the Protection of Competition and theMarketplace” (the “Law”). As stated in Article 1 of the Law, itslegal basis is Article 41 of the Constitution, which enshrines theprinciple that private economic enterprise is free, although “It maynot be carried out against the common good or in a way that mayharm public security, liberty, or human dignity”. A violation of the cartel prohibition constitutes an administrativeoffence and a tort. Companies guilty of cartel conduct may thus besubject to administrative sanctions and/or be exposed to civildamages claims. Violations of the cartel prohibition are not subjectto criminal sanctions.


Article 81 EC applies to cartel conduct likely to affect tradebetween Member States, whereas Article 2 of the Law only appliesto cartel conduct which does not fall within the scope of Article 81EC, i.e., to cartels with essentially local effects or scope. However,pursuant to Article 3(1) of Council Regulation (EC) No. 1/2003 ofDecember 16, 2002, on the implementation of the rules oncompetition laid down in Articles 81 and 82 of the Treaty(“Regulation No. 1/2003”), where the Autorità Garante dellaConcorrenza e del Mercato, i.e., the Italian Competition Authority(the “ICA”), applies Article 2 of the Law to agreements, decisionsby associations of undertakings or concerted practices within themeaning of Article 81(1) EC which may affect trade betweenMember States within the meaning of that provision, it shall alsoapply Article 81 EC to such agreements, concerted practices ordecisions.Article 2 of the Law prohibits any agreement, decision or concertedpractice having as its object or effect to appreciably prevent, restrictor distort competition within the domestic market or a substantialpart of it. By way of example, Article 2 refers to cartel conductconsisting in: (a) directly or indirectly fixing purchase or sellingprices or any other trading conditions; (b) impeding or limitingproduction, markets, investment, technical development ortechnological progress; (c) sharing markets or sources of supply; (d)

applying objectively dissimilar conditions to equivalenttransactions with other trading parties, thereby placing them at acompetitive disadvantage without an objective justification; or (e)making the conclusion of contracts subject to acceptance by theother parties of supplementary obligations which, by their nature oraccording to commercial usage, have no connection with thesubject of such contracts.


The cartel prohibition is enforced by the ICA, a five-memberindependent administrative agency. The ICA’s members areappointed jointly by the Speakers of the Senate and the Chamber ofDeputies from candidates of “well-known independence, who haveheld public offices of great responsibility and relevance”. Each ofthe five serves for a seven-year, non renewable, term. The ICAStaff, namely the Investigation Directorate having jurisdiction byindustry, carries out the investigations of alleged cartel conduct.The five members sitting as the College adopt final decisions,which may find an infringement, order the cartel members toterminate it and, possibly, impose a fine on them. Cartel decisionsin the telecom and insurance sectors must be adopted after hearingthe non-binding opinion of the respective industry regulator (i.e.,the Autorità per le Garanzie nelle Comunicazioni and the Istitutoper la Vigilanza sulle Assicurazioni Private e d’InteresseCollettivo).The ordinary civil court having jurisdiction entertains damageclaims based on a violation of the cartel prohibition. Under Article33(2) of the Law, petitions for declaratory relief (i.e., for adeclaration that an agreement hindering competition is null andvoid), actions for damages and requests for interim relief relating toinfringements of Article 2 of the Law must be brought before thecourt of appeals (Corte d’Appello) having territorial jurisdiction.Such court has jurisdiction at first and last instance, i.e., itsdecisions are subject to review by the Court of Cassation onquestions of law only. In addition, pursuant to the general civilprocedure rules, lower civil courts (Giudici di pace and Tribunali)have jurisdiction with respect to private actions under Article 81 EC(see Section 8 below).


Pursuant to Article 14(1) of the Law, the ICA’s decision to openproceedings sets: (i) the date of termination of the proceedings, bywhich the College must adopt its final decision, in which sanctionsmay be imposed (see Section 3 below); as well as (ii) the time limit

Cesare Rizza

Mario Siragusa



Ital

y

Cleary Gottlieb Steen & Hamilton LLP Italy

within which the representatives of the companies involved may beheard at their request. Any third parties having a direct interest inthe end result of the proceedings may request to intervene in theinvestigation. The addressees of the ICA’s decision to openproceedings and any intervener may file written submissions anddocuments as well as have access to the case-file. Article 8 of thePresidential Decree No. 217 of April 30, 1998 (the “Decree”)clarifies that the ICA is entitled to exercise the investigative powersentrusted with it only after notifying the decision to openproceedings to the company involved, typically at the outset of anon-site inspection.Where it deems to have acquired sufficient evidence of the collusivepractice in question, the ICA issues a statement of objections (“SO”),by which it notifies the companies involved and any complainant ofits objections against the cartel members. At the same time, the ICAfixes the date of closure of the investigation (i.e., the last day onwhich the ICA may exercise its investigatory powers and the parties,the interveners and the complainants, if any, may get access to thecase-file). The final hearing before the College of the parties andthird parties concerned typically takes place on the date of closure ofthe investigation. The SO must be served on the parties and thirdparties involved at least 30 days before the date of closure of theinvestigation. The companies involved may file written submissionsin response to the SO and documents no later than five days beforethe date of closure of the investigation.


Italian law does not provide for any sector-specific offences orblock exemptions from the cartel prohibition.

1.6 Is cartel conduct outside Italy covered by the prohibition?

To the extent that cartel conduct which takes place outside Italy haseffects within the Italian territory or a substantial part of it, suchconduct falls within the scope of application of Article 2 of the Lawand, possibly, Article 81 EC, if it affects trade between MemberStates. As a consequence, such conduct may be investigated andsanctioned by the ICA. The Law arguably is not applicable tocompanies established in Italy that engage in cartel conductaffecting only foreign trade, including where the anticompetitiveagreements or practices take place within the domestic territory.





The ICA may exercise its investigative powers only after it serveson the companies involved, typically at the outset of an on-siteinspection, the decision to open proceedings, which must clearlyindicate the presumed facts that it intends to investigate. For companies established outside of Italy, service of process of theICA’s decisions to open proceedings is accomplished through thediplomatic channel, which takes considerably longer thannotification by the ICA officials before the commencement of adawn raid. Accordingly, where a dawn raid is staged to take placesimultaneously at the premises of several companies, companiesestablished outside of Italy are not raided, even with the assistanceof the local NCA staff.


The Decree lays down the relevant procedural rules for theenforcement of the Law, including the cartel prohibition.The list of investigative powers provided for in the Decree isexhaustive and does not include the exercise of any type of generalsurveillance powers such as bugging, telephone tapping, or trailingindividuals allegedly involved in cartel conduct.


No, there are not.


The ICA does not have the power to search residential premises.Officials of the relevant ICA’s investigation directorate carry outsearches of business premises, with the assistance of the Tax Police(Guardia di Finanza). Although the raided company’s legaladvisors may assist it, the inspection cannot be delayed by thecompany’s request to wait for their arrival to the premises.


Italian law protects the confidentiality of communications betweena lawyer, who is a member of the Bar of an EU Member State andthe client. To the extent that these communications are exchangedin the exercise of the client’s right of defence, they are covered byprofessional legal privilege and cannot be used by the ICA for thepurposes of a cartel investigation.However, pursuant to Italian law, membership of the Bar is




Only with regard to acompany’s legal repre-sentatives and in thecourse of an unan-nounced search of busi-ness premises or ahearing

No

Carry out an unannounced search of businesspremises Yes No

Carry out an unannounced search of residentialpremises No No



Yes No



Yes No


Yes No

WWW.ICLG.CO.UK121


Ital

y


incompatible with, inter alia, the status of employee. Accordingly,in-house lawyers, who are employees of the company for whichthey work, cannot be members of the Bar, and, therefore, theircommunications and/or advice are not covered by the rules ofprivilege.


The undertakings concerned are obliged to cooperate actively withthe ICA, which implies that they must make available to the ICAany and all information in their possession, only insofar as it relatesto the subject-matter and the purpose of the investigation, asdescribed in the decision to open proceedings (see above, question2.2). The use of information obtained by the ICA in the course of acartel investigation for purposes other than that for which it wasrequested, is prohibited, although such information may providecircumstantial evidence which may, in some cases, be used todecide whether or not it is appropriate to initiate a separate antitrustprocedure.


The ICA may impose sanctions of up to approx. €25,822 againstcompanies that refuse or fail, without objective justification, toprovide the information or produce the documents requested by theICA in the exercise of its investigative powers. The same appliesby analogy to companies refusing to submit themselves to on-siteinspections. Moreover, fines of up to approx. €51,645 may beimposed against companies that provide misleading information tothe ICA.To date, companies have been fined for providing misleadinginformation in only one instance: by a decision issued on July 23,1993, two members of the Italian freight forwarders associationFedespedi were fined in the amount of approx. €15,490 each.



Pursuant to Article 15(1) of the Law, where the ICA finds aninfringement of the cartel prohibition, it orders the companiesinvolved to put an end to the infringement within the deadline thatit establishes in its final decision. Moreover, in case of seriousviolations of competition rules, such as cartels, the ICA may alsoimpose on the undertaking involved a fine of up to 10% of the totalturnover realised in the financial year prior to the notification of thefinal decision. The notion of total turnover must be interpreted asreferring to total worldwide turnover (see Tribunale AmministrativoRegionale per il Lazio (Regional Administrative Tribunal ofLatium, the “TAR”), Judgment No. 9203 of October 29, 2003,Philip Morris & ETI/ICA).With regard to fines imposed on associations of undertakings forinfringements that they have committed, it is the ICA’s practice tocalculate the amount of the fine based on the association’s revenuesor membership fees, rather than the members’ turnover, as allowedin the EC legal system under Article 23(4) of Regulation No.1/2003.In setting the amount of the fine, the ICA must take into account thegravity and duration of the infringement. In its recent decisions, the

ICA has been increasingly relying on the principles set out by theEuropean Commission in its 1998 and 2006 Guidelines on themethod of setting fines. The ICA has not adopted separateguidelines in this matter.Furthermore, Article 31 of the Law refers to the principles laiddown by Law No. 689 of November 24, 1981 (“Law No.689/1981”), insofar as they are compatible with the Law.According to Article 11 of Law No. 689/1981, the specific actionstaken by the author of the infringement to eliminate or reduce itseffects, its personality and economic conditions must also be takeninto account in the calculation of the amount of an administrativefinancial penalty, such as that provided for by Article 15(1) of theLaw.Listed below are the total fine amounts imposed by the ICA incertain recent cartel decisions, in which it established a violation ofthe cartel prohibition:

€301.03 million on the six members of a cartel in the jet fuelsector (June 14, 2006);€56.9 million on eight industrial gas producers (April 26,2006; decision annulled by the Consiglio di Stato (Council ofState), Judgment No. 1006 of March 7, 2008, Rivoiraa.o./ICA);€30.668 million on eight companies for colluding in thewooden chipboard panel market (May 17, 2007; total finereduced to €26.132 million by the TAR, Judgment No. 2312of February 6, 2008, SAIB a.o./ICA);€11.3 million on two water utility companies for bid rigging(November 22, 2007; decision annulled by the TAR,Judgment No 6238 of May 7, 2008, Acea and Suez/ICA);€9.9 million on 15 companies coordinating their bids forlocal public transport contracts (October 30, 2007; total finereduced to €9 million by the TAR, Judgment No. 6215 ofApril, 2008, TEP a.o./ICA);€9.7 million on seven baby milk producers (October 20,2005; total fine reduced to €8.6 million by the Council ofState, Judgment No. 102/2008, Milupa a.o./ICA);€4.374 million on the five members of a cartel in the marinepaint sector (January 25, 2007; total fine reduced to €2.1million by the TAR, Judgment No. 14157 of October 10,2007, Hempel/ICA); €3.996 million on four suppliers of ostomy medical products(August 3, 2007; total fine reduced to €1.6 million by theTAR, Judgment No. 5578 of April 16, 2008, Bristol-MyersSquibb a.o./ICA); and€2.37 million on two suppliers of autoclaved aeratedconcrete found to coordinate their commercial policies(October 24, 2007; decision annulled in part, including thefine, by the TAR, Judgment No. 6213 of May 7, 2008, Xellaa.o./ICA).


No criminal or administrative sanction may be imposed onindividuals involved in cartel infringements.


Pursuant to Article 28 of Law No. 689/1981, the ICA may collectthe monies owed by the infringers within five years of the date onwhich the violation was committed. In case of continuous illegalconduct, such as cartels, the statutory limitation period startsrunning on the day on which such conduct ceases. No statute oflimitation exists for the ICA’s powers to investigate and find a cartelinfringement, without imposing fines.



Ital

y



Not applicable.



On February 15, 2007, the ICA adopted its first leniencyprogramme, thus introducing in the domestic competition regime asystem of partial or total exoneration from the penalties that wouldotherwise be applicable to companies reporting their cartelmembership (Comunicazione sulla Non Imposizione e sullaRiduzione delle Sanzioni ai sensi dell’Articolo 15 della Legge 10Ottobre 1990, N. 287; the “Leniency Notice”). Under the Leniency Notice, full immunity from fines is available tothe first cartel participant coming forward to report the illegalactivity, by spontaneously providing the ICA with information ordocumentary evidence, provided that the following cumulativerequirements are met:

in the ICA’s opinion, given the nature and the quality of theapplicant’s submission, the information or evidence providedis decisive to find a cartel infringement, possibly through atargeted inspection; andthe ICA does not already have in its possession sufficientinformation or evidence to prove the existence of theinfringement.

No immunity is available where the ICA already knows about theexistence of the cartel when the applicant comes forward, includingon the basis of a previous immunity application for the sameinfringement. Nevertheless, even in such a scenario, the ICA maygrant a reduction, generally not exceeding 50%, in the fine thatwould otherwise be imposed on the applicant, where the applicantprovides the ICA with evidence that, due to its nature or level ofdetail, significantly strengthens the evidentiary set already in theICA’s possession, thus appreciably contributing to the ICA’s abilityto prove the infringement.In order to determine the appropriate amount of the fine reduction,the ICA will take into consideration the value of the evidentiarymaterials provided by the applicant, the timeliness of itscooperation, in light of the stage of the investigation procedure, aswell as the degree of any cooperation offered by other undertakings.Moreover, in case of disclosure of previously unknown factsbearing directly on the gravity or duration of the cartel, the ICA willnot take them into account when setting the amount of any fines tobe imposed on undertakings providing evidence relating to suchfacts.Irrespective of whether immunity or a simple fine reduction isapplied for, the leniency applicant must also:

cease its participation in the infringement immediately aftersubmitting its application, unless it is otherwise agreed withor requested by the ICA; andcooperate fully and on a continuous basis with the ICA forthe entire duration of the procedure, including by:timely providing the ICA with all relevant information andevidence that comes into its possession;timely answering to any request for information that maycontribute to establishing the relevant facts;making its employees and, to the extent possible, its formeremployees available for interviews with the ICA staff, wherenecessary; and

refraining from destroying, altering, or hiding relevantinformation or documents, or informing anyone of theexistence of a leniency application or its content before thestatement of objections is issued, unless the ICA consents tosuch disclosure.

In its decision of May 17, 2007, mentioned above, the ICA appliedthe Leniency Notice for the first time, granting immunity from finesto three companies belonging to the Trombini group for reportingthe existence of a cartel in the wooden chipboard panel industry, towhich, Trombini claimed, it was compelled to participate by theringleader company. What is noteworthy is that Trombini started tocooperate with the NCA at the end of 2003, even before the cartelagreement was put into effect and at a time where no leniencyprogramme existed in Italy. Moreover, Trombini submitted itsleniency application in December 2006, only one day before theAuthority published for comments the Leniency Notice in draftform. Incidentally, the reason for Trombini’s decision to cooperatewith the ICA was arguably its reliance on an isolated 1997precedent, in which the ICA decided - on the basis of the objectiveof Article 15 of the Law - not to impose a fine on one of theparticipants in the cartel of explosives for civil use, on account ofits cooperation to the investigation and its decision to discontinueits involvement in the infringement even before the opening of theinvestigation. In the Wooden Chipboard Panel case, the ICAdecided to grant immunity to Trombini directly on the basis ofArticle 15, para. 2-bis, i.e., the enabling provision on the basis ofwhich the Leniency Notice was later adopted. Although arguablythe ICA’s decision lacked a proper legal basis, at least in strictlytechnical terms, it must be welcomed to the extent that it showed theICA’s willingness to make its leniency policy a success story. The ICA reportedly adopted, but not published, special internalrules of procedure for dealing with leniency applications. Unlike atthe European Commission’s DG Competition, the ICA Staff do notmake policy statements in newsletters or law reviews and seldomparticipate as speakers in conferences and seminars, so it is fair topredict that the learning curve in this matter will probably be flatand long for the business and practitioners alike.


The Leniency Notice lays down a discretionary marker system,whereby an immunity applicant’s place in the queue can beprotected for a limited period of time, while it gathers all therequired information and evidence to support the application. Uponthe applicant’s reasoned request, the ICA may grant it a marker anddetermine the deadline within which the applicant has to ‘perfect’the marker by submitting the information required to meet theevidential threshold for immunity.If the applicant perfects the marker within the set period, theinformation and evidence provided shall be deemed to have beensubmitted on the date when the marker was granted. Where themarker is not perfected timely, the evidence provided by theundertaking can only be assessed for the purpose of granting a finereduction.Companies intending to file a fine reduction application may notapply for a marker.


Under the Leniency Notice, a prospective applicant planning tosubmit a corporate leniency statement in oral form needs to provide

WWW.ICLG.CO.UK123


Ital

y


adequate reasons for its request in order to obtain the ICA’sauthorisation, which is broadly discretionary. The applicant’s oralstatements are taped and transcribed by the ICA Staff. The fact ofapplying orally does not exempt the applicant from the obligation toprovide the ICA with all the relevant documentary evidence in itspossession.The ICA Staff’s transcript of a leniency applicant’s oral statement isaccessible from the other parties to the investigation under thegeneral procedural rules on access to the file. The Leniency Noticesimply provides that access to such transcripts is postponed to thedate of notification of the SO.


Under the general rules of procedure, access to ICA’s case file isgranted also to complainants and any other “persons having a directconcern”, even other than the addressees of the SO (e.g., anyinterested consumer associations). Moreover, contrary to what the2006 EC Notice dictates for leniency applications submitted to theEuropean Commission, in Italy the persons given access to the fileare not prevented from making copies of the statement/transcript, orfrom using the information obtained also for purposes other than“the purposes of judicial or administrative proceedings for theapplication of the Community competition rules at issue in therelated administrative proceedings”. As a result, corporatestatements are given in effect a very low level of protection in thecontext of civil damages follow-on litigation. For example, U.S.private plaintiffs may have access to leniency statements under theItalian Leniency Notice, even if they do not qualify as “personshaving a direct concern” for the purposes of access to the file underthe Italian rules, via the co-defendants of the applicant, to which theSO will be addressed and which can thus have access to thestatement and have “control” over the document for the purposes ofdiscoverability in U.S. courts (U.S. Federal Rules of CivilProcedure, Rule 34).


The obligation of full and continuous cooperation with the ICA (seequestion 4.1 above) applies until the date of adoption of the finaldecision.


No “leniency plus” or “penalty plus” policy exists under the currentICA’s leniency programme.



No leniency procedure exists for individuals reporting cartelconduct independently of their employer.


6.1 Are there any early resolution, settlement or plea-bargaining procedures (other than leniency)?

Pursuant to Article 14-ter of the Law, within three months of thedate on which the ICA has notified the opening of an investigationinto possible antitrust infringements, the companies concerned mayoffer commitments in order to eliminate the anticompetitive natureof the investigated conduct. If the ICA finds that the commitmentsproposed by the parties are suitable to meet the concerns expressedin its preliminary assessment, it may make those commitmentsbinding on the companies concerned, closing the proceedingswithout a finding of infringement. The commitment procedure wasintroduced in August 2006 and, since then, most of the ICA’sinvestigations have been closed on the basis of Article 14-ter of theLaw. However, consistently with the Commission’s approach in theapplication of Article 9 of Regulation No. 1/2003, the ICA refusedto entertain commitments offered by companies participating insecret horizontal restrictive agreements, which as such constitutevery serious infringements (see Case I695, Listino Prezzi del Pane,decision of June 4, 2008, Bull. No. 22/2008). Nonetheless, as theICA held in its 2007 decision concerning the marine paint cartel,where the commitments offered by all or some of the cartelmembers are rejected as inadequate and/or insufficient, the partiesto the proceedings may expressly request that those commitmentsbe reassessed as a mitigating circumstance justifying the reductionof the basic amount of the fines, in particular where at least one ofthe behavioural undertakings offered has already been put intoeffect (see Case I646, Produttori Vernici Marine, decision ofJanuary 25, 2007, Bull. No. 4/2007).No settlement or plea bargaining procedure exists.

7 Appeal Process


Pursuant to Article 33 of the Law, the addressees of an ICAinfringement decision may apply to the TAR for its annulmentwithin 60 days of the date of notification. The TAR’s judgmentsmay be appealed to the Council of State. In competition cases, theaverage duration of the judicial proceedings before either Court is12 months. The operative part of the Court’s decision is publishedwithin a week of the date of the hearing.The nature and the scope of the administrative courts’ power ofreview of the legality of the ICA’s exercise of its discretion in theevaluation of complex economic situations have been discussed atlength in the Council of State’s case law (see Judgments Nos 926 ofMarch 2, 2004, Gemeaz Cusin/ICA; 280 of February 3, 2005,Codacons/ICA; 1271 of March 10, 2006, ICA/Telecom Italia; and1397 of March 16, 2006, Assobiomedica/ICA). In its view, theaccuracy of the findings of fact made by the ICA can be fullyreviewed by administrative courts; this entails their power to assessthe proofs collected by the ICA and the exculpatory evidenceoffered by the parties, since the courts’ access to the facts isunrestricted. As far as the ICA’s technical discretion is concerned,if judicial protection is to be effective, it cannot be limited to amerely external review but must allow the court to perform athorough and penetrating “intrinsic” control, if need be by applyingrules and technical information that belong to the same specialisedsubject matter concerned by the ICA’s decision. The administrativejudge’s review must extend to the control of the (economic or other



Ital

y


type of) analysis made by the ICA, so as to reassess any technicalchoices made and proceed to the application to the case in point ofthe proper interpretation of the “undetermined legal notions” (suchas ‘relevant market’ and ‘agreement in restraint of competition’)that are referred to in the competition rules. The task of verifyingwhether the powers conferred on the ICA have been exercisedcorrectly, which the reviewing court is entrusted with, is subject tono limitations, the only constraint being that the judge cannotexpress its own autonomous choices and, by doing so, directlyexercise the power that the legislator reserved to the ICA.Pursuant to Article 23 of Law No. 689/1981, the TAR and theCouncil of State also have unlimited jurisdiction to review carteldecisions whereby the ICA has fixed a fine. Accordingly, they maycancel, reduce or increase the amount of the fines levied by theICA.


Witness testimony is not admitted in administrative appealproceedings against ICA’s decisions.

8 Damages Actions


Pursuant to Article 33 of the Law, courts of appeal have jurisdictionover competition damage claims based on Article 2 of the Law.They decide on first and last instance and their decisions are subjectto review by the Court of Cassation on questions of law only.Pursuant to the Code of Civil Procedure, the lower civil courts(tribunals and petty claims courts) have jurisdiction overcompetition damage claims based on Article 81 EC. Pursuant toArticles 120 and 134 of the Code of Industrial Property Rights, thespecialised sections for industrial property rights instituted withinthe tribunals and courts of appeals have jurisdiction, at first andsecond instance, respectively, for private actions relating to theexercise of industrial property rights and based on Italian or ECcompetition law. Finally, consumers’ representative actions mustbe brought before tribunals (see question 8.2 below).Based on general civil liability principles, a plaintiff claimingantitrust damages must prove that: (i) the defendant intentionally ornegligently violated the law; (ii) the plaintiff suffered damages; and(iii) a direct causal link exists between the defendant’s conduct andthe alleged damages. Recoverable damages in antitrust actions arelimited to the plaintiff’s actual loss (i.e., ‘out of pocket’ loss plusloss of income). Multiple punitive damages are not available.Any natural or legal person having full legal capacity can bringdamage actions in court, provided that the plaintiff personally has acause of action and the defendant (be it established within oroutside of the EU) has a sufficient jurisdictional nexus to Italy.According to the case law, indirect purchasers, too, have standing tosue for antitrust damages (Rome Court of Appeals, March 31, 2008;Turin Court of Appeals, July 6, 2000). Private damage claims basedon competition law infringements are governed by the principles ofItalian tort and contract law. An application for a preliminary injunction may be brought prior to,or during, the proceedings on the merits. If the preliminaryinjunction does not anticipate the effects of the final judgment (i.e.,the interim suspension of a contract, which anticipates the effects ofa nullity action) but merely aims at preserving its effectiveness (i.e.,

the seizure of the defendant’s bank accounts, which aims atpreserving the effectiveness of a damage action, but does notanticipate its effects), proceedings on the merits must commencewithin 60 days of the issuance of the interim injunction.

8.2 Do your procedural rules allow for class action orrepresentative claims?

Class actions are not allowed in the Italian legal system. However,Article 140-bis of the Consumers’ Code - which was passed in2007, after nearly two years of debate regarding the costs andbenefits of introducing in the Italian legal system a proceduraldevice bearing some resemblances with U.S.-style class actions -makes it possible for the first time to bring so-called “collectiveactions”. The new rules are scheduled to enter into force on January1, 2009, although their revision, undertaken by the government inthe summer of 2008, could result in a further postponement of thistime limit. Under the new law, collective actions may be broughtonly by associations of consumers and users registered with theMinistry for Economic Development (of which there are currently16), or by ad hoc committees that are found by the courts to beadequately representative of the collective interests that they seek toprotect. The new remedy may be pursued only with respect tocertain actionable torts or breaches of contract, and only where theinterests of a “multitude of consumers or users” are at stake. Acollective action may be brought to pursue allegations of, inter alia,“anti-competitive activities”, such as agreements betweenenterprises that restrict competition and abuses of a dominantposition. However, since a consumer or user is defined as “anyindividual who is acting for purposes falling outside his trade,business or profession” (Article 3(a) of the Consumers’ Code), thenew rules on collective actions seem not to apply to claims onbehalf of: (i) individuals acting within the scope of their trade,business or profession, including their employment contract; or (ii)parties who are not individuals. As a result, the new instrument isexpected to have a modest impact on private cartel litigation.Among other conditions, the new legislation includes a provisionintended to preclude conflicts of interest between plaintiffassociations or committees and the consumers or users whoseinterests it purports to protect. A two-stage procedure iscontemplated: an initial phase to establish liability, and asubsequent non-contentious one before a conciliation chamber, forthe determination of damages owing to individual consumers orusers who have elected to opt into the collective action or haveotherwise intervened in the proceedings.


The limitation periods for private competition damage claims basedon tort or breach of contract are, respectively, five and 10 years.According the Court of Cassation, the limitation period for antitrustdamages actions starts running when the claimant is - or, usingreasonable care, should be - aware of both the damage and itsunlawful nature, i.e., that the damage was caused by an antitrustinfringement (Court of Cassation, Judgment No. 2305 of February2, 2007, SAI/Nigriello).


Pursuant to the general civil procedure rules, the unsuccessful partyis ordered to pay all costs, including attorneys’ fees. However,where each party succeeds on some and fails on other matters, orwhere the circumstances are exceptional, the court may order that

WWW.ICLG.CO.UK125


Ital

y


the costs be shared or that each party bear its own costs. Fees are settled by the court and depend on the seriousness andnumber of the issues dealt with, and on the basis of the tariff formembers of the Bar (which is approved by the Ministry of Justice).The court’s settlement must remain within the tariff’s maximumand minimum limits. However, in certain exceptionalcircumstances, the court may depart from these limits on conditionthat it gives reasons for so doing.


The main cases of cartel litigation in which Italian civil courts haveawarded damages are the following:

In Piccoli/Isoplus, damages for breach of contract wereawarded to an agent whose business proposals had beensystematically turned down by Isoplus as a result of amarket-sharing agreement, which the principal had enteredinto with certain competitors (Bari Court of Appeals,November 22, 2001).In Bluvacanze/I Viaggi del Ventaglio a.o., damages in tortwere awarded to a travel agency that had been collectivelyboycotted by several tour operators, in retaliation for theaggressive discounts the agency offered to its customers byrenouncing part of its commissions. Bluvacanze providedevidence of a meeting among the three defendants, followingwhich two of them notified the former of their intention tostop providing it with travel packages. The plaintiff alsoprovided some press statements by the defendants, declaringthat they were dissatisfied with Bluvacanze’s policy to grantcustomers an additional 10% discount, by reducing itscommission fees. Therefore, although there was no directproof of the boycott, the Court found that the indirectevidence submitted by the plaintiff was sufficient to presumeits existence. The court awarded Bluvacanze damages as a percentage ofthe turnover that the travel agency had achieved during theprevious year, multiplied by the annual increase rate of therelevant market for travel packages in the year in which theinfringement had taken place. Such percentage was equal tothe normal profit margin that the travel agency would haveearned, less the discount that it used to grant to its customers.The court also awarded additional damages to the travelagency, on an equitable basis, as compensation for the harmthe collective boycott had caused to its reputation (MilanCourt of Appeals, July 11, 2003). In Inaz Paghe/Consiglio Nazionale dei Consulenti delLavoro, damages in tort were awarded to a software providerthat had been collectively boycotted by national and localemployment consultant associations, in retaliation forencroaching on activities allegedly reserved to authorisedemployment consultants. The court found that thedefendants strongly recommended not to buy the plaintiff’sproduct and offered replacement products to the plaintiff’sclients. The court awarded damages based on loss of profits arisingfrom the contracts terminated by the clients of the plaintiff asa result of the collective boycott. In order to identify thesecontracts, the court compared the number of contractsterminated in the two-year periods before and after theboycott, to the number of contracts terminated during thetwo-year boycott. It then multiplied the average profit foreach client (as calculated by the court-appointed expert) bythe number of contracts terminated due to the boycott,assuming a potential residual contractual duration of two tothree years. The court did not award any damages for potential newcustomers that the plaintiff had allegedly not been able to

win due to the boycott, as it considered that the plaintiff’sallegations were not adequately proven (Milan Court ofAppeals, December 11, 2004). In the context of consumer actions for damages arising froma price-fixing conspiracy among insurers in the third-partyauto liability market, as previously established by the ICA, inseveral cases adjudicated upon by certain petty claims courtsand the Naples Court of Appeals damages were awarded,based on a fair estimate of the over-price paid by theplaintiffs, which was found to amount to 20 per cent of thetotal premiums (corresponding to the premiums’ averageannual price increase during the duration of the cartel,according to the ICA). In International Broker, the court awarded damages to abroker for the loss of profit suffered as a result of the pricealignment determined by the participation of the main oilrefining companies in a local market in a joint venture for theproduction and distribution of bitumen. The court awardedthe plaintiff both actual loss and loss of profit. The formerwas calculated as the total costs borne by the plaintiff ingathering the evidence of the infringement and participatingas complainant in the ICA’s investigation; as to the loss ofprofit, the court established that it was equal to 40 percent ofthe plaintiff’s turnover in the 12 months prior to theimplementation of the anticompetitive agreement by thedefendants (Rome Court of Appeals, March 31, 2008).

9 Miscellaneous


The most significant recent development in the field of cartels andleniency has been the adoption of the Leniency Notice, discussedabove (see Section 4).

9.2 Please mention any other issues of particular interest inItaly not covered by the above.

As mentioned above (see question 8.2), in December 2007 theConsumers’ Code was amended to introduce consumers’representative actions, which can be brought inter alia to pursueallegations of “anti-competitive activities”, as of January 1, 2009.It is also noteworthy that in the International Broker follow-ondamage litigation (see question 8.5), the court obtained from theICA, pursuant to Article 213 of the Civil Procedure Code, a copy ofthe minutes of a hearing of the defendants’ representatives as wellas of the documents seized in a dawn raid at the defendants’premises in the course of the ICA proceedings. Since the LeniencyNotice does not prevent the ICA from disclosing to a civil court, inresponse to a request for information, information gathered throughleniency applications, prospective leniency applicants shouldcarefully assess the risk of follow-on damage claims before comingforward to the ICA.

AcknowledgmentThe authors would like to acknowledge the assistance of theircolleague, Michele Piergiovanni, an associate of Cleary Gottlieb, inthe preparation of this chapter.



Ital

y

Mario Siragusa

Cleary Gottlieb Steen & Hamilton LLP Piazza di Spagna 15I-0087 RomeItaly

Tel: +39 0669 5221Fax: +39 0669 2006 65Email: [email protected]: www.cgsh.com

Mario Siragusa is a partner of Cleary Gottlieb. His practice focuseson EC and Italian competition law and complex commerciallitigation. Mr. Siragusa appears frequently before the EuropeanCourt of Justice, the Court of First Instance of the EuropeanCommunities, the Directorate General for Competition of theEuropean Commission, as well as the Italian Antitrust Authority andItalian civil and administrative courts. Mr. Siragusa lecturesregularly at conferences throughout the United States and Europeand has published numerous articles in U.S. and European legaljournals. He is a professor at the College of Europe in Bruges andlectures at the Catholic University in Milan. Together with CesareRizza, he is the co-editor of the volume 3 EU Competition Law:Cartel Law (Leuven, 2007).

Cesare Rizza

Cleary Gottlieb Steen & Hamilton LLP Piazza di Spagna 15I-0087 RomeItaly

Tel: +39 0669 5221Fax: +39 0669 2006 65Email: [email protected]: www.cgsh.com

Cesare Rizza is counsel at Cleary Gottlieb. His practice focuses onEuropean Community law and Italian competition law. Mr. Rizzaappears frequently before the EC courts of law and Italian civil andadministrative courts, as well as before the European Commissionand the ICA. From 1997 to 2001, he worked at the Court of Justiceof the EC as legal secretary to Italian Judge Antonio La Pergola(formerly Advocate-General). In 2007 he acted as State aid lawadvisor for the EC Policy Department of the Office of the Presidentof the Council of Ministers of Italy. Mr. Rizza regularly lectures atconferences and is widely published in legal journals.

Cleary Gottlieb’s antitrust/competition practice is one of the largest and most established in the world, comprising 150lawyers based in Brussels, Paris, London, Moscow, Frankfurt, Cologne, Rome, Milan and Washington, D.C. Withleading lawyers practicing in most of the firm’s offices, the breadth and depth of Cleary Gottlieb’s competition/antitrustpractice is unmatched. Given the growing cooperation among regulators in Europe and the U.S., competition/antitrustlawyers from the firm’s different offices work closely together to meet the needs of companies with global interests. Thefirm advises on all aspects of EU and major European national competition laws, including merger control, marketdominance and restrictive practices. Its lawyers appear regularly before the European Commission, nationalcompetition authorities and courts of law. Cleary Gottlieb is also recognised as the leading antitrust practice in Italy.Band 1 Firm in Competition/Antitrust, Italy, Chambers Europe (2008); “Leading” in Competition and Antitrust in Italy,PLC Which Lawyer? Yearbook 2008; Competition Law Firm of the Year, Acquisitions Monthly (2007).




Chapter 22

Nagashima Ohno & Tsunematsu

Japan



The “Law Concerning Prohibition of Private Monopoly andMaintenance of Fair Trade” (Law No. 54 of 1947) (the“Antimonopoly Law”), as amended from time to time, is thelegislation that prohibits the cartels. The amendment to theAntimonopoly Law of Japan, which was introduced with thepurpose of strictly prohibiting cartels has become effective as ofJanuary 4, 2006 (the “2006 Amendment”). Moreover, in addition tothe prohibition under the Antimonopoly Law of Japan, collusion ina public bid is subject to penalty under the Criminal Code.


Under the Antimonopoly Law, a cartel (e.g., price-fixing,production limitation, and/or market and customer allocation) isprohibited as an unreasonable restraint of trade, i.e., an agreementor understanding among competitors designed to eliminate orrestrict competition among them, and which substantially restrainscompetition in a particular field of trade (Article 3, Latter Part).While the Antimonopoly Law does not explicitly limit the scope ofthe conduct in violation of the Antimonopoly Law as anunreasonable restraint of trade as that among competitors, theTokyo High Court, in its March 9, 1953 decision, held that onlyrestrictions among competitors constitute an unreasonable restraintof trade. Unreasonable restraint of trade by a trade association isalso prohibited under Article 8, Paragraph 1, Item 1 of theAntimonopoly Law. Although Article 3, Latter Part of the Antimonopoly Law, prohibitsonly conduct that substantially restrains competition in the relevantmarket, if an agreement among competitors that have certainmarket power in the relevant market is found to exist, it seems thatthe Fair Trade Commission of Japan (the “JFTC”) has enforced theAntimonopoly Law as if the Antimonopoly Law prescribes thatsuch cartels are illegal per se.


The JFTC is the sole enforcement agency established by theAntimonopoly Law. In contrast to the United States, there is noenforcement agency in Japan that shares the power and responsibility

to enforce the Antimonopoly Law with the JFTC. Also in contrast tothe United States, but similar to the EU, in Japan, the JFTC is theinvestigator, prosecutor, and judge of the administrative proceedingthat is set forth under the Antimonopoly Law, with the JFTC’sdecisions being subject to judicial review. The JFTC consists of achairman and four commissioners. The General-Secretariat (Jimu-Sokyoku), headed by the Secretary-General (Jimu-Socho), is attachedto the JFTC for the operation of its business, and it consists of theSecretariat (Kanbo), the Investigation Bureau (Shinsa-kyoku), and theEconomic Affairs Bureau (Keizai Torihiki-kyoku) (including theTrade Practices Department (Torihiki-bu)). In general, theInvestigation Bureau (Shinsa-kyoku) is in charge of investigations,and, if an administrative hearing procedure is commenced, theHearing Examiners (Shinpan-kan) preside over the administrativehearing procedures.


When the JFTC may find an alleged violation of the AntimonopolyLaw as an unreasonable restraint of trade by any means (e.g., acomplaint by a third party, information from an employee of thesuspected corporation, and/or application under the leniencyprogramme), the JFTC first conducts a feasibility study for theinvestigation, and then the JFTC determines to conduct eitheradministrative investigation or the compulsory measures forcriminal offences under the Antimonopoly Law. If the JFTC, as a result of the compulsory investigation for criminaloffences, determined that the alleged conduct constitutes a carteland the criminal sanctions are appropriate, the JFTC files a criminalaccusation with the Public Prosecutors’ Office, and criminalsanctions under the Antimonopoly Law will be imposed on acorporation and/or individuals through the criminal proceduresunder the applicable laws in the same way for other criminal cases. If the JFTC conducts the administrative investigation and issues acease and desist order and/or payment order of the administrativesurcharge, the defendant corporation that has an objection againstsuch JFTC’s administrative orders may initiate the administrativehearing procedures. The Administrative Hearing Rules set twoyears as the target period to complete the procedures in order toefficiently proceed with the administrative procedures.


No requirements for a conduct by an entrepreneur in a particularindustry to constitute an unreasonable restraint of trade are set outunder the Antimonopoly Law or other relevant regulations.

Eriko Watanabe



Japa

n

Nagashima Ohno & Tsunematsu Japan

Certain activities by a small business such as a cooperativequalified under the applicable laws are exempted from theapplication of the Antimonopoly Law under Article 24 thereof, andcertain other joint activities among competitors are exempted fromthe application of the Antimonopoly Law by the provisions of otherindividual business laws over particular industries (e.g., the RoadTraffic Act, Maritime Traffic Act, Insurances Act, Air Aviation Act).In the foreign trade area, certain export cartels which meet therequirements provided in the Export and Import Act are alsopermitted to some extent.

1.6 Is cartel conduct outside Japan covered by the prohibition?

The Antimonopoly Law contains no provision expressly settingforth the JFTC’s jurisdiction. However, the JFTC considers that ithas jurisdiction over conduct that has an “effect” on the Japanesemarket, irrespective of where those activities are carried out.Therefore, in summary, the JFTC may have jurisdiction over cartelcases involving the Japanese market.






1. Compulsory Measures for Criminal OffencesThe JFTC may inspect, search and/or seize materials in accordancewith the warrant issued by a court judge under the amendedAntimonopoly Law as the compulsory measures for criminaloffences. The JFTC may not arrest an individual.The JFTC made public that the JFTC will initiate a criminalinvestigation under the Antimonopoly Law where there is aconsiderable reason to suspect: (i) on a malicious and material

violation of the Antimonopoly Law, including cases involving pricefixing, restriction of supply, market division, bid-rigging, andcollective boycotts; and (ii) an entrepreneur or industry thatrepeatedly violates the Antimonopoly Law, or the entrepreneur whodoes not comply with a cease and desist order, and it is difficult tocorrect such conduct by JFTC’s administrative measures under theAntimonopoly Law. Where the JFTC is convinced that a criminaloffence as listed above has taken place as the result of the criminalinvestigation, the JFTC will then file an accusation with the PublicProsecutors’ Office.2. Administrative Investigation by the JFTC(1) The JFTC is empowered to take the actions in order to conductthe necessary investigation of a case, as a compulsory one, such as(i) to order persons involved in a case or any other relevant personto appear at a designated time and place to testify or to producedocumentary evidence; (ii) to order experts to appear and to giveexpert testimony; (iii) to order persons to submit account books,documents and other material and to retain these materials; and (iv)to enter any place of business of persons involved in a case and anyother necessary place to inspect conditions of business operationand property, account books, documents, and other material.Please note that the Antimonopoly Law has no explicit provisionsto allow the JFTC to conduct the dawn raid at the individualresidence while the term “any other necessary place” may includethe residence.The 2006 Amendment increases criminal penalties of imprisonmentup to not more than one year or a fine of up to 3 million yen for anyindividual who refuses, obstructs or evades inspection as providedin the Antimonopoly Law. The JFTC may also conduct investigation on a voluntary basis. Acorporation is also subject to a fine of up to 3 million yen.(2) The JFTC usually conducts a dawn raid, a compulsoryinvestigation, in a cartel case. Having said that, the dawn raidrequires the consent and presence of the manager, who may contactthe JFTC on behalf of the corporation with regard to the dawn raid.The presence of an attorney, including in-house counsel, is not alegal requirement to lawfully or validly conduct the dawn raid.The JFTC takes originals of documents and materials held at theoffices of companies that are seized during a dawn raid by either anorder or a request to which an investigated corporation respond ona voluntarily basis. Note that Rules on AdministrativeInvestigations provides that the persons who are ordered to submitthe materials are entitled to make photocopies of such materialsunless the investigation is impeded.It is usual for the JFTC to question employees with regard to thesubject matter of the investigation, at the site of the dawn raids and,in addition, after the completion of review of materials and/orcollection of information from other persons by requesting suchpersons to respond to questions. The questioning is usuallyconducted by the JFTC on a voluntary basis with the consent by anapplicable individual. Further, the JFTC usually issues a report order requesting certaininformation and documents during the process of the administrativeinvestigation, while the JFTC also sometimes requests theinformation and/or documents to be submitted on a voluntary basis.


No. The JFTC’s power to conduct surveillance is limited to thoseprovided under the Antimonopoly Law. See question 2.2 above.




Carry out an unannounced search of businesspremises Yes Yes*

Carry out an unannounced search of residentialpremises No explicit authorisation Yes*


Yes Yes*

Right to retain original documents Yes Yes*


Yes Yes


No explicit authorisation Yes*

WWW.ICLG.CO.UK129


Japa

n



No. See question 2.2 above.


Investigators of the JFTC authorised by the Antimonopoly Lawcarry out the searches. If other crimes are involved, the policeagency and/or public prosecutors may conduct their owninvestigation in accordance with the Criminal Procedure Law at thesame time. The JFTC usually does not wait for the arrival of legaladvisors, in particular, the outside counsels.


Under the Antimonopoly Law or any other relevant Japanese lawsuch as the Criminal Procedure Law or the Civil Procedure Law,there is no attorney-client privilege, and the correspondencebetween outside/in-house counsels and clients or advice fromoutside/in-house counsels to clients are not exempt from thescrutiny of the JFTC upon the occurrence of a dawn raid by theJFTC (note though that lawyers licensed in Japan are required andwill refuse to disclose the confidential information of their clients).Furthermore, the JFTC is not prohibited from asking an intervieweequestions about advice received from outside/in-house counsels.Moreover, while some licensed lawyers have become in-housecounsel of companies, unlike the situation in the United States,many members of a company’s legal department in Japan whoperform the role of in-house counsel are not licensed lawyers, andthey are not able to refuse the disclosure under the laws applicableto the licensed lawyers.


There are no other material limitations of the investigatory powers.Note that a legally interested person such as plaintiff may reviewand reproduce case records of the administrative proceedings by theJFTC. Further, the JFTC made a public announcement in 1991 thatthe JFTC will provide plaintiffs with access to certain investigationrecords which the JFTC collects during its investigation, throughthe request by the court if a damage suit is filed in the court, exceptfor certain information such as trade secrets and privacyinformation. Through these procedures, attorney-client privilegeddocuments protected in other jurisdictions may be filed for judicialreview in Japan.


The 2006 Amendment increases criminal penalties of imprisonmentup to not more than one year or a fine of up to 3 million yen or lessfor any individual/corporation who/which refuses, obstructs orevades inspection as provided in the Antimonopoly Law. Thesanction may be imposed on the investigated companies with thesuspicion of the cartels.



1. Criminal sanctionsFor an unreasonable restraint of trade, the Antimonopoly Lawstipulates the criminal penalties, including a fine of 500 million yenor less for a corporation.2. Administrative Sanctions - JFTC Enforcement(1) If a violation of the Antimonopoly Law is supported byevidence obtained in the course of an investigation, the JFTC mayorder the entrepreneur that committed the violation to cease anddesist from such act and to take any other measures necessary toeliminate such act. The 2006 Amendment extends the statutorylimitation period from one year to three years for the JFTC to issuecease and desist orders. The cease and desist order is effective uponthe service thereof to the recipient of the cease and desist order andsuch recipient is obligated to comply with the cease and desist orderin question even if the recipient initiates the administrative hearingprocedures, unless the enforcement of such order is particularlysuspended by the decision of the court or the JFTC. (2) The JFTC is required to order payment of an “administrativesurcharge” (kachokin) by entrepreneurs who are found to haveparticipated in unreasonable restraint of trade which directly affectsprices or which consequently affects prices by curtailing the volumeof supply (i.e., (a) price fixing or (b) cartels on supply, market shareor customers that affect prices). The amount of the surcharge is calculated as the followingpercentage of the total sales of the product/services concerned forthe period of the given cartel up to three years from the date of suchconduct ceased.The rate of the administrative surcharge was increased as follows:(a) Principle

(i) Manufacturers, etc.: 10%.(ii) Retailers: 3%.(iii) Wholesalers: 2%.

(b) Medium & small-sized corporations(i) Manufacturers, etc.: 4%.(ii) Retailers: 1.2%.(iii) Wholesalers: 1% (unchanged).

The 2006 Amendment imposes an administrative surcharge at therate of 150% of the respective administrative surcharge rate set outabove on those entrepreneurs, in general, who have repeatedconduct in violation of the Antimonopoly Law and who weresubject to an administrative surcharge payment order within the last10 years. On the other hand, the 2006 Amendment decreased theadministrative surcharge rate by 20% of the respectiveadministrative surcharge rate set out above on those entrepreneurs,in certain circumstances.The 2006 Amendment introduced an adjustment system in which ifboth the administrative surcharge and criminal fines are imposed onthe same entrepreneurs based on the same conduct, the amount ofthe administrative surcharge shall be calculated by deducting 50%of the amount of the criminal fine.The JFTC made a public announcement, on March 11, 2008, statingthat the Cabinet decided to submit the bill of further amendment ofthe Antimonopoly Law to the National Diet (the “Bill ofAmendment”).The Bill of Amendment proposes to increase the administrativesurcharge rates by 50% (i.e., to 15% of the sales of the given



Japa

n


products) for those who have played a leading role in cartels (e.g.,those who originate the illegal scheme, who request other firms toparticipate in the illegal scheme or desist others from the avoidanceof the infringement and/or those who continuously set prices orallocate trade partners in response to a conspirator’s request).


For an unreasonable restraint of trade, the Antimonopoly Lawstipulates servitude (i.e., labour in a prison) of three years or lessand/or a fine of 5 million yen or less for an individual (e.g., anemployee in charge of a cartel).


The limit is 3 years from the time when conduct ceased. The Billof Amendment proposes to extend the statutory limitation period forthe JFTC to issue surcharge payment orders from three years to fiveyears. Moreover, the Bill of Amendment also proposes to add aprovision that allows the JFTC to issue an administrative paymentorder against those entrepreneurs who succeed the offender’sbusiness by means of a company split, business transfer, etc., forwhich the Antimonopoly Law has no explicit provisions except formergers (i.e., amalgamation under the Corporate Law).


Yes. However, the payment of legal fees and expenses in order todefend such payment to the employee may trigger the liability ofthe management of the corporation under the shareholders’derivative suits unless such payment is for the purpose and effect ofmitigating the company’s liability. A company may not bear thepenalties.



As soon as the corporation identifies the alleged facts in detail andobtains the evidence therefor, the suspected corporation may bedetermined to qualify as the leniency applicant. The first applicantmust approach the JFTC before the JFTC has commenced a dawnraid in order to obtain total immunity.The 2006 Amendment introduced a leniency programme for thefirst time under Japanese law.If an entrepreneur committing unreasonable restraint of trade, (i)voluntarily and independently reports on the existence of cartelsand provides related materials to the JFTC, and (ii) ceases suchviolation before the initiation of an investigation, immunity from orreduction in the administrative surcharge payment shall be appliedto such entrepreneurs as follows:(A) 1st applicant filed before initiation of investigation: Total

immunity;(B) 2nd applicant filed before initiation of investigation: 50%

deducted; (C) 3rd applicant filed before initiation of investigation: 30%

deducted; and(D) any applicant filed after initiation of investigation: 30%

deducted.

The total number of entrepreneurs that may be subject to theleniency programme in a given case is no more than three. The Billof Amendment, however, proposes to increase the number ofleniency applicants from a maximum of 3 to a maximum of 5.Moreover, although each investigated company is counted as oneindependent company under the current leniency programme, evenif there is a parent-subsidiary relationship or any other affiliationamong the investigated companies, the Bill of Amendment willintroduce a joint application system for those entrepreneursaffiliated with each other and implicated in the same infringement.The administrative surcharge for a ‘first-in’ is totally exempted.The JFTC made a public announcement that the JFTC will not filea criminal accusation for an officer or employee of the ‘first-in’ whois cooperative. Because the JFTC has exclusive rights to file acriminal accusation with regard to the violation of theAntimonopoly Law and the Public Prosecutors’ Office is highlylikely to respect such decision by the JFTC, it practically means thatthe officer or employee of the first applicant is exempted from thecriminal sanctions with regard to the violation of the AntimonopolyLaw. The suspension of transactions which is customarily orderedby the relevant public offices (e.g., the ministries and localgovernments) with which the suspected corporation hastransactions may be shortened. Having said that, civil liabilitycannot be released.The administrative surcharge is reduced by 50% for the “second-in”. However, there is no exemption from the criminal and civilliability for second-in.


The Leniency Rules make anonymous prior consultation available.An entrepreneur will be informed of the expected order (i.e., themarker) of the leniency application, if it will report to the JFTC torequest application of a leniency programme. The leniencyapplicant is required to file the relevant form with the JFTC byfacsimile in order to prevent the JFTC from receiving more thanone written report at the same time. The products/services that aresubject to the violation and the types of conduct in violation of theAntimonopoly Law are required to be set forth in the form. TheJFTC will inform the applicant of the priority of the first party(marker) and the deadline of the submission of the materials. Theapplicant will be required to submit the materials before thedesignated deadline using another form. If the JFTC so determines,certain parts of the material may be provided to the JFTC orally.Before an investigation begins, the JFTC will give priority to theentrepreneur who submitted the initial report by facsimile earlierthan other entrepreneurs to request the application of a leniencyprogramme.


See the answer to question 4.2.


While the Antimonopoly Law provides the confidential obligationunder the Antimonopoly Law for the JFTC officials in general,there are no specific provisions with regard to the confidentiality forthe leniency applicants under the Antimonopoly Law. However, the

WWW.ICLG.CO.UK131


Japa

n


JFTC made a public announcement that although the JFTC will notdisclose applications, including the names of the applicants and itsorder for a leniency application, if the applicants so desire the JFTCwill make the names and the order public so that the applicants mayrequest to shorten the period for the suspension of the transactionswith the relevant ministries and/or local governments.The documents filed with the JFTC upon the leniency applicantmay be subject to discovery in US litigation, and the JFTC allowsan application with an oral explanation in certain circumstances,while the application itself must be filed in written format.However, it can be difficult to proceed with the entire process of theleniency application with no written materials.


The leniency will not be granted if: (a) any of the applicationdocuments or materials contain false information; (b) the applicantfails to cooperate with the JFTC which cooperation may berequested by the JFTC throughout the investigation (e.g., request tosubmit a report or additional materials), or submits a false report orerroneous materials; or (c) the applicant has forced other cartelparticipants to engage in the given cartel or has prevented cartelparticipants from leaving the cartel.There is no time period for ceasing the obligation.


No. Although an applicant may file a leniency application for anyconduct in violation of the Antimonopoly Law as a cartel, it is notconsidered as a “leniency plus” policy and it has no effects on anycartels other than that for which such leniency application is filed.



Article 45, Paragraph 1 of the Antimonopoly Law provides that anyperson may report a possible infringement of the AntimonopolyLaw to the JFTC and request that necessary action to be taken. Anemployee may file a report with regard to the violation of theAntimonopoly Law under this Article. Moreover, the Whistle-blowers Act provides that no employer may unfavourably deal withsuch individual and retaliation is prohibited.



No, there are no other settlement or plea bargaining procedures.

7 Appeal Process


1. Criminal caseIf the JFTC, as a result of the compulsory investigation for criminal

offences, determined that the alleged conduct constitutes a carteland the criminal sanctions are appropriate, the JFTC files a criminalaccusation with the Public Prosecutors’ Office, and criminalsanctions under the Antimonopoly Law will be imposed on anindividual and a corporation through the criminal procedures underthe applicable laws in the same way for other criminal cases. Theappeals for criminal cases are the same as those for other criminaloffences.2. Administrative caseIf the JFTC conducts the administrative investigation and issues acease and desist order and/or payment order of the administrativesurcharge, the defendant corporation that has an objection againstsuch JFTC’s administrative orders may initiate the administrativehearing procedures. If the entrepreneur files a request foradministrative hearing procedures, the JFTC may issue a decision(i.e., dismissal of the request, or reversal or amendment to theorder) after completion of the hearing procedures.A defendant corporation may seek to quash a decision renderedthrough the administrative hearing procedures presided by the JFTCHearing Examiners by bringing an action against the JFTC in theTokyo High Court. In an action to quash a JFTC decision, theTokyo High Court is bound by the JFTC’s findings of fact as longas they are supported by substantial evidence. A party may presentnew evidence only if (i) the JFTC previously refused to accept theevidence without a justifiable reason, or (ii) the party was not ableto introduce the evidence at the JFTC hearing and such inabilitywas not due to gross negligence. A JFTC decision is subject tocancellation if the facts on which it is based are not supported bysubstantial evidence or if the decision is contrary to the JapaneseConstitution or other laws.


Yes. The cross-examination of witnesses is made in the same wayas in other types of administration proceedings and litigations.

8 Damages Actions


Although “private enforcement” of the Antimonopoly Law throughcivil damage suits by private plaintiffs is not as common in Japanas it is in the United States, a party (e.g., a competitor or a customer)who suffers damage from a cartel is entitled to undertake civilaction for recovery of damages based on provisions of strict liabilityunder Article 25 of the Antimonopoly Law or on the more generaltort law provisions of the Japanese Civil Code. The AntimonopolyLaw enables a plaintiff to claim compensation more easily. That is,if a suit for indemnification of damages or counter-claim under theprovisions of Article 25 (i.e., strict liability) has been filed, the courtis required, without delay, to request the opinion of the JFTCregarding the amount of damages caused by such violations.


There are no procedural rules that allow for class-action orrepresentative claims.



Japa

n



1. The statutory limitation period for a damage actions to befiled in accordance with the Antimonopoly Law is 3 yearsafter the date on which the cease and desist order oradministrative surcharge order becomes irrevocable (i.e., anappeal therefor has not filed, in principle, within 60 daysafter the service thereof).

2. The statutory limitation of a damage suit under the generaltort law (i.e., civil code) is 3 years after a person becomesaware of the damages and the person who caused suchdamages and 20 years of the cease of conduct.


The cost rule is the same as those applicable to civil actions.Namely, either a plaintiff or defendant who loses the case is usuallyordered to bear the cost for the given litigation.


To our knowledge, there have been some successful civil damageclaims filed by plaintiffs (e.g., the representatives of residents wholive in the local government entity that incurred the damages) withregard to bid-rigging cases involving public bids.

9 Miscellaneous


A significant development was the 2006 Amendment aimed atfurther strengthening the enforcement against cartels and bid-rigging which constitute unreasonable restraint of trade prohibitedunder Article 3, Latter Part of the Antimonopoly Law. For thatpurpose, the 2006 Amendment introduced: (a) an increase of therate of the administrative surcharge; (b) varied rates of anadministrative surcharge for repeated conduct and early-terminatedconduct in violation of the Antimonopoly Law; (c) a leniencyprogramme; (d) criminal investigation procedures, in addition to theadministrative investigation measures; and (e) new procedures thatallow the JFTC to simultaneously issue cease and desist orders andadministrative surcharge payment orders, respectively, and thatcauses such orders to become effective and binding immediately. In accordance with the decision at the National Diet to reviewfurther amendment of the Antimonopoly Law made at the timewhen the bill of the 2006 Amendment passed the National Diet, theCabinet Office (Naikaku-fu) established the Antimonopoly LawBasic Issues Round-table Conferences (Dokusen Kinishi Ho KihonMondai-Kondankai) (the “Advisory Panel”). On June 26, 2007, theAdvisory Panel published its report (the “Advisory Panel Report”)on the major issues discussed in the Advisory Panel after collectingthe public comments on the draft report. On October 16, 2007, the JFTC made public a document named“Prospective Amendments to the Antimonopoly Law,” a policy forthe further amendment proposed by the JFTC in accordance withvarious discussions made to date including the Advisory PanelReport (the “Proposed Amendment”). Further, the JFTC made apublic announcement, on March 11, 2008, stating that the Cabinetdecided to submit the bill of further amendment of the

Antimonopoly Law to the National Diet (the “Bill of Amendment”).The Bill of Amendment includes, among other things, the importantitems for further amendments to the Antimonopoly Law in relationto the JFTC’s cartel enforcement, such as (a) an extension of thestatute of limitations for administrative order from the current three-year period to five years (maximum period between the terminationdate of infringement and issuance of such order), (b) an increase ofadministrative surcharge rates imposed on entrepreneurs that haveplayed a leading role in concerned cartels, bid-riggings, etc., (c) areview of a leniency programme to extend the framework in which,regarding cartels or bid-riggings, the JFTC reduces administrativesurcharge rates to entrepreneurs that have provided the JFTC withfacts other than those the JFTC has already found out, and (d)treatment of affiliated companies with regard to a leniencyapplication as one group.The bill of Amendment was submitted to the ordinary session of theNational Diet but has not been adapted for a political reason to dateand it is expected to be discussed in the nest session in the NationalDiet.

9.2 Please mention any other issues of particular interest inJapan not covered by the above.

The JFTC seems to have conducted investigations in accordancewith a cooperation with foreign competition authorities in only afew international cartel cases.Japan and the United States signed the Agreement Between theGovernment of Japan and the Government of United States ofAmerica Concerning Cooperation on Anticompetitive Activitiesproviding for coordination and cooperation with respect to antitrustenforcement activities in 1999. Under the agreement, thecompetition authorities of each country are mutually bound tonotify the enforcement activities that may affect the interests of theother.Japan has also entered similar agreements with the EuropeanCommission in 2003 (i.e., Agreement Between the Government ofJapan and the European Community Concerning Cooperation onAnticompetitive Activities) and Canada in 2005 (i.e., AgreementBetween the Government of Japan and the Government of CanadaConcerning Cooperation on Anticompetitive Activities),respectively.Moreover, Japan signed an economic partnership agreement withSingapore (i.e., Agreement Between Japan and the Republic ofSingapore for a New-Age Economic Partnership) in 2002 andMexico (i.e., Agreement Between Japan and the United MexicanStates for the Strengthening of the Economic Partnership) in 2004,respectively.The Bill of Amendment proposed to introduce provisions thatstipulate conditions for exchange of information with foreigncompetition authorities, such as reciprocity, assurance ofconfidentiality, prohibition of information use for inappropriatepurposes, and restrictions on use of information for criminalprocedures.

WWW.ICLG.CO.UK133


Eriko Watanabe

Nagashima Ohno & Tsunematsu Kioicho Building, 3-12, KioichoChiyoda-ku, Tokyo 102-0094Japan

Tel: +81 3 3511 6131Fax: +81 3 5213 2231Email: [email protected]: www.noandt.com

Admitted to bar: 1988, Japan. Education: Tohoku University (LL.B., 1983). University ofWashington 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 and Corporate Law),April 2004-2007. Languages: Japanese and English. Practice Areas: Antitrust/Competition Law. Publication: “Regulation on Setting Technology Standards UnderThe Antimonopoly Law of Japan” Washington University GlobalStudies Law Review (2002). “Japan: Reform of the EnforcementRegime of the Antimonopoly Law (2006)” Concurrences (2006).Global Competition Review (2007) Cartel Regulation 2008 (Japan).“Defense Strategies for International Cartel Cases - A JapanPerspective” ABA International Cartel Workshop (2004, 2006 and2008). “Anti-Cartel Enforcement in Japan and ProposedAmendment to the Antimonopoly Law in 2008” ABA InternationalCompetition Conference (2008). “Merger Control Worldwide”(Japan part) Cambridge University Press (2008). “Anti-CartelEnforcement Worldwide” (Japan part) Cambridge University Press(2008).

Nagashima Ohno & Tsunematsu, established in 2000, is widely known as a leading law firm in Japan, and a foremostprovider of international and commercial legal services. The firm represents domestic and foreign companies andorganisations involved in every major industry sector and in every legal service area in Japan. They have structuredand negotiated many of Japan’s largest and most significant corporate and finance transactions, and have extensivelitigation strength spanning key commercial areas, including intellectual property and taxation. As of September 1,2008, the firm has 301 lawyers (including 12 foreign-licensed lawyers) capable of providing its clients with practicalsolutions to meet their business needs. Nagashima Ohno & Tsunematsu has tremendous experience in the internationalarena, and has successfully negotiated many international transactions involving Japanese companies or Japaneseasset. The firm has a vast network of relationships with foreign companies and law firms that provides them with aunique perspective when representing clients in international deals.


Japa

n

134

Chapter 23


Kim & Chang

Korea



The Monopoly Regulation and Fair Trade Law (MRFTL) is theprimary source of competition law in Korea. The Korea Fair TradeCommission (KFTC), as the main regulatory agency that enforcesthe MRFTL, may impose administrative sanctions for illegal cartelactivities pursuant to the MRFTL. The MRFTL also containsprovisions that may subject illegal cartel activities to civil and/orcriminal liability.


Article 19(1) of the MRFTL prohibits entities from engaging incertain collaborative acts and behavior that unfairly restraincompetition in a particular field or trade. Specifically, Article 19(1)of the MRFTL provides that no entity shall agree with anotherentity by contract, agreement, resolution or any other means, tojointly engage in any of the following acts that unfairly restraincompetition in a relevant area of trade: (i) fix, maintain, or alterprices; (ii) determine the terms and conditions for trade in goods orservices or for payment of prices or compensation thereof; (iii)restrict the production, shipment, transportation, or trade in goodsor services; (iv) restrict the territory of trade or customers; (v)hinder or restrict the establishment or expansion of facilities orinstallation of equipment necessary for the manufacturing ofproducts or the rendering of services; (vi) restrict the types orspecifications of the goods at the time of production or tradethereof; (vii) establish a corporation or the like to jointly conduct ormanage important parts of businesses; or (viii) hinder or restrict thebusiness activities or the nature of business of other enterprises(hereinafter referred to as “Unfair Collaborative Acts”).


The primary governmental agency that enforces the MRFTL is theKFTC, which is a ministerial-level administrative agency that alsofunctions as a quasi-judicial body. The KFTC’s main purpose is toformulate and administer competition policies, as well as handle,deliberate and decide antitrust cases. The KFTC consists of two parts:(i) a committee (the “Committee”), which is the decision-makingbody; and (ii) a secretariat, which is the working body. TheCommittee is comprised of nine commissioners, who deliberate and

make decisions on competition and consumer protection issues. Thesecretariat, through its various bureaus, is directly involved in draftingand promoting competition policies, investigating antitrust issues, andpresenting and handling such matters in accordance with theCommittee’s decisions. An outline of the KFTC’s structure may befound in English at http://www.ftc.go.kr/eng/aboutkftc/organization.php.The Prosecutor’s Office may bring criminal claims for violations ofthe MRFTL pursuant to, and only upon, criminal complaints filedby the KFTC. Private parties may bring civil claims before a Korean court for anydamages suffered as a result of a violation of the MRFTL.


There are six basic steps between the opening of an investigation andthe imposition of sanctions: (1) notice of investigation; (2)investigation; (3) Examiner’s Report; (4) response to the Examiner’sReport; (5) hearing; and (6) decision. An investigation is initiated bythe KFTC sending written notice to the respondent of its intent tocommence an investigation (such notice can be delivered on site at thecommencement of a search and seizure). Subsequently, the KFTCwill begin its fact-finding investigation, which may include searchesand seizures at the respondent’s premises (commonly known as “dawnraids”), requests to produce information and documents, andinterviews of the relevant employees and personnel. After the KFTChas completed its fact-finding investigation, the KFTC examiner willprepare an Examiner’s Report setting forth its findings, analysis andconclusions, which will first be internally reviewed within the KFTC.Once the Examiner’s Report has been internally approved within theKFTC, a copy of the report will be provided to the respondent. Therespondent will then have an opportunity to submit a written responseto the KFTC in order to respond to any of the issues raised in theExaminer’s Report. Subsequently, a hearing before the Committeewill be held, where both the respondent and the KFTC examiner willpresent oral arguments and address any questions from theCommittee. After considering the Examiner’s Report, therespondent’s written response and the oral arguments at the hearing,the Committee will issue its decision on the case.


The MRFTL does not contain any sector-specific offenses orexemptions. However, we note that bid rigging in connection witha bid for a construction project is separately punishable under theConstruction Industry Framework Law.

Richard J. Lee

Chang-Sik Hwang

WWW.ICLG.CO.UK135


Kor

ea

Kim & Chang Korea

1.6 Is cartel conduct outside the Republic of Korea covered bythe prohibition?

Yes. Pursuant to Article 2-2 of the MRFTL, activities that takeplace outside of Korea will be subject to the MRFTL if suchextraterritorial activities have an influence or impact on the Koreandomestic market. Even before Article 2-2 was added to the MRFTLto specifically cover extraterritorial activities, the KFTCinvestigated and exercised extraterritorial jurisdiction overworldwide cartels in the graphite electrode, vitamin, chemicaltransportation and D-RAM industries.




Note: This table provides a general summary of the KFTC’sinvestigatory powers. The KFTC may only bring administrativecases for violations of the MRFTL. The MRFTL does allow,however, for private plaintiffs to bring a civil claim for any damagessuffered as a result of a violation of the MRFTL. In addition, theProsecutor’s Office may bring a criminal claim for such violationspursuant to a criminal complaint filed by the KFTC. Both civil andcriminal claims would be brought before the Korean court (asopposed to the KFTC), and would be subject to the Korean Code ofCivil Procedure (for civil cases) and the Korean Criminal Code ofProcedure (for criminal cases).


As further explained in question 2.8 below, the failure to cooperatewith a KFTC investigation by any officer or employee of acompany may not only lead to administrative sanctions, but also anincrease in the administrative surcharge amount imposed by theKFTC for the Unfair Collaborative Act (please refer to question 3.1below regarding the surcharge that may be imposed for UnfairCollaborative Acts). Furthermore, as a practical matter, interferingwith the investigation may leave a guilty or adverse impression onthe investigators or commissioners of the KFTC.


The KFTC does not have any general surveillance powers(including wiretapping) in connection with an investigation of aMRFTL violation.


Other than the table of general investigatory powers set forth inquestion 2.1 above, the KFTC does not have any other significantinvestigatory powers. However, we note that both central and localmunicipalities, as well as government owned companies, arerequired to provide the KFTC with information relating to bidssubmitted for public procurement projects in order for the KFTC tomonitor any potential bid rigging activities.


Officials from the KFTC will carry out searches of businesspremises (as noted above, searches of residential premises are notpermitted). Such officials do not wait for legal advisors to arrivebefore conducting the search.


No. By way of background, the scope of the attorney-clientprivilege under Korean law is very limited. In that regard, onlyoutside counsel may assert the privilege and refuse to produce anyconfidential information relating to their clients. On the other hand,clients (including their in-house counsel) cannot assert theprivilege, and may be compelled to produce any attorneycommunication or work product in their possession.


The KFTC officials conducting the investigation are required toproduce official certificates evidencing their power. In addition, theKFTC officials are not permitted to exercise their investigativepower for purposes other than enforcing the MRFTL. The KFTCofficials are subject to confidentiality obligations and are notpermitted to disclose any confidential information acquired duringthe course of an investigation.


Interference with the KFTC’s on-site investigation and failure tocomply with the KFTC’s order to produce materials or informationmay lead to administrative sanctions (in the case of individuals, up to50 million Won, and in the case of companies, up to 200 million Won).Even though the KFTC does not have the legal power to force an on-site investigation if the company refuses entry, as noted above, thefailure to cooperate may nonetheless lead to administrative sanctions.In addition, as discussed in question 3.1 below, the KFTC can imposean administrative surcharge of up to 10% of the revenue generatedfrom the relevant business covered by the Unfair Collaborative Act. Ifany officer or employee interferes with the KFTC’s investigation, thenthe KFTC may use such interference as a basis to impose an upwardadjustment of up to 20% of the amount of such surcharge. There havebeen several cases where these sanctions were imposed.







Yes N/A



Yes N/A


No N/A



Kor

ea

Kim & Chang Korea



The KFTC can impose the following administrative sanctions oncompanies for violating the MRFTL: (i) issue a cease-and-desistorder; (ii) require a public announcement of the sanctions beingimposed; and/or (iii) impose an administrative surcharge of up 10%of the revenue generated from the relevant business covered by theUnfair Collaborative Act. In addition, the KFTC may file a criminal complaint with theProsecutor’s Office for violations of the MRFTL. If a company isfound guilty, the Korean court may impose a criminal fine of up to200 million Won.


Administrative sanctions are not applicable to individuals.However, if the KFTC files a criminal complaint with theProsecutor’s Office against an individual for violating the MRFTL,and such individual is found guilty by a Korean court, then theindividual may be subject to criminal sanctions of up to three yearsof imprisonment or a criminal fine of up to 200 million Won. For bid rigging cases, an individual can also be criminally punishedunder the Korean Criminal Code and (in the case of bid rigging inthe construction industry) the Construction Industry FrameworkLaw.


The KFTC may not bring any administrative cases or file a criminalcomplaint with the Prosecutor’s Office for any Unfair CollaborativeActs that occurred more than five years previously.


No. A company cannot pay the legal costs and/or financial penaltiesimposed on a former or current employee. Indeed, if the directorsof a company were to allow the company to indemnify its former orcurrent employees for violations of the MRFTL, then the directorswould be found in breach of their fiduciary duties to the company.



There are two types of leniency programs for companies under theMRFTL: (i) full leniency, which means full exemption from anysurcharge; and (ii) partial leniency, which means a partialexemption from any surcharge.Under Article 35 of the Enforcement Decree of the MRFTL, thereare two possible ways that an applicant may qualify for fullleniency. First, an applicant may qualify for full leniency if theapplicant reports an Unfair Collaborative Act to the KFTC prior tothe commencement of an investigation and meets each of thefollowing criteria:(a) the applicant is the first to provide the KFTC with the

evidence necessary to find the existence of the UnfairCollaborative Act;

(b) the report is made at a time when the KFTC either has noknowledge of the Unfair Collaborative Act or the KFTC hasnot obtained sufficient evidence necessary to prove theUnfair Collaborative Act;

(c) the applicant states all facts relevant to the UnfairCollaborative Act and cooperates with the KFTC in goodfaith, including the submission of relevant documents, untilthe KFTC’s investigation and the hearing before theCommittee has been completed; and

(d) the applicant ceases all activities that could be deemed as anUnfair Collaborative Act.

Second, an applicant may also qualify for full leniency if theapplicant begins to cooperate with the KFTC after an investigationhas commenced and fulfills each of the following criteria:(1) the applicant cooperates at a time when the KFTC either has

no knowledge of the Unfair Collaborative Act or has notobtained sufficient evidence necessary to prove the UnfairCollaborative Act; and

(2) the applicant satisfies criteria (a), (c) and (d) above.Even after the first applicant has been granted full leniency, a“second reporter” can qualify for partial leniency and receive a 50%reduction in any surcharge. The second reporter may report itsUnfair Collaborative Act to the KFTC either before or after thecommencement of an investigation and still qualify for partialleniency, but must fulfill each of the following criteria: (i) the applicant is the second entity to provide the KFTC with

evidence necessary to find the existence of the UnfairCollaborative Act; and

(ii) the applicant satisfies criteria (c) and (d) above.A third or subsequent reporter cannot qualify for leniency under theprogramme. However, the KFTC may reduce the surcharge by up to20% for any entity that cooperates with the KFTC’s investigation.


Yes. With respect to criteria (a), (c) and (d) listed in Section 4.1 above,a leniency applicant may file an application leaving some of therequisite information blank while committing to provide suchinformation at a later time. In principle, the applicant has 15 days tosupplement its application. However, the KFTC may grant theapplicant up to 60 days to supplement its application. If the leniencyapplication satisfies the applicable criteria and is approved by theKFTC, then the application will be deemed to have been filed as of thetime when the initial application was made with missing information.


Yes. Oral applications are allowed when there are circumstanceswhich make it difficult for the applicant to file a written application.However, this would not necessarily further minimise anydisclosure risks for civil damages since discovery under the Koreanlitigation system is already limited in any event.


The KFTC is obligated to keep in confidence the identity of theleniency applicant, as well as the content of the application andevidentiary materials submitted by the leniency applicant, and mayonly use such information for purposes of its investigation or the

WWW.ICLG.CO.UK137


Kor

ea

Kim & Chang Korea

pursuit of litigation relating the case under investigation. TheKFTC is also required to redact the name of the leniency applicantfrom the Examiner’s Report and its exhibits, and hold separatehearings for leniency applicants.


A leniency applicant should continue to cooperate with the KFTCin good faith until the KFTC’s investigation and the hearing beforethe Committee has been completed.


Under Article 35(1)(iv) of the Enforcement Decree of the MRFTL,the target of an ongoing investigation can seek full or partialleniency with respect to another Unfair Collaborative Act that is notthe subject of the KFTC’s initial investigation. For example, if anentity that is subject to an investigation with respect to a particularUnfair Collaborative Act submits necessary evidence to the KFTCwith respect to another particular Unfair Collaborative Act that isnot under investigation, then the entity may be entitled to the full orpartial leniency with respect to the Unfair Collaborative Act alreadyunder investigation. Of course, the entity may also receive lenienttreatment with respect to the Unfair Collaborative Act that is notunder investigation as well.



Article 64-2 of the MRFTL allows the KFTC to provide monetaryrewards to an individual who first reports an Unfair CollaborativeAct and submits evidence necessary to prove the reported UnfairCollaborative Act. Such reporting individual, however, should notbe a KFTC official or an enterpriser involved in the UnfairCollaborative Act.



There are no stipulated early resolution, settlement or pleabargaining procedures under the MRFTL (other than leniency) forUnfair Collaborative Acts.

7 Appeal Process


The KFTC’s order may be appealed by the respondent by either (a)filing a request with the KFTC to reconsider its order or (b) filingan appeal with the Seoul Appellate Court in order to revoke theKFTC’s order. The respondent must make such filing within 30days from its receipt of the KFTC’s written order. Although therespondent may not concurrently appeal the order before the KFTCand the Seoul Appellate Court, the respondent may first request theKFTC to reconsider its order, and then file an appeal with the Seoul

Appellate Court if the KFTC rejects the request for reconsideration.In the case of an appeal before the Seoul Appellate Court, both theKFTC and the respondent may further appeal to the case to KoreanSupreme Court if either party does not agree with the SeoulAppellate Court’s decision.


Yes. For both an appeal before the KFTC and the Seoul AppellateCourt, witnesses may be called to testify and cross-examined.

8 Damages Actions


In addition to the sanctions that may be imposed by the KFTC, acompany that violates the MRFTL may be subject to civil claimsbrought by private plaintiffs (e.g., consumers) injured by the UnfairCollaborative Act. In order to initiate a civil claim, the plaintiffwould file a complaint with the Korean court having jurisdictionover the parties. The parties may then file and exchange multiplebriefs to present the court with their arguments and supportingevidence. Under Korean Code of Civil Procedure, the scope ofdiscovery in civil cases is very limited. For example, a party to acivil claim would not have the right to depose the other party andextensive, wide-ranging documentary discovery is not permitted. After the parties have submitted their briefs and supporting evidenceto the court, the court will hold a hearing(s) to hear oral arguments andwitness testimony. Subsequently, the court will render its decision. Ifthe defendant is found liable, then the defendant would be liable forthe actual damages incurred by the plaintiff, but would not be subjectto treble or other punitive damages (as may be the case under U.S.antitrust laws). If the amount of actual damages is difficult to provedue to the facts and circumstances of the case, but the plaintiff is ableto prove that it was actually damaged, then the court would havediscretion under the MRFTL to determine the reasonable amount ofsuch damages based upon the arguments made and the evidencepresented by the plaintiff.


Under recent amendments to the Consumer Basic Law, a consumerassociation satisfying certain qualifications may bring an action incourt to enjoin a company from engaging in, or to require a companyto discontinue, behaviour that endangers the lives or physical bodiesof consumers or infringes upon the property rights of consumers.While the Korean system is different from class actions in otherjurisdictions (since it is more akin to a consumer interest groupaction), such system may nevertheless have similar results,particularly in antitrust matters where anti-competitive acts in manycases may result in damages to consumers. However, monetarydamages may not be assessed; only injunctive relief is available.


Civil claims for violations of the MRFTL must be filed within threeyears from the time when the plaintiff became aware of the illegalact, the damages suffered, and the causal relationship between suchillegal act and the damages suffered.



Kor

ea

Kim & Chang Korea


The prevailing party in a civil claim is entitled to be reimbursed forcertain specified costs set forth in the Korean Code of CivilProcedure, which includes court filing fees, witness travel fees, etc.Attorney’s fees may also be reimbursed. However, the amount ofattorney’s fees that may be recovered by the prevailing party is verylimited and typically only covers a small fraction of the actualattorney’s fees incurred by the prevailing party.


There have not been any civil cases for cartel conduct that havebeen subject to final judgement. However, there is one lower courtdecision, rendered on January 23, 2007, in which the lower courtfound the defendants civilly liable for cartel conduct in the oilrefinery industry. In that case, the lower court awarded the plaintiff(which was the Korean military) damages in the amount ofapproximately 80 billion Won. The lower court’s decision iscurrently on appeal before the Seoul Appellate Court. In addition to the foregoing case, several other civil cases regardingcartel conduct are pending at the lower court levels.

9 Miscellaneous


In a recent case, the Seoul Prosecutor’s Office attempted to bring acriminal action against 13 companies and their respective officersfor price fixing. However, on February 12, 2008, the Seoul CentralDistrict Court dismissed the indictment brought by the prosecution.The Seoul Prosecutor’s Office had indicted the companies andofficers even though the KFTC had granted them immunity fromcriminal liability due to their participation in the KFTC’s leniencyprogramme. The KFTC had not filed criminal complaints againstthe companies and officers.

The Seoul Prosecutor’s Office indicted the companies and officerseven though the MRFTL requires that a criminal complaint mustfirst be filed by the KFTC in order impose any criminal liability. Indismissing the indictment, the Seoul Central District Court held thatthe Prosecutor’s Office may only indict those violators againstwhom the KFTC has filed a criminal complaint and that, without anexplicit basis in the law, the prosecution’s indictment was againstthe principle of legality.Although it is expected that the Prosecutors’ Office will appeal, thisis a landmark case that clarifies the roles of the Prosecutors’ Officeand the KFTC in criminal cases and affirms the authority andexpertise of the KFTC in antitrust matters.

9.2 Please mention any other issues of particular interest inthe Republic of Korea not covered by the above.

The Korea Fair Trade Commission has been aggressive in recentyears about using its investigative powers on international issuestouching the Korean market. There have been several prominentworldwide cartel cases, including cases involving graphiteelectrodes, vitamins, chemical transportation and most recently D-RAM. To foster the extraterritorial application of Korean competition law,the KFTC has now created a new department whose only task is toinvestigate and prosecute international antitrust violations. Therecently appointed vice-chairman of the KFTC, Mr. Dong-WonSuh, one of the most eminent antitrust experts in Korea, stated thathis aim was to improve the current antitrust regulations in line withglobal antitrust standards and to strictly enforce regulations oninternational cartels and abuse of market dominance. Hisappointment will thus, in all likelihood, herald a further crackdownon cross-border cartel activities. In its briefing to President Myung-Bak Lee on the 2008 annualenforcement plan, the KFTC set extraterritorial application ofinternational cartels as one of the key priorities and emphasised itsgoal of further enhancing cooperation with other jurisdictions,particularly the United States, Japan and the European Union. It istherefore anticipated that transactions involving foreign companieswill receive close scrutiny in the near future.

WWW.ICLG.CO.UK139


Chang-Sik Hwang

Kim & Chang Seyang Building, 223 Naeja-dongJongno-gu, Seoul 110-720Korea

Tel: +822 3703 1135Fax: +822 7379 091Email: [email protected]: www.kimchang.com

Chang-Sik Hwang is a partner of the antitrust and competition groupat the firm. Since joining the firm in 1991, his areas ofconcentration have included information technology,telecommunication, automotive industry and financial services. Mr.Hwang has recently been involved in the cases of merger filing,abuse of market dominance, unfair business practices, cartel andundue subsidy, and he also has been advising antitrust andcompetition matters for Korean and foreign clients. In addition to his legal expertise, Mr. Hwang currently serves as amember of the Consulting Committee (Intellectual Property division)for Competition Policy at the Korea Fair Trade Commission. At Seoul National University, Mr. Hwang received a Bachelor ofJurisprudence from the College of Law in 1985 and a Master ofJurisprudence from the Graduate School of Law in 1992. He alsotrained at the Judicial Research and Training Institute of theSupreme Court of Korea. In 1996, he graduated from Harvard LawSchool with an LLM degree. He is admitted to the bar in Korea andin New York. Mr. Hwang speaks Korean, English and Japanese.

Richard J. Lee

Kim & Chang Seyang Building, 223 Naeja-dongJongno-gu, Seoul 110-720Korea

Tel: +822 3703 1490Fax: +822 7379 091Email: [email protected]: www.kimchang.com

Richard J. Lee is a foreign attorney in the Corporate Department ofKim & Chang. Mr. Lee has extensive experience in representingmultinational companies on a wide range of cross-bordertransactions, including share and asset purchases and jointventures, corporate governance, competition law, and generalcorporate and commercial law. He also represents and advises anumber of major multinational telecommunications and Internetcompanies in their operations and transactions in Korea.Mr. Lee graduated with a B.S. from the University of California, LosAngeles in 1995, and earned a J.D. from Pepperdine UniversitySchool of Law in 1998. In addition to his experience at Kim &Chang, Mr. Lee was a senior associate in the Business PracticeGroup at the law firm of Christensen, Glaser, Fink, Jacobs, Weil &Shapiro, LLP, in Los Angeles, California, where he representednumerous clients on M&A and real estate transactions.

Kim & Chang is widely recognised as Korea’s premier law firm. Established in 1973, the firm has set the standard forexcellence for legal services in every major area of practice. Having advised in the majority of major transactions,projects and cases in Korea, we have earned an unrivalled track record for developing innovative solutions to theincreasingly complex legal challenges that our clients face, both in Korea and increasingly overseas. With more than650 professionals, including attorneys, tax attorneys, patent and trademark attorneys, economists, and sectorspecialists with proven track records and experiences, the firm handles legal matters in French, German, Chinese,Japanese, Swedish and Spanish in addition to Korean and English. Our clients comprise an extraordinary roster ofmultinational corporations, domestic companies, and international and domestic financial institutions, with most ofthem being companies in the Fortune 500. Kim & Chang continues to be the advisor of choice for multinationalcompanies that have invested in Korea, and in recent years, it is increasingly playing the same role for Korean clientsas they expand their business activities to overseas markets.

Kim & Chang Korea

Kor

ea

140

Chapter 24


Loze, Grunte & Cers

Latvia



The legal basis is civil and administrative law.


A horizontal cartel agreement is an agreement between competitorsaimed at hindrance, restriction or distortion of competition betweenthem in the territory of Latvia, including agreements on direct orindirect determination of prices or tariffs in any manner or theprovisions for formation thereof, as well as exchange ofinformation related to the process or terms for sale; agreements onthe scope and market of production or sales, restriction or control oftechnical development or investments; agreements on marketdivision with respect to territory, buyers, suppliers or otherprovisions; and agreements on participation or non-participation inthe tenders or auctions, or on the terms for such activity (inactivity).Cartel agreements are prohibited and void from the moment ofbeing entered into.(Article 11 of the Competition Law; Article 2.9 of CabinetRegulation No 798 Regulations on non-subjection of particularhorizontal cooperation agreements to the agreement prohibition setout in Article 11(1) of the Competition Law and Article 27 ofCabinet Regulation No 796 Procedure for Calculation of Fines forViolations Referred to in Article 11(1) and Article 13 of theCompetition Law).


The Competition Council of the Republic of Latvia (Article 6 of theCompetition Law) and courts (as described below).


The basic procedural steps between the opening of an investigationand the imposition of sanctions during an investigation of the caseat the Latvian Competition Council are as follows:

assignment of the status of ‘restricted access information’ toinformation being submitted;

initiation of a case;investigation of a case;introduction of the parties to the procedure to the casematerials;expression of the opinion of the parties involved;adoption of a decision or termination of the investigation ofa case;resumption of the investigation of a case; andentry into an administrative contract.

(Articles 22-25, 26, 261, 27, 272 and 273 of the Competition Law.)


In the retail and wholesale sectors, a sector-specific offence is anagreement on the prices and exchange of information on salesvolumes (03.11.2004 decision on case No P/04/06/6; 20.12.2004decision on case No P/03/06/6; 29.03.2006 decision on case NoP/05/06/2; 08.05.2006 decision on case No P/05/06/3; 21.12.2006decision on case No P/04/07/3; 09.01.2008 case No P/07/06/15;23.01.2008 case No P/07/06/42). In public procurement (construction; marketing services; metalprocessing machine supply; removal of snow from streets androads; road construction, etc.) a sector-specific offence is anagreement on participation or non-participation in tenders orauctions, or on the terms of such activity (or inactivity) (14.09.2005decision on case No 171/05/10/1; 18.10.2006 decision on case No722/06/10/5; 27.06.2007 decision on case No 1856/06/06/16;03.10.2007 decision on case No 3425/07/06/2; 27.12.2007 decisionon case No 275/07/10/2; 25.06.2008 decision on case No3028/06/10/12; 17.09.2008 decision on case No P/08/10/4;13.11.2008 decision on case No p/08/10/3).Please note that transcripts of all the cases listed above can beviewed on the Latvian Competition Council’s website:http://www.kp.gov.lv.

1.6 Is cartel conduct outside Latvia covered by theprohibition?

Yes, if the purpose or consequence of such agreement is hindrance,restriction or distortion of competition in the territory of Latvia(Article 11 of the Competition Law).

Andra Rubene

Karlis Reihmanis

WWW.ICLG.CO.UK141


Latv

ia

Loze, Grunte & Cers Latvia






The Executive Authority of the Competition Council has thefollowing main investigatory powers:1) to request and receive from any person information and

explanations;2) to request any person to appear at the Competition Council to

give an explanation;3) to pay a visit to any market participant, including without

prior notice, and to perform certain activities; and4) on the basis of a judicial warrant, in the presence of police,

to enter any objects of a market participant or any third party,to carry out a forcible search of the objects and the storagefacilities therein. Objects can be business or residential,movable or immovable; offices, apartments, other premises,land, vehicles, etc.

(Articles 9.5(1), 9.5(2), 9.5(3), 9.5(4) and 9.5(5) of the CompetitionLaw.)


No; however, in the event another institution investigating a case inits competence, establishes that the respective activities might beconsidered in violation of the competition law and sends the case ofviolation of the competition law to the Competition Council forinvestigation, the Competition Council will use the evidence

obtained by another institution while exercising its surveillancepowers.


Significant powers of investigation are:To remove property during an unannounced search without ajudicial warrant. To prohibit the persons, who are present at the site under inspectionduring an unannounced search with a judicial warrant, from leavingthe site without permission, from moving and from conversingamong themselves until the end of the search and inspection.To print or save in electronic data carriers the information (data)stored in the electronic information system during the unannouncedsearch with a judicial warrant.(Articles 9.5.3(c), 9.5.4(c) un 9.5.4(e) of the Competition Law.)


Officials and authorised employees of the Executive Authority ofthe Competition Council will carry out searches of business and/orresidential premises on the basis of a judicial warrant, in thepresence of police. The commencement of the provision of explanations shall bepostponed temporarily for not longer than one hour if it is necessaryto wait for the arrival of counsel or another provider of legalassistance. (Articles 9(5) and 932(2) of the Competition Law.)


No, it is not.


Latvia respects the privilege against self-incrimination and legalprofessional privilege admitted by the European Community law.When initiating the investigatory activities an official of theExecutive Authority of the Competition Council shall notify amarket participant or another person in relation to whom suchactions are performed on their rights.The market participant, or another person in relation to whom theactions are performed, have the right to:

be present during all investigatory activities, to expresscomments and requests;propose that the information to be provided or a part thereofbe assigned the status of restricted access information;become acquainted with the procedural action report and thedocuments attached thereto, to submit corrections andadditions; andsubmit a complaint regarding the actions of the official of theExecutive Authority to the Chairperson of the CompetitionCouncil.

(Article 93 of the Competition Law.)


Order the production of specific documents orinformation

Yes(See Articles 9.5.1 and9.5.3a) of theCompetition Law.)

N/A


Yes(See Articles 9.5.2,9.5..b) and 9.5.4.f) ofthe Competition Law.)

N/A


Yes*(see Article 9.5.4 of theCompetition Law.)

N/A

Carry out an unannounced search of residentialpremises

Yes* (See Article 9.5.4.- ofthe Competition Law.)

N/A


Yes*(See Article 9.5.4b) ofthe Competition Law.)

N/A

Right to retain original documents

Yes(See Articles 9.5.3a)and 9.5.4d) of theCompetition Law.)

N/A


Yes(See Articles 9.5.1,9.5.2, 9.5.3b) and9.5.4.d) of theCompetition Law.)

N/A


Yes*(See Article 9.5.4g) ofthe Competition Law.)

N/A



Latv

ia



The Latvian laws prescribe for administrative responsibility forfailure to provide information and provision of untrue informationto the Competition Council, and failure to comply with thedecisions and legitimate requests of officials of the CompetitionCouncil (Articles 1755, 1756 and 2158 of the LatvianAdministrative Violations Code). The Competition Council mayimpose administrative penalties to individuals in an amount up to~EUR 711 (LVL 500), and to legal entities from ~EUR 71 up to~EUR 14,229 (LVL 50-10,000).The Latvian laws prescribe criminal liability for failure to complywith the legal requirements set out by an institution for theprotection of competition, if such offence is repeated within a oneyear period, or if such offence is associated with the causing ofsubstantial harm to the interests of the state or of consumers (Article212 of the Criminal Law). The applicable sentence is imprisonmentfor a term not exceeding two years, or community service, or a finenot exceeding one hundred times the minimum monthly wage: ~EUR 227,660 (LVL 160,000), with or without deprivation of theright to engage in entrepreneurial activity for a term of not less thantwo years and not exceeding five years.Sanctions for the obstruction of investigations are not commonpractice in Latvia as the policy used by the market participants iscooperation with the representatives of the Competition Council.



The Competition Law prescribes that fines of up to 10 per cent ofthe net turnover of competitors for the previous financial year maybe imposed for violation of competition laws, but not less than LVL500 (EUR 711). (Article 12.3 of the Competition Law.)


The Competition Law prescribes sanctions to market participants.Market participants may be either a company or an individual. Forpenalties for companies please refer to question 3.1 above.If a market participant is a natural person who is a personal incometax payer, a fine shall be calculated as a percentage of the income ofthe last closed financial year gained from the economic activity ofthe natural person (Article 1(9) of the Competition Law and Article 2 of CabinetRegulations No 796 Procedure for Calculation of Fines forViolations Referred to in Article 11(1) and Article 13 of theCompetition Law.)


If more than 5 years have passed since the termination of a violationand the violation has not left substantial negative consequences inthe market, the Council may impose a fine of LVL 250 (EUR 356).(Article 26 of Cabinet Regulations No 796 Procedure forCalculation of Fines for Violations Referred to in Article 11(1) andArticle 13 of the Competition Law.)


No it cannot.



Yes, there is a leniency programme for companies in Latvia. Aparticipant to the horizontal cartel agreement may address theCouncil with an application on:

assigning the first rank to release from the fine; release from the fine; and/orreduction of fine.

The Latvian Competition Council may release from or reduce theleniency applicant’s fine. The Competition Council fully releases from the fine the firstleniency applicant that has submitted the leniency application.The Competition Council reduces the fine of the leniency applicantwho was the first to submit the application for reduction of fine (by30-50%), and for others by 20-30%.(Article 12 of the Competition Law and Articles 27, 30, 31 and 33of Cabinet Regulations No 796 Procedure for calculation of finesfor violations referred to in Article 11(1) and Article 13 of theCompetition Law.)


Yes, the application on assigning the first rank to leniency applicationmust contain information on the cartel participants, the purpose,character and length of activity of the cartel, relevant good marketsand geographic territory, so far as it is known to the leniency applicantas at the moment of submission of the application.(Article 12 of the Competition Law and Article 30 of CabinetRegulations No 796 Procedure for Calculation of Fines forViolations Referred to in Article 11(1) and Article 13 of theCompetition Law.)


No, the leniency applicant has to submit the application in writingand enclose specific written confirmations.The application on release from the payment of a fine shall beappended by a written explanation stating that a market participant: 1) has given the notice pursuant to its own initiative; 2) has provided all the information and evidence at his or her

disposal as at the moment of submission of application; 3) prior to submission of the application, has not destroyed,

forged or concealed evidence related to cartel; 4) has not been an initiator of the cartel nor has it forced other

market participants to participate in the cartel or continueparticipation therein;

5) has not revealed information on cooperation with the Councilto other participants of the cartel or other persons;

6) undertakes to promptly submit to the Council all theinformation and evidence on the cartel at his or her disposal; and

WWW.ICLG.CO.UK143


Latv

ia


7) undertakes to truly, entirely, constantly and activelycooperate with the Council starting from the moment ofsubmission of the application until adoption of the decisionof the Council.

The application on reduction of a fine shall be appended by writtenconfirmation of the cartel participant containing the aforementionedinformation, excluding information specified in Clause 4.(Articles 32 and 34 of Cabinet Regulations No 796 Procedure forCalculation of Fines for Violations Referred to in Article 11(1) andArticle 13 of the Competition Law.)


The Latvian Competition Council assigns the status of limitedaccess information to data identifying the member of cartel that hassubmitted the application to the Council until the adoption of thedecision.(Article 29 of Cabinet Regulations No 796 Procedure forCalculation of Fines for Violations Referred to in Article 11(1) andArticle 13 of the Competition Law.)


The member of the cartel who has submitted the leniencyapplication shall truly, entirely, continuously and actively cooperatewith the Latvian Competition Council until adoption of the decisionof the Council. (Article 32(7) of Cabinet Regulations No 796 Procedure forCalculation of Fines for Violations Referred to in Article 11(1) andArticle 13 of the Competition Law.)


A person who has incurred losses due to a violation of theCompetition Law is entitled to seek compensation for losses fromthe offender and interest due, set by law. Upon a request by theclaimant, a court may at its discretion set the amount of thecompensation (Article 21 of the Competition Law).The obligation of the participant of the leniency programme tocompensate loss is not specially limited.When adjudicating claims on compensation of loss against thecartel participants the Latvian courts might take into account thebasic policies of the European Union competition law on theobligation of the participant of the leniency programme tocompensate loss.



There are no special procedures for individuals.



To terminate a legal dispute, the Competition Council is entitled toexecute an administrative agreement with the market participantsaimed at termination of legal proceedings. In the administrative agreement, the Competition Council is entitledto decrease the amount of the imposed fine and to change the legalobligations. (Article 273 of the Competition Law.)

7 Appeal Process


The decisions of the Competition Council may be appealed to theregional administrative court within a period of one month from theday when such decision came into effect (Article 8.2 of theCompetition Law). The Competition Council decision shall come into force uponnotification thereof. An appeal against a decision shall not suspendthe execution of the decision, except for the functioning of thedecision in the part thereof regarding the imposition of a fine(Article 271 of the Competition Law).


No, it does not; however, each and same questions might beaddressed to every witness in the case.

8 Damages Actions


The Latvian law does not prescribe for special procedures for civildamages actions for loss suffered as a result of cartel conduct.However, the Latvian courts upon determining the compensationamount at its sole discresson, might consider the policies of theWhite Paper on Damages Actions for Breach of the EC antitrustrules so far that they do not contradict the norms of law in effect inLatvia. (See section 4.6 http://ec.europa.eu/comm/competition/antitrust/actionsdamages/files_white_paper/whitepaper_en.pdf.)


The Latvian law does not prescribe for special rules with respect toclass-action or representative claims. However, if there is no conflictof interest one attorney may represent several claimants on the basisof a power of attorney (Article 82 of the Civil Procedure Law).


The Latvian law does not prescribe for special limitation periods forthe obligation to compensate for civil damages suffered as a resultof cartel conduct.



Latv

ia

Karlis Reihmanis

Loze, Grunte & Cers Attorneys At Law Terbatas 14LV-1011, RigaLatvia

Tel: +371 6 783 0000Fax: +371 6 783 0001Email: [email protected] URL: www.lgc.eu

Karlis Reihmanis is a partner at Loze, Grunte & Cers and one of hispractice areas for more than 10 years has been competition law. Hehas participated as a lecturer in different Latvian and internationalseminars devoted to competition law issues and has been involvedin major local and cross-border mergers and represented manyclients in obtaining clearances of the relevant transactions from theCompetition Council (Spilva and Orkla; Statoil and Neste; S.P.I.Worldwide Trade Limited and AV&D; Volvo and Ingersoll-RandCompany). Karlis Reihmanis’ experience includes legal assistancein relation to the first cross border merger in the Baltic bankingsector involving Danske Bank, one of the largest financial enterprisesin Scandinavia by total assets, and subsidiaries of Sampo BankGroup as well as the acquisition of K-Finance by Pohjola Bank.Currently he is advising the above-listed financial institutions withrespect to different corporate law matters.

Andra Rubene

Loze, Grunte & Cers Attorneys At Law Terbatas 14LV-1011, RigaLatvia

Tel: +371 6 783 0000Fax: +371 6 783 0001Email: [email protected]: www.lgc.eu

Andra Rubene is a senior associate at Loze, Grunte & Cers and hermain focus areas are M&A and competition law. She has beeninvolved in a large number of complicated merger and antitrustclearance cases (Telia/Sonera; Statoil/Shell; ACB/8CBR). She hasalso obtained unique experience defending Statoil in a case onalleged abuse of collective dominant position of Statoil, Neste andLukoil. In 2008 Andra Rubene took an active role in theparliamentary working group introducing a new concept in Latvia ofa dominant position in retail, and advised the Competition Councilduring the development of guidelines for the application of thisconcept. Currently she advices beer producer Aldaris in allegedcartel case and cement producer Cemex in case on potential abuseof dominant position. She also represents airBaltic, the nationalairlines company, in a case on possible violation of dominantposition and execution of prohibited agreement with RigaInternational Airport.

Loze, Grunte & Cers Attorneys At Law is a leading national full service business law firm, and has been legal counselin numerous important and precedent-setting projects in Latvia. The specialisation of the professionals and the capacityof the firm are aimed at a tailor-made approach towards each client, offering the highest quality legal assistance, aswell as implementing large-scale international projects.

Loze, Grunte & Cers, together with its partners of TLS Alliance - Tark & Co (Estonia) and Sutkiene, Pilkauskas & Partners(Lithuania), has been engaged in several landmark transactions in the Baltic region, for example in establishing of thefirst European Company (Societas Europaea, SE) in the Baltics by merging Sampo Life’s Baltic subsidiaries into a singleEuropean company and also conducting the same procedure for Seesam and ERGO.

Over recent years Loze, Grunte & Cers has significantly developed its EU & competition law practice, and the law firmwas very active therein handling the most complicated cases in that area of law.


The usual limitation period for the obligation to compensate forcivil damages is 10 years (Article 1895 of the Civil Law).


The Latvian law does not prescribe for special cost rules for civildamages follow-on claims in cartel cases. According to the usual civil procedure the claimant has to pay thestate duty for bringing and securing the claim, legal costs andexpenses related to obtaining evidence. The court may releaseparties from the payment of court expenses, postpone payment ofexpenses or divide it into portions by deadlines. If the courtsatisfies the claim of the claimant, the court will adjudge thedefendant to compensate the costs incurred by the claimant.(Articles 34, 41, 43 and 44 of the Civil Procedure Law.)


Yes, there have been.

9 Miscellaneous


On 3 October 2008 the Cabinet Regulations No 796 came into effect,where the section on release of horizontal cartel agreementparticipants from the payment of a fine or reduction of a fine has beenadjusted considering the basic principles of the leniency programmespecified in the European Competition Network leniency sampleprogramme and the 7 December 2006 Commission Notice onImmunity from fines and reduction of fines in cartel cases (2006/C298/11). (See http://www.mk.gov.lv/lv/mk/tap/?pid=30342913.)

9.2 Please mention any other issues of particular interest inLatvia not covered by the above.

There have been no other issues of particular interest, other thanthose already mentioned above.



Chapter 25

Sutkiene, Pilkauskas & Partners

Lithuania



The rules prohibiting cartel agreements in Lithuania are set inArticle 5 of the Law on Competition of the Republic of Lithuania(hereinafter - the “Law”) which was adopted on 23 March 1999.The Law lays down fundamental rules for the prohibition of anti-competitive agreements and concerted practices without making adistinction between vertical and horizontal agreements. However,Article 5 (2) of the Law indicates that agreements and concertedpractices between competitors regarding price fixing, sharing themarkets, limiting production or sales shall be considered asrestricting competition per se. Infringement of rules prohibiting cartels can be subject to civil andadministrative procedures, i.e. the competition authority prosecutescartels and imposes administrative sanctions, while private personscan initiate actions claiming damages for breach of the Law underthe rules of civil procedure. No criminal sanctions can be imposedfor the cartel agreements. The cartel prohibition applies to undertakings which could be bothlegal and natural persons (companies and individuals). Thedefinition of an undertaking is prescribed in the Law and providesthat an undertaking is an enterprise, a combination of enterprises(associations, amalgamations, consortiums, etc.), an institution oran organisation, or other legal or natural person that performs ormay perform economic activity in the Republic of Lithuania orwhose actions or intentions, if realised, do or could affect economicactivity in the Republic of Lithuania. Public administration andlocal authorities of the Republic of Lithuania are considered to beundertakings if they engage in economic activity.


The rules for prohibition of cartels are set out in Article 5 (1) of theLaw and substantially resemble Article 81 of the EC Treaty:“All agreements which have as their object the restriction ofcompetition or which may restrict competition shall be prohibitedand shall be void from the moment of conclusion thereof, including: 1) agreements to directly or indirectly fix prices of certain

goods or other conditions of sale or purchase;2) agreements to share the product market on a territorial

basis, according to groups of buyers, suppliers or in any

other way;3) agreements to fix production or sale volumes for certain

goods, as well as to restrict technical development orinvestment;

4) agreements to apply dissimilar (discriminating) conditions toequivalent transactions with individual undertakings,thereby placing them at a competitive disadvantage; and

5) agreements to make conclusion of contracts subject toacceptance by the other parties of supplementary obligationswhich, by their commercial nature or according to usage,have no direct connection with the subject of the contract.”

The definition of an agreement is prescribed in Article 3 of the Lawand covers any contracts concluded in any form (written or verbal)between two or more undertakings or concerted actions ofundertakings, including decisions made by any combination(association, amalgamation, consortium, etc.) of undertakings or byrepresentatives of such a combination.


The Competition Council of the Republic of Lithuania (hereinafter- the “Competition Council”) is a public body primarily responsiblefor the enforcement of the competition law rules, including the rulesfor prohibition of cartels. The Competition Council requiresauthorisation of the administrative court for inspections ofundertakings which are suspected to be involved in a cartel;however, it has full discretion to carry out an investigation into anyindustry and/or any undertaking and to impose sanctions.The decisions of the Competition Council to impose sanctionsagainst cartels could be appealed to administrative courts - theVilnius County Administrative Court (first instance) and theSupreme Administrative Court of Lithuania. Civil courts can also be involved in the process of enforcement ofthe rules prohibiting cartels in private enforcement cases, initiatedby private persons (companies and individuals). However, there isno case law regarding the private enforcement of cartel prohibitionrules in Lithuania so far.


The Competition Council has the right to start an investigation onits own initiative or upon receipt of an application from:undertakings whose interests have been allegedly violated due torestrictive practices; public and local authorities; or associationsrepresenting the interests of the undertakings and consumers. TheCompetition Council must examine applications not later than

Andrius Bambalas

Dr. Lina Daruliene



Lith

uani

a

Sutkiene, Pilkauskas & Partners Lithuania

within 30 days from the submission of the application andsupporting documentation and must take a decision to start or torefuse to start an investigation. Upon the completion of an investigation, the officials of theCompetition Council refer the case with their findings and proposalsto the session of the Competition Council for hearing of the case.Moreover, the parties to the proceedings shall be presented with suchfindings and shall be provided with access to the documents of thecase, other than those containing commercial secrets of anotherundertaking. At the stage of investigation, as well as at the hearing ofthe case by the Competition Council, the parties to the proceedingsand other parties participating in the proceedings have a right topresent their arguments and give explanations both in writing andorally. The hearings of cases at the sessions of the CompetitionCouncil are public and conducted in the presence of the parties to theproceedings, as well as other persons participating in the case.


There are no sector-specific offences or exemptions for cartelsunder the Lithuanian Law; however, the Competition Council by itsResolution No. 1S-132 of 2 September 2004 established thatagreements which satisfied the conditions for granting anexemption laid down in the regulations of the Council of the EUand the European Commission regarding the application of Article81 (3) of the Treaty shall also be deemed satisfying the conditionsfor the exemption under Lithuanian law. In cases where legal actsof the European Union provide that for the undertakings to beeligible for the exemption the income of such undertakings is to beof a certain amount (as a condition for the granting of theexemption), in applying the Lithuanian Law the amount of theincome is reduced 10 times.

1.6 Is cartel conduct outside Lithuania covered by theprohibition?

The applicability of the rules for prohibition of cartels is based onthe principle of extraterritoriality, i.e.: (i) the prohibition isapplicable for cartel agreements concluded outside the territory ofLithuania if the said agreements have an effect in the domesticmarket of the Republic of Lithuania; and (ii) the prohibition is notapplicable to the agreements concluded within the territory ofLithuania if they have effects only outside the national territory.






There are no specific or unusual features of the investigatorypowers of the Competition Council referred to in the summary.


The Competition Council does not have any general surveillancepowers.


In addition to the powers listed in question 2.1, the officials of theCompetition Council during an investigation are empowered:1) to receive from governmental and municipal authorities as

well as from other undertakings, regardless of theirsubordination, data and documents related to the economicoperations of the undertaking under investigation;

2) to carry out an inspection of the economic activities (audit)of the undertaking and obtain findings related to theinspection from institutions carrying out expert examination;and

3) to employ the assistance of specialists, experts and policeofficers in carrying out the investigation.


The searches of business premises are usually carried out by theauthorised officials of the Competition Council, e.g. lawyers,economists or IT specialists. However, the Competition Councilhas a right to enlist the assistance of external specialists, experts andpolice officers.The Law does not impose the obligation on the officials of theCompetition Council to wait for the arrival of legal advisors of theundertaking under investigation; however, in practice the officialsusually wait for a reasonable period of time if the undertakingconcerned claims it necessary.


Professional privilege does not cover in-house legal advice.




Carry out an unannounced search of businesspremises Yes* No

Carry out an unannounced search of residentialpremises No No



Yes* No

Right to retain original documents Yes No


Yes No


No No

WWW.ICLG.CO.UK147


Lith

uani

a



Before commencing a search, the authorised officials of theCompetition Council must produce a document issued by theCompetition Council confirming their powers, purpose and timelimits of the investigation. While exercising their rights granted bythe Law and the Competition Council, the officials must record allactions of the investigation in writing, i.e. draw up documents(minutes, acts, records, requests, etc.) the form and filing procedurewhereof is established by the Competition Council. Theundertakings, suspected of having entered into a cartel agreement,have the right to file complaints to the Competition Council againstillegitimate actions of the investigating officials. A complaint mustbe filed not later than within 10 days from the date of actionssubject to appeal. The Competition Council must make a decisionwithin 10 days from the date of receipt of the complaint. Theundertakings, suspected of the infringement of the Law, may furtherappeal against the decision of the Competition Council to theVilnius County Administrative Court.


Instructions given by the authorised officials during theinvestigation process are obligatory to undertakings, theirmanagement and administrative staff. The Competition Councilmay impose a fine of up to 1 percent of the gross annual income ofthe preceding financial year upon the undertakings for failure toprovide information required for investigation or providingincorrect and incomplete information; obstructing the authorisedofficials from entering and inspecting the premises, land and meansof transport used by the undertaking or inspecting or takingpossession of any documents and other items which may serve asevidence in the case. In practice though, such sanctions for the obstruction ofinvestigation have never been applied.



Upon establishing that undertakings have concluded a prohibitedagreement, the Competition Council, subject to the principles ofimpartiality and proportionality, has a right:(i) to order the undertakings concerned to cease illegal

activities, to take actions restoring the situation prior to theinfringement or to eliminate the consequences of theinfringement, including the obligation to cancel, amend orconclude contracts, as well as set the time limit and lay downthe conditions for meeting the above obligations; and

(ii) to impose fines on undertakings of up to 10 percent of thegross annual income of the preceding financial year.

The amount of the fine depends on the gravity and duration of theinfringement, as well as the circumstances extenuating oraggravating the liability of an undertaking. The rules for thecalculation of fines are set in Resolution No. 1591 of 6 December2004 of the Government of the Republic of Lithuania on “Rulesconcerning the setting of the amount of a fine imposed for theinfringement of the Law on Competition of the Republic ofLithuania” (hereinafter, “Resolution No. 1591”).The latest case law of the Competition Council and administrative

courts shows that fines of 3-5 percent of the gross annual incomeare imposed for hard-core cartel agreements.


The Law does not provide for sanctions for the management orother employees of undertakings. The sanctions for individualsmay be imposed only in case they are considered as undertakingsfor the purposes of competition law rules. In such cases sanctionsare the same as described in question 3.1.


Sanctions for cartel conduct can be imposed not later than within 3(three) years from the date of infringement, and in case of acontinued violation - from the date of performance of the last actionwhich is considered as constituting the infringement.


No, it cannot.



The provisions of the leniency programme in Lithuania areprescribed in Article 43 of the Law and two legal acts implementingthe said provision in a more detailed way, namely the above-mentioned Resolution No. 1591 and Resolution No. 1S-132approved by the Competition Council on 28 February 2008 on therules on exemption from and reduction of fines for the participantsof the prohibited agreements (hereinafter, the “Rules onExemption”) that amended Part III of Resolution No. 1591regarding the leniency programmes available in horizontalagreements.According to the Law, the undertaking, which is a party to aprohibited agreement between competitors, may be exempted froma fine for the infringement upon presenting to the CompetitionCouncil full information related to the agreement provided that allthe following conditions are satisfied: (i) the undertaking provides information prior to the beginning

of the investigation by the Competition Council;(ii) the undertaking is the first of the parties to a prohibited

agreement to provide such information; (iii) the undertaking provides complete information about the

prohibited agreement available to it and co-operates with theCompetition Council during the investigation; and

(iv) the undertaking has not been the initiator of the prohibitedagreement and has not induced other undertakings toparticipate in such an agreement.

The Rules on Exemption also prescribe the rules for reduction offines:In case the Competition Council has already taken a decision tostart the investigation, but an undertaking meets all other above-mentioned conditions a fine may be reduced by 50% to 75%.In case an undertaking meets all the conditions, required for theexemption, but one, namely the undertaking is the initiator of theprohibited agreement or has induced other undertakings to



Lith

uani

a


participate in such an agreement, the fine may be reduced by up to50%.In case an undertaking does not fall into the above-mentionedexceptions, it can still apply for reduction of a fine by 20% to 50%provided that the following conditions are satisfied:(i) the undertaking supplies the Competition Council with new

evidence concerning the prohibited agreement and suchevidence was not available to the Competition Councilbefore and is material for the purpose of proving suchprohibited agreement; and

(ii) the undertaking co-operates with the Competition Councilduring the investigation.


The Rules on Exemption prescribe the marker system in applicationfor immunity from fines with the purpose to extend the time period(usually no longer than for 15 calendar days) so that the undertakingcould gather all the necessary information and evidence. To be eligible to secure a marker, the applicant must provide theCompetition Council with the information concerning his name andaddress, the parties to the alleged cartel, the affected products(services) and territories, the estimated duration of the alleged carteland the nature of the alleged cartel conduct. The applicant shouldalso submit the detailed descriptive list of the evidence it proposesto disclose at a later agreed date, as well as information about otherpast or possible future leniency applications to the authorities ofother countries in relation to the alleged cartel.


Rules on Exemption prescribe that an undertaking wishing to applyfor immunity from fines or reduction of a fine must present awritten application and (or) evidence to the Competition Council.The application must explicitly indicate that it is concerning theimmunity from fines or reduction of a fine.


The fact and contents of the application on exemption from fines orreduction of a fine submitted by the undertaking shall beconfidential and should not be disclosed to other parties of the cartelagreement or other persons until the end of the investigationconcerning the prohibited agreement, unless the undertaking hasgiven a prior agreement to disclose such information. Upon thecompletion of the investigation on the prohibited agreement, otherparties of the proceedings, for the purpose of properimplementation of their right to judicial protection, shall be entitledto get information regarding the contents of the application onexemption from fines or reduction of a fine submitted by the saidundertaking.


The requirement of continuous cooperation ceases to apply whenthe Competition Council completes the investigation, issues anInvestigation Report and makes a decision on exemption from finesor reduction hereof.


There are no “leniency plus” or “penalty plus” policies in theRepublic of Lithuania.



No, there are no such procedures.



There are no formal rules for settlement or plea bargaining betweenthe undertakings under investigation and the Competition Council.However, in practice, arrangements with the Competition Councilas to the amount of the fines are possible. Under the Lithuanian law, once the amount of a fine is imposed bythe Competition Council, the courts, deciding the case on an appeal,may not increase the amount of the fine.

7 Appeal Process


Final decisions of the Competition Council may be appealed to theVilnius County Administrative Court. The appeal can be submittedby the parties to the proceedings (the applicant, the undertakingagainst which the investigation has been carried out or other partieswhose interests are directly related to the case).A written appeal/complaint must be filed with the court not laterthan within 20 days as of delivery of the decision of theCompetition Council or publication thereof, depending on whathappens first. Unless the court decides otherwise, the filing of thecomplaint does not suspend the implementation of the decision ofthe Competition Council.The decisions of the Vilnius County Administrative Court may befurther appealed to the Supreme Administrative Court of Lithuania.The decisions of the Supreme Administrative Court are final and arenot subject to further appeals.


There is no cross-examination of witnesses as such in the appealprocess. However, the parties can use witness statements asevidence and other parties or persons participating in the processcan present questions for such witnesses during the trial.

WWW.ICLG.CO.UK149


Lith

uani

a


8 Damages Actions


Any person, whose interests have been violated by the cartelagreement, may apply to courts for compensation of direct damages(losses) as well as indirect damages (lost profits). Adjudgement ofpunitive damages is not possible under the Lithuanian law. The Vilnius County Court is a court of first instance to hear casesregarding civil damages suffered as a result of cartel conduct. Thedecisions of this court can be appealed to the Lithuanian Court ofAppeals and later to the Supreme Court of Lithuania, whosedecision is final.


There is no possibility for class-actions in Lithuania; however, jointactions (of identified individuals), actions brought by a prosecutorin defence of public interest and actions from the State ConsumerRights Protection Authority or public consumer organisations areallowed.


The limitation period for claims on damages is 3 (three) years fromthe date when the affected person becomes aware or should havebecome aware of the cartel conduct.


The undertakings that violate the Law must compensate for damagecaused to other undertakings or natural and legal persons accordingto the procedure established by the laws of the Republic ofLithuania.


No, there have not been any successful follow-on or stand alonecivil damages claims for cartel conduct so far.

9 Miscellaneous


Draft amendments to the Law on Competition are still pending atthe Parliament of the Republic of Lithuania. The amendments, ifadopted by the Parliament, will allow authorised officials of theCompetition Council to carry out unannounced searches ofresidential, other premises and cars of the management and otheremployees of undertakings, as well as provide for the right to securepremises of undertakings by seal.On 28 February 2008, the Competition Council adopted ResolutionNo. 1S-132 on the rules on exemption from and reduction of finesfor the participants of the prohibited agreements. For more detailsplease see Section 4.

9.2 Please mention any other issues of particular interest inLithuania not covered by the above.

The Competition Council imposed a fine on the group of companiesengaged in consultancy services for the cartel in publicprocurement. Even though only the subsidiaries actuallyparticipated in the cartel agreement, the Competition Council foundthat the parent company was liable too. The Competition Councilbased its reasoning on the fact that the parent company could andactually exercised decisive influence over the commercial activityof the subsidiaries. Therefore, it decided that there was no reasonto establish the exact involvement of the parent company in suchillegal actions of the subsidiaries. This decision of the CompetitionCouncil was appealed and currently the case is pending before theVilnius County Administrative Court.



Lith

uani

a

Dr. Lina Daruliene

Sutkiene, Pilkauskas & Partners Didzioji str. 23LT-01128 VilniusLithuania

Tel: +370 5 251 4444Fax: +370 5 251 4455Email: [email protected]: www.spp.lt

Lina Daruliene studied law at Vytautas Magnus University andUniversity of Law of Lithuania; in 2002 she received a doctoratedegree in social sciences (law). She started her professional careerworking as a legal counsel at the Competition Council of theRepublic of Lithuania and headed the Legal Department of theCompetition Council from 2000 until 2003. Since 2003 LinaDaruliene has been practicing with the law firm Sutkiene,Pilkauskas & Partners where she specialises in domestic and ECcompetition law and, in particular, merger control and antitrustlitigation. Lina Daruliene has been reading lectures on competitionand tax law at Vytautas Magnus University and Mykolas RomerisUniversity since 2001.

Andrius Bambalas

Sutkiene, Pilkauskas & Partners Didzioji str. 23LT-01128 VilniusLithuania

Tel: +370 5 251 4444Fax: +370 5 251 4455Email: [email protected] URL: www.spp.lt

In 2007 Andrius Bambalas obtained a Master’s degree in businesslaw from Mykolas Romeris University. He also attended courses,including those on EC Competition Law, in King’s College (London)and took courses at Erasmus Rotterdam University under theauspices of the Erasmus Socrates II Programme. Andrius Bambalasspecialises in the field of litigation/arbitration and competition law.He started his professional career at Eversheds Saladzius in 2005and has been with the law firm Sutkiene, Pilkauskas & Partnerssince 2008. Andrius Bambalas is also a lecturer in the Departmentof International Law at Mykolas Romeris University.

Law Firm Sutkiene, Pilkauskas & Partners (SPP) is one of the leading law firms in Lithuania with 27 attorneys currentlypracticing within the firm. SPP is a full-service commercial law firm, with special emphasis on mergers andacquisitions, banking and financing, securities markets, real estate and construction, competition law, regulatorymatters and dispute settlement. SPP advises clients on the full range of competition law matters, which encompassesboth Lithuanian and EC competition law. In the last few years, SPP had a track record of most cartel cases handledbefore the Competition Council of the Republic of Lithuania and Lithuanian courts. In addition, the firm has acted fora large number of clients in obtaining clearances from the Competition Council.

SPP is a member of TLS Alliance - a pan-Baltic business law partnership of three leading business law firms in Estonia,Latvia and Lithuania Tark & Co, Loze, Grunte & Cers and Sutkiene, Pilkauskas & Partners and in strategic cooperationwith one of the largest and internationally well-known Belarusian law firms Vlasova, Mikhel & Partners. Together theenlarged team creates a powerful and efficient alliance committed to deliver the highest quality legal services. SPP isalso a member of Interlaw, Association of European Lawyers and Antitrust Alliance networks.




Chapter 26

Elvinger, Hoss & Prussen

Luxembourg



The legal basis of the cartel prohibition is the law of 17th May 2004on competition (hereafter the “2004 Law”), which provides for theenforcement of Articles 81 and 82 of the EC Treaty and basicallymirrors Regulation 1/2003. The general nature of the cartelprohibition is administrative. The 2004 Law applies toundertakings individuals and companies.


Article 3 of the 2004 Law provides for the prohibition of cartels.According to Article 3, a cartel is defined as being all agreementsbetween undertakings, decisions by associations or undertakingsand concerted practices that have as their object or effect theprevention, restriction or distortion of competition within a marketand, in particular, those that:

directly or indirectly fix purchase or selling prices or anyother trading conditions; limit or control production, markets, technical developmentsor investment; share markets or source of supply;apply dissimilar conditions to equivalent transactions withother trading parties, thereby placing them at a competitivedisadvantage; or make the conclusion of contracts subject to acceptance by theother parties of supplementary obligations, which, by theirnature or according to commercial usage have no connectionwith the subject of such contracts.

Such agreements, decisions or concerted practices are automaticallynull and void. However, article 4 of the 2004 Law declares the provisions ofarticle 3 inapplicable to agreements or categories of agreementsbetween undertakings, decisions or categories of decisions byassociations of undertakings and concerted practices or categoriesof concerted practices that (i) contribute to improving theproduction or distribution of goods or to promoting technical oreconomic progress, (ii) allow consumers a fair share of the resultingbenefit, and (iii) do not impose on the undertakings concernedrestrictions that are not indispensable for the attainment of theseobjectives and afford such undertakings the possibility of

eliminating competition in respect of a substantial part of theproducts in question.


The 2004 Law has created the Council for Competition Matters(hereafter the “Council”) and the Investigation Division forCompetition Affairs (hereafter the “ID”). The Council is an independent administrative body composed ofthree permanent members and five substitute members. TheCouncil is the decision making body: it declares whetherundertakings have violated articles 3 to 5 (prohibition of cartels andof abuse of dominant position) or article 81 or 82 of the EC Treatyand may impose fines. The ID is a service of the Ministry of Economy. It registerscomplaints for infringements of the 2004 Law or article 81 or 82 of theEC Treaty, investigates the case and submits its report to the Council.


The ID may start its investigation either as a result of a complaintlodged by a person having a legitimate interest, the Minister ofEconomy or the European Commission.After a preliminary investigation, the ID may close the file (forexample absence of jurisdiction in Luxembourg). If the ID decides to continue its investigation, it may ask forinformation from the relevant undertakings. It may also carry outsearches, proceed to the seizure of documents and ask for expertopinion. After such investigation, the ID may come to the conclusion thatthere is no proof of an anti-competitive practice. It will submit aproposal to the Council to close the file. The Council may eitherfollow the report of the ID and close the file or ask the ID toundertake an additional investigation. If the ID finds that there is sufficient proof of an anti-competitivepractice, it will then notify the communication of the claim to theconcerned undertakings. From such notification onwards, thoseundertakings have a right of access to the file and no request forleniency or immunity may be made. The relevant undertakings willbe granted a deadline to reply to the communication of the claim(minimum one month). Thereupon, the ID will hand the file to theCouncil with its report. The Council will hear the undertakings, thecomplainant, the Minister of Economy (or a representative) and theID. This hearing will take place not less than two months after thenotification of the communication of the claim. The Council may

Léon Gloden

Patrick Santer



Luxe

mbo

urg

Elvinger, Hoss & Prussen Luxembourg

also hear any other person, whether legal or physical, that it deemsnecessary.The Council may decide either to close the file due to an absence ofproof of an anti-competitive practice or if an anti-competitive practicehas been established to request the undertakings to terminate suchpractice and/or to levy a fine against all or some of the undertakings. The decisions of the Council may be challenged before theadministrative judge (see section 7).


In principle, there are no specific exemptions or offences regardingcartels. Some sector-specific legislation contains provisions oncompetition law, such as the law on the telecommunications sector.The 2004 Law also authorises the government to proceed to pricefixing in some sectors under certain conditions (e.g. abnormalfunctioning of the market, or period of economic crisis).

1.6 Is cartel conduct outside Luxembourg covered by theprohibition?

The 2004 Law does not prevent the ID or the Council from takinginto account actions that occurred outside Luxembourg if suchconduct has an effect on the territory of Luxembourg.






According to articles 15 (1) and (2) and 16 (1) and (2) of the 2004Law, the ID can visit business, or other, premises (i.e. residentialpremises) without external authorisation, review documents and

demand an explanation or information. Prior authorisation by the president of the competent district court(which is a civil court) is only necessary if the ID intends to carryout searches and seizures of all documents and company books.


No, there are none.


The ID may appoint experts. The ID may further ask anyundertaking or association of undertakings for information eitherthrough a request for information or by way of a formal decisioncompelling the undertaking or association of undertakings toprovide information. Only the formal decision may be challengedin court. The incompleteness of information may only be subject toa fine in case of a formal decision.


The searches will be carried out by investigators of the ID, who maybe assisted by experts and by police officers. The search has to bemade in the presence of the representative of the undertaking or theowner of the premises (or a representative). The attendance of alawyer during the search is allowed. The ID has no legal obligationto wait for the arrival of legal advisors in order to start the search.


There are no specific provisions in the 2004 Law in relation to theprotection of the communications of in-house lawyers.


The ID may hear any person. However, the witness has a right toremain silent and the ID cannot compel anyone to testify (rightagainst self-incrimination).


On several occasions, the Council has imposed fines onundertakings which refused to submit complete information (seequestion 3.1).



There are no criminal sanctions provided in the 2004 Law. Pursuant to article 18 of the 2004 Law, in case of a breach of articles3 (prohibition of cartels) and 5 (abuse of dominant position), theCouncil may levy administrative fines and penalties againstundertakings.The maximum fine shall not exceed 10 per cent of the highestworldwide turnover (excluding taxes) that has been realised duringthe latest full financial year preceding the year during which the



Carry out compulsory interviews with individuals No, only with their con-sent No


Carry out an unannounced search of residentialpremises Yes* No


Yes No

Right to retain original documents Yes* No


Yes No


Yes* No

WWW.ICLG.CO.UK153


Luxe

mbo

urg


anti-competitive practices have been committed. In case ofconsolidated accounts, the turnover to be considered is the onestated in the consolidated accounts of the mother company. The fine will be set by the Council in view of the importance andduration of the cartel, the harm caused to the Luxembourgeconomy, the situation of the concerned undertaking and thereiteration of the anti-competitive practices. As of November 2008, the Council has not levied any timeconstraints for a cartel yet.A fine, calculated as described above, may be imposed on theundertaking or association of undertakings in case of refusal toprovide correct information to the ID, (whether such informationhas been requested by formal decision or not) or in its absence toprovide correct information within the time limit indicated in theformal decision made by the ID. Moreover the Council may impose on undertakings or associationsof undertakings periodic penalty payments not exceeding 5 percentof the average daily turnover in the preceding business year per dayand calculated from the date appointed by the decision, in order tocompel an undertaking:

to put an end to an infringement of article 81 or article 82 ofthe EC Treaty or articles 3 to 5 of the 2004 Law (cartel orabuse of dominant position), in accordance with its decision; to comply with a decision ordering interim measures; to comply with a commitment made binding by its decision;and/orto supply complete and correct information to thecompetition authorities.

Furthermore, any person or undertaking may introduce a claim inthe civil court on the basis of liability in tort or contractual liabilityto obtain indemnification for the claimant who has suffered harm asa result of the existence of a cartel (see section 8.)


Under the 2004 Law, fines may not be levied against an employee.Employees do not have to bear the financial consequences of thecartel activity by their employer. Further, the 2004 Law does notprovide for personal criminal exposure. If an individual is acting aseconomic undertaking and is involved in a cartel, such individualmay be subject to the same sanctions as a company involved in acartel.Directors, managers or employees cannot suffer any sanction underthe 2004 Law. However if those persons have committed any act orfault which have led to the involvement of the company/employeein a cartel without the approval or the acknowledgment of the boardor the employee, they may be subject to the sanctions provided toby the Law of 10th August, 1915 on commercial companies or theLabour Law Code, as applicable.


Regarding infringements of the provisions of the 2004 Lawconcerning enquiries, the limitation period is 3 years. For all theother infringements the period is 5 years. It starts to run the day ofthe violation or in case of a continuous violation the day where itends. The limitation period regarding the enactment of a sanction is set at5 years. These limitation periods are subject to discontinuation.


Generally a company may pay the legal costs and/or financialpenalties imposed on a manager, director or employee if suchpayment is in line with its corporate interest. Under the 2004 Lawno fines may be levied against an employee.



Article 19 of the 2004 Law provides for a leniency and immunityregime. The Council may exempt the undertaking from fines if theundertaking is the first to report the existence of a cartel of whichneither the Council nor the ID have any knowledge.The Council may reduce the fines provided the undertaking reportsthe existence of the cartel prior to the notification of thecommunication of the claim. The exemption or reduction of fines is subject to the condition that:(i) the undertaking provides the Council and the ID with all thedocuments and information in its possession regarding the existenceof the alleged cartel; (ii) the undertaking provides total andpermanent cooperation until the final decision has been taken by theCouncil; (iii) the undertaking immediately stops participation in thecartel, at the latest when it reports the existence of a cartel to theCouncil or the ID; and (iv) the Council or the ID shall not be inpossession of elements that prove that the undertaking hascompelled other undertakings, by exercising its economic power orby any other means, to participate in the cartel. The Council is notobliged to grant an exemption or a reduction even if the aboveconditions are met.There are no scales according to which fines may be reduced. Nofines, reductions of fines or exemptions have been levied so far. The decision of the Council on the award of leniency or immunitymay only be challenged in court with a decision on the merits of theinfringement.


No marker system is provided by the 2004 Law.Nevertheless, the Luxembourg authorities apply the marker systemmodel as provided by the European Competition Network relatingto leniency. To obtain a marker, the undertaking must, during thefirst contact, provide a minimum of information: its corporatename; address; the circumstances that lead to the leniencyapplication; the participants to the presumed cartel; the market (s)involved; the affected territory (ies); the total duration of thepresumed cartel; and information on any other leniency applicationwhich has been or will be introduced to other competitionauthorities (EU or non-EU). If these conditions are met, the undertaking will get anacknowledgment containing the date and time of the first contact.From such acknowledgment, the undertaking has 2 weeks tocomplete the file and provide the Council and the ID with all theinformation and evidence in its possession.



Luxe

mbo

urg



Yes.


There are no provisions in the 2004 Law on the confidentiality ofthe leniency or immunity applicant and any cooperating party.Article 24 of the 2004 Law only deals with the request made byundertakings or persons that information used in the investigationremain partially or totally confidential (i.e. business secrets).


Article 19 of the 2004 Law provides total and permanentcooperation until the final decision has been taken by the Council.The few decisions rendered by the Council are silent on the ongoingcooperation obligations.


The second undertaking to report the existence of a cartel may onlybe granted a reduction of the fine provided that the other conditionsare met. The 2004 Law is silent with respect to a “leniency plus”or “penalty plus” policy. Each infringement with the sameagreement should be treated separately.



No whistle-blowing procedure is laid down by the 2004 Law. Aletter from employees (or other persons who are not entitled to actin the name and on behalf of the undertaking) may be considerednot binding on the undertaking, while at the same time revealing theexistence of a cartel to the ID or the Council. No specific procedureis provided for.



Plea bargains or similar mechanisms are not allowed underLuxembourg law.

7 Appeal Process


The undertaking may challenge the decision of the Council beforethe administrative court (tribunal administratif). An appeal againsta judgment of the administrative court may be lodged before theadministrative court of appeals (cour administrative).

The authorisation granted by the president of the district court(which is a civil court) to allow the ID to carry out searches andseizures of all documents and company books (see question 2.2)may be challenged before the court of appeals (cour d’appel).


Cross-examination of witnesses is in principle not allowed underLuxembourg law. The process has an inquisitorial nature. Thejudge questions the witnesses. A party may only ask the judge topose a particular question to the witness.

8 Damages Actions


Any person or undertaking may file a private damage claim with thecivil courts on the basis of liability in tort (articles 1382 et seq. ofthe Civil Code) or contractual liability. The purpose of such actionis to obtain indemnification by the claimant who has suffered anyharm from the existence of a cartel, provided the claimant provesthe prejudice and a direct link between such prejudice and theexistence of the cartel.


Luxembourg procedural rules do not allow class-action orrepresentative claims. Notwithstanding, the Luxembourg Union of consumers can bringcessation suits to protect the collective interests of consumers.


Regarding liability in tort or in contract the general statute oflimitation is 30 years according to article 2262 of the LuxembourgCivil code. In case of a commercial contractual relationship, suchstatute of limitation is 10 years (article 189 of the Commercialcode).


The purpose of such civil action is to obtain indemnification by theclaimant who has suffered any harm from the existence of a cartel.Only the actual damage will be indemnified. There are nosentencing guidelines. The costs of the litigation is borne by theunsuccessful party, although Luxembourg law does not provide fora total reimbursement of the costs paid by the successful party.


To our knowledge, no civil damage claims for cartel conduct havebeen introduced up to now.

WWW.ICLG.CO.UK155


Luxe

mbo

urg


9 Miscellaneous


The 2004 Law will be amended by Bill of Law n° 5816, which wasfiled with parliament on 20th December 2007. The main provisionsof this Bill of Law are:

the merger of the ID into the Council; the proceedings will be made more effective and lesscumbersome; the maximum amount of the fines will be differentiatedaccording to whether the undertaking (i) was a party to a

cartel or has abused its dominant position, or (ii) has refusedto submit information to the Council during the investigationof the case; andthe leniency regime will be adapted to the European leniencyprogramme.

The Bill of Law n° 5816 may be amended in the course of theparliamentary process.

9.2 Please mention any other issues of particular interest inLuxembourg not covered by the above.

There is nothing of particular interest to be mentioned.

Patrick Santer

Elvinger, Hoss & Prussen2, place Winston ChurchillL - 2014 Luxembourg

Tel: +352 44 6644 2221Fax: +352 44 2255Email: [email protected]: www.ehp.lu

Patrick Santer is “maître en droit” and holds a DESS in Europeanlaw.He became a member of the Luxembourg Bar in 1995. In 2001 hebecame a partner of Elvinger, Hoss & Prussen. He specialises in European law and commercial litigation. He isalso active in corporate restructuring and generally in corporate law. He was elected member of the Luxembourg Parliament in 1999 andre-elected in 2004. He has presented a memorandum to the “University of Tours” on thesubsidiarity principle under EU law. He is fluent in French, English, German and Luxembourgish.

Léon Gloden

Elvinger, Hoss & Prussen2, place Winston ChurchillL - 2014 Luxembourg

Tel: +352 44 6644 0Fax: +352 44 2255Email: [email protected]: www.ehp.lu

Léon Gloden became a member of the Luxembourg Bar in 1999 andjoined Elvinger, Hoss & Prussen the same year. He became apartner in July 2007. His principal fields of activity are EC law, employment law, realestate law and litigation. He is the author of various publications on EC law issues. He is “maître en droit” from the “Université d’Aix-Marseille III” andholds a DEEA (“Diplôme d’Etudes Européennes Approfondies”) inEC law of the “College of Europe” in Bruges. He is fluent in English, French, German and Luxembourgish.

Elvinger, Hoss & Prussen is a leading Luxembourg law firm with recognised expertise in commercial, business and taxlaw.

Established in 1964, the firm has chosen to remain an independent non-affiliated Luxembourg based firm, acting inclose collaboration with selected correspondent law firms in other jurisdictions.

Individual lawyers and pools of lawyers are highly specialised in determined areas of practice but Elvinger, Hoss &Prussen requires its lawyers to be multi-specialists rather than narrowly focused to efficiently service its local andinternational client base of banks, corporations and investment funds.

Areas of practice: Elvinger, Hoss & Prussen has a strong experience across a wide range of areas of practice includingCorporate, Corporate Finance and M&A, Private Equity, Tax, Banking and Finance, Capital Markets, Structured Finance,Securitisation, Aircraft Financing, Insurance, Investment Funds and Asset Management, General Commercial,Insolvency, Litigation, and Arbitration, IT/IP and Competition Law, General Administrative Law, Construction andProperty Law, Real Estate Financing and Labour Law.

Languages spoken: English, French, German, Luxemburgish, Dutch and Italian.

156

Chapter 27


Camilleri Preziosi

Malta



The basis of cartel prohibition in Malta, which is applicable to bothcompanies and individuals, is Article 5 of the Competition Act(Cap. 379 of the Laws of Malta) (the “Act”). The regime is criminalin nature since an infringement of Article 5 of the Act (or of Article81 of the EC Treaty) is an offence which is punishable, onconviction, by a fine of from one to ten per cent of the turnover ofthe undertaking in the economic interests of whom the person foundguilty was acting, subject to the proviso that the fine is never to beless than Euro 6,988.12. Where a person convicted of this offenceis the Director, manager, secretary or other similar officer of anundertaking, the said person is deemed to be vested with the legalrepresentation of the same undertaking which accordingly isrendered liable in solidum with the person found guilty for thepayment of the said fine.


The basis of cartel prohibition in Malta is Article 5 of the Act, whichcontains an Article 81 EC-like prohibition of agreements andconcerted practices between undertakings, and decisions by anassociation of undertakings, having the object or effect ofpreventing, restricting or distorting competition within Malta or anypart of Malta.


Enforcement of the Act is entrusted to the Office for FairCompetition (“OFC”), which is a government department. Despitethis, the OFC claims to be autonomous and not subject to anyministerial interference in its investigations and decision making.In cases where the OFC finds an infringement of the Act (includingthe existence of a cartel) it may select one of two courses of action:(i) it may issue a decision finding an infringement together with acease and desist order, and any undertaking notified with any suchdecision may request that the OFC submit the decision for reviewbefore the Commission for Fair Trading (“CFT”); or (ii) in caseswhere the OFC finds that a serious infringement of the Act hastaken place, the OFC is to make a report to the CFT, and the CFT isto issue a decision thereon.

The CFT is an independent administrative tribunal presided by amagistrate, with the other members being an economist and anaccountant. The OFC and the CFT are not themselves empowered to imposefines for infringements of the Act. Since an infringement of the Actis a criminal offence, the penalties contemplated by the Act can onlybe imposed, following successful prosecution by the ExecutivePolice, by the Court of Magistrates.


Currently the Act does not provide for a set procedure for thecarrying out of investigations of potential breaches of competitionlaw, including breaches relating to cartels, although in practice theOFC does give the parties to the case the opportunity to be heard,whether orally or in writing. A consultation paper issued in July 2007 by the Ministry ofCompetitiveness and Communications proposed setting up aprocedure whereby, prior to initiating proceedings relating to aninfringement of the Act, the Director of the OFC would be obliged tonotify each of the parties concerned in writing of the objections raisedagainst them and set a time limit within which they could inform theDirector in writing of all facts known to them which are relevant totheir defence. The proposal also suggested an amendment to the Actto the effect that the Director would be obliged to base his decisionsonly on objections contained in the statement of objections. Theseproposed amendments have not as yet been promulgated.


The Act does not contemplate sector specific offences orexemptions, though the Minister does have the as yet unutilisedpower by means of Article 33(1) of the Act to promulgatesubsidiary legislation “exempting any agreement, decision orpractice in connection with agriculture and fisheries from theprovisions of article 5 under such conditions as he may prescribe”.

1.6 Is cartel conduct outside Malta covered by the prohibition?

There is, to our knowledge, no decision by the OFC, the CFT or theMaltese Courts which specifically addresses this issue, andaccordingly it is not possible to provide a definitive answer to thisquestion. Article 5(1) of the Act provides that the relevant criterion fordetermining whether an agreement or concerted practice will be

Adrian Mallia

WWW.ICLG.CO.UK157


Mal

ta

Camilleri Preziosi Malta

subject to the Act is whether the restraint has an effect oncompetition within Malta. It should be noted that though the Act does not explicitly state thatthe CFT is to follow the rules on jurisdiction followed by MalteseCourts, it is highly likely that the CFT would do so. This means thatthe CFT would be likely to assert jurisdiction to decide an issue inthe cases set forth in Article 742 of the Code of Organisation andCivil Procedure, namely, to try actions concerning: a. citizens of Malta, provided they have not fixed their domicile

elsewhere;b. any person as long as he is either domiciled or resident or

present in Malta;c. any person, in matters relating to property situate or existing

in Malta;d. any person who has contracted any obligation in Malta, but

only in regard to actions touching such obligation andprovided such person is present in Malta;

e. any person who, having contracted an obligation in someother country, has nevertheless agreed to carry out suchobligation in Malta, or who has contracted any obligationwhich must necessarily be carried into effect in Malta,provided in either case such person is present in Malta;

f. any person, in regard to any obligation contracted in favour ofa citizen or resident of Malta or of a body having a distinct legalpersonality or association of persons incorporated or operatingin Malta, if the judgment can be enforced in Malta; or

g. any person who expressly or tacitly, voluntarily submits orhas agreed to submit to the jurisdiction of the court.

From a criminal perspective, however, the jurisdiction of theMaltese courts is somewhat more limited. The Criminal Code (Cap9 of the Laws of Malta) provides that the Criminal Courts canexercise jurisdiction, inter alia, “against any person who commitsan offence in Malta, or on the sea in any place within the territorialjurisdiction of Malta”. This would seem to imply that prosecutionand imposition of fines could only occur for a breach of Article 5(1)if the agreement concluded in Malta.






As a general rule, the OFC cannot conduct a search on any premisesafter 19.00 hrs or before 07.00 hrs unless it has reason to believethat the delay could cause the loss of necessary information and itis expressly authorised in the warrant authorising the search toconduct a search between 19.00 hrs and 07.00 hrs.




The OFC may also search any means of transport and may, duringany search, order the non-removal of any objects from any searchedpremises or means of transport, or place any objects under seal.The Executive Police, in criminal investigations, have the powersthat are normally granted to Police officers such as the power ofarrest, and so forth.


The Act provides that searches can be carried out by the Director ofthe OFC (or his delegates). The Director may request the assistanceof the Executive Police; however, in the case of a search which is tobe carried out in residential premises, the Director must always beaccompanied by a Police officer not below the rank of inspector.The Director is not obliged to wait for legal advisors to arrive priorto commencing the search.


There is no clear answer to this question as to our knowledge thisissue has never been decided by the Maltese Courts. As a generalrule, legal advice is protected by the rules of privilege.Traditionally the Maltese Courts have interpreted this rule widely,and therefore it is likely that the Maltese Courts would consider in-house legal advice to be privileged.


Any information disclosed to the Director or any documentproduced to him during an investigation is to be treated as secretand confidential and may only be disclosed before the CFT in anymatter before it, or before a competent court in relation to theprosecution of any offence against the Act.


Article 23 of the Act provides that it is a criminal offence for anyperson, in the course of an investigation under the Act, toknowingly or recklessly:







Yes (in the course of asearch) Yes

Right to retain original documentsYes (in the course of asearch) Yes


No Yes


Yes (in the course of asearch) No



Mal

ta


(a) give any false, inaccurate or misleading information; (b) supply incomplete information; (c) being an owner, Director, officer, administrator or manager

of an undertaking, fail, without reasonable cause, to supplyinformation requested within the time given;

(d) prevent or hinder any investigation; or(e) produce or furnish, or cause or knowingly allow to be

produced or furnished, any document or information whichhe knows to be false in any material particular.

The offence is punishable by the imposition of a fine of not less thanEuro 232.94 and not more than Euro 2,329.37 or to imprisonmentfor a term from three to six months, or to both such fine andimprisonment.To our knowledge these sanctions have never yet been imposedduring a cartel investigation.



Since the sanctions for an infringement of Article 5 of the Act arecriminal in nature, it is only natural individuals who can be foundguilty of this infringement, though a company is liable in solidumfor the payment of a fine (see question 3.2 below).


An infringement of Article 5 of the Act amounts to a criminaloffence which is punishable, on conviction, by a fine of from one toten per cent of the turnover of the undertaking in the economicinterests of whom the person found guilty was acting, subject to theproviso that the fine is never to be less than Euro 6,988.12. Wherea person convicted of this offence is the Director, manager,secretary or other similar officer of an undertaking the said personis deemed to be vested with the legal representation of the sameundertaking which accordingly is considered to be liable in solidumwith the person found guilty for the payment of the said fine.


Article 26 of the Act provides that criminal action for offencesunder the Act is prescribed by the lapse of five years.


Yes. See the answer to question 3.2 above. Also, the Act providesthat any fines imposed are recoverable by the Director of the OFCas a civil debt in favour of the Government, and the undertaking inthe economic interests of whom the person found guilty was actingis liable in solidum with the person found guilty for the payment ofthe said fine. Once paid by a company, the debt in favour of theGovernment would be extinguished.



No, there is currently no leniency programme in place for

companies, though the Minister responsible for commerce isempowered by the Act to promulgate regulations to set up aleniency programme.


This is not applicable - please see question 4.1 above.











There are no procedures for individuals to report cartel conductindependently of their employer.



Yes, a plea bargaining procedure is provided for by Article 26B ofthe Act. This Article basically provides that it is permissible for theDirector of the OFC to enter into an agreement in writing with anoffender whereby the offender pays or gives security to thesatisfaction of the Director for the payment of a sum being not lessthan fifty per cent of the minimum penalty applicable for theoffence and not more than seventy per cent of the maximum penaltyapplicable for the offence as the Director of the OFC may, with theconcurrence of the CFT, establish. Upon the signing of theagreement by the Director of the OFC and the offender, all criminalliability of the offender under the Act with regard to the offence inrelation to which the agreement is concluded is extinguished. To our knowledge, this procedure has yet been used by the Directorof the OFC.

WWW.ICLG.CO.UK159


Mal

ta


7 Appeal Process


As is mentioned above, decisions taken by the OFC can, at therequest of interested parties, be submitted to the CFT for review.Decisions of the CFT, on the other hand, are not subject to appeal,but may be reviewed by the superior courts on very limited grounds,such as a failure by the CFT to comply with the rules of naturaljustice. On the other hand, decisions taken by the Court of Magistratesimposing a fine for an infringement of Article 5 of the Act aresubject to appeal to the Court of Criminal Appeal.


The cross-examination of witnesses is permitted during the reviewprocess before the CFT, but not generally permitted during theappeal hearings before the Court of Criminal Appeal.

8 Damages Actions


Private enforcement of the Act is possible, in that a person who hassuffered damages as result of an infringement of the Act can bringan action for damages. Any such action would be based on theprovisions of the Civil Code (Chapter 16 of the Laws of Malta), inparticular on the provisions in the Civil Code relating to torts. Any actions for damages would be brought either before the SmallClaims Tribunal, the Court of Magistrates or the First Hall CivilCourt, depending on the value of the clam. Proceedings take arelatively long period of time, ranging from one year (inproceedings before the Small Claims Tribunal) to four years ormore (in proceedings before the First Hall Civil Court), dependingon the complexity of the case and the evidence produced. In so far as costs are concerned, the general rule is that legal costsare borne by the party losing the case, though the Courts have thediscretion to vary this rule. Maltese courts do not award “punitivedamages”.


Yes. Article 161(3) of the Code of Organisation and CivilProcedure (Cap 12 of the Laws of Malta) provides that two or moreplaintiffs may bring their actions by one sworn application, if theactions are connected by their subject matter or if the decision ofone of the actions might affect the decision of the other action, or ifthe evidence in support of one action is, generally, the same to beproduced in the other action or actions.


The applicable prescription period in actions for damages of thisnature is two years.


The general rule is that legal costs are borne by the party losing thecase, though the Courts have the discretion to vary this rule


To our knowledge there have as yet been no cases brought beforethe Maltese courts for damages arising as a breach of the Act.

9 Miscellaneous


A consultation paper issued by the Ministry for Competitivenessand Communications towards the end of July 2007 has soughtfeedback from the public on a proposal to the effect that theenforcement of Competition Law should change from the criminalsphere to the administrative sphere meaning, in effect, that if theproposal becomes law the imposition of fines will no longer requireprosecution before a Criminal Court but, rather, simply a decisionto that effect by the Director of the OFC.

9.2 Please mention any other issues of particular interest inMalta not covered by the above.

None.



Mal

ta


Adrian Mallia

Camilleri PreziosiLevel 3, Valletta Buildings, South StreetVallettaVLT 11, Malta

Tel: +365 2123 8989Fax: +356 2122 3048Email: [email protected] URL: www.camilleripreziosi.com

After reading a degree in law at the University of Malta, as well asa Masters in the Economics of Competition Law, Adrian joined thefirm as a trainee in 2003, was made an Associate in 2004, and aSenior Associate in 2008. He is actively involved in mattersconcerning competition law, electronic communications law, dataprotection, public procurement IT and e-commerce Law. Adrian has acted for one of the major players in the electroniccommunications market in open access issues as well as in litigationbefore the Commission for Fair Trading and the ElectronicCommunications Appeals Tribunal. He represents clients regularlybefore the Office for Fair Competition in competition law issues.Adrian has acted as examiner of law students submitting their thesisin the final year of the LLD course, and the Majister Juris (EuropeanLaw) at the University of Malta.

Camilleri Preziosi is a leading Maltese law firm with a commitment to deliver an efficient service to clients by combiningtechnical excellence with a solution driven approach to the practice of law.

There can be no compromise on striving for excellence - not only in recruiting and training the best lawyers but inembracing a work ethic founded on the core values of honesty, integrity and quality of service.

We take a multi-disciplinary approach to our practice and all our lawyers advise across a broad range of areas. Eachlawyer within the firm will have a specific area or areas of practice that indicates a particular competence andexperience in that sector, but he or she does not practice exclusively in that area.

Our clients work with lawyers they know well, and who know them and their businesses. The close relationships wedevelop and the keen interest we take in our clients’ businesses enable us to give practical and effective advice.



Chapter 28

SAI Consultores, S.C.

Mexico



In Mexico, the legal basis and general nature of the cartelprohibition is administrative. It is regulated by Article 28 of theFederal Constitution, the Federal Law on Economic Competition(FLEC) and its Regulations. The FLEC was first published on December 24, 1992 and came intoforce on June 22 1993. Amendments were made to the FLEC onJune 28, 2006 and entered into force on June 29, 2006.Amendments to its Regulations were made in July 2007.The Federal Criminal Code (Article 253) includes a provision of thecartel prohibition. This provision is limited to goods and servicesthat are considered to be of necessary consumption. Although it isnot clear if such a provision may be considered to be dependentupon the administrative laws (i.e. whether in order to be criminallysanctioned, the existence of the cartel must first be determined bythe Federal Competition Commission), it has not been applied inMexico.


Article 28 of the Constitution, which prohibits monopolies inMexico; Article 9 of the FLEC, which states the specific conductssanctioned as absolute monopolistic practices; and Article 253 ofthe Federal Criminal Code, which prohibits cartels with respect togoods or services that are considered of necessary consumption.


The cartel prohibition is enforced by the Federal CompetitionCommission (FCC), which is the Mexican antitrust agency.


The basic procedure is divided into two stages: (I) an investigationprocedure; and (II) an administrative procedure followed as a trial.The procedure can begin by complaint or ex officio. Either way, theinvestigation procedure begins with the publication in the OfficialGazette of the abstract of an agreement by which the FCCdetermines the practice subject to investigation. Once such an

agreement is published, the FCC begins with the investigationprocedure, which cannot exceed a 120 business-day period. Thisperiod, however, may be extended 4 times.If during the investigation the FCC finds sufficient evidence topresume the existence of an absolute monopolistic practice, theauthority will issue an agreement to declare the end of theinvestigation period, followed by a ruling of probable responsibilitythat will be notified to the agents that are probably guilty of theunlawful behaviour.The ruling of probable responsibility gives rise to the beginning ofthe second stage of the procedure, the administrative procedurefollowed as a trial. In this stage, the FCC gives the probableresponsible party a 30 business-day period to file its defence and allkind of evidence in support of such defence. Once the evidence isadmitted and studied by the FCC (the period that may vary upon (i)the type of evidence submitted and (ii) the requirement of furtherevidence by the authority), the authority provides a 10 businessday-period to submit closing arguments. A resolution shall beissued within a 40 business-day period after the period for filingclosing arguments has elapsed.Once the resolution is issued, the economic agent may challenge theFCC’s resolution through an appeal for reconsideration before thesame authority, who must issue the final and definite resolutionwithin a 30 business-day period.


The FLEC applies to all sectors of the economy.

1.6 Is cartel conduct outside Mexico covered by theprohibition?

The FCC has the authority to acknowledge the cases of unlawfulbehaviour undertaken outside the country the aim or effect of whichmay also take place in the national territory.



According to Article 24 of the FLEC, the FCC has the followinginvestigatory powers:

To issue information requirements to the economic agentsinvolved in an investigation procedure, as well as theircompetitors, clients and suppliers.

Lucia Ojeda Cárdenas



Mex

ico

SAI Consultores, S.C. Mexico

To undertake verifying visits to the economic agentsinvolved in the investigation procedure.To interview individuals who are related to the factsinvestigated.



When the amendments to the FLEC entered into force in 2006, theverifying visits of the FCC required the authorisation by a Court.However, the General Attorney filed an Action ofUnconstitutionality against such provision, arguing that the FCChad the necessary powers to undertake the visits without such anauthorisation. Mexico’s Supreme Court of Justice decided that suchan authorisation implied an invasion of the Judicial Branch over theExecutive Branch. Thus, the FCC may now order such visitswithout requiring any authorisation form courts.Notwithstanding the abovementioned, the FCC may not executeunannounced searches of business nor residential premises.According to the FLEC, the FCC is obliged to rule an order toundertake an inspection visit, which must specify the object of thesearch and the documents to be inspected.


No, the FCC is not authorised to execute any kind of surveillancepowers such as bugging. In Mexico the only authority allowed toexecute surveillance powers is the Public Minister, which is theauthority empowered to prosecute criminal offences. However, thePublic Minister must ask for a judicial authorisation in order toexecute surveillance powers.


No, there are not.


As a result of the Action of Unconstitutionality, the FCC is now

entitled to carry out searches of business and/or residential premiseswithout judicial authorisation.The searches will be carried out by the FCC’s personnel. According to the applicable legislation, the FCC must first ask forthe legal representative of the company subject to the investigationto be present in the diligence. If such a representative is notavailable for the search, the FCC must then leave an appointment.If on the day of the appointment the legal representative is notavailable, the FCC may undertake the search before anyone who isavailable, not being compelled to wait for the legal advisors toarrive.


The Mexican legislation has no provisions with regards to the rulesof privilege for competition purposes.


All investigatory powers are compelled to the Law. TheCommission may not, in any case, exceed or go further from whatit is permitted by Law. The Commission in all cases shall point outthe reasons of the investigation, and the specific informationsearched. All residential or business searches will only be carriedout regarding documents or information previously required by theCommission.


When an economic agent does not deliver the required documentsor information, the FCC may warn the economic agent to do so and,in case of failure to deliver it, the agent may be awarded with a finearound US$6,000 for each day that elapses without complying withthe FCC’s order.



The FCC may impose the following sanctions: order of suspension, correction or suppression of the practicebeing dealt with; penalties; andwarnings.

The FLEC provides administrative sanctions, including correctiveconduct orders and fines. Maximum fine amounts are indexed tothe minimum salary wages in Mexico City. Maximum fines forperforming an absolute monopolistic practice can be around US$6million for each economic agent involved. In case of recurrence,the FCC may impose a fine of up to twice this amount or,alternatively, equal to the 10 per cent of the firms’ annual sales orassets.


Article 35 of the Federal Law on Economic Competition establishesa fine up to thirty thousand times (30,000) the minimum salarywage legally in force in Mexico City (about USD$ 122,000) to




Carry out an unannounced search of businesspremises No N/A



No N/A



Yes N/A


No N/A

WWW.ICLG.CO.UK163


Mex

ico


those individuals who directly participate, on its own or by ordersof a company, in the commission of a monopolistic practice.Also, a fine up to twenty eight thousand times (28,000) theminimum wage legally in force in Mexico City (about USD$114,000), will be awarded to all those individuals who helped,propitiated, induced, or participated in the commission of amonopolistic practice.


According to Article 34 bis 4, the FCC will not be able to exerciseits powers of investigation after a five-year period has elapsed.


It is not certain since it is not stated in the Law nor in its Regulationsand due to the absence of precedents in these matters.



With the amendments to the FLEC, a leniency programme wasincorporated to the Law.Article 33 bis 3 of the FLEC provides that any economic agent whois performing or has committed an absolute monopolistic practice,may recognise so before the FCC and thus receive a fine reductionbenefit. Such benefit may be applicable if the following conditionsare met:1. it is the first, among the economic agents involved in the

unlawful practice, to provide enough elements from whichthe Commission could prove the existence of a monopolisticpractice;

2. it fully cooperates continuously during the investigation, andin its case, during the substantiation of the procedurefollowed as a trial; and

3. it undertakes the necessary actions to terminate itsparticipation in the prohibited conduct.

It is worth mentioning that economic agents can ask for leniencywhile the investigation is still in course. By the end of theinvestigation no leniency requests will be accepted.


Yes, when applying for the leniency programme, the Commissiongives the economic agent an identification number in order todistinguish it from other economic agents applying for the leniencyprogramme, as well as to determine the order in which theapplications where received.According to Article 33 bis 3 of the FLEC, the order in which theapplications where received will determine the amount in which thefine will be reduced.


Article 43 of the Regulations provides that all requests to adopt the

leniency programme shall be made via voicemail and/or e-mail tothe phone number or e-mail address indicated by the Commissionfor theses means. Moreover, Article 33 bis 3 of the FLEC provides that the identity ofthe economic agent that is applying to the leniency programme willremain confidential.


Article 33 bis 3 of the FLEC provides that only the identity of theeconomic agent that applied to the leniency programme will remainconfidential. Considering that the leniency programme wasrecently incorporated to the FLEC, there are not yet precedents forthese matters. However, most probably the name of the economicagent will need to be disclosed when the resolution of the applicantbecomes public.


The continuous cooperation will cease until the final resolution isissued by the FCC.


No, in Mexico there is no leniency plus nor penalty plus policies.



There is no specific procedure in Mexico for “whistle-blowing”.According to the Law, any person may file a claim reporting cartelconduct. However, only the economic agent directly participatingin the cartel may apply for the leniency programme.



No, settlements or plea bargaining according to the FLEC may onlybe requested by those economic agents involved in relativemonopolistic practices.

7 Appeal Process


The FLEC establishes that against all resolutions issued by theFCC, economic agents may file a petition of reconsideration. After filing the petition of reconsideration, the resolution may beappealed by filing an amparo. The amparo aims to challenge allthose procedure violations, as well as any constitutional guaranteesviolated during the procedure followed as a trial. This trial can onlybe filed after exhausting the remedies established in the law:petition of reconsideration. On the other hand, the proceeding of



Mex

ico


annulment aims to challenge any fine awarded for the commissionof a prohibited conduct, as well as to confirm the FCC’s finalresolution.


No, under Mexican law cross-examination is not permitted onappeal processes.

8 Damages Actions


The process to claim the bill for civil damages is independent to theprocess carried out by the FCC. The process to ask forcompensation for civil damages is judicial, before a district court, inthe form of a civil trial independent of the administrative processfollowed before the FCC.According to Article 38 of the FLEC, those economic agentsharmed by the commission of a monopolistic practice can seekcompensation for civil damages judicially. In this sense, thejudicial authority can ask the FCC to calculate the damages causedby the cartel.


No, class actions are not regulated under Mexican law. A bill wasintroduced to the Mexican Congress this year to amend Article 17of the Federal Constitution to establish the obligation to legislate onprocedures for attending collective redress (or collective actions).This proposal has been highly supported by the FCC who considersthat efficient mechanisms for compensation claims would producea beneficial impact in terms of deterrence of anticompetitiveconducts. The amendment and the implementing regulation arecurrently under discussion.


According to Article 38 of the FLEC, all affected economic agentsby a monopolistic practice or a prohibited concentration can seekfor damages recovery after a final resolution is emitted. According to the civil code, the applicable limitation period toexercise a civil damage action is 5 years.


The FLEC does not establish cost rules for civil damages. Alldamages are challenged in a civil court under civil rules.

Article 2108 of the Civil Code defines “damage” as the loss orreduction of profit caused by the nonperformance of an obligation.To claim a civil damage, the loss or reduction should be direct andimmediate, in other words, it has to be directly caused by thenonperformance of the obligation.In this sense the FLEC authorises the FCC to calculate the damagesunder judicial request.


There are no precedents in these matters.

9 Miscellaneous


By the end of 2007 a bill was introduced in Mexico’s Congress toamend Article 35 of the FLEC in order to increase the fines that canbe imposed by the FCC for monopolistic practices. The FCC issuedan opinion dated September 14, 2007 supporting an increase infines as a deterrent to unlawful behaviour. During the discussionprocess several amendments were proposed to be incorporated tothe bill to the extent that the FCC was forced to issue a new opinionwithdrawing its support to the bill, as revised, arguing that itsapproval would be a step back to the current regulation sinceapplications of fines would be made impossible.The Mexican Congress has not passed the bill yet. Neverthelesspublic statements indicate that legislators of the different partiessupport the discussion of a new bill which will not only include theamendment of Article 35, but also to other articles of the FLEC inorder to provide the FCC with better tools to impose and enforcefines for monopolistic practices.

9.2 Please mention any other issues of particular interest inMexico not covered by the above.

With the amendments to the FLEC in 2006, a leniency programmewas incorporated to the Law. Thus, the leniency programme inMexico is new and there are not yet precedents regarding thismatter. Although applications have been submitted with regards to theleniency programme, no public data is available in this respect. Todate, no procedure initiated as a result of this programme hasfinished and thus many aspects of the implementation of theprogramme are still unknown.

WWW.ICLG.CO.UK165


Mex

ico

Lucia Ojeda Cárdenas

SAI Consultores, S.C.Prolongación Paseo de la Reforma 600-103Col. Santa Fe Peña Blanca, 01210México, D.F.

Tel: +52 5985 6618Fax: +52 5985 6628Email: [email protected]: www.sai.com.mx

Lucia Ojeda Cárdenas joined SAI in 1998 and became partner inOctober 2002. In her professional practice she has assisted, formore than 10 years, clients from diverse sectors in obtainingauthorisations from the Federal Competition Commission (FCC) forthe realisation of global, regional and national transactions. In otherissues, she also renders advice to clients in matters related tointernational trade and international investment, in particular thoseinvolving the interpretation and application of the North AmericanFree Trade Agreement (NAFTA) and other trade agreements signedby Mexico. Lucia has also been very active in the NationalAssociation of Enterprise’s Lawyers (ANADE) where she has beenelected Chair of the Competition Committee for the period 2005-2006 and 2007-2008. She earned her Law Degree with honoursat the Instituto Tecnológico Autónomo de México (ITAM), where shehas also taught.

In 1995, and after having held key positions in the Mexican delegation that negotiated the North American Free TradeAgreement (NAFTA), a group of lawyers and economists decided to leave the public sector to create a firm with a novelconcept in Mexico: consulting services with a law and economics interdisciplinary approach. In order to assist ourclients on specialised matters, while maintaining our interdisciplinary approach, the firm renders its services throughtwo divisions: SAI Abogados and SAI Consulting. Our clients include a wide variety of small, medium-sized and largecompanies, both Mexican and foreign, who find in our services an integral solution to the challenges they face in theever more competitive national and international business environment.


166

Chapter 29


Nysingh advocaten-notarissen N.V.

Netherlands



The cartel prohibition is laid down in the Dutch Competition Act(Mededingingswet - ‘Act’). The Act is based on Europeancompetition rules, and applies to companies and, as far as sanctionsare concerned, individuals. The cartel prohibition is enforced byboth public (administrative) and private enforcement.


Article 6(1) of the Act provides that “agreements betweenundertakings, decisions by associations of undertakings andconcerted practices of undertakings, which have as their object oreffect the prevention, restriction or distortion of competition on theDutch market, or a part thereof, are prohibited.” Article 6(2) of theAct declares agreements and decisions, prohibited pursuant tosubsection (1), legally null and void. The Act does not provide precise definitions of the terms used inArticle 6(1). Due to the fact that the Act is based on the Europeancompetition rules, the case law of the European Court of Justicewith respect to Article 81 EC is relevant and of great importance forthe interpretation of the Dutch cartel prohibition.Article 6(3) of the Act lays down exceptions from the prohibition ofArticle 6(1) of the Act, similar to those in Article 81(3) EC. Theseare directly applicable by the Netherlands Competition Authority(Nederlandse Mededingingsautoriteit - ‘NMa’) and the courts. Article 7 of the Act states that the cartel prohibition is not applicableif there are no more than eight undertakings involved in theagreement or concerted practice or if no more than eightundertakings are involved in the association of undertakings, andthe combined turnover of the undertakings does not exceed€5,500,000 in case of supply of goods, or €1,100,000 in case ofservices. In addition, the cartel prohibition is also not applicable incase of an agreement, concerted practice or decision of anassociation of undertakings between competitors on the relevantmarket(s) if their aggregated market share does not exceed 5% andtheir aggregated turnover does not exceed €40,000,000.


The NMa is entrusted with the public enforcement of the Act in

general, and the cartel prohibition in particular. The NMa is anindependent administrative authority (zelfstandig bestuursorgaan)and is managed by a board of three members, appointed by theMinister of Economic Affairs. Apart from the Leniency Office, theNMa has two departments that enforce the Competition Act: theCompetition Department and the Legal Department.


The Competition Department of the NMa, on its own initiative, asa result of a complaint or as a result of an application for leniency,may open an investigation to examine whether the cartel prohibitionhas been violated. If, after this investigation, the NMa hasreasonable suspicion that Article 6(1) of the Act has been infringedand that a sanction should be imposed, the Competition Departmentshall draw up a report (comparable to the EC statement ofobjections). This report has to be sent to the undertaking,association of undertaking or the individual it concerns. Once a report has been drawn up, the case will be passed on to theLegal Department of the NMa. This department decides whether asanction should be imposed. The preparation of the decision by whichthe sanction will be imposed, including the hearing of interestedparties, shall be performed by officials that were not involved in thepreparation of the reports and in the preceding investigation. All interested parties (i.e. in any case the addressees of the report)must be given the opportunity to state their views on the report. Inthis respect the report and all other documents relating to the mattershould be made available to interested parties for inspection for aperiod of at least four weeks.


There are no sector-specific offences or exemptions with regard tothe cartel prohibition.

1.6 Is cartel conduct outside The Netherlands covered by theprohibition?

In order for the cartel prohibition to apply, the agreements,concerted practices or decisions by an association of undertakingsmust have an effect on competition on the Dutch market or a partthereof. As long as there is an effect on competition on the Dutchmarket, it is irrelevant where the involved undertakings areestablished or where the agreements, concerted practices ordecisions by an association of undertakings are made.

Ekram Belhadj

Cees Dekker

WWW.ICLG.CO.UK167


Net

herla

nds

Nysingh advocaten-notarissen N.V. Netherlands

It is possible that cartel conduct infringes Article 6(1) of the Act andArticle 81(1) EC at the same time. In this case, the NMa has thepower to and is obliged to enforce Article 81(1) EC as well.


2.1 Summary of general investigatory powers




The NMa is not authorised to retain documents, but is entitled tomake copies of documents. In order to enable the NMa to makethese copies in case it is not possible to do this on the spot, the NMais entitled to take the original document for a short period.


The NMa has no general surveillance powers.


The NMa has no other significant powers of investigation thanthose mentioned in the summary table.


The searches of business and/or residential premises will be carriedout by officials of the Competition Department of the NMa. Ifnecessary, the Competition Department may invoke the help of thepolice. In order to carry out a search of residential premises anauthorisation of an examining magistrate (rechter-commissaris) ofthe District Court of Rotterdam has to be obtained. Officials normally will wait for half an hour for legal advisors toarrive, unless in-house counsel are in attendance.


Documents relating to the application of competition rules whichare exchanged between an undertaking and an in-house lawyerwhich is admitted to the Bar, is protected by the legal privilege.


If the officials carrying out the investigation have reason to suspectthat an undertaking or association of undertaking has committed aninfringement, this undertaking or association is not obliged to makea statement. The NMa officials shall notify the parties concernedabout this right.In order to carry out a search of residential premises a writtenauthorisation of an examining magistrate of the District Court ofRotterdam has to be obtained. Moreover, the search of residentialpremises shall be carried out under supervision of that magistrate.Most important is that the authorisation must contain the subjectmatter and the purpose of the search. This authorisation is onlyvalid until the third day after it has been given. The official carryingout the inspection is obliged to make a report of this inspectionwhich has to be made available to the person whose residentialpremises have been searched.


Pursuant to the General Administration Law Act (Algemene WetBestuursrecht) any person is obliged to offer as much cooperationas is reasonable to an NMa official carrying out investigation tasks.In case of an infringement of this obligation, the NMa may imposea fine of a maximum of €450,000, or, if the infringement relates toan undertaking or an association of undertakings and if this amountis greater, a fine not exceeding 1% of the turnover in the priorfinancial year. According to Article 5:17(1) of the General Administration Law Actthe NMa may order all business documents to be made available forthe NMa officials. If this article is infringed, the NMa may imposean order subject to a penalty, ordering the business information anddocuments specified in the order to be made available forinspection. This order can be imposed together with the finementioned in Article 69 of the Act.The NMa may also impose a fine on any person who breaks anysealing made by an NMa official in accordance with Article 54(1)of the Act. This fine shall not exceed €450,000. If the infringementrelates to an undertaking or an association of undertakings and thisamount is greater, a fine not exceeding 1% of the turnover in theprior financial year can be imposed.On several occasions the NMa has imposed sanctions on the basisof Article 69 of the Act, varying from €2,250 (for an infringementby an individual) to €4,500 (the maximum fine then). Themaximum was raised in 2004. Recently the NMa imposed a fine of€10,000 on an individual for non-cooperation with the NMa.



The NMa may impose fines, not exceeding €450,000, or, if this isgreater, 10% of the turnover of the undertaking or aggregated







Yes No



Yes No


Yes No



Net

herla

nds


turnover of the undertakings that are members of the association ofundertakings, in the financial year preceding the decision. Further, the NMa can impose an order subject to a penalty payment,which can be imposed together with a fine. The object of an order isthat the infringement or further infringements shall be reversed or toprevent a recurrence of the infringement. Conditions relating to theprovision of information to the NMa may be attached to an order.An order subject to a penalty may be imposed as a structural remedyif it is proportionate to the infringement committed and necessary tobring the infringement effectively to an end (Article 58a of the Act).Structural remedies can only be imposed either where there is noequally effective behavioural remedy or where any equally effectivebehavioural remedy would be more burdensome for the undertakingconcerned than the structural remedy. It is also possible that the NMa takes a decision which states that theundertaking is obliged to act in accordance with the cartelprohibition. Infringement of this decision may lead to a fine or anorder subject to a penalty.The NMa has issued a Fining Code setting out the criteria for thelevel of fines which can be imposed. The starting point is theturnover which has been realised by the undertaking throughout theentire duration of the infringement from the sale of goods and/or theprovision of services to which the infringement relates. Thisstarting point will be multiplied by a factor based on the seriousnessof the cartel. The outcome equals the basic amount of the fine. Indetermining the fine, the NMa may consider aggravating andmitigating circumstances. Consequently, the basic fine may beadjusted, resulting in an increase or decrease of the fine.


As from 1 October 2007 the NMa may also impose a fine onindividuals for giving instructions to or exercising de factoleadership with regard to an infringement of the cartel prohibition.This fine may not exceed €450,000.The NMa also has the power to impose an order subject to a penaltyor a decision obliging the person to act in accordance with the cartelprohibition, see the answer to question 3.1 above.In accordance with the Fining Code the fine is based on the incomeand the assets of the person in the year preceding the finingdecision. The starting point will be determined within thebandwidths €50,000 to €400,000. The fine will be determinedconsidering seriousness and duration of the infringement andaggravating or mitigating circumstances.


The power to impose a fine and/or order subject to a penalty shalllapse five years after the infringement is committed.


There are no legal rules forbidding a company to pay the legal costsand/or financial penalties imposed on a former or current employee.



In order to encourage undertakings involved in cartels to inform theNMa of the existence of such cartels, the NMa adopted a leniencyprogramme, set out in the Leniency Guidelines (RichtsnoerenClementie). On the basis of these Guidelines the NMa may offerundertakings which have been involved in a cartel, a reduction ofthe fine that may be imposed (“fine reduction”) or not to impose afine (“fine immunity”). Three types of leniency are set out in the Leniency Guidelines:

Category A contains fine immunity. Immunity from a finewill be granted to an applicant when the applicant: a) is thefirst to provide the NMa with information regarding a cartelto which the NMa has not yet opened an investigation; b) thatinformation provides sufficient reason for the NMa to startan investigation to the cartel; c) the applicant has not coercedany other undertaking to participate in the cartel; and d)offers full cooperation.Category B contains a fine reduction of at least 60% up to100%. The applicant has to fulfill four conditions in order tobe granted a fine reduction of this category: a) theundertaking is the first to provide the NMa with informationregarding the cartel after the NMa has opened aninvestigation to the cartel, but before the NMa has sent astatement of objections (see question 1.4 above) to allinterested parties; b) the evidence submitted has substantialadded value; c) the undertaking has not coerced any otherundertaking to participate in the cartel; and d) offers fullcooperation. Category C contains a fine reduction of at least 10% with amaximum of 50%. This fine reduction will be offered when:a) the applicant is not the first to inform the NMa about thecartel before the NMa sends a report (see question 1.4 above)to all interested parties, or the applicant is the first to applyfor leniency but has coerced any other undertaking toparticipate in the cartel; b) the leniency notice has substantialadded value; and c) offers full cooperation to the NMa.

The percentage of fine reduction as referred to in Categories B and Cwill be determined on the basis of the ranking of the undertaking thatapplies for leniency and the added value of the information provided. An undertaking wishing to apply for leniency has to contact theLeniency Office of the NMa. This contact may take placeanonymously to just exchange thought about a ‘hypothetical’situation. An undertaking may also contact the Leniency Office tobe informed of whether fine immunity is still available, providedthat the undertaking is represented by an attorney. In the case thatthe Leniency Office decides to answer to this question affirmative,the attorney is obliged to file a leniency request immediately.The ranking with respect to the category of leniency will bedetermined by the date and time of receipt of a complete leniencynotice, an abbreviated leniency notice or date and time on which amarker was granted.An important condition that must be fulfilled in order to qualify forleniency, is that the applicant is obliged to offer full cooperation tothe NMa until the decision on imposing a sanction is irrevocable.Once a notice is made, full cooperation means that the applicantprovides all relevant information available to it, that theundertaking ends its involvement in the cartel unless it would bereasonably necessary to preserve the integrity of the inspections,and makes current and, if possible, former employees available forinterviews with the NMa.

WWW.ICLG.CO.UK169


Net

herla

nds


The Leniency Office will send a written confirmation of theleniency notice to the undertaking containing the conditions of thisoffer of leniency. This offer of leniency must be signed by theapplicant. When taking a decision with regard to imposing asanction, the NMa will consider the leniency offer provided that theundertaking has complied with the conditions subject to which theleniency was offered. So, if the undertaking does not comply withthose conditions the leniency offer will lapse. In that case, the NMais still allowed to use the information which was provided asevidence.


The NMa may grant a marker to an undertaking submitting anincomplete leniency notice, provided that the notice raisesreasonable suspicion that the applicant is involved in a cartel. Toobtain a marker, the applicant should provide the NMa withinformation concerning its name and address, the undertakingsinvolved in the cartel, the affected products and/or services, thegeographic scope, the duration of the cartel and, the nature of thecartel conduct. The applicant also has to inform the NMa aboutwhether other competition authorities inside or outside the EU havebeen approached or are to be approached in relation to the cartel.When a marker is granted, the NMa will determine the periodwithin which the applicant has to complete the leniency notice.


A leniency notice can be made in writing (by e-mail, fax, post) ororally (by phone). The Leniency Guidelines state that in case thatthe applicant has a reasonable interest, the statement mentioned inquestion 4.1 above, can be made orally. The Leniency Office willnote the statement and make a transcript of it.


Until the NMa sends the statement of objections to all parties to thecartel, the identity of the applicant will not be made public, unlessthe NMa is obliged by law to make the identity of the applicantpublic or when the applicant allows the NMa to do so.In case of an oral statement, the NMa will grant any addressee ofthe statement of objections (other than the applicant) access to thestatement, provided that this addressee and the person representingit states in writing that the information will not be copied and willonly be used for the purpose of the administrative procedure.


The requirement to offer full cooperation to the NMa applies untilthe decision on imposing a sanction is irrevocable.


There is no ‘leniency plus’ or ‘penalty plus’ policy applicable.



Any individual may report cartel conduct independently of theiremployer, but there are no special procedures available except forindividuals who gave instructions to or exercised de factoleadership with regard to and infringement of the cartel prohibition. Beneficiaries of the Leniency Guidelines are not only companies,but also natural persons who gave instructions to or exercised defacto leadership with regard to an infringement of the cartelprohibition. These individuals may apply for leniency regardingthemselves, irrespective of whether their company applies forleniency. The conditions as set out in response to question 4.1 applyin the same way to these individuals applying for leniency.



Apart from the leniency programme, there are no settlement or pleabargaining procedures applicable. However, an early resolutionsystem exists in the Act. In order to prevent an investigation fromtaking place, to end an ongoing investigation or to prevent the NMafrom drawing up a report or to issue a decision to impose a fine, theundertaking concerned may offer certain commitments to meet theconcerns expressed by the NMa. The purpose of the commitmentsoffered is to prevent infringements on the cartel prohibition to occuror to bring infringements to an end. Commitments may, by decisionof the NMa, be made binding upon the undertaking offering themif: i) it is ensured that the undertaking will act in accordance withthe cartel prohibition; ii) the undertaking establishes to act inaccordance with the commitments; and, iii) it is more effective totake a commitment decision than to impose a penalty. Thecommitment decision will be issued for a certain period and itsvalidity can be extended. Recently the NMa has taken acommitment decision in the Kinderopvang Amsterdam case. In thiscase the commitments are binding for a period of three years.The NMa may (re)open an investigation where i) there has been amaterial change in any of the facts on which the decision was based,ii) the decision was based on incomplete, incorrect of misleadinginformation provided by the undertaking, or, iii) the undertakingconcerned acts contrary to its commitments.

7 Appeal Process


An NMa decision may be appealed by interested parties, defined inthe General Administration Law Act as any person whose interest isdirectly affected by a decision. Interested parties must first make an administrative appeal beforethe NMa within six week after the decision has been notified. Uponrequest, the NMa may give permission to appeal directly to theDistrict Court of Rotterdam instead of making an administrativeappeal first. A decision on administrative appeal may be appealedbefore the District Court of Rotterdam within six weeks after thisdecision has been notified. This district court is a special court



Net

herla

nds


dealing with competition cases which involve the NMa. A decisionof this court can be further appealed to the Trade and IndustryAppeals Tribunal. During the appeals parties may submit writtendocuments and the parties may be heard by the Court and theTribunal.


The General Administration Law Act allows witnesses to be cross-examined by both parties.

8 Damages Actions


Pursuant to Article 6(2) of the Act conduct which is prohibited byArticle 6(1) of the Act is null and void. Consequently, parties whichhave suffered losses as a result can start damages claims on thebasis of Article 6:162 of the Civil Code (Burgerlijk Wetboek). Suchclaims for damages will be governed by the rules of the Civil Code.


The Code of Civil Procedure (Wetboek van BurgerlijkeRechtsvordering) does not provide explicitly for class-action orrepresentative claims. A civil court may declare an agreementbetween a group of claimants and defendants binding for allclaimants whose interests the group represents.


According to the Civil Code the limitation period for claims ofdamages suffered as a result of cartel conduct is five years after theday the claimant becomes acquainted with the damages and theresponsible party of parties. In any case the claim has to be broughtbefore the civil court within 20 years after the infringement hastaken place.


The losing party will have to bear part of the legal costs of theprocedure. These costs will be assessed by the court in accordancewith certain criterion.


There have been no reported successful civil damages claims in thepast regarding infringements of the cartel prohibition. Dutch lawdoes not provide specific rules for follow-on actions.

9 Miscellaneous


In order to increase the effectiveness and efficiency of theenforcement of the Competition Act, the Competition Act has beenamended. With respect to the cartel prohibition and leniency thefollowing changes are made:

The NMa may impose fines on individuals who giveinstruction or exercise de facto leadership with regard to acartel.Partly as a consequence of the point mentioned above, theLeniency Guidelines and Fining Code have been revised.Residential premises may be searched by the NMa.Two new exceptions have been added: Article 7(2) andArticle 16 of the Act.

9.2 Please mention any other issues of particular interest inthe Netherlands not covered by the above.

Not relevant.

WWW.ICLG.CO.UK171


Net

herla

nds

Cees Dekker

Nysingh advocaten-notarissen N.V.Burgemeester Roelenweg 118021 EV ZwolleThe Netherlands

Tel: +31 38 425 9207Fax: +31 38 425 9252Email: [email protected]: www.nysingh.nl

Cees Dekker was admitted to the bar in 1989 and specialises incompetition law. He is a former head of the legal department of theNetherlands Competition Authority (NCA). He has extensiveexperience in defending companies in cartel investigations by theNCA and the European Commission, in advising on commercialstrategies and distribution agreements and on state aid matters. Healso pleaded cases before the European judiciary. Cees lectured on EC and competition law at the universities ofGroningen and Amsterdam. He has a great many publications to hiscredit and is much in demand as speaker at conferences oncompetition law. He published “NederlandsMededingingsprocesrecht” (“Dutch competition law procedures”),which is regarded as the standard on this subject in theNetherlands, and “Staatssteun in de decentrale praktijk” (“State aidfor decentralised authorities”). He is also co-chairman of the highlyregarded postdoctorate course in competition Law of the GrotiusAcademy and co-chair of the Specialty Group Competition law of theinternational law firm network TAGLaw.

Ekram Belhadj

Nysingh advocaten-notarissen N.V.Burgemeester Roelenweg 118021 EV ZwolleThe Netherlands

Tel: +31 38 425 9207Fax: +31 38 425 9252Email: [email protected]: www.nysingh.nl

Ekram Belhadj is an associate in the Competition and ProcurementGroup. She specialises in European law, competition law and publicprocurement. Ekram has also published articles in the field ofEuropean law and competition law. She qualified cum laude in2005 and lectured European and competition law at the Universityof Utrecht. In 2007 she was admitted to the bar.

Nysingh offers its clients a full range of legal services and has a reputation as leader in competition law, procurementlaw, manufacturing, wholesale and distribution, insurance, corporate and public law/litigation, corporate structuring,health and transportation.

The firm’s Competition and Procurement Law Group is considered by clients as accurate and fast to respond. Theteam’s ability to deliver high-quality strategic advice is also widely noted. Clients include multinational corporations,listed and non-listed, international trade associations and (semi) governmental institutions from all continents seekingrepresentation and advice in industries ranging from agribusiness, oil and energy, construction and geophysics andtransport to textiles, technology and science, aerospace and tourism, sports and entertainment.

In the global economy the firm is also practicing law within TAGLaw, one of the world’s largest legal networks, whichhas a presence in more than 75 countries around the world.


172

Chapter 30


Wilson Harle

New Zealand



Cartels are prohibited through application of the Commerce Act1986 (“Act”) and, in particular, the following sections of the Act:

Section 27 - contracts, arrangements or understandings thatsubstantially lessen competition;Section 29 - contracts, arrangements or understandings thatcontain exclusionary provisions; andSection 30 - contracts, arrangements or understandings to fix,control or maintain price.

The prohibitions are civil, and not criminal, in nature.


Section 27(1) of the Act provides that no person shall enter into “acontract or arrangement, or arrive at an understanding, containing aprovision that has the purpose, or has or is likely to have the effect,of substantially lessening competition in a market”. Section 27(2)prohibits any person from giving effect to such a provision andsection 27(3) renders the provision unenforceable.Section 30 of the Act deems price fixing to be a breach of section27 of the Act, without proof of a purpose, effect or likely effect ofsubstantially lessening competition in a market. Section 30provides:(1) Without limiting the generality of section 27 of this Act, a

provision of a contract, arrangement, or understanding shallbe deemed for the purposes of that section to have thepurpose, or to have or to be likely to have the effect, ofsubstantially lessening competition in a market if theprovision has the purpose, or has or is likely to have theeffect of fixing, controlling, or maintaining, or providing forthe fixing, controlling, or maintaining, of the price for goodsor services, or any discount, allowance, rebate, or credit inrelation to goods or services, that are:(a) supplied or acquired by the parties to the contract,arrangement, or understanding, or by any of them, or by anybodies corporate that are interconnected with any of them, incompetition with each other; or(b) resupplied by persons to whom the goods are suppliedby the parties to the contract, arrangement, or understanding,or by any of them, or by any bodies corporate that are inter-connected with any of them in competition with each other.

(2) The reference in subsection (1)(a) of this section to thesupply or acquisition of goods or services by persons incompetition with each other includes a reference to thesupply or acquisition of goods or services by persons who,but for a provision of any contract, arrangement, orunderstanding would be, or would be likely to be, incompetition with each other in relation to the supply oracquisition of the goods or services.

Section 29(3) and 29(4) of the Act prevent any person from enteringinto or giving effect to a contract arrangement or understanding thatcontains an “exclusionary provision”. An exclusionary provision isdefined in section 29(1). A provision of a contract, arrangement, orunderstanding is an exclusionary provision if:(a) it is a provision of a contract or arrangement entered into, or

understanding arrived at, between persons of whom any 2 ormore are in competition with each other;

(b) it has the purpose of preventing, restricting, or limiting thesupply of goods or services to, or the acquisition of goods orservices from, any particular person, or class of persons,either generally or in particular circumstances or onparticular conditions, by all or any of the parties to thecontract, arrangement, or understanding, or if a party is abody corporate, by a body corporate that is interconnectedwith that party; and

(c) the particular person or the class of persons to which theprovision relates is [or would, but for the exclusionaryprovision, be or be likely to be] in competition with one ormore of the parties to the contract, arrangement orunderstanding in relation to the supply or acquisition of thosegoods or services.

Section 29(1A) provides a limited exception to this prohibition “ifit is proved that the provision does not have the purpose, or does nothave or is not likely to have the effect, of substantially lesseningcompetition in a market”.


The Act is enforced by the Commerce Commission (“NZCC”), anindependent body corporate established under the Act. The NZCCinvestigates and may bring civil proceedings in the High Court toenforce the cartel provisions of the Act referred to above.


The NZCC can, of its own motion or following a complaint,investigate conduct that it suspects breaches the Act. In doing so, itmay seek information informally or may exercise its formal

Allison Ferguson

Ian Denton

WWW.ICLG.CO.UK173


New

Zea

land

Wilson Harle New Zealand

investigatory powers to obtain information (see below).If, following investigation, the NZCC forms the view that there issufficient reliable and admissible evidence of a breach of the Act, itmay commence proceedings in the High Court. The NZCC is notobliged to seek information from, or contact, an intended defendantbefore commencing proceedings.The High Court (and not the NZCC) is the court of first instancewith jurisdiction to determine whether the Act has been contravenedand to impose sanctions where cartel conduct infringing the Act isproved at trial or is admitted.


There are no sector specific cartel offences.There are no sector-specific exemptions under the Act. However,there are a number of exceptions that should be noted.

The Act does not apply to Government activity except to theextent that it amounts to conduct in trade.The Act may be subject to other legislative authorisationincluding as to intellectual property rights. There are limitedexceptions to the cartel provisions of the Act under a numberof statutes, often relating to Industry Boards, public health orwhere NZCC or Ministerial approval has been given to theprovision previously.Joint ventures, joint buying groups and some recommendedprices may be exempt from the price fixing provisions of theAct.Section 44 of the Act provides a number of specificexemptions, for instance, relating to partnership agreements,employment, provisions that relate to the export of goodsfrom New Zealand if certain procedures have been followed,and provisions relating to the carriage of goods by sea fromor to New Zealand.Contracts, arrangements or understandings that have beenauthorised under the Act by the NZCC are exempt.

1.6 Is cartel conduct outside New Zealand covered by theprohibition?

Section 4(1) extends the application of the Act to cartel conductoutside New Zealand by any person resident or carrying on businessin New Zealand to the extent that such conduct affects a market inNew Zealand. In addition, conduct by a person outside of NewZealand has been held to be within New Zealand for jurisdictionalpurposes of the Act where there are communications to or fromNew Zealand, the person has acted through an agent in NewZealand or there have been overt acts in New Zealand that amountto a breach of the Act.






Where the NZCC considers it necessary or desirable for the purposeof carrying out its functions and exercising its powers under the Act,it may serve on a person in New Zealand a notice under section 98of the Act. The notice can require that person to furnish informationin writing, produce documents or appear in person before theNZCC to give evidence on oath either orally or in writing.Documents are defined in the Act broadly and would include,among other things, electronic information recorded by or stored oncomputer. A notice under section 98 can be served on any personand is not limited to suspected members of the cartel.A person is not excused from furnishing information, producingdocuments or giving evidence, including answering any questionwhen appearing before the NZCC, on the grounds that to do so mighttend to incriminate him or her or their spouse. However, a statementmade by a person in answer to a question put by or before the NZCCshall not be admissible against that person in proceedings forpecuniary penalties or in criminal proceedings (except proceedingson a charge of perjury or misleading the NZCC).The NZCC may seek a search warrant from the District Court. TheNZCC can execute the search warrant to enter and search premisesand copy or remove documents and other items, includinginformation on a computer (see above). The removal of a computerfor data retrieval or the cloning of the computer in its entirety maygive rise to issues regarding the protection of information that islegally privileged or outside the scope of the search warrant and somay need to be undertaken by agreement and with suitableprotections for that information. The NZCC can seek explanationsof the documents seized pursuant to a search warrant in subsequentsection 98 interviews.The NZCC’s powers to obtain and execute a search warrant ofpremises or to serve notice under section 98 of the Act may beexercised notwithstanding that proceedings have been commencedincluding in the High Court in respect of alleged cartel conduct.The NZCC has power under section 100 of the Act to make orderspreventing a person from disclosing specified information given tothe NZCC during an investigation. The power applies to anyinformation, document or other evidence including statementsmade to the NZCC. An order under section 100 remains in forceuntil the completion of the investigation or any earlier datespecified in the order. It is an offence to publish or communicatethe information covered by such an order.








Yes* N/A

Right to retain original documents Yes* N/A


Yes N/A


No N/A



New

Zea

land



No. However, the NZCC can obtain telephone records pursuant toa section 98 notice or search warrant.


In situations of urgency, specially appointed Commissioners of theNZCC can make “cease and desist” orders preventing the conductfrom continuing. These orders are similar in nature to injunctiveorders made by the Court. For orders to be granted, the Cease andDesist Commissioner must be satisfied that a prima facie case ofbreach of the Act has been demonstrated and it is necessary to acturgently to prevent a person or consumers from suffering seriousloss and it is in the public interest.


The employee of the NZCC who is specified in the search warrantcarries out the search, with the assistance of others if required. Thewarrant must be produced on entry and the occupier of the premisesmust assist in its execution. It is a criminal offence to resist,obstruct or delay the execution of the warrant. There is norequirement in the Act for the person executing the warrant to waitfor legal advisers to the occupier of the premises to be present butthe Commission can allow a reasonable time for that to occur.


The NZCC may not obtain legally privileged material under eithera notice under section 98 or in executing a search warrant. Legaladvice provided by in-house counsel will be protected where therules of privilege apply.


The Act contains few express material limitations on theCommission’s investigatory powers. The NZCC may use itspowers under section 98 where it considers it necessary or desirablefor the purposes of carrying out its functions and exercising itspowers under the Act. This is a low threshold. The exercise of itspowers within those limits and the interaction with the NewZealand Bill of Rights Act 1990 has been the subject of littlejudicial scrutiny although the courts have commented on when itwill be appropriate for the NZCC to seek a search warrant and whatinformation it must provide to the District Court when doing so.


It is an offence under section 103 of the Act:without reasonable excuse, to refuse or fail to comply with anotice under section 98 including refusing or failing toappear before the NZCC to give evidence;in purported compliance with a section 98 notice, to furnishinformation, produce a document or give evidence knowingit to be false or misleading;to refuse to answer any question or produce any book ordocument, having been required to appear before the NZCC; to resist, obstruct or delay an employee of the NZCC acting

pursuant to a search warrant; orto deceive or knowingly mislead the NZCC in relation to anymatter before it.

A body corporate who contravenes section 103 is liable to a fine ofup to $30,000 and an individual may be fined up to $10,000.The NZCC has successfully prosecuted companies and individualsunder section 103. It has also indicated that it, in appropriatecircumstances, it could consider the failure to comply with a section98 notice to justify prosecution for obstructing the course of justiceunder the Crimes Act 1966 and deceiving or knowingly misleadingit to amount to perjury.



It is a breach of the Act to actually contravene the Act, attempt todo so, aid, abet, counsel, procure, induce or attempt to induceanother person to contravene the Act, be in any way directly orindirectly knowingly concerned in or party to another person’scontravention of the Act or conspire to contravene the Act.If the High Court finds, on application by the NZCC, that the cartelprovisions of the Act have been contravened, it may order theperson found to have contravened the Act to pay a pecuniarypenalty to the Crown (not the NZCC). In the case of a body corporate, the amount of any pecuniarypenalty must not, in respect of each act or omission, exceed thegreater of $10,000,000 or either:

if it can be readily ascertained and if the Court is satisfiedthat the contravention occurred in the course of producing acommercial gain, 3 times the value of any commercial gainresulting from the contravention; orif the commercial gain cannot be readily ascertained, 10% ofthe turnover of the body corporate and all of itsinterconnected bodies corporate (if any).

The Court may also make declarations and grant injunctive relief.


The maximum pecuniary penalty that the High Court can order inrespect of the contraventions referred to above by an individual is$500,000 in respect of each act or omission. On the application ofthe NZCC, the High Court can also order that a person be excludedfrom management of a body corporate for up to five years.


Proceedings may be commenced by the NZCC within 3 years afterthe matter giving rise to the contravention was discovered or oughtreasonably to have been discovered. However, no proceedings maybe commenced 10 years or more after the matter giving rise to thecontravention occurred.


A company must not indemnify a current or former director,servant, or agent of the company or an interconnected company inrespect of liability for:

payment of a pecuniary penalty that arises out of a provision ofa price fixing contract, arrangement, or understanding that isdeemed under section 30 to breach section 27 of the Act; or

WWW.ICLG.CO.UK175


New

Zea

land


costs incurred by that person in defending or settling anyproceeding relating to that liability.

Any company that purports to indemnify may be subject to apecuniary penalty of up to two times the amount of the indemnitygranted and the indemnity is void.Indemnification is not prohibited in respect of other breaches of theAct.



The NZCC operates a leniency policy for cartel conduct (“LeniencyPolicy”). The NZCC will grant immunity from NZCC initiatedproceedings to the first person (company or individual) to approachit formally with information about a cartel provided the person fullyco-operates with the NZCC in its investigation and any subsequentlegal proceedings.The Leniency Policy is available to the first person to applyformally to the NZCC for leniency, even if that person instigated thecartel or was the clear leader of it. The Policy is not available wherethe NZCC is already investigating conduct relating to the leniencyapplication or there has been an earlier leniency applicant (althoughthe Co-operation Policy may be available in either of thosecircumstances). The NZCC will grant conditional immunityinitially and requires full and timely cooperation before it will issuea letter confirming final immunity.The NZCC also operates a co-operation policy (“Co-operationPolicy”). Pursuant to it, the NZCC may, at its discretion, agree topursue a lower level of enforcement against a person who fullycooperates with it. The NZCC has stated that where the assistanceof a person is unusually critical to the success of the investigationor proceeding, the NZCC may agree not to pursue that person at allin return for co-operation. The Co-operation Policy is availableeven where the NZCC is already aware of a cartel or there hasalready been a successful leniency applicant.When co-operating pursuant to either the Leniency Policy or theCo-operation Policy, all information available to the personregarding the existence, activities, operation and membership of thecartel, including information that is held overseas, must be providedto the NZCC. If the applicant is an individual, he or she must beavailable for interviews and to appear as a witness in proceedings ifrequired to do so by the NZCC. If the applicant is a company, itmust use best efforts to secure the complete and truthful co-operation of current and former directors, officers and employees.It is usual for the NZCC to require the person to agree to permit theNZCC to share information provided to it with overseas regulators.If the ongoing conditions of leniency or co-operation are not met,the NZCC will not be bound by the conditional grant of immunityand may use all information provided to it in any proceedingsagainst that person. It is usual for the NZCC to have previouslyrequired the person to agree to waive any jurisdictional challengesto such proceedings. Immunity under the Leniency or Co-operation policies will notaffect private claims by third parties.


There is presently no formal marker system. The NZCC has

indicated that it may consider whether to implement one when itreviews the Leniency Policy this year.


The Leniency Policy applies where a confidential formal writtenapplication has been made. The NZCC will receive oralhypothetical or off the record enquiries as to whether leniency maybe available. However, the Commission did not include a paperlessprocess in its Leniency or Co-operation policies. It addresses, on acase by case basis, issues arising around creation of documentationfollowing the application. This includes considering whetherwithout prejudice or litigation privilege may apply to prevent thirdparties gaining access to information provided by a leniency or co-operation applicant.


Applications are treated as being confidential.As a condition of the Leniency Policy, the NZCC requires that theperson must not disclose to, or communicate with, any third partiesthe fact of the application, the grant of conditional immunity andany information provided to the NZCC.The NZCC endeavours to keep confidential the identity of successfuland unsuccessful applicants for leniency. It has said that it will takesteps to ensure that, as far as the law allows, communicationsbetween it and leniency applicants are not disclosed.

4.5 At what point does the ‘continuous co-operation’requirement cease to apply?

The continuous co-operation requirement applies throughout theinvestigation and any subsequent proceedings.


The NZCC does not formally operate a leniency plus arrangement.The Co-operation Policy described above can operate, to someextent, as a leniency plus policy.The NZCC does not operate a formal penalty plus policy. However,failure to voluntarily advise the NZCC of involvement in anothercartel that is subsequently discovered is likely to be considered anaggravating factor in any subsequent application for co-operation orany assessment of recommended penalty in respect of cartelbehaviour.



The Leniency Policy applies to the first person (corporate orindividual) who applies for leniency. If an individual successfullyapplies for leniency independently from a company, the ensuingimmunity does not extend to the company. If a companysuccessfully applies for leniency, the immunity may extend to anycurrent or former director, officer or employee of that company.



New

Zea

land




Cartel activity is not a criminal offence in New Zealand and so ‘pleabargaining’ is not relevant.The NZCC may enter into without prejudice settlement discussionswith a party to cartel conduct in the context of its Co-operationPolicy. In such discussions, the NZCC has said that it will debatethe legal basis and the sufficiency of evidence in respect of eachcause of action in a proceeding but that it will not trade causes ofaction in order to reach a settlement.A settlement may be as to liability only or may also include arecommended penalty. Any penalty for cartel conduct is set by theHigh Court. The NZCC and defendant can, at most, agree arecommended penalty (and put forward a range of appropriatepenalties) for the court to consider. The High Court has indicatedthat it will carefully consider the appropriateness of any penaltyrecommended to it by the parties but, to date, has set penalties inaccordance with the parties’ recommendation.

7 Appeal Process


Enforcement proceedings for breach of the cartel provisions of theAct are commenced by the NZCC in the High Court. The judgmentof the High Court may be appealed to the Court of Appeal. Appealsfrom the Court of Appeal are to the Supreme Court but requireleave.


Evidence, including cross examination of witnesses, is produced inthe High Court. It is unusual for evidence to be admitted on appeal.

8 Damages Actions


Civil proceedings for breach of the Act may be brought by third partiesin the usual way. The plaintiff must establish each element of thecontravention, on the balance of probabilities, and prove loss resultingfrom the contravening conduct. Compensatory and exemplarydamages may be awarded but there are no multiple damages awards.


The present High Court Rules enable one or more persons to sue onbehalf of all persons with the same interest in the subject matter ofthe proceeding. However, this is more limited than commonprovisions overseas for class actions and new legislation andamendments to the High Court Rules have been suggested to enableclass actions in New Zealand. It has been suggested that any suchlegislation could enable the NZCC to seek to become the leadplaintiff in a class action.


The limitation period for civil proceedings is the same as forpenalty proceedings brought by the NZCC (see above).


The usual rules as to costs in civil cases apply. Costs are at thediscretion of the court and will usually be awarded to the successfulparty. Costs awarded are only a contribution to actual costsincurred and indemnity costs are seldom awarded.


Private actions for cartel conduct have not reached trial.Confidential settlements may account for this, especially where theprivate action follows on from a proceeding brought by the NZCC.

9 Miscellaneous


At present, the NZCC is unable to share information that it hascompulsorily obtained with overseas competition authorities or useits statutory information gathering powers to assist overseasregulators. A bill was introduced into Parliament in September2008, which, if passed, would permit this. At present, the NZCCseeks confidentiality waivers from leniency and co-operationapplicants to enable it to share information.

9.2 Please mention any other issues of particular interest inNew Zealand not covered by the above.

The NZCC has identified the detection of prosecution of cartels tobe a high priority for it. It works closely with the AustralianCompetition and Consumer Commission, and the informationsharing arrangements referred to above are directed to enhancingthat co-operation with the ACCC.

WWW.ICLG.CO.UK177


New

Zea

land

Ian Denton

Wilson Harle64 Fort StreetAucklandNew Zealand

Tel: +64 9 915 5709Fax: +64 9 915 5701Email: [email protected]: www.wilsonharle.com

Ian is a partner in Wilson Harle. He is a commercial litigationpractitioner with significant experience in competition and consumerprotection matters. Ian has appeared for clients as counsel and junior counsel in theDistrict Court, High Court, Court of Appeal and Privy Council incommercial and in competition matters. In the area of competition law, Ian has acted for clients in a numberof investigations and in proceedings involving alleged cartel activity.He provides advice on compliance issues under the Commerce Actand in applications for clearance of acquisitions. Ian regularlyassists clients in investigations and in responding to notices issuedin relation to the Commerce Act and has acted in criminalproceedings defending clients alleged not to have complied withsection 98 notices served by the Commission. He has extensiveexperience in advising on the other statutes administered by theCommission, including the Fair Trading Act 1986 and CreditContracts and Consumer Finance Act 2003, and has acted forclients prosecuted under those statutes and by other regulatoryagencies such as the Securities Commission and Companies Office.

Allison Ferguson

Wilson Harle64 Fort StreetAucklandNew Zealand

Tel: +64 9 915 5707Fax: +64 9 915 5701Email: [email protected]: www.wilsonharle.com

Allison is a partner of Wilson Harle where she practises incommercial litigation. She is experienced in advising clients onstrategic competition issues as well as assisting and representingclients with investigations of, and proceedings by, the CommerceCommission under the Commerce Act, including in relation toalleged cartel activity. Allison is also experienced in advising on, andrepresenting clients in proceedings under, the Fair Trading Act andother regulatory statutes administered by the CommerceCommission, particularly in the fields of energy andtelecommunications. She has appeared as counsel in the HighCourt, the District Court, the Court of Appeal, the Privy Council andbefore arbitration panels.

Wilson Harle is a specialist litigation firm based in Auckland, New Zealand. The firm was formed by former partnersand staff of one of New Zealand’s largest national commercial law firms. It practises exclusively in the area of litigationand related advice, the decision to do so being intended to minimise the potential for conflicts and maximise the abilityto offer comprehensive but independent services at the highest level in the chosen area of practice.

Wilson Harle is recognised as one of the leading dispute resolution practices in New Zealand, having been listed assuch in the Asia-Pacific Legal 500 since its first year of operation in 2002 and was described in the 2006 - 2007 issueas having “gained an established reputation as a leading boutique in New Zealand”.

As part of their practice as commercial litigators, members of Wilson Harle regularly assist clients in dealing withregulatory bodies such as the Commerce Commission. In particular, the partners have acted in connection with anumber of alleged cartels, including international cartels, in assisting clients in the Commission’s investigation and indefending proceedings and in co-operation negotiations with the Commission. They have also assisted clients ininvestigations and proceedings under other statutes administered by the Commission, for misleading and deceptiveconduct and sector specific legislation, and in challenging the determinations or actions of the Commission by way orappeal or judicial review.


178

Chapter 31


Advokatfirmaet Selmer DA

Norway



Section 10 of the Norwegian Competition Act (Act of 5 March 2004no.12) prohibits anti-competitive agreements and arrangementsbetween “undertakings”. Section 2 of the Act defines“undertaking” as any private or public entity that exercisescommercial activities. The definition corresponds to the EUconcept and covers any legal or natural person. Public enforcement is both civil and criminal. Civil sanctions mayconsist of orders to bring the infringement to an end, includinginterim measures pursuant to Section 12 of the Act, andadministrative fines pursuant to Section 29 of the Act. The criminalsanctions are fines and imprisonment pursuant to Section 30 of theAct. Section 10 is modelled on Article 53 of the EEA Agreement whichin turn replicates Article 81 of the EC Treaty. Article 53 of the EEAAgreement is applicable inter alia to cartel activity that affects tradebetween the EEA Member States (the EU Member States andNorway, Iceland and Liechtenstein). Multinational cartels maytherefore be subject to parallel application of Section 10 of theCompetition Act, Article 53 EEA and Article 81 EC.


The Norwegian cartel provision follows from Section 10 of theCompetition Act. The wording is similar to Article 54 EEA andArticle 81 EC. The provision prohibits agreements and concertedpractices between undertakings which have as their object or effectthe prevention, restriction or distortion of competition. The non-exhaustive list of practices caught by the provision includes:

price fixing;output restrictions; andmarket sharing.

The third paragraph of Section 10 provides that restrictiveagreements may be legal if they fulfil the following cumulativeexemption criteria:

they improve the production or distribution of goods orservices or promote technical or economic progress; they allow consumers a fair share of the resulting benefits; they do not impose on the undertakings concerned

restrictions which are not absolutely necessary for theattainment of the consumer welfare enhancing objectives;andthey do not afford the undertakings concerned the possibilityof eliminating competition in respect of a substantial part ofthe relevant products or services.

As is the case under EC/EEA law, agreements or decisions that arecaught by the prohibition in the first paragraph and do not qualifyfor exemption according to the third paragraph, are automaticallyvoid and unenforceable without the need for intervention by asurveillance authority. In cases where there is a trade effect within the EEA, Article 53 ofthe EEA Agreement is also applicable alongside Section 10.


The Norwegian Competition Authority enforces the provisions ofthe Competition Act, including the cartel prohibition in Section 10.It investigates possible violations and is empowered to adoptadministrative sanctions including fines. The Competition Authority may elect to report undertakings orpersons to a Prosecution Authority, in which case the continuedinvestigation and sanctioning will follow the general criminalprocedure rules. In principle, the Prosecution Authorities mayinitiate an investigation independently but do not, in practice, do so. Decisions of the Competition Authority may be appealed to theMinistry of Government Administration and Reform. Decisionsregarding administrative fines are however not subject to appeal butmust be challenged before the courts in a civil procedure. In cases where trade between the EEA Member States is affected,Article 53 of the EEA Agreement is also applicable. In such cases,the Competition Authority is empowered and has the obligation toenforce Article 53 EEA; see Section 7 of the EEA Competition Act(Act 5 March 2004 no. 11). Article 53 is also enforced by the EFTASurveillance Authority or the European Commission according tothe division of competence provisions in Article 56 EEA. Casesmay be transferred between the Competition Authority and theEFTA Surveillance Authority pursuant to the rules of Protocol 4 tothe Surveillance and Court Agreement, which mirrors theprovisions of Regulation 1/2003 EC, and between the EFTASurveillance Authority and the Commission according to Section 11of Protocol 23 to the EEA Agreement. Coordination of cartelenforcement in multi-jurisdictional cases is governed by theprovisions in Protocol 4 / Regulation 1, Protocol 23 and thecompetition network cooperation notices issued by the EFTASurveillance Authority and the Commission.

Ingvill Tollmann Fosse

Harald Evensen

WWW.ICLG.CO.UK179


Nor

way

Advokatfirmaet Selmer DA Norway


The Competition Authority opens investigations on its owninitiative and at its own discretion. The investigation proceduredoes not have procedural deadlines or milestones. The Authoritymay initiate an investigation on the basis of information received inany way, including own market intelligence, complaints, andinformation from other Competition Authorities. So far leniencyapplications have not been important. The general rules of publicadministration, including the provisions of the PublicAdministration Act applies to the Competition Authority’sinvestigations. These include an obligation to investigate andestablish the facts in a sufficiently thorough manner before anydecisions are made. Pursuant to Section 24 of the Competition Actthe Authority may order any person or individual to supplyinformation. Requests for information may be written or thepersons involved may be requested to submit the information orally.The latter method is often used in connection with dawn raids.Pursuant to Section 25 of the Competition Act the Authority mayenter the premises of undertakings or homes of relevant persons inorder to search for evidence (dawn raids). Dawn raids are a normalpart of cartel investigations. The Authority must obtain a courtorder in order to execute the dawn raid. The parties are not heardbefore the court order is issued. Section 16 of the Public Administration Act provides that a partymust be given advance notice and an opportunity to commentwithin a stipulated time period, before an administrative decision ismade. The advance notice shall explain the nature of the case andotherwise contain such information as is considered necessary toenable the party to protect its interests in a proper manner. Decisions shall be reasoned and shall refer to the relevantprovisions of law and to factual circumstances on which theadministrative decision is based (Sections 24 and 25 of the PublicAdministration Act). Section 27 of the Competition Act and Section 19 of the PublicAdministration Act regulates the parties’ right to access documentswith the Competition Authority. The parties shall have access to thecase documents upon request, provided such access results in noharm or risk to the investigation or third parties. Normally theAuthority does not grant access to the documents until the advancenotification (draft decision) is issued. The Competition Authoritymay conclude its investigation by reporting the case to aProsecution Authority, normally the Norwegian National Authorityfor Investigation and Prosecution of Economic and EnvironmentalCrime (Økokrim) or one of the larger police authorities. TheProsecution Authority may, after a criminal investigation procedure,elect to issue a bill of indictment and take the case to court, or ashas been the practice in most cases under the pre 2004 CompetitionAct, issue an optional penalty writ. If the fine is not accepted by thedefendant, the Prosecution Authority may take it to court.


There are no sector specific offences. The Competition Act does not apply to terms and conditionsrelating to work or employment. As of January 2009 the following sector specific exemptions are inforce:

agreements concerning primary production and sales ofagriculture and fishery products,collective agreements on prices and public financingbetween certain groups of health personnel in private

practice and public authorities,certain category agreements related to the sale of books, agreements on common prices for members of taxi-centrals,agreements on common prices for members of ruralcooperatives offering services,agreements on common prices for members of machinerycooperation in agriculture.

In addition there are block exemptions parallel to those in the EU /EEA.

1.6 Is cartel conduct outside Norway covered by theprohibition?

Section 5 of the Competition Act provides that the Act is applicableto conduct that is undertaken, have effect or is liable to have effectwithin the realm of Norway. Further it may be decided by regulationthat the Act shall govern conduct that has effect, or are liable tohave effect, exclusively beyond of the realm of Norway. As ofJanuary 2009 no such regulation has been enacted. Consequently,the cartel prohibition covers agreements that are made outsideNorway as long as they are liable to have effect in Norway and notagreements that will only have effect outside Norwegianjurisdiction.




Please Note: * indicates that the investigatory measure requires theauthorisation by a Court or another body independent of theCompetition Authority. Criminal investigatory powers are exercisedby the Prosecution Authority with or without a court order.


The Competition Authority has quite wide-ranging investigativepowers under the Competition Act. Its authority to requestinformation includes the right to decide how the information is to


Order the production of specific documents orinformation Yes Yes*

Carry out compulsory interviews with individuals Yes Yes*




Yes* Yes*



Yes Yes*


Yes* Yes*



Nor

way


be obtained: by written statement; production of documents andother evidence; or by oral explanation. It is common for theAuthority to demand oral explanations from specific individuals inconnection with a dawn-raid. Non-compliance with the Authority’srequest or the supply of incorrect information is subject toadministrative fines or criminal sanctions.The appeal court has accepted that the Competition Authority maymake “mirror copies” of identified parts of an undertaking’s orperson’s computer hard discs, such as catalogues and areas linkedto certain persons or divisions. It will be for the parties involved toidentify privileged information. The Competition Authority’s investigation is administrative incharacter although imposition of administrative fines is consideredcriminal sanctions under the European Human Rights Convention.Self incrimination privilege may not be available at theadministrative stage, at least not for natural persons, sinceindividuals are only subject to criminal sanctions.


The Competition Authority does not have such general surveillancepowers. If the case is pursued under the Criminal Procedure Actsuch surveillance would require a court order.




Search of premises will be carried out by personnel from theCompetition Authority; the team will normally consist of specialistinvestigators, lawyers, economists and IT specialists. A party under investigation has the right under the PublicAdministration Act to be assisted by a legal representative. TheCompetition Authority is prepared to postpone the search if legalrepresentation can be obtained within a reasonable timeframe. Insuch instances the Authority will demand access to relevant officesand/or seal the premises in order to “freeze” the situation. Howlong the Authority will be prepared to wait will depend on theurgency, e.g whether there is a coordinated search in severallocations, the expected complexity and duration of the search andthe availability of specialist lawyers. It is advisable not accept to be interviewed by the Authority unlessthe person has proper legal representation.


Yes. By reference to Section 119 of the Criminal Procedure Act theCompetition Authority may not access information containing interalia legal advice. Legal privilege applies to all documentsconcerning legal advice including correspondence to and fromlawyers. It is limited to advice sought and given in a role as legaladvisor and does not encompass documents and informationrelating to any other roles that the lawyer may have such as boardsecretary etc. The legal privilege applies equally to in-house andexternal counsel.


As mentioned above any party being subject to a search may have“a witness” present, in most instances this is a legal representative.The right to representation only extends as far as the search may becarried out without material disadvantage for the Authority orwithout the purpose of the search being put at danger.


Yes. The obstruction of investigations such as failure to supplyinformation, provision of incorrect or incomplete information,breaking of seals or physical obstruction of a search may besanctioned with administrative fines or criminal fines orimprisonment. The obligation to supply information imposed byformal requests for information may be sanctioned with periodicpenalty payments. Individuals, including lawyers, have beenreported to the police for obstruction of investigations, but there areno public decisions on such sanctions.



The sanctions for companies are either administrative finespursuant to Section 29 of the Act or criminal fines pursuant toSection 30 of the Act. The maximum administrative fine for infringement of the cartelprohibition is 10% of the company’s turnover. For obstructing theinvestigation the maximum administrative fine is 1% of thecompany’s turnover. The maximum fines follow from Regulation22 August 2005 no. 909 on the setting of administrative fines. In the preparatory works to the Competition Act it is stated thatguidance should be sought from EU/EEA law when settingadministrative fines. The regulation on administrative finesreiterates Section 29 of the Competition Act where it is stated thatwhen determining the amount of the fine, particular attentionshould be paid to the turnover of the offending undertaking, thegravity and duration of the violation and leniency. The regulationcontains a more detailed list of points derived from the pre 2006EC/EEA guidelines. It is to be assumed that the CompetitionAuthority will also take into account the more detailed points of the2006 EC and 2007 EEA fining guidelines when imposingadministrative fines in individual circumstances. There have beenno administrative fines in cartel cases since the Act came into forcein May 2004. For criminal fines the preparatory works also make reference toEC/EEA guidance for administrative fines in determining criminalfines. In addition Section 48b of the Penal Code is relevant. Itmentions the preventive effect of the punishment, the gravity of thebreach, whether the company could have prevented theinfringement by guidelines, instruction, education, control or othermeasures, whether the breach was committed in order to further theinterest of the company, whether the company have or could haveachieved any advantage by the infringement, the financial means ofthe company and whether there are other reactions following fromthe infringement on the company or on anyone acting on its behalf,inter alia whether any person is subject to criminal prosecution. Most cartel cases are closed by acceptance of a fine issued by the

WWW.ICLG.CO.UK181


Nor

way


Prosecuting Authority, and there is one landmark case under theprevious competition rules which had similar provisions againstcartels. In criminal cases the company risks relinquishment of gains inaddition to fines. Relinquishment of gains has been awarded underthe previous competition rules in one landmark case, and has beenthe subject of one mediation procedure before the court. In cartelcases, gains would normally be the profit related to excessivepricing. Such profits are difficult to estimate and would be basedon the court’s discretion. An important consequence of being fined for cartel activity is thatthe public procurement rules may bar the company fromparticipating in bids for public contracts for a certain period.


There are no administrative fines for individuals; sanctions arecriminal fines or imprisonment for up to three years and up to sixyears in severely aggravated circumstances. The principles for setting fines to individuals will to a large extent bethe same as for companies. Criminal fines have been imposed onindividuals for infringement of the former cartel provisions. As ofJanuary 2009 there are no convictions or penalty writs under thecurrent Act which entered into force on 1 May 2004. Fines forindividuals are of course much lower than for companies but willlikely be higher under the 2004 Act than during the previous regime. Imprisonment has not yet been used in Norway. Section 34 of the Penal Code regarding relinquishment of gains alsoapplies to individuals, as does the periodic penalty paymentspursuant to Section 28 of the Competition Act.


The limitation period for cartel conduct is 10 years for theimposition of administrative sanctions. The limitation period issuspended once the Competition Authority takes steps to secureevidence pursuant to Section 25 of the Competition Act (dawn-raids) or informs the undertaking that it is suspected of infringingthe cartel prohibition. The limitation period for criminal sanctions for cartel conduct isalso 10 years. The period is suspended by the initiation of legalproceedings or by the suspect being charged, either by declarationor by investigatory actions.


There are no legal provisions preventing a company from payingsuch costs. Such payment is considered a reportable and taxableincome or gift.



Section 31 of the Competition Act provides that consideration shallbe given to whether the undertaking has assisted the CompetitionAuthority in the detection of its own violations or those of otherswhen determining the amount of administrative or criminal fines.In criminal cases the company may also by virtue of Section 59 of

the Penal Code enjoy penalty reduction, inter alia because ofunconditional admission of guilt. Regulation 22 August 2005 no. 909 on determining administrativefines and leniency provides a detailed leniency programme. Theprogramme is based on the pre 2006 leniency notices from theEFTA Surveillance Authority and the Commission. Total immunity from administrative fines is granted if theundertaking is the first to submit new evidence that forms asufficient basis to obtain a court order allowing the Authority toperform a dawn-raid or which is sufficient to prove infringement ofthe cartel prohibition. The company must cooperate fully during the CompetitionAuthority’s procedure, must immediately end the participation inthe infringement unless the Competition Authority asks it tocontinue, and must not have been an instigator of the infringement. Companies that do not qualify for immunity but provide evidencethat significantly strengthens the Competition Authority’spossibility of proving an infringement and immediately ends itsparticipation, may enjoy reduction in fines. The first company in isgiven a reduction of 30-50% reduction, the second 20-30% andothers up to 20%. This programme does not cover criminal sanctions. However, in apublic statement issued on 6 March 2008 the Competition Authoritypromises not to report parties that have been granted leniency to theProsecution Authorities, and also states that it considers criminalprosecution of parties that have been granted immunity from orreduction in administrative fines to be protected from subsequentcriminal prosecution by virtue of Protocol 7 to the EuropeanConvention on Human Rights. The Authority states further that itwill not report to the Prosecution Authorities any individualemployed by an undertaking covered by the leniency programme.The Prosecution Authorities have a procedural obligation to hearthe Competition Authority before they initiate investigation in cartelcases. It is extremely unlikely that criminal investigation will beinitiated against the Competition Authority’s advice, and it hasnever happened. In practice the leniency programme shouldtherefore afford adequate security against criminal prosecution. The Ministry of Government Administration and Reform hasrecently proposed to include criminal sanctions in the leniencyprogramme. A regulation to this effect may be expected in the fallof 2009. Until December 2008 there have only been two leniencyapplications under the programme.


The Competition Authority does not have a marker system asprovided by the 2006 Commission and 2007 EFTA SurveillanceAuthority leniency notices, but evidence may be presented inanonymous or hypothetical form.


The regulation contains no requirement concerning the form of aleniency application. The authority normally makes recordings ofinterviews and will also make a report on the information provided.See question 4.4 regarding proposed new rules that will limit accessto leniency documents.



Nor

way



There are no specific confidentiality rules regarding informationprovided in connection with a leniency application. The generalprovisions on access to documents apply. Section 26 of the Competition Act provides that the access toinformation Act does not apply inter alia to cartel cases so long asthe case has not been brought to conclusion. The provision alsocovers any criminal procedures. This means that third parties haveno right to access information during the procedure. However itdoes not bar the Competition Authority from releasing informationprovided it is not confidential information (business secrets etc.)under the confidentiality obligations in the Civil Litigation Act. Pursuant to Section 27 of the Competition Act undertakings andindividuals under investigation are to be allowed access to case-documents upon request, provided such access results in no harm orrisk to the investigation or to third parties. The parties are allowedaccess to documents relevant for their own defence, the right toaccess does not cover documents that only concern otherundertakings or individuals. The Ministry of Government Administration and Reform recentlyproposed new rules for the treatment information submitted inconnection with leniency applications aimed at harmonising theNorwegian rules with the EC/EEA rules. Such information will betreated confidentially and may not be used in follow-on actions. Ifadopted, the rules may be expected to enter into force on 1 January2010.


The cooperation requirement applies throughout the administrativeprocedure.


In setting administrative or criminal fines the authorities or courtswill take into consideration cooperation that have assisted theauthorities in the detection and investigation of cartels and otheroffences, see question 4.1 above. There are no specific “leniencyplus” programmes. “Penalty plus” principles are not applied.



There are no specific procedures in the Competition Act orregulations covering independent cartel reports by individuals.Pursuant to Sections 2-4 and 2-5 of the working environment Act anemployee has the right to report censurable conditions to publicauthorities without risking retaliation from the employer. Theseprovisions would apply to cartel whistle blowing. Currently there are no specific provisions granting immunity to anindividual reporting a cartel offence on its own, but it is to beexpected that the Competition Authority would apply the principlesof its statement of 6 March 2008 to such cases, see question 4.1.There are no financial incentives to whistle blowing individuals.Employers are of course free to operate their own incentivesystems.

The Ministry of Government Administration and Reform recentlyproposed amendments to the Competition Act that will ensureconfidentiality for whistle blowers. If adopted it may be expectedthat they will enter into force on 1 January 2010.



There are no specific settlement or plea bargaining procedures. Ifan undertaking brings a decision imposing administrative fines tocourt, the court has an obligation pursuant to Chapter 8 of the CivilLitigation Act to propose court mediation. A case concerningrelinquishment of gains under the previous competition act wasclosed by court mediation. In criminal proceedings the Prosecuting Authority may imposefines (and relinquishment of gains) by penalty writ, which, ifaccepted by the defendant, closes the case without courtproceedings. Before the defendant accepts the penalty writ it is inmost cases possible to discuss the amount of the fine with theProsecuting Authority, although Norwegian criminal proceduredoes not provide for a plea bargaining procedure. If the ProsecutingAuthority demands imprisonment, the case must be taken to courtand there are no plea bargaining procedures.

7 Appeal Process


The Competition Authority’s decisions may be appealed to theMinistry of Government Administration and Reform, howeverdecisions to impose administrative fines may not be appealed.Instead the undertaking may bring action against the state to contestthe decision. It is advisable to bring action within the two-monthpayment deadline. The case is tried pursuant to the procedural rulesof the Civil Litigation Act and the court may try all aspects of thematter. Criminal sanctions are imposed by the courts and follow the regularcriminal procedure. As of January 2009 there have been no impositions of fines forcartel offences under Section 10.


The appeal process before the courts allows for cross-examinationof witnesses irrespective of whether the procedure is civil orcriminal. Norwegian criminal procedure is based upon the bestevidence principle and the right of contradiction. This entails thatevidence shall be presented first hand, oral proceedings and thatboth parties have the rights to cross-examine the other party’switnesses. Furthermore, the European Human Rights Convention,which is incorporated into Norwegian law, contains in Article 6 no.3 the right to cross-examine witnesses as part of the right to a fairtrial.

WWW.ICLG.CO.UK183


Nor

way


8 Damages Actions

8.1 What are the procedures for civil damages Actions for losssuffered as a result of cartel conduct?

Civil damages actions for cartel conduct must be based on thegeneral principles of the law of damages. Breach of the cartelprohibition will normally constitute wilful or negligent conduct,which may form the basis for damages. A final cartel decision willin most cases be considered conclusive evidence of such conduct,except penalty writs issued by the Prosecution Authorities sincethese are not reasoned. A successful claim for damages requires that the claimant is able toshow economic loss as a result of the cartel conduct. Claim fordamages may be brought before the courts pursuant to the rules ofthe Civil Litigation Act. As of January 2009 no follow-on caseshave been brought to court. There are a small number of out-of-court settlements in cases where there were a limited number oflarge customers. None of these are public. Pursuant to Section 27 of the Competition Act, anyone with legalinterest may demand access to documents of inter alia cartel cases.The right to access may include access to confidential informationas long as it does not appear unreasonable to whom the informationpertains. The right to access is limited to closed cases. This willenable the parties to use documents seized with the cartelparticipants as a basis for a claim for damages.

8.2 Do your procedural rules allow for class-Action orrepresentative claims?

Yes, the new Civil Litigation Act that entered into force on 1January 2008 allows for class-action. The Civil Litigation Act setsout particular class action procedural rules in Chapter 35.


The limitation period for raising claims is 3 years from the time theclaimant obtained information on the cartel activity and the possibleloss. If the Competition Authority’s investigation drag out it maybe necessary to bring action before documents and informationbecomes available from the Competition Authority. However, if theProsecution Authorities have brought criminal proceedings, thedamage claim is not time-barred until one year after a legallyenforceable criminal judgment.


The main rule according Section 20-21(1) of the Civil LitigationAct is that the party who substantially or in full obtains a judgmentaccording to the claim is entitled to full compensation for costs.


As of January 2009 no civil damages claims have been broughtbefore the courts. As mentioned above, civil damage claims havebeen settled out of court.

9 Miscellaneous


There is nothing to report.

9.2 Please mention any other issues of particular interest inNorway not covered by the above.

There is nothing to report.



Nor

way


Harald Evensen

Advokatfirmaet Selmer DA Tjuvholmen allé 1N-0112 OsloNorway

Tel: +47 2311 6500Fax: +47 2311 6501Email: [email protected] URL: www.selmer.no

Harald Evensen, partner, heads the firm’s practice group forEuropean and competition law, with its main practice areasNorwegian and European competition law, public procurement,state aid and the rules on establishment, free movement of goodsand services, persons and capital. He has extensive competitionlaw experience from private practice and public service, includingserving as Legal Director with the Norwegian Competition Authorityand with the EFTA Surveillance Authority. Clients include a numberof multinational companies.Mr. Evensen is an active speaker and writer in his area of expertise.He is editor and co-author of the Commentary to the NorwegianCompetition Act (1999) and (2009), and has published articles onthe Norwegian merger rules (2002) and the use of frameagreements in public procurement (2003).

Ingvill Tollman Fosse

Advokatfirmaet Selmer DA Tjuvholmen allé 1N-0112 OsloNorway

Tel: +47 2311 6500Fax: +47 2311 6501Email: [email protected]: www.selmer.no

Ingvill Tollman Fosse is an associate at Selmer in Oslo.Ingvill primarily works with EU and EEA issues, includingcompetition law and state aid. She is also affiliated with Selmer’stechnology, media and culture department. Ingvill has a Master of Law from the University of Bergen where shegraduated in 2007 and an LLM in Intellectual Property from KingsCollege London 2008.

Advokatfirmaet Selmer DA is an internationally oriented fast growing leading Norwegian law firm (turnover growth of17% and 42 % the last two years), with 110 lawyers and 20 strategy- and finance advisors. Selmer’s multidisciplinaryenvironment with lawyers, accountants, economists and civil engineers gives Selmer a unique ability to understand andhandle efficiently complex issues, creating added customer value.

Selmer is a leading transactional law firm, and has strong expertise in businesses such as banking and finance, energy,maritime and offshore, real estate and consumer goods. Clients include listed companies, multinational corporationsand the Norwegian Government.

Selmer is known for providing business oriented and practical advice.



Chapter 32

WKB Wiercinski Kwiecinski Baehr

Poland



The Act of February 16, 2007 on competition and consumerprotection (the “Act”) forms the legal basis for the prohibition ofcartels under Polish law. The Act is - in principle - part of theadministrative law. Participation in cartel is not a criminal offence in Poland, with oneexception (bid rigging - see the answer to question 1.5 for furtherdetails).


Article 6 of the Act prohibits agreements which have as their objector effect elimination, restriction or any other infringement ofcompetition in the relevant market. Definition of an “agreement” is broad and covers formal andinformal agreements or understandings in any form between oramong two or more competitors (horizontal agreements) andbetween entrepreneurs conducting their activity at differenteconomic levels (vertical agreements). Decisions of associations ofentrepreneurs may also constitute “agreements” in the meaning ofart. 6 of the Act.Art. 6 of the Act lists practices infringing the law. It includes allhard-core offences like price fixing, market sharing and outputlimitation. The list is not exhaustive.There are some exemptions from the general prohibition ofanticompetitive agreements (like e.g. de minimis exemption orblock exemptions), but they do not apply to hard-core cartels.


The President of Office of Competition and Consumer Protection(the “OCCP President” or the “Authority”) is the body responsiblefor the enforcement of the competition law provisions in Poland. The OCCP President acts throughout its headquarters as well asthroughout its nine regional branches located in the biggest Polishcities.


There are two types of proceedings related to allegedanticompetitive conduct: the explanatory proceedings and theantimonopoly proceedings.

If the circumstances indicate a possibility that the provisionsof the Act have been infringed, the OCCP President mayinstitute, on an ex officio basis, explanatory proceedings todetermine initially whether an infringement that wouldjustify the institution of antimonopoly proceedings hasoccurred (it is a right and not an obligation of the OCCPPresident to initiate explanatory proceedings - if there aresufficient grounds to initiate antimonopoly proceedings fromthe beginning, the competition authority is entitled to do so).The explanatory proceedings are not conducted against anyparticular undertaking (there are no parties to theproceedings). In consequence, there is no possibility to e.g.impose financial penalties in the course of explanatoryproceedings. However the financial penalty may be imposedfor procedural infringements committed during theexplanatory proceedings e.g. for refusal to provideinformation requested by the OCCP President. Evidence anddocuments collected in the course of the explanatoryproceedings usually constitute part of the file of thesubsequent antimonopoly proceedings. The antimonopoly proceedings are always instituted on exofficio basis. They are initiated with a resolution containingformal charges against named parties (e.g. cartelparticipants). There are no clear phases within theantimonopoly proceedings. Their aim is to collect allnecessary information about the alleged infringement,primarily through formal requests to provide, in writing,information or documents (other sources of evidence, liketestimony from witnesses and experts opinions are alsoallowed). It is noteworthy that the infringement may beestablished and financial penalties may be imposed only afterconduct of the antimonopoly proceedings.

Unannounced inspections can be conducted in the course ofexplanatory proceedings as well as in the course of antimonopolyproceedings.


‘Bid rigging’ in public tenders constitutes a criminal offence underArticle 305 of the Polish Criminal Code.By law some specific sectors of the economy are exempted from thegeneral prohibition of anticompetitive practices e.g. certainagricultural markets as well as gaming lotteries.

Bartosz Turno

Aleksander Stawicki



Pol

and

WKB Wiercinski Kwiecinski Baehr Poland

1.6 Is cartel conduct outside Poland covered by theprohibition?

The OCCP President may institute the proceedings if the practicecauses or may cause an effect in the territory of the Republic ofPoland. In this way the prohibition applies also to cartel conductoutside Poland, provided that such conduct has or may have someeffect in Poland (e.g. it influences prices charged to Polish customers).






The unannounced inspection (dawn raid) can have a form of controlor a search (within a control).

Control is based on cooperation with an undertaking underinvestigation. In its course, the controllers have a right to,inter alia, enter premises, buildings, rooms or means oftransportation related to the economic activities of the dawn-raided; demand access to files, books and all kinds ofdocuments or data carriers related to the subject of theinspection, make notes, duplicates and extracts and requireoral explanations. They are also allowed to retain files,books and all kinds of documents and any other object whichmay represent evidence, however only upon a special rulingof the OCCP President. It is noteworthy that controllers maybe assisted by the Police or by officers of other stateinspection authorities. Searches (within a control) can be conducted underpermission issued by the Court for the Protection ofCompetition and Consumers. No active cooperation fromthe side of the undertaking is required in such case, allactivities may be performed upon the own initiative of thecontrollers. During a search, controllers may also be assistedby the Police. The Polish Code of Criminal Procedureapplies to searches.




In justified cases, in the course of a control or a search, the OCCPrepresentatives, upon a prior notice given to the undertaking beingraided, are entitled to record the control or its selected parts bymeans of video or audio devices. The IT data carriers on which the course of a search was recordedshall be attached to the inspection protocol.


With respect to business premises, authorised representatives of theOCCP, as well as authorised representatives of the Trade Inspection,may carry out an inspection.Inspection in a form of control can be carried out upon productionof a written authorisation issued respectively by the OCCPPresident or by the voidship inspector of the Trade Inspection. Asearch (within a control) can be carried out upon issuance of theresolution by the Court for the Protection of Competition andConsumers. The OCCP President may also authorise representatives of theCompetition Authority of another Member State as well as anyindividuals having special knowledge (experts) to participate in theinspection e.g. IT specialists.During a control or a search, the OCCP representatives or theauthorised representative of the Trade Inspection may beaccompanied by the officers of other state inspection authorities orby the Police. In such case, the state inspection authorities or thePolice will perform activities upon the inspector’s request. With respect to non-business/residential premises (e.g. privatehouses, means of transport), an inspection - only in a form of asearch - can be conducted. A search of non-business premises canbe carried out only by the Police. However the OCCPrepresentatives or authorised representatives of the CompetitionAuthority of another Member State as well as individuals havingspecial knowledge (experts) are present during that search.There are no specific legal provisions that would oblige theinspectors to wait for the arrival of legal advisors. However inpractice, the inspectors may be ready to wait for a reasonable time.It is not recommended to obstruct the inspection if the inspectorsare not willing to wait for legal advisors to arrive.


The official position of the OCCP President is that the rules of legalprivilege are not applicable in Poland. We would argue that on the basis of the relevant legislation as well ason the basis of the bar rules of conduct advice rendered by qualifiedlawyers (advocates or legal counsels) should be legally privileged.In practice, the inspectors may be ready to respect the privilegedcharacter of some documents e.g. legal opinions.To the best of our knowledge, this issue has not been subject to thecourt ruling so far consequently there is no guideline in thejurisprudence.







Yes N/A



Yes N/A


Yes N/A

WWW.ICLG.CO.UK187


Pol

and



Individuals may refuse to provide information or co-operate in thecourse of an inspection exclusively when this would expose them ortheir relatives and other related persons to criminal liability.


The OCCP President may impose upon the undertaking, by way ofa decision, a financial penalty being an equivalent of up to EUR 50million, if the undertaking, even unintentionally, has not co-operated in the course of the inspection. Financial penalty in thesame amount may be imposed for a failure to provide informationor for providing false or misleading information to the OCCPPresident.Financial penalty in the maximum amount of approx. EUR 37,000can also be imposed upon a person acting on behalf of theundertaking, the owner of non-business premises (a housingapartment, room, real estate, or means of transportation), as well asupon employees of the undertaking, for failure to provideinformation or providing false or misleading information, requestedby the OCCP President or a failure to co-operate in the course of theinspection.In 2007, a financial penalty of approx. EUR 500,000 (PLN 2million) has been imposed by the OCCP President for destroyingdocuments in the course of the search.



The OCCP President may impose upon the undertakingparticipating in a cartel a financial penalty being not in excess of10% of the revenue earned in the accounting year preceding theyear within which the penalty is imposed. The financial penalty isimposed in the decision finding an infringement.


Polish law does not provide for sanctions for individuals (unlessthey can qualify as “undertakings” (e.g. liberal professions) - insuch case the rules described in question 3.1 apply).


In case of practices restricting competition (including cartels), theantimonopoly proceedings shall not be instituted where, since theend of the year in which they have been abandoned, one year haselapsed (e.g. if the cartel activity stops in May 2008, theproceedings may be initiated until 31 December 2009).


Yes. There is no provision of law that would prohibit it.



The leniency programme was introduced into the Polish legalsystem in 2004 and is governed by the Act and by the Regulationthe Council of Ministers of 17 July 2007 (the “Regulation”). Thereis no additional “soft-law” (e.g. guidelines or notices) with respectto the leniency programme in Poland.The leniency programme in Poland is not limited to cartelagreements among competitors, but also applies to verticalagreements.Application for a leniency is available before initiation of anyproceedings by the OCCP President as well as during theexplanatory or antimonopoly proceedings.According to Article 109 of the Act, a full leniency (a waiver of afine) will be granted only to:

the first leniency applicant who provides the OCCP Presidentwith “information concerning the existence of forbiddenagreement, as may suffice for instituting antimonopolyproceedings” (i.e. before any proceedings are initiated orduring explanatory proceedings); or the first applicant who, upon its own initiative, provides “aproof rendering it possible to issue a (final) decision” (i.e.during antimonopoly proceedings),

provided that the OCCP President “did not have at the time anyinformation or pieces of evidence proving sufficient for institutingantimonopoly proceedings or issuing a decision”. There are also additional requirements that need to be fulfilled inorder to qualify for full immunity: (1) the applicant must fullycooperate with the OCCP President in the course of theproceedings; (2) the applicant must stop its involvement in theagreement not later than as of the day on which the leniencyapplication is filed; and (3) the applicant will not benefit from fullimmunity if it was an initiator of the agreement and induced otherundertakings to participate in the agreement. The first leniency applicant who does not qualify for full immunityas well as subsequent leniency applicants may benefit from areduction of fine (partial immunity). There are the following conditions for partial immunity:

the applicant “has presented to the President of the Office,upon his own initiative, evidence which to an essential extentwill contribute to issuing of the decision” andthe applicant “has ceased participating in the agreement notlater than as of the day on which it presented the evidence”to the OCCP President.

Although the law does not explicitly impose an obligation to fullycooperate with the OCCP President for those that qualify for partialimmunity, it appears from one of the Authority’s decisionsregarding leniency (decision of April 7, 2007 No. DOK 1/08) thatthe applicant for a reduction of a fine is also obliged to fullycooperate with the OCCP President in the course of theproceedings.The maximum fine for breach of Polish competition law is set at thelevel of up to 10% of the company’s revenue earned in the financialyear preceding the year within which the penalty is imposed. Incase of leniency applicants who do not qualify for immunity, themaximum possible fine is reduced to 5%, 7% and 8% of thecompany’s revenue, respectively, (depending on the “place in theline”). The 8% reduction can, in principle, be awarded to allundertakings that fulfil the formal criteria (there is no limit in the



Pol

and


number of beneficiaries). The fact that the “reward” forparticipation in a leniency programme is very limited (e.g.reduction of the maximum level of penalty from 10% to 5% of therevenue) is often criticised by the legal practice in Poland.


Polish law does not provide for a “marker system”. The only wayto secure immunity is to file the leniency application. The Regulation requires that the applicant “attaches to the requestinformation sufficient to initiate the proceeding or a piece ofevidence which allows or significantly facilitates the issuance of thedecision”, as well as other documents. There is also a possibility toattach a “preliminary description” of “other evidence andinformation”, not possessed by the applicant when the request isbeing filled. There is also a procedure of dealing with an incomplete request. Inprinciple, such a request should be completed within the time limitsspecified by the OCCP President. If the applicant fails tosupplement missing information or documents to the OCCPPresident on time, the authority “does not take the request intoconsideration”. What is important is that “the request together withevidence remains in the case file”. This could lead to a conclusion that although Polish law does notprovide for a “marker” system as such, in practice it should bepossible to contact the OCCP President, provide basic informationregarding the agreement (i.e. a brief description of a practice,entrepreneurs involved, relevant market affected by the agreement)along with statements that an applicant did not initiate an agreementand induce other members to participate in it, but without e.g. keyevidence. Following that the OCCP President should require theapplicant to complete the application within the specified time andthe fact that it has not been originally provided with all attachmentsshould not have an adverse impact on the position of the applicant. The foregoing approach seems to be accepted by the OCCPPresident, although it is not free of legal risks. In addition, oneshould bear in mind adverse effects of failure to completeapplication within the specified time.


In general leniency applications in Poland should be filed inwriting. However, it is also possible to make an oral statement. Inthis case application for leniency is recorded in writing by theauthorised OCCP’s official in a form of a protocol. The protocolconstitutes the part of a case file. There are no legal barriers tomake an oral statement during a dawn raid.We believe, that the access to the case file by third parties (e.g. inthe context of civil damage follow-on litigation) is limited by theprovisions of the Act (this is however a complex issue that wouldrequire separate analysis). The final decision of the OCCPPresident finding an infringement is binding upon Polish courts (itis a binding proof of the infringement, not of the related damage).The final decision of the OCCP President finding an infringementis binding upon Polish courts (it is a binding proof of theinfringement, not of the related damage).


Leniency applications together with attachments are treated asconfidential in the course of the explanatory and antimonopolyproceedings. They will, however, be made accessible to all parties tothe proceedings “prior to the issuance of the final decision”. Thismeans that they are accessible usually after the issuance by the OCCPPresident to the parties to the antimonopoly proceedings of the noticethat hearing of evidence is terminated and parties have right to providethe Authority with final consideration of evidence gathered by theAuthority in a course of proceedings. The law does not specify whenexactly the notice in question should be issued and consequently theleniency applications together with attachments should be madeaccessible. However this should be sufficient for legitimate protectionof interest of other parties - we would assume that normally this willbe, and usually is, 14 days, with some possibilities to extend it to 30days, especially in complex cases with many parties). Earlier disclosure of documents and information submitted by theleniency applicant (i.e., in the course of the proceedings and notonly prior to the issuance of the final decision), requires a writtenconsent of the applicant for a disclosure. Finally, it is worth mentioning that an application for leniency, aswell as enclosures to the application, are kept in the files even if anapplication for leniency is rejected by the OCCP President (whenthe conditions for leniency are not fulfilled) or withdrawn by theleniency applicant.


The requirement of “continues cooperation” is binding for theleniency applicant throughout the entire proceedings carried out bythe OCCP President. It should be pointed out that by law only the undertaking applyingfor full leniency (a waiver of a fine) is obliged to co-operate fullywith the OCCP President in the course of the proceedings.However, as mentioned above in question 4.1, it appears from oneof the Authority’s decisions regarding leniency (decision of April 7,2007 No. DOK 1/08) that the applicant for a reduction of a fine isalso obliged to fully cooperate with the OCCP President in thecourse of the proceedings. To the best of our knowledge thisdecision has been appealed and is not final. Position of the OCCPPresident should be taken into account by all leniency applicants.


No. There is no leniency plus nor penalty plus policy in Poland.



The Polish leniency programme is designated only forentrepreneurs (undertakings) and not for the individuals (see theanswers to questions 3.1 and 3.2). Therefore, there are no whistle-blowing procedures for individuals.In the same time, any interested person (including natural persons andundertakings) may submit to the OCCP President informationindicating possibility of violation of competition law (amicus curiae).

WWW.ICLG.CO.UK189


Pol

and




There is a possibility to “settle” the case with the OCCP Presidentoutside the leniency programme (i.e., apply for a decision thatwould impose remedies bringing illegal anticompetitive practice toan end). In case of a commitment decision no penalty is imposed. The position of the OCCP President is that this instrument is notapplicable in the case of cartels.

7 Appeal Process


The decision of the OCCP President is subject to an appeal to theCourt for the Protection of Competition and Consumers (the“Competition Court”), lodged within two weeks from the date ofdelivering of the decision. The Competition Court is a civil courtand the Code of the Civil Procedure applies in the course of theproceedings. The OCCP President and the undertakings thatcommitted the alleged practice are parties to the proceedings. In principle, appeal to the Competition Court suspendsenforceability of the decision. The law provides for a possibilitythat the decision is made immediately enforceable by the OCCPPresident, where it is required to maintain competition on therelevant market. The OCCP President shall without delay remit the decision to theCompetition Court together with the case files. Where the OCCPPresident considers the appeal to be justified, it may, withoutremitting the files to the Court, revoke or change the decision in itsentirety or in part. The Competition Court is authorised to change the decision in fullor in part or to annul the decision (the latter - in principle only ifthere are manifest errors in the proceedings or in the decision,which cannot be cured in the course of the court proceedings).A ruling of the Competition Court may be subject to an appeal filedwith the court of second instance i.e. with the Court of Appeals.The ruling of the latest can be further appealed to the SupremeCourt with a cassation appeal. A cassation appeal is howeveraccepted by the Supreme Court only in individually selected cases(e.g. where there is a novel issue of law or there is a manifest errorin the verdict of the Appeal Court).


Yes, the Code of Civil Procedure that applies in the courtproceedings, allows for the cross-examination of witnesses.

8 Damages Actions


There are no specific legal basis for bringing action for damages incase of a breach of the competition law in Poland. General Civil

Code rules apply in such cases. All material and formalrequirements have to be met, and the party has to be able to provethe infringement (see however comments in question 4.3), the lossand the rational link between the loss and the breach of thecompetition law rules. There are no specialised courts for hearing competition relateddamage cases, the civil courts (departments having jurisdiction incommercial cases) will hear such cases. The case can be initiatedfollowing final decision of the OCCP President (and in such a case,the decision is binding upon the court (it is a proof of infringement))or directly in front of the court (there is no requirement to initiatethe antimonopoly proceedings first).


In Poland, at this moment there is no possibility for a class-action.However, the draft of an act allowing for a class action is in theprocess of negotiations.The Polish Civil Code foresees a possibility for representativebodies (such as the consumer associations, human rightsorganisations, scientific and technological bodies, trade unions andautomobile associations, other than bodies representing commercialtransport undertakings) to initiate the proceedings on behalf of thecitizens. Additionally, however only after the consent of theplaintiff, they can join the proceedings already initiated.


The proceedings shall not be instituted three years after the date onwhich the party injured discovered the damage and the identity ofthe party that is obliged to redress but in any case not later than tenyears from the date when the event that caused the damagedoccurred.Separate rules will apply if the damage claim is based on contractbetween the injured party and the cartelist.


In those cases, general rules apply. Until the final decision, bothparties will bear their own legal costs. In the final decision, thecourt will decide who will bear the costs. In principle, it is thelosing party, who bears all the costs related to the proceedings,however, there are exceptions from that rule.


We are not aware of such cases.

9 Miscellaneous


Please find below some statistics on competition law enforcementin Poland.



Pol

and


Source: the OCCP “Report on activities” for 2007 (available onhttp://www.uokik.gov.pl/en/information_about_the_occp/general_information/reports_of_activities/).

Source: the OCCP “Report on activities” for 2007 (available onhttp://www.uokik.gov.pl/en/information_about_the_occp/general_information/reports_of_activities/).

9.2 Please mention any other issues of particular interest inPoland not covered by the above.

On January 1, 2009 the guidelines for setting fines for practicesinfringing competition (“the Guidelines”) issued by the OCCPPresident came into force. The Guidelines apply to practicesinfringing Article 6 (anticompetitive agreements, including cartels)and Article 9 (abuse of dominant position) of the Act as well as topractices infringing Article 81 and 82 of the EC Treaty (when theprovisions of the EC Treaty are applied simultaneously with thePolish Act).

The Guidelines took effect after public consultations that werecarried on in October and November 2008. Although theGuidelines are not legally binding they are considered to be helpfulin increasing the OCCP President’s transparency with respect to themethodology of setting financial penalties. Moreover, theGuidelines should provide undertakings infringing competitionrules with assistance while calculating potential financial penalties.While dealing with the nature of infringement, the Guidelinesdifferentiate between three types of infringement: very serious,serious and other infringements. The very serious infringementsinclude all horizontal agreements (price-fixing agreements, bidrigging, market sharing agreements or collective boycotts) and allcases regarding the abuse of the dominant position that lead or maylead to the elimination of other undertakings from the market. Thenature of the infringement determines the level of the fine. Thebasic amount will be different for each of the three kinds of theinfringements (i.e. more than 1% but not more than 3% of incomefor very serious infringements; more than 0.2% but not more than1% of income for serious infringements; and more than 0.01% butnot more than 0.2% of income for other infringements).The Guidelines provide also the non-comprehensive list ofmitigating and aggravating circumstances that could affect the levelof fine (increase or decrease it) by no more than 50%. The list ofmitigating circumstances include passive role of the undertaking inthe infringement, acting under constraint, voluntary removal of theeffects of the infringement, the abandonment by the undertaking ofthe anticompetitive practice before the OCCP President institutesthe antimonopoly proceedings or promptly after institution of suchproceedings, cooperation with the OCCP President in the course ofproceedings, especially contributing to a prompt and efficientcarrying the proceedings. The aggravating circumstances includethe role of ringleader or the initiator of the infringement; coercion,exerting pressure or retaliation in order to implement or continuethe infringement, prior infringement of the prohibition ofcompetition restricting practices (recidivism), deliberateinfringement.The publication of the Guidelines, the first document of this typeever published by the OCCP President, is a long awaiteddevelopment. It is also believed that the increase in the OCCPPresident’s transparency with respect to the methodology of settingfines may contribute inter alia to development of the leniencyprogramme in Poland as undertakings will be able to calculate thegain stemming from collaboration with the OCCP President withinleniency programme.

Year 2004 2005 2006 2007

Number ofleniency appli-cations inPoland

1 2 2 6

Horizontal agreements

Vertical agreements

Abuse of a dominant position

Number of deci-sions recognisingthe practice asrestricting competi-tion and ordering itscessation (2007)

3 1 34

Number of deci-sions recognisingthe practice asrestricting competi-tion and finding thatit has been ceased(2007)

3 2 16

Number of deci-sions not recognis-ing the practice asrestricting competi-tion (2007)

4 2 21

WWW.ICLG.CO.UK191


Aleksander Stawicki

WKB Wiercinski, Kwiecinski, Baehr Sp.k.11 Polna Str.00 633 WarsawPoland

Tel: +48 22 201 0000Fax: +48 22 201 0099Email: [email protected]: www.wkb.com.pl

Aleksander Stawicki, LL.M., legal counsel and partner in charge ofWKB’s competition practice. Aleksander advised major Polish and foreign Clients in a greatnumber of proceedings before the Polish competition authority inconnection with alleged anti-competitive practices and mergercontrol. He has also advised clients from regulated industries inproceedings before Polish regulatory authorities and has extensiveexperience in drafting and implementing compliance programmesfor Polish and foreign Clients. He authored several publications on the topic, featuring in bothPolish and foreign literature. Aleksander has spoken on competitionissues at many Polish and international conferences. Aleksander is recommended as a leading Polish competition lawexpert by Chambers Europe, PLC Which Lawyer? and LMG Guide toWorld’s Leading Lawyers in Competition and Antitrust.

Bartosz Turno

WKB Wiercinski, Kwiecinski, Baehr Sp.k.11 Polna Str.00 633 WarsawPoland

Tel: +48 22 201 0000Fax: +48 22 201 0099Email: [email protected]: www.wkb.com.pl

Bartosz Turno is an associate at WKB, currently finalising an LL.D.course at the School of Law and Administration of Adam MickiewiczUniversity in Poznan. He worked for the Polish competitionauthority UOKiK for a few years and was a stagiaire with CartelsDirectorate of European Commission’s Directorate General forCompetition in Brussels. He has authored several publications oncompetition law and has spoken on competition issues at manyPolish and international conferences. Before joining WKB, Bartoszworked at the Brussels office of a leading US law firm specialisingin competition law.

WKB Wiercinski, Kwiecinski, Baehr is one of the leading Polish independent law firms with offices in Warsaw andPoznan.

The Firm provides comprehensive legal advice on all competition law issues. It has advised Clients before thecompetition authority and before the courts in complex cases related to the alleged anticompetitive practices in, interalia, the energy industry, media and new technologies markets, advertising market, architectural services, solid andliquid fuel trade, building materials and the insurance market. WKB lawyers regularly advise Clients in concentrationcontrol proceedings and in drafting and implementation of compliance programmes.

WKB is recommended as a leading Polish law firm specialising in competition law by prestigious legal publications suchas Chambers Europe, PLC Which Lawyer? European Legal 500 and Legal Media Group Guides to World’s LeadingLawyers in Competition and Antitrust.


Pol

and

192

Chapter 33


Marques Mendes & Associados

Portugal



The Portuguese competition legal regime, which underwent asignificant transformation in 2003 with the adoption of a newCompetition Act (Law No. 18/2003 of 11 June 2003, assubsequently amended, hereinafter referred to as “the Act”), isessentially administrative in nature.In what specifically regards cartels, the general prohibition thereof iscontained in article 4(1) of the Act, which prohibits, in line with article81(1) of the EC Treaty, agreements between undertakings, decisions byassociations of undertakings and concerted practices, in whatever form,which have as their object or effect to appreciably prevent, distort orrestrict competition in the whole or part of the national market.Infringements to the Act, including cartels, are considered as quasi-criminal minor offences, without prejudice to any criminal liability(in cases where cartels involve behaviours, such as fraud orextortion, which are qualified as crimes under criminal law) (seearticle 42 of the Act), and are punished with fines and otherancillary sanctions as set out in articles 43 and 45 of the Act.


As stated above, the general prohibition thereof is contained in article4(1) of the Act, which prohibits, in line with article 81(1) of the ECTreaty, agreements between undertakings, decisions by associationsof undertakings and concerted practices, in whatever form, whichhave as their object or effect to appreciably prevent, distort or restrictcompetition in the whole or part of the national market.The said provision lists some of the behaviours which may beprohibited, including:a. directly or indirectly fixing purchase or sale prices or

interfering with their establishment by free market forces,causing them to artificially rise or fall;

b. directly or indirectly fixing other transaction conditions atthe same stage or different stages of the economic process;

c. limiting or controlling production, distribution, technicaldevelopment or investments;

d. sharing markets or sources of supply;e. systematically or occasionally applying discriminatory

pricing or other discriminatory conditions to equivalenttransactions;

f. directly or indirectly refusing to purchase or sell goods orservices; and

g. conditioning the signing of contracts to the acceptance ofadditional obligations that, by their nature or according tocommercial usage, have no connection with the object of thecontracts.

Not only those practices expressly listed in article 4(1) of the Act butalso any other practices, provided their object or effect is theprevention, distortion or restriction of competition, fall within thescope of the legal prohibition. It is noteworthy that only the distortionsor restrictions of competition which are appreciable are deemedrelevant for the purposes of the prohibition established in article 4 ofthe Act - a feature which was not present in the former regime andwhich, somehow, corresponds to the adoption of a de minimisapproach clearly influenced by the developments at EC level.


The Portuguese competition enforcement agency is theCompetition Authority, which was created, and its statutes(hereinafter “the Statutes”) enacted, by Decree-Law No. 10/2003,of 18 January 2003.The Authority has the nature of a public entity with administrativeand financial autonomy, and has been granted statutoryindependence for the performance of its activities, withoutprejudice to being subject to general guidance principles ofcompetition policy established by the Government, as well as toministerial supervision (“tutela”) over certain acts [see articles 1(1)and 4 of the Statutes].The Authority is subject to the administrative supervision of theMinister responsible for economic affairs, who, in particular, mustapprove the Authority’s plan of activities and budget, as well as theAuthority’s annual report of activities and accounts (see article 33of the Statutes). Furthermore, the Authority’s annual report ofactivities must be submitted to the Parliament by the Government(see article 37 of the Statutes).The Competition Authority is composed of two bodies, the Council(“Conselho”) and the Sole Supervisor (“Fiscal Único”). They areassisted by the Office of the President and the Public HearingsOffice. Additionally, the Authority employs a team of lawyers,economists and other staff, organised in several departmentsamongst which the Office of the Chief Legal Officer, the Office ofthe Chief Economist, the Merger Operations Department, theRegulated Markets and State Aid Department and the RestrictivePractices Department. These, in turn, are supported by theCompetition Protection Inspectorate, the Judicial AffairsDirectorate and the Administrative and Financial Directorate.

Pedro Vilarinho Pires

Mário Marques Mendes

WWW.ICLG.CO.UK193


Por

tuga

l

Marques Mendes & Associados Portugal

The Authority’s organisation chart may be found on the Authority’swebsite.


When the Authority becomes aware, from whatever origin(including private complaints), of infringements to article 4 of theAct, it starts an investigation in which it makes inquiries necessaryto identify the practices and the infringing undertaking(s) [seearticle 24(1) of the Act]. The general regime of quasi-criminalminor offences, enacted by Decree-Law No. 433/82 of 27 October1982, shall apply to these proceedings on a subsidiary basis [seearticle 22(1) of the Act].All services under the State’s administration, as well as independentadministrative authorities, have the duty to inform the Authority ofany fact they become aware of, which may constitute aninfringement to competition rules [see article 24(2) of the Act]. When the investigation is complete, the Authority either:a. takes no further action, if there is insufficient evidence of

infringement. In the cases where the investigation is starteddue to a complaint, the Authority, before closing the file,shall notify the complainant of its intentions granting areasonable period for submission of the complainant’sobservations [see article 25(2) of the Act]; or

b. starts proceedings by notifying the accused undertakings, orassociations of undertakings, if there is sufficient evidence ofinfringement. In this notification, the Authority shall fix areasonable deadline for the undertakings concerned (i) tosubmit their observations on the Authority’s charges, as wellas on the evidence produced by the latter, and (ii) to requestother measures to obtain complementary evidence, whichthey may deem convenient.

The proceedings carried out by the Authority after opening a formalinquiry must ensure that the parties involved are granted a hearingand respect the other principles of the adversarial system. Inaddition, the Authority must comply with the principles followed byall Portuguese authorities in conducting administrative proceduresand investigations (for example, those contained in theAdministrative Procedural Code).If the practice investigated may cause damage that is imminent,serious and irreparable or difficult to correct, the Authority can, atany time in the investigation or evidence-taking, order theimmediate suspension of the practice or take any other provisionalmeasures necessary to immediately re-establish competition, orwhich are indispensable for the final decision to be effective.Whenever practices affecting a market subject to sector regulationare being investigated, the Authority must obtain the opinion fromthe relevant regulatory authority prior to approving any interimmeasures or adopting a decision that applies fines or other penalties,orders preventive or corrective measures or exempts the practicesunder article 5 of the Act (see articles 27 and 28 of the Act).At the end of the in-depth investigation, the Authority adopts a finaldecision (article 28 of the Act) in which it may:a. close the file, due to, e.g., the inexistence of an infringement;b. consider that an infringement exists, in which case it may

order the infringer to adopt the indispensable measures tobring the infringement to an end within the deadlineestablished therefor;

c. apply fines or other sanctions; d. authorise an agreement under the terms and conditions set

out in the aforementioned article 5 of the Act.


The Competition Act applies to all economic activities carried out,occasionally or permanently, within the private, public orcooperative sectors. In this respect, the Act did not include the solegeneral exemption allowed under the previous competition regime:undertakings legally charged with the management of services ofgeneral economic interest or which benefit from legal monopoliesare now subject to competition provisions, as long as theapplication of these rules does not impede, in law or in fact, thefulfilment of their mission.According to article 5(1) of the Act, agreements, decisions andpractices prohibited under article 4 may be considered justified,provided that they contribute to improving the production ordistribution of goods and services or to promoting technical oreconomic development. Similarly to the provisions of article 81(3)of the EC Treaty, this exemption will only apply when,cumulatively, they:a. allow the consumers of those goods and services a fair share

of the resulting benefit;b. do not impose on the undertakings concerned any restrictions

that are not indispensable to attaining these objectives; andc. do not afford such undertakings the possibility of eliminating

competition in a substantial part of the goods or servicesmarket in question.

Agreements, decisions or practices are also deemed justified when,though not affecting trade between Member States, they satisfy theremaining application requirements of a Block ExemptionRegulation adopted under article 81(3) of the EC Treaty. Thisbenefit may be withdrawn by the Authority if the behaviour coveredleads to effects incompatible with the provisions of article 5(1).Pursuant to article 5(2) of the Act, the Authority may carry out aprior analysis of agreements, decisions and practices to grantnegative clearance or individual exemptions. As far as regulated sectors are concerned, the Authority’sresponsibilities are to be carried out in cooperation with thecorresponding regulatory authorities. The Act establishes a mutualinformation obligation regarding possible anti-competitivebehaviour in those sectors. It does not, however, clarify how toresolve possible conflicting decisions.

1.6 Is cartel conduct outside Portugal covered by theprohibition?

Without prejudice to the international obligations of the PortugueseState, the Act applies to all restrictive practices and concentrationoperations which occur in the national territory or which have, ormay have, their effects in such territory (see article 1 of the Act).









Por

tuga

l




None.


No, there are not.


The Authority may request from any other services of the PublicAdministration, including criminal police authorities, through theircorresponding ministerial cabinets, the cooperation deemednecessary for the performance of the Authority’s powers [see article17(1)(e) of the Act].


Searches of business premises are conducted by the Authority’sofficials who must carry a credential issued by the Authority, whichshall indicate the purpose of the action undertaken, and a copy ofthe judicial warrant [see article 17(3)(b) of the Act]. The law does not impose on the Authority, or on its officials, anyduty to wait for legal advisors to arrive.


When in-house legal advisors are not members of the PortugueseBar Association and therefore cannot be considered practisinglawyers under Portuguese law, their legal advice is not protected bythe rules of privilege.


The proceedings carried out by the Authority after opening a formalinquiry must ensure that the parties involved are granted a hearingand respect the other principles of the adversarial system. In

addition, the Authority must comply with the principles followed byall Portuguese authorities in conducting administrative proceduresand investigations (for example, those contained in theAdministrative Procedural Code).


The provision of false, inaccurate or incomplete information, therefusal to cooperate with the Authority, or the obstruction to theexercise of the latter’s investigation powers, is punishable with fines ofup to 1% of the previous year’s turnover in Portugal for each infringingundertaking. The public records of the Authority’s decisions do notinclude any case in which this sanction has been imposed.



As stated above, infringements to the Competition Act areconsidered as quasi-criminal minor offences, without prejudice toany criminal liability (which can arise from behaviour such as fraudor extortion) (see article 42 of the Act). The applicable fines are (see article 43 of the Act):a. up to 10% of the previous year’s turnover in Portugal for

each undertaking infringing Article 4 of the Act; andb. up to 1% of the previous year’s turnover in Portugal for each

infringing undertaking that provides false, inaccurate orincomplete information, or does not cooperate with theAuthority or obstructs the exercise of the latter’sinvestigation powers.

Should the infringement be considered sufficiently serious, theAuthority, together with the fine, may apply the following ancillarysanctions (see article 45 of the Act):a. order, at the offender’s expense, the publication of the

sanctioning decision in the official gazette (“Diário daRepública”) or in a Portuguese newspaper with national,regional or local circulation, depending on the relevantgeographic market; and

b. in case of competition law infringements carried out inpublic procurement proceedings, prohibit the concernedundertaking(s) to participate, during a maximum of twoyears, in proceedings for entering into contracts for publicworks, for concessions of public works or public services, forthe lease or acquisition of goods, for the acquisition ofservices or for the granting of public licences orauthorisations.

Pursuant to article 46 of the Act, the Authority can also imposeperiodic penalty payments of up to 5% of the average daily turnoverin Portugal in the preceding financial year for each day of delay incomplying with an Authority decision imposing a sanction orordering the adoption of certain measures, counted from a date setby a decision.Under the Act, individuals, legal entities, companies and associationswithout legal personality can be liable for the quasi-criminal minoroffences set forth in the Act [see article 47(1) of the Act].Legal entities and equivalent entities are liable for offences to theAct when the infringements were carried out [see article 47(2) ofthe Act]: a. on their behalf; b. on their account, or; c. in the exercise of duty by members of their corporate bodies,

by their representatives or by their employees.





Yes N/A



Yes N/A


Yes N/A

WWW.ICLG.CO.UK195


Por

tuga

l


Under article 47(3) of the Act, the directors of legal entities andequivalent entities are responsible when they are, or should be,aware of the infringement and fail to take appropriate measures toterminate it immediately. The sanction is the same as that for theinfringing undertaking, subject to a special reduction, unless a moreserious penalty applies under another legal provision.Undertakings that are part of an association subject to a fine orperiodic payment are joint and severally liable for paying the fine[see article 47(4) of the Act].


See the previous answer.


The statute of limitations in the case of quasi-criminal minoroffences set forth in the Act is (see article 48 of the Act):a. three years in the case of provision of false, inaccurate or

incomplete information, or lack of cooperation with theAuthority or obstruction of the exercise of the latter’sinvestigation powers; and

b. five years in the remaining cases.The statute of limitation for sanctions imposed under the Act is, inprinciple, five years counting from the date the decision thatimposed the sanction became definitive.


Employees are not liable for infringements to the cartels’prohibition established in article 4 of the Act. In fact, under the Act,the only representatives of companies that can be personally liablefor cartel infringements are the members of the board of directors.Employees’ infringements to competition law shall typically consistof violations of obligations to provide information or documents.In principle, nothing seems to prevent a company from voluntarilypaying the costs of and/or the financial penalties imposed on itsformer or current employees.



Law No. 39/2006, of 25 August 2006, enacted the leniency regimein Portuguese Competition law. This regime has meanwhile beencomplemented by Regulation No. 214/2006, of 22 November 2006,of the Competition Authority, which sets out the leniencyadministrative procedure.Law No. 39/2006 establishes that the immunity or special reductionof fines may be granted in proceedings concerning agreements andconcerted practices prohibited under article 4 of the Act and, ifapplicable, under article 81 EC. To obtain full immunity, an applicant must (see article 4 of Law No.39/2006):a. be the first undertaking to provide information and evidence

on a prohibited agreement or concerted practice before aninvestigation has begun;

b. co-operate fully and continuously with the CompetitionAuthority from the moment of the initial contact;

c. end its participation in the cartel; andd. not have coerced other undertakings to participate in the

breach.A reduction of fines is available if, at the time the information isprovided, an investigation is already underway, but the Authorityhas not yet notified the cartel participants of the proceedings it hasstarted (see articles 5 and 6 of Law No. 39/2006).Only the first two leniency applicants can benefit, within thefollowing percentage bands:a. the first applicant can obtain a minimum reduction of 50%

(see article 5 of Law No. 39/2006); andb. the second applicant can obtain a maximum reduction of

50% (see article 6 of Law No. 39/2006). In both cases, the applicant must (see articles 5 and 6 of Law No.39/2006):a. provide information that is decisive for the investigation and

in proving the breach; andb. comply with all the other conditions of an immunity

applicant, except for being the first undertaking to applybefore an investigation has begun.

In determining the amount of the reduction, the CompetitionAuthority takes into account the leniency applicant’s contributionnot only to the investigation but also to proving the breach [seearticles 5(2) and 6(2) of Law No. 39/2006].A leniency applicant can obtain a special or an additional reductionin fines in a procedure related to a restrictive agreement or practiceif it is the first to offer evidence relating to other restrictiveagreements or practices that it is party to in the same or in anothermarket. Evidence must be offered either before an investigation hasbegun, or after an investigation has begun, but before theCompetition Authority has notified the undertakings concerned ofthe proceedings it has started (see article 7 of Law No. 39/2006).Article 8 of Law No. 39/2006 extends the leniency regime to themembers of the board of the companies involved. Executives, be iton behalf of the company or individually, may benefit fromimmunity or a fine reduction, along the same lines and under thesame conditions as companies do.


It is possible to obtain a marker that establishes the order of theapplicants from when the application is deemed filed.A leniency application must be filed with the Authority by (seeRegulation No. 214/2006):a. delivery to the Authority’s administrative services at its head

offices;b. registered mail addressed to the Authority’s head offices; orc. e-mail sent to the address [email protected], with

electronic signature and chronological validation. The application is deemed filed on the date and hour:a. indicated in the receipt issued by the Authority’s

administrative services;b. in which the mail is registered; orc. in which the e-mail is sent, as certified by an authorised

certifying entity.



Por

tuga

l



A leniency application must be made using the form included inAnnex I to the abovementioned Regulation No. 214/2006.Accordingly, oral applications are not accepted.


The decision to grant leniency is made in the final decision adoptedin the anti-trust proceedings (see article 10 of Law No. 39/2006).Although no decisions have yet been issued under the leniencyregime, it is foreseeable that such a decision shall identify all theundertakings involved in the investigated agreement or concertedpractice, including those that have applied for leniency, whether ornot this has been granted. Given the secrecy rules that apply toproceedings for quasi-criminal minor offences, the applicants’identity, as well as that of the other undertakings involved, is notdisclosed until a final decision in such proceedings is made.In addition, the undertakings involved in anti-trust proceedingshave defence rights, which include access to all the evidencegathered by the Authority, such as that provided by a leniencyapplicant. Although there is no case law on this, it is possible thatthis would include all evidence, including the applicant’s identity.In any event, the Authority must, when investigating anti-trustinfringements, ensure the protection of the investigatedundertakings’ legitimate interests (including leniency applicants) bynot disclosing their business secrets (see article 16 of the Act).


As stated above, a leniency applicant must co-operate fully andcontinuously with the Competition Authority from the moment ofthe initial contact. This is made by:a. providing all evidence already obtained or to be obtained in

the future;b. responding diligently to any request of information;c. avoiding acts that may endanger the investigation; andd. not informing the other participants in the concerted practice.Since neither Law No. 39/2006 nor Regulation No. 214/2006expressly indicate any point in which the continuous cooperationrequirement ceases to apply, the correct understanding should bethat such requirement subsists until the final decision in the antitrustproceedings.


See the answer to question 4.1 above.



Two types of situations should be considered:a. Members of the Board of Directors: as stated above, Law No.

39/2006 extends the leniency regime to the members of the

board of the companies involved. Executives, be it on behalfof the company or individually, may benefit from immunityor a fine reduction, along the same lines, under the sameconditions and using the same procedures as companies do.

b. Employees: As also stated above, when the Authoritybecomes aware, from whatever origin (including privatecomplaints), of infringements to article 4 of the Act, it startsan investigation. Individuals who wish to report cartelconduct independently of their employer may therefore filecomplaints as any other individual, and may use thecomplaint form available on the Authority’s website.



The Act does not contain any rule about early resolution, settlementor plea bargaining procedures, or accepting binding or informalcommitments. However, according to the Authority’s website, ithas closed anti-trust infringement procedures after the partiesoffered commitments.

7 Appeal Process


Law No. 52/2008, of 22 August 2008, which carries out acomprehensive reform of the organisation and functioning of thejudicial Courts and which gradually entered into force as of 1January 2009, has amended the provisions of the Act whichestablish the Courts that are competent to handle appeals fromdecisions adopted by the Authority both in sanctioning and inadministrative proceedings. Under the new regime, suchcompetence, previously entrusted, in exclusive terms, with theLisbon Court of Commerce, shall, as of 1 January 2009, begradually granted to the section of commerce (“juízo de comércio”)of the territorially competent court. In the absence of such sectionof commerce, the section of commerce of the Court of Lisbon shallbe the competent one.According to the new regime (which it must be stressed shallgradually enter into force, starting with the territorial areasindicated in Law No. 52/2008) the appeal process runs as follows:a. The Authority’s sanctioning decisions (typically involving

anti-competitive agreements, decisions and practices, abusesof economic power and infringements of the merger controlrules) may be appealed to the section of commerce of thecompetent court, under the quasi-criminal minor offencesregime. Appeals that refer to decisions applying fines orother penalties will suspend the enforcement of suchdecisions. The appeals of decisions of the section ofcommerce of the competent court which may be appealed arefiled with the Appellate Court of Lisbon, as a court of lastresort.

b. Decisions of the Authority adopted in administrativeproceedings set forth in the Act may be appealed to thesection of commerce of the competent court, followingadministrative procedural law. The decisions of the lattercourt may be appealed to the Appellate Court of Lisbonwhose decisions, in turn, may be appealed, as far as issues oflaw are concerned, to the Supreme Court of Justice. Shouldthe appeal of the Authority’s decision be limited to issues oflaw, then the appeal must be filed directly with the SupremeCourt of Justice.

WWW.ICLG.CO.UK197


Por

tuga

l



The procedures regarding the appeals of the Authority’s decisions tothe commerce section of the competent court (or to the LisbonCourt of Commerce, under the former appeals regime) allow for thetestimonial evidence.

8 Damages Actions


The substantive Portuguese legal regime applicable to third partyclaims for damages is defined in articles 483 et seq. and 562 et seq.of the Portuguese Civil Code, which set out the general rules onliability for illicit acts. According to the general Civil Code rules, the standard liabilityrequirements are: (i) the finding of an illicit behaviour; (ii) the proofof injury to the claimant; and (iii) the demonstration of a causal linkbetween the illicit conduct and the damage.The procedural framework within which private parties may bringclaims before Portuguese courts of law is set forth in the PortugueseCode of Civil Procedure. Such claims shall, as a rule, follow thecommon form of civil procedure.


Since 1995, a form of class action for damages is admitted underPortuguese law. Law No. 83/95, of 31 August 1995, which definesthe regime applicable to the so-called “acções populares” (“popularactions”), confers upon any citizens (legal entities or professionalsare excluded) or associations and foundations that promote certaingeneral interests, the right to claim for a compensation arising froman injury caused by the violation of such general interests.Arguably, the promotion and protection of competition are amongthe general interests that may justify the initiation of an “acçãopopular”. However, up to now, “acções populares” have rarelybeen initiated, and to our knowledge never with respect to theviolation of competition laws. Joint actions are also admissible under Portuguese law, notably,where the different actions are interrelated or based on commongrounds, or where the intervention of all the concerned parties isnecessary to preserve the effectiveness of the proceedings.


Under article 498 of the Portuguese Civil Code, actions fordamages must be initiated within three years from the date when thecomplainant acquires knowledge of the right to claim for damages.Such date shall not necessarily correspond to the date when theinfringement or the damage has occurred, as a reasonably prudentcomplainant may become conscious of the existence of the damageor of the related infringement of competitions laws at a later date.


Two types of court fees should be considered: (i) the “imposto dejustiça” (justice tax); and (ii) expenses relating to services requestedby the court and other fees incurred by the court in connection withthe proceedings (e.g. costs resulting from the intervention of expertsappointed by the court).The amount of court fees and expenses applicable in each specificcase is defined in accordance with the Code of Judicial Fees, andmay thus be estimated by plaintiffs prior to the filing of the action.The amount of the court fees largely depends on the initial amountof the claim or claims made before the court.Court fees are initially borne by all the parties. However, at the endof the proceedings, the court shall determine the proportion of thefees to be borne by each party. The basic rule is that the “losingparty” shall bear the full amount of the fees. In case of partial loss,the fees shall be divided proportionally among the concernedparties. Notwithstanding, each party shall support the fees of itsrespective lawyers, except where the parties have agreed otherwiseor, to a limited extent, if the judge decides to sanction the losingparty for litigating in bad faith.


There is no public record of any such case.

9 Miscellaneous


Article 6 of Decree-Law No. 18/2008, of 29 January 2008 (a statutethat enacted the Public Procurement Code) has amended article 45of the Act, setting as a new possible ancillary sanction forcompetition law infringements carried out in public procurementproceedings the prohibition to participate, during a maximum oftwo years, in proceedings for entering into contracts for publicworks, for concessions of public works or public services, for thelease or acquisition of goods or services by the State, or for thegranting of public licences or authorisations. As regards specific cases, the specialised Portuguese media gaveaccount of an investigation conducted by the Authority, leading tothe accusation of seven companies for alleged cartelisation in thecatering sector, which was reportedly initiated by an applicationfiled by a former director of one of the accused companies under theleniency regime. This would be the first case initiated pursuant toa leniency application.

9.2 Please mention any other issues of particular interest inPortugal not covered by the above.

None.



Por

tuga

l

Mário Marques Mendes

Marques Mendes & Associados Av. Eng.º Duarte Pacheco, 19, 12th floor1070-100 LisboaPortugal

Tel: +351 21 382 6300Fax: +351 21 382 6319Email: [email protected]: www.marquesmendes.com

Mário Marques Mendes is a senior partner at Marques Mendes &Associados.Mário Marques Mendes is a 1976 law graduate of the University ofLisbon Law School, a 1981 law graduate of the College of Europe,Bruges, and, as a Fulbright Scholar, a 1984 LLM graduate of theUniversity of Michigan Law School. Subsequently he becameAssistant Professor of Law at the University of Lisbon Law Schooland Lecturer in International Trade Law at the Centre for EuropeanStudies of the Portuguese Catholic University, Lisbon, whileresuming private practice. He served as vice-president of the LisbonCouncil of the Portuguese Bar Association (1996-99).His main practice areas are Competition/Antitrust Law, EC Law,Corporate Law, Telecommunications Law, Mergers and Acquisitions,Agency and Distribution Law, Intellectual/Industrial Property Law,International Trade and Public Procurement Laws, Litigation andArbitration. He was recognised as specialist lawyer in EU andCompetition laws by the Portuguese Bar Association. He is a frequent speaker and has written extensively on varioussubjects of EU law, notably competition/antitrust, and ofinternational trade law. He is a member of the Portuguese Bar Association, PortugueseAssociation of European Law, European Association of Lawyers andInternational Bar Association. Litigation and Arbitration.

Pedro Vilarinho Pires

Marques Mendes & Associados Av. Eng.º Duarte Pacheco, 19, 12th floor1070-100 LisboaPortugal

Tel: +351 21 382 6300Fax: +351 21 382 6319Email: [email protected] URL: www.marquesmendes.com

Pedro Vilarinho Pires is a partner at Marques Mendes & AssociadosPedro Vilarinho Pires, born in 1958, is a 1981 law graduate of theUniversity of Lisbon Law School. He was trainee Assistant-Professorof Law (“monitor”) at the University of Lisbon. In the years of1993/1997 he was IBM Portugal in-house Counsel and Director ofthe Legal Services.His main practice areas are Commercial Law, Corporate Law,Competition/Antitrust Law, Banking/Finance and Insurance Laws, ITLaw, Intellectual/Industrial Property Law, Telecommunications Law,Public Procurement Law, Labour Law, Agency and Distribution Law,Contract Law. He has authored and co-authored various writings on PortugueseCompetition law. He is a member of the Portuguese Bar Association, and of theInternational Bar Association.

Marques Mendes & Associados is a leading law firm whose practice covers a wide spectrum of business andcommercial law, with emphasis on corporate, banking/finance and all areas of EU law, in particularcompetition/antitrust at both EC and national levels (agreements and concerted practices, merger control - ofteninvolving multi-jurisdiction concentration operations -, abuse of dominant position and State aid) and regulatorymatters, as well as litigation and arbitration. The firm is also strongly involved in the information technology,telecommunications, energy and media areas.

The firm represents major national and multinational companies - including some of the top-ranking Fortune 500corporations - in a variety of sectors such as information technology (including computer hardware and software),consumer electronics, automotive industry, finance (including banking, insurance and securities), project financing,telecommunications, energy, media and entertainment, plastic and cement industries, pharmaceuticals, food andbeverage industry, international air transport and transport infrastructures. The firm has also been retained by EC aswell as national institutions and has advised and represented major companies and national public sector entities incross-border issues and transactions.




Chapter 34

Pachiu & Associates

Romania



The basis for cartel prohibition is represented by Article 5 (1) of theCompetition Law No. 21/1996 (the “Law”) which defines antitrustagreements as any express or tacit agreements between undertakings,decisions of the associations of undertakings or concerted practices,having as the object or effect the restriction, prevention or distortion ofcompetition on the Romanian market or on a part of it. Violation of the prohibition regarding antitrust agreementsconstitutes administrative offence, criminal offence and tort andtherefore triggers contraventional, criminal or civil liability, as thecase may be.


In particular the prohibition refers to those practices consisting of:(i) concerted fixing, directly or indirectly, of the selling or purchaseprices, tariffs, rebates, markups, as well as any other terms oftrading; (ii) limiting or controlling production, distribution,technological development or investments; (iii) allocatingdistribution markets or supply sources according to territorialcriteria, sales-and purchase volume or other criteria; (iv) imposingunequal terms for equivalent services to trading partners, thuscausing a competitive disadvantage to some of them; (v)conditioning the conclusion of contracts by imposing upon partnersthe acceptance of certain clauses stipulating additional serviceswhich, either by their nature or by commercial usage, do not relateto the object of such contracts; (vi) participating, in a concertedmanner, with rigged bids in auctions or any other forms ofcompetitive tendering; or (vii) eliminating competitors from themarket, limiting or preventing access to the market and the freeexercise of competition between other undertakings, as well asagreements not to buy from or to sell to certain parties withoutreasonable justification.The provisions of Article 5 (1) are not applicable to undertakings:(i) if their turnover for the fiscal year prior to the alleged antitrustbehavior does not exceed the threshold annually set by theCompetition Council; and (ii) if the market share of the involvedundertakings does not exceed 5% on any of the relevant affectedmarkets, for cases of agreements among competing undertakings(“horizontal agreements”) and 10% on any of the relevant affectedmarkets, for cases of agreements among undertakings which do not

compete (“vertical agreements”). Nevertheless, the aforementionedlimitations are not applicable to antitrust practices when they referto prices, tariffs, market division agreements or auctions.


Identification and investigation of the violations of the cartelprohibition are incumbent to Competition Council (rom.: “ConsiliulConcurentei”) who is represented by the competition inspectors.The Competition Council is an autonomous administrativeauthority. It includes seven members, appointed by the President ofRomania, at the proposal of the Government, for a five-year term ofoffice. They may be reappointed for one term.The Competition Council has the power to conduct investigationsthrough its competition inspectors, upon its own initiative or upona third party complaint, claim or notification. The CompetitionCouncil is entitled to make decisions regarding the violations ofcartel prohibition.When an alleged antitrust practice is confirmed, the CompetitionCouncil may decide either to order that the antitrust practices foundare stopped or to formulate recommendations, to impose specialconditions and other obligations to the parties involved, or to finethe undertakings.The Competition Council may impose - through a decision ofinterlocutory measures - to the undertakings part of the cartel totake any measure that it deems necessary for re-establishing thenormal competitive environment and for bringing the parties backto their previous status quo. The suspension or banning of theidentified antitrust practices, as well as the injunctions sent to theundertakings and requesting them to return to the previouscircumstances, shall be ordered by the Competition Council onlywhen finding obvious illicit actions that constitute antitrustpractices expressly banned by this law and that must be terminatedwithout delay in order to forestall or stop a serious and certaindamage from being done. Such measures shall be strictly limited,in duration and scope, to what is necessary for correcting anobvious and intolerable alteration of free competition.


The basic procedural steps between the opening of an investigationand the imposition of sanctions are the following:

The competition inspectors propose to the plenum of theCompetition Council in the investigation report, thesanctioning of the offences.

Ramona Lie

Delia Vasiliu



Rom

ania

Pachiu & Associates Romania

The competition inspectors propose in a note to thecommissions of the Competition Council the application ofthe comminatory fines.The Competition Council resolves by decision upon themeasures to be adopted by the offender. In case within 45 days from communicating the decision, theoffender does not comply with the measures disposed, theCompetition Council may apply the maximum finestipulated by Law.In case the offender does not adopt the measures disposed bythe Competition Council, the competition inspectors shallapply sanctions and, for this purpose, shall draw up a reportfor the acknowledgement of the offence and the applicationof the sanction.

The competition inspector will inform the offender regarding hisright to object to the contents of the acknowledgment andsanctioning document.


There are sector-specific block exemptions for the followingcategories of practices: selective distribution; aggregate orexclusive distribution; exclusive buying; research-development;specialisation; patent licence and know-how; franchise; motorvehicles distribution; spare parts and service, and insurance. In such cases, the exemptions are established through CompetitionCouncil regulations.However, the benefit of block-exemption is granted only if theagreements including such block-exemption contribute to: (i)improving the production or distribution of goods, executing workoperations or supplying services; (ii) promoting technical oreconomic progress, improving the quality of goods or services; (iii)consolidating the competitive position of the small and medium-sized undertakings on the domestic market; or (iv) charging, overthe long run, substantively lower prices to the consumers.Moreover, it is necessary that the following conditions should becumulatively met: (i) the positive effects prevail over the negativeones or are sufficient to compensate the restriction of competition;(ii) customers or consumers are assured a benefit corresponding tothat realised by the parties from the respective practices; (iii) thepossible restrictions of competition are critical to obtain theexpected advantages, and the respective practices do not imposeupon the parties restrictions that are not necessary to attain theaforementioned objectives; and (iv) the respective practices do notallow the undertakings to eliminate competition from a substantialpart of the product or service market in question.

1.6 Is cartel conduct outside Romania covered by theprohibition?

Yes, cartel conduct outside Romania is covered by the prohibitionwhen it has effects within the Romanian territory.


2.1 Summary of general investigatory powers




The Law does not provide specific or unusual features of theinvestigatory powers referred to in the summary table.


At local level, territorial units of the Competition Council do ingeneral survey the undertakings’ behaviour on the market in view ofearly detection of antitrust practices. However, the use of technical surveillance such as telephonetapping, room bugging or other forms of registration is allowed inRomania only in very limited cases - criminal investigations orintelligence specific activities - and the performance of suchoperations takes place in very strict conditions prescribed by thelaw.


The competition inspectors also have the following significantpowers of investigation: (i) to access the properties, locations orheadquarters of the undertakings; (ii) to examine any documents,ledgers, financial/accounting papers and commercial papers orother evidence related to the activity of the undertakings, regardlessof their location; (iii) to take statements from the representativesand the employees of the undertakings regarding the relevant factsor documents; (iv) to collect any documents, ledgers,financial/accounting papers and commercial papers or from otherevidence related to the activity of the undertakings or to obtain, inany form, copies or excerpts from these documents; and (v) to sealany location where the undertakings carry on their activity and anydocuments, ledgers, financial/accounting papers and commercialpapers or other evidence related to the activity of the undertakingsfor the period and to the extent this is necessary for the inspection.


The Competition Council, through its competition inspectors,








No No



Yes No


Yes No

WWW.ICLG.CO.UK201


Rom

ania


carries out searches on both business and residential premises. Nevertheless, the competition inspectors may carry out searches onresidential premises, i.e. at any other locations than the businesspremises, including the residence, lands or means of transportationof the leaders, administrators, directors and other employees of theundertakings subject to investigation, only on the basis of thejudicial authorisation granted by a judge.The fundamental right to defence is recognised and guaranteed bythe Romanian Constitution. Still, the cases when the presence of alawyer is compulsory for the validity of the procedural acts arelimited to situations regarding either restrictions to personalfreedom (e.g. in criminal cases, when the defendant is under arrest)or vulnerable persons (e.g. minors). In all other circumstances,searches performed by the inspectors of the Competition Councilcan take place without a lawyer being present.


The legal advisor has the mandatory obligation to preserve theconfidentiality on all aspects of the case and he/she cannot beforced by any individual/legal entity to divulge such aspects.

2.7 Other material limitations of the investigatory powers tosafeguard the rights of defence of companies and/orindividuals under investigation

The competition inspectors having access to the documents, dataand information of central and local public administration bodies,as well as of any other institutions and public authorities shallobserve the state secret or business secret character legallyattributed to such documents, data and information.


The obstruction of investigations represents a misdemeanour and issanctioned by the competition inspectors with fines of up to 1% ofthe aggregate turnover of the financial year prior to the sanctioning. In 2008, for the first time in Romania, a company was sanctionedfor its refusal to undergo a Competition Council dawn raid in aninvestigation regarding the bread market.



The violations of cartel prohibitions are deemed as administrativeoffences, sanctioned by fines of up to 10% of the aggregate turnoverof the undertaking involved, calculated for the financial year priorto the year of sanctioning.In addition, on the basis of findings of a Competition Council’sdecision, the returns or, as the case may be, the supplementaryincomes achieved by undertakings as consequence of perpetratingadministrative offences shall be disgorged and deposited to the statebudget.Moreover, the Competition Council may issue a decision to forcethe undertakings to pay comminatory fines of up to 5% of the dailyaverage turnover of the financial year prior to the year ofsanctioning, for each day of delay, calculated from the date set upin the decision, in order to influence them to observe the provisionsof Article 5 (1) of the Law regarding cartel prohibition.

Furthermore, individuals and/or legal entities reserve the right tosue for the complete remedy of the damages caused by employmentof such antitrust practices.


Participation by an individual with fraudulent intent and in adecisive way to the conceiving, the organisation or the realisation ofany of the antitrust practices prohibited under Article 5 (1) of theLaw which are not deemed as exemptions, shall be considered acriminal offence and shall be convicted to imprisonment from 6months to 4 years or shall be fined. In certain cases, payment of afine may replace the imprisonment.


The right of the Competition Council to apply sanctions forviolations of the provisions of the Law regarding antitrust practicesshall be applicable for a limited period of 5 years. The statute oflimitations of the Competition Council begins the day when theantitrust practice stopped. For violations of the Law which arecontinuous or reiterative, the statute of limitations begins the daythe last antitrust action or fact stopped.


There is no express legal prohibition regarding a company payingthe legal costs and/or the financial penalties imposed on its formeror current employees.



Yes, pursuant to the provisions of Article 51 (2) of the Law, theGuidelines regarding the conditions and application criteria of aleniency policy were adopted under Competition Council Order No.93/2004 (the “Guidelines”).According to the Guidelines, the Competition Council will grant anundertaking immunity from a fine if such undertaking is the first tosubmit evidence that, in the Competition Council’s view, mayenable the Council: (i) to open the investigation procedure pursuantto Article 40 of the Law; or (ii) to prove an infringement of Article5 (1) of the Law.An undertaking may benefit from immunity from fines if itcumulatively fulfills the following conditions: (i) it cooperatesfully, continuously and expeditiously with the CompetitionCouncil; (ii) it renounces to participate in the alleged illegal activity,no later than the date at which it submits evidence; and (iii) it didnot take steps in order to coerce other undertakings to participate inthe illegal alleged activity.An undertaking may benefit from a reduction of fines if itcumulatively fulfills the following conditions: (i) the undertakingmust provide the Competition Council with evidence of the allegedinfringement of the law, which represents significant added valuewith respect to the evidence already in its possession; and (ii) theundertaking must end its involvement in the suspected illegalinfringement no later than the date at which it submits the evidenceto the Competition Council.



Rom

ania


For the first undertaking which informs the Competition Councilwith respect to the existence of a cartel, the Competition Councilgrants immunity.The reduction level an undertaking will benefit from, relative to thefine which would have been normally imposed will be grantedwithin the following thresholds: (i) for the first undertaking thatmeets the conditions for reduction of fines - a reduction of 30% to50%; (ii) for the second undertaking that meets such conditions - areduction of 20% to 30%; and (iii) for the subsequent undertakingsthat met the respective conditions - a reduction of up to 20%.In order to determine the reduction level within each of those bands,the Competition Council will take into consideration the date atwhich the evidence was submitted as well as the significant addedvalue brought by it.


Any undertaking wishing to apply for immunity from a fine shouldcontact the Competition Council, either directly or through itsrepresentative or attorney. If it is proved that the conditions relatedto the granting of immunity are not met, the undertaking willimmediately be informed that it may not benefit from immunityfrom the fine regarding the suspected infringement. When thegranting of the immunity from a fine is possible for a presumptiveinfringement of the Law, in order to comply with the conditionsstipulated above, as the case may be, the undertaking may: (i)provide as soon as possible to the Competition Council all theevidence already available to it relating to the suspectedinfringement; or (ii) present in the first stage the availableinformation in hypothetical terms. In this case, the undertakingmust present a descriptive list of the evidence proposed to bedisclosed at a later agreed date. This list should reflect accuratelythe nature and the content of the evidence, keeping, at the sametime, the hypothetic character of its disclosure. The copies of thedocuments from which the sensitive parts have been eliminated,may be used to illustrate the nature and the content of the evidencepresented in the descriptive list.


Normally, the application is made in writing. However, for thehypothesis that the leniency application is made orally, such shall beregistered in order for the interviewed person to further have thepossibility to rectify the registered statement. Moreover, once theapplication was made, all necessary evidence shall be produced.


The Competition Council should ensure the protection of businesssecrets and other confidential information and should be able torequest undertakings that have submitted documents or statementsto identify confidential information.Where business secrets and confidential information are necessaryto prove the infringement, the Competition Council should balancethe interest in the protection of such information and the publicinterest in having the infringement of the competition rulesterminated. To that end, it should assess for each document whetherthe need to disclose is greater than the harm which might resultfrom disclosure.

4.5 At what point does the continuous cooperationrequirement cease to apply?

The undertaking which intends to benefit from the leniency policyshall cooperate with the Competition Council throughout the entireprocedure pending before the Competition Council.


The Guidelines do not provide for either a “leniency plus” or a“penalty plus” policy.



No, there are no procedures for individuals to report cartel conductindependently of their employer. However, such individuals maypetition the Competition Council asking that an inspection shouldbe performed by the Council with regard to certain cartel conductsof their employer.



There are no early resolutions, settlement or plea bargainingprocedures.

7 Appeal Process


The decisions of the Competition Council may be challenged by theinterested individual or legal entity within 30 days as of the date ofcommunication of the decision. The claim challenging suchdecision shall be submitted before the Bucharest Court of Appeal.The verdict may be appealed before the High Court of Cassationand Justice. Upon request, the Court may decide to suspendexecution of the decision, while court proceedings are pending.


Romanian civil procedural law allows for the cross-examination ofthe witnesses in every stage of the file before a court of law, theappeal stage included.

8 Damages Actions


According to the Law, apart from the sanctions enforced based onthe provisions of the Law, individuals and/or legal entities have theright to sue for the complete remedy of the damages caused byantitrust practices, such as cartel conduct practices.

WWW.ICLG.CO.UK203


Rom

ania


There are no special procedures for civil damages actions, andtherefore the rules of the Romanian civil law and procedural lawshall apply. Pursuant to the provisions of the civil law, theindividual and/or legal entity claiming for damages caused by acartel conduct, shall prove (i) the fault of the defendant (theintention or negligence in breaking the Law); (ii) the loss sufferedas a consequence of the defendant’s behaviour; and (iii) the directcasual connection between the defendant’s acting/behaviour and theloss suffered. In this type of civil damages claim the recoverabledamages represent the actual loss of the complainant.


No class-action or representative claims are allowed by the currentRomanian procedural rules.


In case of civil damages actions, the Romanian civil law providesfor a bar limitation of 3 years from the date the prejudiced partyknew or should have known the existence of the prejudice and theauthor of such prejudice.


According to the Romanian procedural rules, the court expenses ofthe winning party shall be paid, at least partially, by the losing party.


No such civil damages claims reported on cartels have been settledby the competent courts. A possible reason could be the fact thatthe litigations on cartels, in fact, are very few until the presentmoment.

9 Miscellaneous


A special measure to be adopted refers to the establishment of a“competition record”, similar to the criminal or fiscal records,which shall enable the Competition Council to evaluate anundertaking from the point of view of its previous conduct in thefield of competition. This would have a particular effect inassessing whether an undertaking is qualified to benefit fromleniency measures.

9.2 Please mention any other issues of particular interest inRomania not covered by the above.

The Competition Council has the power to give binding opinions ondraft laws which may have an antitrust impact. Thus, legislativeproposals are evaluated by the Competition Council also from theperspective of their possible favouring or determining cartel-likebehaviour.



Rom

ania

Delia Vasiliu

Pachiu & Associates 4 - 10 Muntii Tatra Street, 5th FloorBucharest 1Romania

Tel: +40 21 312 1008Fax: +40 21 312 1009Email: [email protected]: www.pachiu.com

Delia graduated the Law School of West University in Timisoara in2004. She is also a Master of Business Law postgraduate and aPh.D. candidate in international commercial law at the Law Schoolof Bucharest University. She is a senior member of the Bucharest Bar Association and amember of the National Romanian Bars Association.Delia has an extensive experience in assisting Austrian and Germaninvestors in Romania and is also a regular contributor to severalreviews and law publications specialised in intellectual property law.Her expertise covers corporate law, commercial contracts, civil law,litigation, and regulatory matters. Delia is fluent in Romanian,German and English and conversant in Italian.

Ramona Mihaela Lie

Pachiu & Associates 4 - 10 Muntii Tatra Street, 5th FloorBucharest 1Romania

Tel: +40 21 312 1008Fax: +40 21 312 1009Email: [email protected]: www.pachiu.com

Ramona graduated from the Law School of Babes-Bolyai Universityfrom Cluj-Napoca in 2001 (J.D. equivalent). She is also apostgraduate in constitutional and administrative law from the LawSchool of Babes-Bolyai University and a graduate of the LL.Mprogramme in Comparative Constitutional Law of the CentralEuropean University from Budapest, Hungary.Ramona is a member of the Bucharest Bar Association and amember of the National Romanian Bars Association. Ramonaprovides legal assistance in matters related to corporate law,commercial contracts, banking law, real estate law and tax law. Ramona is fluent in Romanian and English and conversant inFrench.

Pachiu & Associates is a business law firm established by Romanian attorneys. Firm lawyers are graduates of leadinguniversities from Romania or abroad, and are all members of the Bucharest and Cluj Bar Associations and NationalRomanian Bars Association. More than half of the lawyers are senior members of the Bar Associations. All lawyersare fluent in Romanian and English. Some lawyers are fluent in German, Spanish and French. The Firm provides fora full range of commercial and corporate legal advice. The Firm has extensive expertise in matters related to corporategovernance, corporate disputes, securities, mergers and acquisitions, bankruptcy, commercial contracts, offshore andtax structures, labour law, real estate, anti-trust law, intellectual property, banking and project financing, securedtransactions, cross-border transactions, public acquisitions, procurement, and litigation. Apart from its consistentmergers & acquisitions and cross-border transactions practice, the firm developed a strong tax practice. Any type oftransaction is always duly considered from a tax point of view. The firm maintains a close relationship with someleading multinational law firms and other small and medium sized law firms from abroad, to ensure efficient liaisonwith important foreign business centres and jurisdictions.




Chapter 35

Liniya Prava

Russia



Russian antimonopoly legislation is based primarily on FederalLaw No. 135-FZ “On Protection of Competition” (the“Competition Law”), adopted on 26 July 2006, effective as of 26October 2006. The current regulatory framework also includes theCode on administrative offences of the Russian Federation (the“Administrative Code”), the Criminal Code of the RussianFederation (the “Criminal Code”) and other laws and regulations ofthe Russian governmental authorities. Resolution No. 30 “Onapplication of the antimonopoly legislation” (the “ApplicationResolution”) issued by the Supreme Arbitrazh Court of the RussianFederation aims at the elaboration of the unified approach towardsthe interpretation of certain provisions of the Competition Law.This resolution shall serve as a guideline for lower courts whenconsidering similar issues.The cartel prohibition applies to legal entities and natural persons,including individual entrepreneurs, and cartel conduct mayconstitute an administrative offence and a tort. Moreover, cartelprohibition stipulated by the Criminal Code is of criminal natureand exclusively relates to conduct of individuals.


The Competition Law prohibits agreements between legal entitiesand individual entrepreneurs on the commodities market that resultor may result in the following:1. Fixing or maintenance of prices (tariffs), discounts, bonus

payments and extra charges.2. Increase, reduction or maintenance of prices at tenders.3. Division of the commodities market by reference to territories

or according to the volume of sales/purchases, the range ofgoods to be sold, or the range of sellers or buyers (clients).

4. Refusal to enter into an agreement with certain vendors orpurchasers (clients) without economic or technologicaljustification, unless such refusal is expressly allowed byfederal law, normative acts of the Russian President, of theGovernment of the Russian Federation or of authorisedfederal executive authorities or by court acts.

5. Suspension of contractual terms that are disadvantageous tothe counterparty or do not relate to the subject matter of theagreement.

6. Setting of different prices (tariffs) for the same goodswithout economic or technological or other justification.

7. Discontinuance or reduction of the production of goods forwhich there is a consumer demand or for which orders havebeen placed provided that their profitable production ispossible.

8. Hindering of access to the market by other legal entities andindividual entrepreneurs or their removal therefrom.

9. Setting of requirements for membership (participation) inprofessional and other unions if such requirements lead ormay lead to the restriction of competition and theestablishment of unjustified criteria of participation,impeding participation in payment and other systems withoutwhich competing financial organisations will not be able torender required financial services.

The Competition Law prohibits the so-called “coordination ofeconomic activities” by individuals, commerce companies and non-profit organisations, if such coordination leads or may lead to theconsequences listed above. “Coordination of economic activities”is understood as coordination of the actions of legal entities andindividual entrepreneurs by a third person who does not belong tothe “group of persons” of such legal entities and individualentrepreneurs.The Competition Law further prohibits other concerted actions andagreements which lead or may lead to restriction of competition,save for “Vertical Agreements” (agreements between legal entitiesor individual entrepreneurs not competing with each other, one ofwhich acquires goods or is the potential acquirer, while the othersupplies goods or is the potential seller) which are permitted by theCompetition Law (“Vertical Agreements” between economicentities provided the market share of each party thereto is less than20% or “Vertical Agreements” in a written form which arecommercial concession agreements with the exception of “VerticalAgreements” between financial organisations).Agreements and concerted actions, leading to the restriction ofcompetition, save for those resulting in the consequences asdescribed in items 1-9 hereof, may be permitted if:

They do not enable a certain person to eliminate competitionon the relevant commodities market.They do not impose on the parties thereto or on third partiesany restrictions which are not consistent with theachievement of the objects of such agreements or concertedactions.They result or may result in the improvement of theproduction or distribution of goods or services or thepromotion of technical or economic progress andachievement by consumers of benefits adequate to thoseachieved by parties thereto.

Oleg Volkov

Tatiana Kachalina



Rus

sia

Liniya Prava Russia

The Government of the Russian Federation is authorised todetermine cases where agreements and concerted actions fallingunder the above mentioned criteria are permitted (“GeneralExceptions”).It shall be noted that prior to their conclusion, cartel agreementsmay be cleared through filing an application with the FederalAntimonopoly Service of Russia (the FAS). Persons going to enterinto an agreement that may be allowed in accordance with theCompetition Law may submit documents and information whichare listed in order No. 168 issued by the FAS on 18 June 2007. Theantimonopoly authorities shall review provided documents andinformation and state whether the agreement complies with therequirements of the Competition Law within 30 days following thereceipt of all the required documents and information. It shall benoted that the said term may be extended for another twenty days.The decision on clearance of the agreement draft is valid within oneyear since its issuance.The Administrative Code provides for sanctions to be imposed onthe companies and individuals involved in the said activities.Article 178 of the Criminal Code stipulates sanctions for impeding,restriction or elimination of competition by fixing or maintenanceof monopoly high or low prices or uniform prices, division of themarket, limitation of access to the market, removing of the otherundertakings from the market, provided such actions have resultedin a serious impairment (more than one million roubles (EUR28,241,008.77 or USD 35,789,827.83)) (section 1 of the article); forthe same actions performed by an official who abuses his/herposition, or by a group of persons with premeditation (section 2 ofthe article); for actions contemplated in either sections 1 or 2 of thearticle carried out either with violence or threat thereof, or throughthe destruction of or damage to property of another person or threatthereof (without signs of extortion), or by an organised group(section 3 of the article). It shall be noted that article 178 of theCriminal Code may be considered “dormant” since it requires acause-and-effect relation to be proven between the cartel conductand the damage caused for an amount of more than one millionroubles (EUR 28,241,008.77 or USD 35,789,827.83).(Exchange rates are in conformity with the Central Bank OfficialRate fixed for 2 December 2008: USD 27.9409 and EUR 35.4095.)


The main antimonopoly authority in Russia is the FAS. The CentralBank of the Russian Federation (the CBR) and the Federal Servicefor Financial Markets (the FSFM) also take part in the enforcementof cartel prohibition related to banks and financial institutions andthe securities markets. The FAS carries out its activities on thebasis of the head office (consisting in its turn of departmentsresponsible for certain areas of the economy) and local branches. InAugust 2008 the Anti-Cartel department was established within thehead office of the FAS. As for cartel-related crimes, they are dealtwith by the interrogating officers and investigators of the Ministryof Internal Affairs and considered by courts.


The procedure for administrative investigation is stipulated by theCompetition Law, the Administrative Code and order No. 447 “Onadoption of the FAS administrative regulations of initiation of theinvestigation and scrutiny of the violation of the Competition Law”issued on 25 December 2007 by the FAS (the “AdministrativeRegulations”).

The FAS shall review the application within one month. However,the said period may be extended by the antimonopoly authorities foranother two months which shall be reported to the applicant inwriting. Following the scrutiny of the application and relatedmaterials the FAS will then make one of the following decisions:

Decision to prosecute based on a prima faci case that aviolation of the Competition Law has occurred.Decision not to prosecute due to the absence of any signs ofa violation of the Competition Law.

Once the decision on initiation of the administrative case is made,the FAS shall form a committee which is to consider the case. Thecommittee chaired either by the head of the FAS or his/her deputyis made up of the FAS’s employees. The number of committeemembers shall not be less than three. Furthermore, the committeereviewing the case on violation allegedly committed by creditorganisations on the banking service market and by financialinstitutions (save for credit organisations) which hold licencesissued by the FSFM, shall meet the following additionalrequirements:

The number of members shall be even.Half of the committee shall consist of representatives of theCBR (in relation to credit organisations) or representative ofthe FSFM (in relation to financial institutions, save for creditorganisations).

Questions that may arise in the course of investigation areconsidered by a majority vote of the members of the committee.The chairman has a casting vote to break a tie. A copy of the FAS order on case initiation and the convocation ofthe committee shall be sent to the claimant and defendant within 3working days since it issuance. The chairman sets the date for thecommittee meeting within 15 days following the issuance of theorder on case initiation and forming of committee. The case shallbe considered within 3 months following the order on committeeproceedings. The said term may be further extended for a periodnot exceeding six months on the grounds as stipulated within theCompetition Law. The procedure for investigation cartel-related crimes does not differfrom that for other crimes.


In general, Russian law does not provide for any sector-specificoffences or exemptions. However, financial organisations shallsubmit to the FAS a notification on each and every agreement thatthey have entered into with other financial organisations or withstate authorities save for the following transactions:

Agreements between financial organisations provided theassets of each party thereto do not exceed 10 per cent of thesingle market in Russia or 20 per cent of the commoditiesmarket if the goods which are subject of the agreement arecirculating on the other markets in the Russian Federation.Agreements between financial organisations not related tothe rendering of financial services to third parties.Agreements on financial services and agreements based oncontracts for the rendering of financial services.Agreements between financial organisations entered into inthe normal course of business.Agreements on the termination of previously concludedcontracts.Agreements on the alteration of non essential terms ofpreviously concluded contracts.Preliminary agreements.

WWW.ICLG.CO.UK207


Rus

sia

Liniya Prava Russia

The notification shall be submitted within 15 days following theconclusion of the agreement.

1.6 Is cartel conduct outside Russia covered by theprohibition?

Pursuant to the Competition Law cartel conduct outside the RussianFederation in respect of assets located in Russia,shares/participation interests in Russian legal entities and/or rightsover Russian legal entities is subject to Russian antimonopolycontrol if they have or may have an impact on competition in theRussian Federation.






The investigative powers of the FAS are limited to those explicitlystipulated within the Competition Law. Officials of the FAS areentitled to free access to federal or local executive authorities and tonon-governmental bodies and commercial organisations with theview to collect documents and information requested by theantimonopoly authority. However, the FAS officials may enter thepremises only once they have produced the necessary documentsthat identify them as FAS officials and the relevant order issued byeither the FAS head or his/her deputy. Legal entities, individualsand state agencies shall provide the FAS with information,documents, written and oral explanations upon the provision of amotivated written request made by the FAS. The relevant authorityis vested in the FAS pursuant to the Competition Law. Moreover,the FAS is entitled to approach the Ministry of Internal Affairs witha request to carry out operational-investigative measures. Thecooperation of the Ministry of Internal Affairs and the FAS is

regulated by joint order of the FAS and the Ministry of InternalAffairs dated 30 December 2004. Notwithstanding this order,currently the procedure for implementation of those measures uponthe FAS’s request is not clearly stipulated and such operations arerarely performed. Moreover, evidence gathered in the course ofsubsequently ceased criminal investigation may be used in theadministrative proceedings.


Russian law does not vest the FAS with general surveillancepowers. Albeit the FAS may apply to the Ministry of InternalAffairs to perform certain investigative operations. However,certain investigative actions, for instance, bugging are possible onlyin relation to the investigation of crimes upon court authorisation.




Russian law does not provide for any searches to be performed bythe FAS. The FAS officials may only enter business premises.However, searches may be performed by representatives of theMinistry of Internal Affairs upon a request made by the FAS. As forthe investigation of crimes, the search of residential premises shallbe authorised by court. Under the Criminal Procedure Code legaladvisors are entitled to be present at the premises being searched.However, the investigation authorities are not obliged to wait forlegal advisors to arrive. An absence of legal advisors may not beregarded as ground for challenging the search results.


No. Under Russian law the privilege regime is applicable only tolawyers who are members of the Bar (association of advocates).However, membership of the Bar is incompatible with the status ofemployee with the exception of teaching or other creative activities.Thus, in-house legal advice is not protected by the rules of privilegesince a company’s employees may not be members of the Bar.


The FAS shall not disclose information containing commercial,official or other secrets protected by law and received whileexercising its powers. FAS officials are subject to civil,administrative and criminal liability for unauthorised disclosure,with any damage caused by such disclosure to be compensated forfrom the Russian federal budget.


Failure to provide the FAS with the requested information anddocuments and submission of deliberately false information mayresult in the imposition on companies of administrative fines in theamount of RUB 300,000 (EUR 8,472.30 or USD 10,736.95) toRUB 500,000 (EUR 14,120.50 or USD 17,894.91). For individualsthe fine amount for the same offence is from RUB 1,500 (EUR




Carry out an unannounced search of businesspremises Yes* Yes



Yes* Yes



Yes Yes


Yes* Yes



Rus

sia

Liniya Prava Russia

42.36 or USD 53.68) to RUB 2,500 (EUR 70.60 or USD 89.47).The officials are penalised for the said offence with a fine fromRUB 10,000 (EUR 282.41 or USD 357.90) to RUB 15,000 (EUR423.62 or USD 536.85). The said sanctions have been previouslyused more than once. Moreover, under the Criminal Code, theobstruction of a criminal investigation constitutes a crime and issubject to the sanctions as follows: a fine up to RUB 80,000 (EUR2,259.28 or USD 2,863.19) or in the amount equal to the convict’swages or other income received within a period of up to six months;or obligatory work for 180 hours up to 240 hours; or arrest for 3 to6 months. The said crime aggravated by the abuse of officialposition is punished with a fine from RUB 100,000 (EUR 2,824.10or USD 3,578.98) to 300,000 (EUR 8,472.30 or USD 10,736.95) orin the amount equal to the convict’s wages or other income receivedwithin a period from 1 year to 2 years; or imprisonment for up to 4years with or without deprivation of the right to hold certainpositions or to perform certain activities. To the best of ourknowledge, such sanctions have not been applied to the obstructionof a criminal investigation related to cartel prohibition.



Under the Administrative Code, a company may be penalised withfines from one percent to 15 percent of the company’s earningsgained on the market where the violation was committed. However,the amount of a fine shall not exceed 4 percent of the company’saggregate earnings received from the realisation of all goods,services and works during the calendar year preceding the yearwhen the violation was committed or during that part of the yearpreceding the commitment of such an offence provided that thecompany was not involved in such realisation in the previous year.In November 2008, referring to the current financial crisis, the FASannounced that turnover fine amounts shall be halved but shall notbe less than the above mentioned minimum amount. According tothe Competition Law the FAS may issue an injunction on thetransfer of the company’s income received in violation of theCompetition Law. If the company fails to transfer the said sum, theFAS is authorised to claim its transfer in court. Pursuant to theApplication Resolution the injunction on transfer of the company’sincome and decision on the imposition of a fine may not be issuedsimultaneously for the same violation. Moreover, the recovery ofthe company’s income is allowed only because of impossibility tocalculate the fine to be imposed on the company under theAdministrative Code. However, the “impossibility to calculatefine” is not absolutely clearly explained. In our opinion suchimpossibility may result only from a failure to calculate thecompany’s earnings gained on the market where the violation hasbeen committed. The current implementation practice being silenton the said issue, we may not exclude the possibility that the FASand the courts will interpret this provision so that “impossibility offine calculation” covers release from administrative liability asstipulated by the Administrative Code.The FAS is also entitled to issue an injunction requiring a companyto take or refrain from taking certain actions.


According to the Administrative Code the company’s officials aresubject either to a fine ranging from RUB 17,000 (EUR 480.10 orUSD 608.43) to RUB 20,000 (EUR 564.82 or USD 715.80) or todisqualification for a period of up to three years. Furthermore, the

income gained by individual entrepreneurs as a result of theinfringement of the Competition Law shall be transferred to thestate treasury which may be enforced in court upon the claim of theFAS. Moreover, individual entrepreneurs are also subject to theFAS injunctions which are aimed at restoring a competitiveenvironment and require a person to follow certain courses of actionor refrain from performing certain actions.Criminal liability:Actions contemplated in section 1 of article 178 of the Criminalcode (see question 1.2 hereof) are penalised with a fine up to RUB200,000 (EUR 5,648.20 or USD 7,157.97) or in the amount equalto the convict’s wages or another income gained within a period ofup to 18 months or with arrest for 4-6 months or imprisonment forup to 2 years which makes it a minor crime. Persons who are foundguilty of actions envisaged in section 2 of article 178 of theCriminal Code are subject to a fine from RUB 100,000 (EUR2,824.10 or USD 3,578.98) to RUB 200,000 (EUR 5,648.20 orUSD 7,157.97) or in the amount equal to the convict’s wages oranother income gained within a period from 1 year to 2 years or toimprisonment for up to 5 years which makes it a crime of averagegravity. Actions contemplated in section 3 of article 178 of theCriminal code are penalised with imprisonment for a period from 2to 7 years coupled with the imposition of a fine up to 1 millionroubles (EUR 28,241,008.77 or USD 35,789,827.83) or equal to theconvict’s wages or another income gained within up to five years orwithout such fine which makes it a grave crime.


As to administrative violations, the limitation period is one yearfollowing the offence being committed or following the detectionthereof in relation to continuous offences. As for crimes, thelimitation period is two years for minor crimes, six years for crimesof average gravity and ten years for grave crimes after the crime hasbeen committed.


We believe that a company may pay the legal costs imposed on aformer or current employee. Under the Administrative Code andthe Criminal Code the fines shall be paid by the perpetrator himself.However, under Russian law it is not absolutely clear whether thecompany may pay the fine amount on behalf of the violator.Moreover, the enforcement procedure for fine imposition mayimply a withholding of a part of the convict’s wages and theemployer’s payment of the withheld amount. In any way the partiesare free to agree on reimbursement of the fine and legal costs paidby the company’s employee.



The person (including companies and individuals) which has beeninvolved in cartel conduct shall be exempted from administrativeliability as stated by the Administrative Code provided that suchperson:

has voluntarily approached the FAS (according to therepresentatives of the FAS filing after the opening of theinvestigation shall not be considered voluntary);

WWW.ICLG.CO.UK209


Rus

sia

Liniya Prava Russia

has refused to be involved in cartel conduct or ceasedits/his/her further participation therein; and/orhas submitted all available information related to the allegedviolation.

However the leniency provisions do not cover liability as stated bythe Competition Law and the Criminal Code. As for criminalliability, a violator’s surrender shall be regarded as one ofextenuating circumstances.


Russian legislation does not provide for a “marker” system.


No. Under the Administrative Regulations the application shall bemade in writing and signed by the applicant or its/his/herrepresentative.


There are no special provisions regarding confidentiality of aleniency application.


Russian law does not provide for any deadline in relation to“continuous cooperation”.


There is no official “leniency plus” policy stipulated by theantimonopoly legislation. Under the Administrative Code repeatedoffence shall be regarded as one of aggravating circumstances but itdoes not provide for further regulations. Pursuant to the CriminalCode punishment for a crime aggravated by certain circumstancesincluding recidivism shall not be less than 1/3 of the maximumsanction stipulated by the relevant article thereof.



Whistle-blowing procedure for individuals is set out by theAdministrative Regulations. In general it does not differ drasticallyfrom that stipulated for companies. The application shall be madein writing and signed by an applicant or its/his/her representative.The application shall be accompanied by documents evidencing theviolation of the Competition Law. In the absence of the saiddocuments the applicant shall specify the grounds for failure tosubmit such documents and persons holding such documents. Theapplication and documents may be submitted either by mail, or viacourier against receipt, or handed personally by the applicant.Upon the applicant’s claim the copies of documents and anapplication may be provided with the incoming stamp. Application,

materials and attached documents shall be submitted in the Russianlanguage. Such documentation submitted by a foreigner may be ina foreign language but it shall accompanied by a duly documentedtranslation (apostilled by the authorised body of the state wherematerials were issued or legalised if the state is not a party to the1961 Hague Convention on Apostille). Being stipulated by theCriminal Procedure Code, the procedure for reporting crimeprovides for both oral and written forms. However anonymousapplications may not be ground for initiation of a criminal case. Itshall be noted that deliberately false denunciation of a crime issubject to criminal liability.



As to the administrative sanctions the Administrative Code does notprovide for plea bargaining arrangements. However, the FAS maytake extenuating circumstances into consideration and reduce thefine amount.Special procedure for the consideration of a crime without a courtinvestigation may be applied to the accused person upon applicationof the defendant who has pled guilty. In such case the sentence maynot exceed ¾ of the maximum sentence stipulated by the CriminalCode. Moreover, an individual may be relieved from criminalliability under minor crimes and crimes of average gravity throughreconciliation with the injured person.

7 Appeal Process


A decision or injunction issued by the FAS may be challenged incourt within three months following the issuance thereof. Filing ofthe appeal shall suspend the relevant Act of the FAS until the courtruling comes into force. A resolution made under theAdministrative Code may be appealed within 10 days after receiptof the resolution copy.A court ruling in relation to a crime may be appealed within 10 daysfollowing the announcement thereof in the procedure stipulated bythe Criminal Procedure Code of the Russian Federation.


Appellate court proceedings allow for the cross-examination ofwitnesses. However, cassation courts may only announce thetestimony of previously examined witnesses.

8 Damages Actions


Pursuant to the Interpretation Resolution the injured person mayseek legal remedy in court. Moreover, failure to inform theantimonopoly authorities on the violation of the Competition Lawshall not influence the consideration of the claim brought by theinjured person. According to the Application Resolution the injuredperson is free to choose either court or administrative remedy.



Rus

sia

Liniya Prava Russia

However, the court proceeding shall be suspended until thecompletion by the FAS of violation investigation, provided theinjured person approached the FAS simultaneously with filing thelawsuit.


Russian procedural rules do not provide for class-action. However,joint claims of identified individuals, claims filed by the publicprosecutor in defence of public interest or filed by authorised statebodies and organisations are allowed.


The limitation period applicable to damages action is three yearssince the plaintiff learnt or should have learnt about theinfringement of his/her/its rights.


There are no specific cost rules for follow-on claims in cartel cases.However, damages claims brought by the injured person withincriminal procedure are exempted from any state duty and shall beconsidered by the same court as that which is hearing the criminalcase.


To the best of our knowledge there have not been any successfulcivil damages claims for cartel conduct.

9 Miscellaneous


In July 2008 the Prime Minister of the Russian Federation criticisedthe FAS for its inefficient work saying that “some employmentdecision in relation to the FAS” may be taken and that the FAS“shall eventually wake up and begin actively and efficiently toperform its functions”. Since then the number of cases initiated bythe FAS has increased drastically. Moreover, in September 2008the antimonopoly authorities submitted to the government of theRussian Federation the so-called “Second Antimonopoly Package”of amendments to Russian law. The changes effecting the CriminalCode shall “wake up” dormant article 178 by reformulating thereofand introduce provisions on exemption from criminal liability of thewhistleblower. The amendments to the Law on Operational andinvestigative activity and certain other acts are deemed to facilitatethe cooperation of the FAS and Ministry of Internal Affairs oninvestigation of cartel conduct and broaden their investigativepowers. Alterations of the Administrative Code and theCompetition Law and of other acts shall provide for more detailedregulation of whistle-blowing and leniency procedures. However,currently the said draft is under adjustment and is not publiclyavailable.

9.2 Please mention any other issues of particular interest inRussia not covered by the above.

According to the Application Resolution concerted actions may beproved in the absence of documents evidencing an arrangement toperform them. The actions of legal entities and individualentrepreneurs may be recognised as concerted on the basis of“actual circumstances” under which they were carried out. Forinstance, the relatively consistent and synchronous actions ofmarket participants without objective reasons may be regarded asproven concerted actions.

WWW.ICLG.CO.UK211


Tatiana Kachalina

Liniya PravaGorky Park Tower, Leninskiy Prospekt 15AMoscow 119071 Russia

Tel: +7 495 589 2300Fax: +7 495 589 2400Email: [email protected]: www.lp.ru

Specialisation: corporate law, M&A, antitrust, privatisation,securitisation, mortgage lending, project finance and capitalmarkets.Tatiana Kachalina holds the Partner’s position. She has vastexperience in consulting on M&A and antitrust, general corporateand capital markets transactions, including advice on some pioneerRussian securities transactions. Ms. Kachalina also was largelyinvolved in important lawmaking working groups and initiatives andparticipated in drafting such federal laws as “On amending of andadditions to the Federal law “On Mortgage-backed Securities”, “Onamending of and additions to the Federal law “On Mortgage (pledgeof immovable property)”, “On insider information and marketmanipulation”, as well as numerous subordinate legislation acts inthe field of securities regulation.

Oleg Volkov

Liniya PravaGorky Park Tower, Leninskiy Prospekt 15AMoscow 119071 Russia

Tel: +7 495 589 2300Fax: +7 495 589 2400Email: [email protected]: www.lp.ru

Specialisation: corporate matters, antitrust, M&A.Oleg Volkov is an associate with the law firm of Liniya Prava in itsMoscow office and a member of the firm’s corporate group. Olegfocuses on M&A and antitrust issues including international projects.Oleg has been involved in advising Russian and foreign clients oncorporate matters including M&A transactions, due diligence reviewand antitrust clearance. Prior to joining Liniya Prava Oleg worked asan in-house counsel for a market leader manufacturing company.Oleg holds law degree with distinction and diploma of translator inthe legal sphere. Also he spent six months as an exchange studentin the University Paris X. He is qualified to practice law in theRussian Federation and speaks Russian, English, French andGerman.

The Russian law firm Liniya Prava is a leader in legal assistance on financial markets. We have an outstanding practiceof legal consultancy on transactions of various complexity and are dedicated to provide our clients (local andinternational major and medium companies) with desirable practical result.

The main office of Liniya Prava in Moscow has been functioning quite successfully since February, 2000 havingexpanded its business to Ukraine (office in Kiyv) and the UK (office in London).

Liniya Prava has developed a remarkable legal practice in corporate and M&A, capital markets, securitisation andprivatisation, mortgage, real estate, litigation, project finance, foreign investment, etc. We deliver comprehensive legaladvice in oil & gas, telecommunication and energy sectors having gained recognition of professional society,appreciation and confidence of the clients due to our commitment to quality, strategic thinking, innovative problem-solving and sound judgment.

Effective cooperation of Liniya Prava with leading foreign law and audit firms, major Russian banks and state authoritieslets us succeed in large-scaled projects, including cross-border transactions, and provide our clients with fast andeffective problem solution.

Due to its long and successful work Liniya Prava has gained the name of a leader in legal assistance on IPOs, debtfinance, M&A, mortgage and assets securitisation.

Liniya Prava Russia

Rus

sia

212

Chapter 36


Balcar Polanský Eversheds s.r.o.

Slovakia



The legal basis of the cartel prohibition is Act no. 136/2001 Coll.,on the Protection of Competition and the Amendment andSupplement to the Act of the Slovak National Council no. 347/1990Coll., on the Organisation of Ministries and Other Central Bodies ofthe State Administration of the Slovak Republic as amended (the“Act”). Its purpose is to protect economic competition on themarket for products, works and services, as well as to createconditions for the further development of the market with theprimary aim of economic development in favour of the consumer. While cartels can also be prosecuted on the basis of the CriminalAct (see question 1.3), the Act is not an act of civil law, strictlyspeaking. According to Slovak jurisprudence, both the Act and theCriminal Act are considered to be part of the public law.


The substantive provisions for the cartel prohibition prohibitagreements and concerted practices between undertakings, as wellas decisions of their associations, the objective of which is therestriction of competition, or which effect it may be, unless the Actprovides otherwise. Such conduct expressly includes agreementsrestricting competition which directly or indirectly state the price orother business conditions, obligations of limiting or control ofproduction, demand, technical development or investment, divisionof the market or sources of supplies, obligation of parties of theagreement that they will exercise different conditions for equal orsimilar performance of various subjects, tying, bid rigging, etc.


The relevant body for the enforcement of the cartel prohibition is theAntimonopoly Authority of the Slovak Republic (the “Authority”),which is the central body of the state administration in the field ofprotection and support of competition. Its office is in Bratislava. TheAuthority issues its decisions in administrative proceedings. Also, the Criminal Code stipulates the crime of misuse ofparticipation in economic competition for conduct of a naturalperson (the Slovak law does not recognise the criminal liability oflegal persons) who violates the Act and causes a loss of a minimum

of EUR 26,500 to another entrepreneur. In such case, the relevantauthority for the enforcement of cartel prohibition is the criminalprocedure authorities. The investigation is typically done by thepolice (after this we refer simply to the police).


The administrative proceedings in the case of cartel prohibitionalways commence at the Authority’s own initiative. The Act saysthat the Authority may also commence a proceeding at its owninitiative based upon written notification of a natural or legalperson, who is not an entrepreneur, which seems to suggest that anentrepreneur such as a company cannot submit such notification. Inour opinion, this interpretation would be incorrect, which theAuthority also informally confirmed, saying that it acceptsinitiatives filed by entrepreneurs as well. The Act states the persons who are parties to the proceedings (the“Parties”) and so-called third persons (such as the consumer,supplier or competitor of the Party). Under certain circumstancesthird persons having legal interest may take part in the proceedingsas well. The Authority must instruct the Parties on their proceduralrights and duties, unless they are represented by an attorney-at-law.The Authority must notify the Parties about the opening of aninvestigation in written form. The Authority must issue a decision within six months followingthe date on which the proceedings have commenced. Incomplicated cases the Authority Chairperson may repeatedly allowan appropriate extension of the time limit for issuing the decision.The total limit cannot exceed a maximum of 24 months. If theAuthority is unable to issue a decision within six months, it mustnotify the Parties and state a reason. Before a decision is issued, the Authority is obliged to invite theParties to express in oral or written form their views on the groundsof the decision and the methods by which it was issued or topropose amendments as well as to inform them about theconclusions of the investigation made by the Authority on the basisof the available information and documents.


The Act does not apply to competition restrictions by undertakingsproviding services in the public interest pursuant to speciallegislation, provided that the application of the Act would preventthem from legally or effectively fulfilling their tasks pursuant to thespecial legislation, such as the Act on Postal Services or the Act onCollective Bargaining.

Helga Mad’arová

Michal Zahradník

WWW.ICLG.CO.UK213


Slov

akia

Balcar Polanský Eversheds s.r.o. Slovakia

Furthermore, the Act does not cover the field of Network Industriessuch as the electricity sector, the gas industry, the heating supplysector or the water service sector. Postal services also includeelectronic communications. In cases of restriction of competition in these fields, the protectionof competition falls within the scope of another independent bodywhich ensures it under special rules.

1.6 Is cartel conduct outside the Slovak Republic covered bythe prohibition?

Pursuant to Article 2 section 4 of the Act, it also applies to activitiesand actions that have taken place abroad, provided they lead or maylead to a restriction of competition in the domestic market.According to Article 2 Section 5 of the Act, the Act does not applyto restrictions to competition the effect of which takes placeexclusively in a foreign market, except in cases where aninternational treaty by which the Slovak Republic is bound providesotherwise.






The Authority’s right to retain original documents acquired, forexample, during a dawn raid, is limited only to the time necessaryfor copying. However, it is questionable whether the Authoritycould request and retain original documents on the basis of adifferent rule, which says that the Authority is entitled to requestdocuments and information from any person and such documentsmust be provided (Article 22 section 10 of the Act).The right to carry out an unannounced search of residential

premises is always limited by the court’s authorisation. Policeinvestigatory powers are further limited by the written consent ofthe state prosecutor, except in exceptional cases. The consent mustbe delivered to the entrepreneur at the moment of the search or amaximum of 24 hours after the search was carried out and it mustinclude the aim of the search, e.g. documents or computers carryingevidence of a certain crime.


The authority does not have them as no such powers are permissiblein the administrative proceedings. Surveillance powers are onlyforeseen in criminal proceedings and would only be available if thepolice conclude that the infringement of the Act could constitute acriminal offence and start a criminal investigation (see question 1.3).


Generally, the police possess much stronger means than theAuthority. However, the Authority can use force if it is necessaryfor entrance and can ask the police for assistance in this respect.


Authority employees are empowered on the basis of a writtenauthorisation by the Authority Chairperson to enter any buildings,premises and means of transport of an undertaking which arerelated to the activities or actions of the undertaking in order tocarry out an inspection. The residential premises can be entered if reasonable suspicionexists that information or documents related to the activities oractions of an undertaking, on the basis of which a serious restrictionof competition may be proven, are located in private buildings,private premises or private means of transport of the undertaking’semployees. An inspection may only be performed with courtapproval and in the presence of a custodian appointed by the court.In both cases, the Authority can start a search without waiting forthe legal advisors.


In-house legal advisors are not protected by the rules of privilege.


No. The Authority is only obliged, after concluding the gatheringof evidence, to invite the Parties to express their views on the case(see question 1.4).


The Authority may impose a fine of up to EUR 166,000 (note: allthe numbers in EUR are rounded) on an undertaking or legal entitythat fails to fulfil the obligation to submit the requested documentsor information to the Authority within the specified time limit, thatsubmits false or incomplete documents or information, or that doesnot allow examination or access to the premises. The Authoritymay impose a fine of up to EUR 3,300 on an entrepreneur who fails



(Police)

Carry out compulsory interviews with individuals Yes Yes(Police)

Carry out an unannounced search of businesspremises Yes Yes*

(Police)


(Police)


Yes Yes*(Police)

Right to retain original documents No Yes*(Police)


Yes Yes(Police)


Yes No



Slov

akia


to attend, without valid reason, a hearing or otherwise interfereswith the progress of the proceeding. The Authority may repeatedlyimpose these fines. However, these are rarely used.



The Authority may impose a fine on an undertaking of up to 10%of its turnover for the preceding closed accounting period, or a fineof up to EUR 332,000 for an undertaking that attained a turnovernot exceeding EUR 332 or attained no turnover, or on anundertaking the turnover of which cannot be calculated.


An individual who is an entrepreneur might be accused of thecriminal offence of misuse of participation in economicalcompetition. If the person is found guilty, he/she may be sentencedto 2-6 years in prison. Furthermore, a sentence prohibiting businessactivity for up to 10 years and/or a fine of up to EUR 332,000 maybe imposed.


The Authority may impose fines to entrepreneurs within four yearsfrom the day on which the proceedings commenced. However, theAuthority may impose these fines at most within eight years of theday the violation of the provisions of the Act or special legislation,the failure to fulfil a condition or the violation of an obligationimposed by a decision of the Authority has occurred. That meansthat if such conduct remains undiscovered for the stated period, itmay not be fined.


A penalty may not be imposed on an employee.



The Act says that the Authority must cease from imposing asanction for participation in an agreement restricting competition inthe market or may decrease its amount up to 50% if an entrepreneurapplies for the leniency programme and fulfils all the conditions, inprinciple helping the Authority to prove the existence of suchagreement.The detailed leniency programme (in the form of guidelines or amanual) has been issued by the Authority. The English wording canbe found on the Authority’s web page (at present athttp://www.antimon.gov.sk/files/30/2008/LeniencyII_final_en.rtf). The leniency programme applies only to horizontal agreements, andonly to those that are expressly listed in the Act (including pricecartels or bid rigging). Under the leniency programme the fine may be either cancelledtotally (concerning one entrepreneur per case who has provided theAuthority with the decisive proof of existence of a cartel agreementand at the same time has fulfilled other conditions stated by the

Authority such as ceasing to participate in the agreement) ordecreased up to 50%. The fine will be cancelled completely if thefollowing conditions are met: (i) the entrepreneur who hasparticipated in an agreement restricting competition first and uponits own initiative provides the Authority with decisive proof of theexistence of a cartel agreement; (ii) the entrepreneur provides theAuthority with all evidence it possesses and cooperates with theAuthority during the fact-finding procedure; and (iii) theentrepreneur terminates its participation in such an agreement at thetime of providing such proof, at the latest. The entrepreneur mustnot have forced other entrepreneurs to participate in the agreementin the past or have been the initiator of its conclusion. Theseconditions must be met cumulatively. If an entrepreneur on its own initiative provides the Authority withimportant evidence, which, among other information and evidencethat the Authority already has in possession, enables the Authorityto prove the violation of the Act and terminates its participation inthe agreement, the Authority may reduce the fine up to 50%.


Yes, an entrepreneur may apply for a “marker”, which is a certainposition among other entrepreneurs applying not to have a fineimposed (reservation of a sequence). An entrepreneur who wishesto apply for the possibility of not being fined may first ask theAuthority for a marker. He/she must at least provide basicinformation, such as: his/her name and address; the parties to theagreement infringing competition; the product or service involvedin the agreement; the area affected by the agreement; an estimationof the period during which the agreement might have beeneffective; and a brief description of how the agreement functions.Included in this information the entrepreneur is obliged to provideinformation on leniency programme applications he/she has alreadyfiled or plans to file in other EU Member States or with theEuropean Commission. The application for a marker must include the reason why it is filedas well as a period of time within which it will be completed. If the entrepreneur completes his/her application for a marker asrequired, the application for not imposing a fine is deemeddelivered on the day the marker is granted.


An application to initiate a leniency programme may be filed inwriting or orally, but in practice the oral application does not reallysimplify the process. In this case the Authority will take minutes,which must be signed by the applicant. It may also be filed bytelegraph or by fax provided that the written original will be filed inthe following three calendar days. However, it is possible to makea “hypothetical application”, i.e. without disclosing the identity ofthe applicant at the first stage, for example through an attorney.


This information is specified in the Act very generally. Accordingto the general principles of the administrative procedure only theparties of the administrative procedure may access the leniencyapplication. According to article 28 of the Act, the Parties may,during the proceeding, indicate which information or documents are

WWW.ICLG.CO.UK215


Slov

akia


business secrets or information or documents that are of aconfidential character and it must give a reason for suchclassification. The Authority then protects such information. However, if the information in question is necessary for issuing thedecision and no alternative documents or information have beenprovided which are not business secrets or confidential, theAuthority will disclose it. Also, the Authority cannot guarantee toprotect the content of the application once the court proceedings arecommenced. Generally, we can say that the application, including the evidenceprovided, will probably become public.


It is not expressly stipulated. The continuous cooperationrequirement seems to apply until the end of the administrativeprocedure.


The statutory limits cannot be exceeded. The Authority issuedguidelines for the calculation of fines (at the moment only in Slovakat http://www.antimon.gov.sk/487/metodicky-pokyn-o-postupe-pri-urcovani-pokut.axd) which stipulate aggravating and mitigatingfactors, but they apply only within the statutory threshold.



According to Article 25 Section 2 of the Act, the Authority maycommence the proceedings on its own initiative based on thewritten notice of any natural or legal person, including employeesof an entrepreneur. There is no special procedure for such cases.



No such procedures are applicable in the Slovak Republic.

7 Appeal Process


A decision of the Authority issued in the first instance proceedingsmay be appealed within 15 days following the date of delivery ofthe decision. The appeal is filed at the Authority. A timely filedappeal has a suspension effect unless the public interest requiresthat the suspension effect be excluded. The Authority will notifyother Parties that an appeal has been filed and invites them toexpress their opinions and/or provide further evidence. The appeals are decided by the Council of the Authority consistingof seven members by means of a ballot. The decision of theCouncil is final and may not be appealed again within the ordinaryappellate procedure.

The final decision may, under special circumstances, be appealedby means of extraordinary appellate instruments as in a retrial,protest of a prosecutor or the examination of the decision outsidethe appeal procedure. These procedures are rather unique andrequire special conditions to be filled. They are decided either bythe person who issued the original decision (if the appeal will besatisfied and the new decision will not have any effect on personsdifferent from the appealer or these persons agree with suchdecision) or the Council of the Authority. It is possible to file a lawsuit against the final decision of theAuthority which will be decided by the court.


Not within the administrative procedure. The cross-examination ofa witness in criminal proceedings is possible both before the policeand the court.

8 Damages Actions


Slovak law has no special procedures for civil damages actions forloss suffered as a result of cartel conduct. In these cases, the partiesare entitled to claim damages in civil proceedings before civilcourts in accordance with the provisions of the Code of CivilProcedure generally applicable for compensation for any kind ofdamage. However, it is possible to assume there may be somedifficulties related to the burden of proof, calculation of damage andproving a causal link between the conduct and damages suffered.


No, the Slovak Code for Civil Procedure does not allow class-action or representative claims. The closest equivalent is a courtorder to “join matters”. This means that the court may join mattersthat have commenced before it and relate together in fact. Further,consumer protection organisations can initiate proceedings againstcartel member(s) and require that they refrain from illegal actionbut cannot claim damages on behalf of consumers.


When the entitled party is a natural person, it should claim damagesbefore the limitation period expires, as the defendant can then raisean objection that the claim became time-barred. The claim becametime-barred after two years from the day when the injured partylearned of the damage, and of the party being liable to providecompensation, but not later than three years from the day when aloss occurred. In cases where the loss was caused wilfully, theutmost deadline will expire ten years from the day when the lossoccurred.When the entitled party is a legal entity - a competitor, the claimbecomes time-barred four years from the day when the injured partylearned, or could have learned, of the damage, and of the partybeing liable to provide compensation, but not later than ten yearsfrom the day when such a breach of obligation occurred.



Slov

akia

Michal Zahradík

Balcar Polanský EvershedsE. Peškové 15150 00 PragueCzech Republic

Tel: +420 251 009 111Fax: +420 251 009 112Email: [email protected]: www.balcarpolansky.cz

Michal is a junior partner based in the Prague office of BalcarPolanský Eversheds. Michal specialises in dispute resolution,commercial law, banking and competition. He is considered anexpert in the regulatory aspects of commercial law. Michal hasadvised extensively on regulatory issues in the Czech Republic, forexample advising the administrator in the forced administration of IPbanka and advising on the crisis management of Union banka. Hehas experience in proceedings before the competition authorities.Michal advised on the illegal pricing investigations of Czech buildingsocieties, on the merger clearance relating to the acquisition ofinvestment group WOOD & Company by Straumur-BurdarasInvestment Bank and the acquisition of Seagram Spirits and Winesgroups by Diageo and Pernod Ricard. He has experience with dataprotection and other regulatory aspects of Czech, Slovak and EUlaw. Much of Michal’s dispute resolution work centres onproceedings under EU regulations.

Helga Mad’arová

Balcar Polanský Eversheds s.r.o.Pribinova 25811 09 BratislavaSlovak Republic

Tel: +421 220 251 311Fax: +421 220 251 312Email: [email protected]: www.balcarpolansky.sk

Helga is a trainee based in the Bratislava office of Balcar PolanskýEversheds. She graduated from the faculty of law at the ComeniusUniversity in Bratislava, Slovakia in 2005. She is a member of theSlovak Bar Association (trainee lawyer). Helga specialises in civiland commercial law. Helga has gained experience in the area ofregulatory rules, including competition as well as data protectionmatters, etc.

Balcar Polanský Eversheds started as Balcar Polanský in 1990 in Prague as one of the first law firms in post-communistCzechoslovakia. In 2005, the firm expanded to Slovakia. The Prague and Bratislava offices co-operate closely andsupport each other on Czecho-Slovak transactions and other cross-border work. The Slovak branch benefits from thefirm’s 18 years of experience and from the strong team of Slovak lawyers based in Prague. The Balcar Polanský officesbecame part of the Eversheds International network in 2007, and the firm was rebranded as Balcar PolanskýEversheds.

Balcar Polanský Eversheds concentrates on finding innovative solutions to help their clients succeed in the rapidlymaturing Czech and Slovak markets. The firm provides comprehensive services in all areas of commercial law as wellas expertise in Czech, Slovak and EU competition law. The firm’s lawyers have advised clients on many complextransactions with competition aspects, such as Straumur-Burdaras Investment Bank’s acquisition of the Czech andSlovak companies from the WOOD & Company investment group.



Each party to the dispute is obliged to bear the costs incurred in theproceedings. As a general rule in cases where the party has had fullsuccess in a matter, the winner is awarded recovery of its costs bythe losing party. Costs of the proceedings mainly consist of court fees (in the case ofcivil damages, when the injured party is not a competitor, thecurrent court fee for a claim for compensation for damage is 6% ofthe sum claimed, up to a maximum of EUR 17,000, otherwise,when the injured party is a competitor, 6% of the sum claimed, upto a maximum of EUR 33,000). The court fee is borne by theplaintiff. However, if he/she wins, the loser will be bound tocompensate the winner for court fees.


We have no knowledge of any such civil actions for damages to dateor whether any “out of court” settlements have been reached.

9 Miscellaneous


In regard to the fact that the Act has not been amended since 2005,the main development is that at the end of 2008 the government ofthe Slovak Republic approved a draft bill of the Act. The contentof the draft bill is an amendment of the relevant provisions of theAct due to the transfer to a new currency, the EURO and anamendment of those provisions of the Act requested by experience. The authority was active during the last year (based on theAuthority’s statistics, in 2008 the Authority issued 108 decisions,took 119 administrative proceedings aimed at investigating possiblemarket restrictions in various fields and at present has opened 20administrative proceedings). In 2008 it issued fines totalling morethan EUR 33 million. We assume this activity will continue andexpect to see more cases in the coming years.

9.2 Please mention any other issues of particular interest inSlovakia not covered by the above.

None.



Chapter 37

Odvetniki Šelih & partnerji, o.p., d.n.o.

Slovenia



The cartel prohibition is regulated in the competition legislation, i.e.the Slovenian Act on the Prevention of the Restriction ofCompetition (hereinafter referred to as the Competition Act) whichwas adopted on 1 April 2008 (published in the Official Gazette ofthe Republic of Slovenia, No. 36/2008) and entered into force on 26April 2008. The Competition Act contains only administrativefines. Although the general nature of the cartel prohibition is civil, theSlovenian Penal Code (hereinafter referred to as the Penal Code)and the Slovenian Criminal Liability of Legal Entities Act(hereinafter referred to as the Criminal Liability of Legal EntitiesAct) qualify certain cartels as criminal offences. The criminalaspect is omitted in the following answers unless specifically statedotherwise; the general rules of criminal law apply in relation to theprosecution of cartel-related criminal offences.


The central provision on the cartel prohibition is article 6 of theCompetition Act which prohibits and annuls all agreementsbetween undertakings, decisions by associations of undertakingsand concerted practices which have as their object or effect theprevention, restriction or distortion of competition in the Republicof Slovenia. The prohibition shall apply in particular to agreements, decisionsby associations of undertakings and concerted practices which:

directly or indirectly fix purchase or selling prices or othertrading conditions; limit or control production, markets, technical development,or investment; apply dissimilar conditions to equivalent transactions withother trading parties, thereby placing them at a competitivedisadvantage; make the conclusion of contracts subject to acceptance by theother parties of supplementary obligations which, by theirnature or according to commercial usage, have no connectionwith the subject of their contracts; and/orshare the market or sources of supply.

There are three exemptions from the above general prohibition:

the rule of reason; the de minimis exemption; andblock exemptions.

Pursuant to the application of the rule of reason which is regulatedin article 6, paragraph 3 of the Competition Act, agreements,decisions by associations of undertakings and concerted practicesare not prohibited if the undertakings concerned manage to provethat such agreements, decisions by associations of undertakings orconcerted practices, respectively, contribute to improvingproduction or distribution of goods, or to promoting technical andeconomic progress while allowing consumers a fair share of theresulting benefit. To benefit from this exemption such agreements,decisions by associations of undertakings and concerted practicesmay not:

impose on the undertakings concerned any restrictions whichare not indispensable to the attainment of these objectives;and afford such undertakings the possibility of eliminatingcompetition in respect of a substantial part of the products orservices in question.

The de minimis exemption as regulated in article 7 of theCompetition Act is applicable to horizontal and mixed horizontal-vertical agreements between undertakings whose aggregate marketshare (including the market share of their group companies) in noneof the affected markets in the Republic of Slovenia exceeds 10 percent, and to vertical agreements between undertakings whoseaggregate market share (including the market share of their groupcompanies) in none of the affected markets in the Republic ofSlovenia exceeds 15 per cent. These market shares will be reducedto 5 per cent if the competition in the affected market is reduced dueto cumulative effects caused by the same or similar agreements ofother undertakings. To qualify for the de minimis exemption,horizontal agreements may not be aimed at fixing prices, restrictingproduction or trade, or sharing markets or sources of supply, andvertical agreements may not be aimed at determining retail prices orgranting territorial protection to undertakings concerned or to thirdparties. European block exemption regulations apply as appropriate, alsowhen there is no proven effect on trade between EU Member States.The Slovenian Government is empowered to adopt additional blockexemptions; however, it has not yet done so.


The cartel prohibition is mainly enforced by the SlovenianCompetition Protection Office (hereinafter referred to as the Office)pursuant to the Competition Act. The Office is also empowered to

Ziva Zoric

Nataša Pipan Nahtigal

v v



Slov

enia

Odvetniki Šelih & partnerji, o.p., d.n.o. Slovenia

impose administrative fines due to violations of cartel law. Cartel-related criminal procedures are initiated by state prosecutors andadjudicated by regular courts having jurisdiction over criminalmatters.


An investigation by the Office may start following a complaint orex officio. Once an instance of alleged anticompetitive conduct hascome to the attention of the Office, the Office may address a requestfor information to every undertaking, shareholders, members ofmanagement or supervisory bodies and employees of anundertaking even before issuing an order on the commencement ofprocedure. If such request is made by way of a formal decision, theaddressees may also be fined for not submitting the requestedinformation. Before issuing an order on the commencement ofprocedure, the Office may also collect market information andperform similar actions. A procedure formally starts with an order on the commencement ofprocedure. An abstract of such order is published at the Office’sInternet site. The Office generally decides on the basis of thedocuments provided by the parties in the procedure and thedocuments obtained by the Office itself and generally without anoral hearing. Exceptionally, the official conducting the proceduremay conduct an oral hearing in order to clarify and/or establishdecisive facts of the issue. Pursuant to the Competition Act an investigation is not acompulsory procedural act. In order to perform an investigation theOffice issues an investigative order. After an investigation isperformed the Office prepares a record on the respectiveinvestigative action. After completing the fact finding process, the Office prepares asummary of the relevant facts. If the Office intends to establish aviolation, the parties have to be delivered the summary and giventhe opportunity to respond. The procedure of the Office is generally completed by the issuanceof a decision establishing a violation or a decision terminating theprocedure. If a decision establishing a violation is issued, theOffice proceeds by issuing a decision on the sanction, which isissued in a separate misdemeanour procedure.


No, there are not.

1.6 Is cartel conduct outside Slovenia covered by theprohibition?

Agreements, decisions by associations of undertakings andconcerted practices are prohibited according to article 6 of theCompetition Act if they prevent, restrict or distort competition inSlovenia, irrespective of whether they have been entered into, orhave occurred, respectively, in Slovenia or abroad. In addition, theOffice also exercises supervision of the application of articles 81and 82 of the EC Treaty, as described in the chapter on the EuropeanUnion.




Please Note: * indicates that the investigatory measure requires theauthorisation by a Court or another body independent of thecompetition authority.** See question 2.2.


The general rules of criminal law apply in relation to theprosecution of cartel-related criminal offences. Such proceedingsare not carried out by the Office. Instead, cartel-related criminalprocedures are initiated by state prosecutors and adjudicated byregular courts having jurisdiction over criminal matters.


The Office does not have any general surveillance powers.


The Office is also allowed to perform other measures relating to thesubject-matter and the purpose of an inspection; among others, italso has the power to enter into and inspect land and means oftransport, as well as the right to temporary seizure of items andbusiness books for not more than 20 working days.


Investigative actions are carried out by the authorised employees ofthe Office. Individual professional tasks may also be performed byspecialised organisations, institutes or individuals when this is notin conflict with the public interests or the interest of the parties(authorised persons). The Office may request police assistance.

Investigatory power Civil / administrative Criminal**




Yes (* only if with anentity not subject toinvestigation)

N/A



Yes (*scope of personaldata collection allowedwithout authorisation isdisputed)

N/A

Right to retain original documents Yes (temporarily) N/A


Yes N/A


Yes* N/A

WWW.ICLG.CO.UK219


Slov

enia


The Competition Act does not provide for any obligation ofauthorised persons to wait for legal advisors to arrive.


No. Only letters, notices or other ways of communication betweenthe undertaking and its (outside) attorney are privileged accordingto article 32 of the Competition Act, and also such communicationis only privileged within the scope relating to the ongoinginvestigation.


A dispute between the Office and the Information Commissioner (aSlovenian body supervising the protection of personal data, as wellas access to public information) is currently pending beforeSlovenian courts in relation to the extent of protection of personaldata under the Slovene Constitution (communication privacyrelating to the content of letters and other correspondence includingelectronic communication). The Information Commissioner has,namely, prohibited the Office from using certain personal dataacquired during a cartel investigation. Also the Slovenian Government has established that the currentlyvalid Competition Act does not adequately define competencies ofthe Office to interfere with communication privacy. It is likely thatthe Competition Act shall be amended in this respect (to moreprecisely define powers of the Office regarding processing andexamining of personal data and regarding examining and access toelectronic business communication during investigations).


A fine of up to 1 per cent of the turnover realised in the previousfinancial year by the undertaking concerned may be imposed onundertakings obstructing the investigation. To our knowledge suchsanctions have not yet been imposed.



The maximum penalty under the Competition Act for a legal personfor violation of article 6 of the Competition Act, or article 81 EC, oracting contrary to certain enforceable decisions of the Officeamounts to 10 per cent of the turnover realised by the respectiveundertaking in the previous financial year. If the respective cartel is qualified as a criminal offence, thefollowing sanctions may be imposed on a legal person under thePenal Code and the Criminal Liability of Legal Entities Act:

A fine from EUR 50,000 to EUR 1,000,000, or alternativelyup to a maximum of two hundred times the amount ofdamage caused or illegal gain obtained through the criminaloffence.Expropriation of property (may be applied instead of a fine ifcertain conditions are met);Winding-up of the legal person (may be applied instead of afine if certain conditions are met).Prohibition of participation at public procurement tendersfrom three to ten years (as an accessory sentence).

Prohibition of trading in financial instruments on a regulatedmarket from one to eight years (as an accessory sentence).

Finally, it should be noted that provisions in agreements anddecisions infringing the cartel prohibition are void.


Penalties under the Competition Act for individuals acting as soleproprietors or as self-employed persons are the same as penaltiesfor legal entities under the Competition Act as described in question3.1 above. In addition, individuals responsible for anticompetitive behaviourwithin legal entities, sole proprietors or self-employed persons maybe fined with a monetary fine under the Competition Act rangingfrom EUR 5,000 to EUR 30,000.If the respective cartel is qualified as a criminal offence, the mostsevere possible sanction is imprisonment ranging from 6 months upto 5 years. A monetary fine may be imposed instead ofimprisonment. In addition to imprisonment or monetary fine, thereare several possible accessory sentences and safety measures, themost relevant being a prohibition from performing an occupationfor not less than one year and not more than five years.


Generally, the administrative offence procedure shall not bepermitted after the expiry of 5 years from the day the offence hasbeen committed. However, the limitation periods shall not run incertain cases prescribed by law. For example, any action of thecompetent authority aimed at persecution of the offender shallinterrupt the course of the limitation periods, and the 5-year periodshall then start to run once again as of the interruption. In any case,and irrespective of the possible interruptions, any action within theadministrative offence procedure shall not be permitted any moreafter the expiry of 10 years from the day the offence has beencommitted. As a consequence, no fines under the Competition Actmay be imposed on the offender after the expiry of 10 years fromthe day the offence has been committed.Please note that also after the expiry of the above limitation periodsthe competent authority may still issue a decision establishing thatthe agreements and decisions infringing the cartel prohibition areunlawful and void. The limitation period applicable to the cartel-related criminaloffences is 10 years from the day the offence has been committed.Also in this case the limitation periods shall not run in certain casesprescribed by law.


A company is not prohibited from paying the legal costs andfinancial penalties and may thus do so if so agreed upon with therespective former or current employee. Such expenses would,however, not be tax deductible.



A true leniency programme does not exist. However, according to



Slov

enia


article 76 of the Competition Act the fine applicable to anundertaking in a cartel may be waived by the Office if the followingconditions are cumulatively fulfilled:

the offender reveals its participation in the cartel;the offender is the first to submit evidence which (in theopinion of the Office) enables the carrying out of aninvestigation relating to the alleged cartel, or the finding ofan infringement of article 6 of the Competition Act or article81 EC relating to the alleged cartel; the offender cooperates with the Office during the wholeprocess;the offender ceases to participate in the alleged cartel as soonas the offender starts cooperating with the Office relating tothe waiver of the fine, except if this would (in the opinion ofthe Office) conflict with the interests of the investigation; andthe offender did not force others to participate or continue toparticipate in the alleged cartel.


No, there is no marker system in Slovenia.


Not applicable as leniency applications are not foreseen.


Not applicable as leniency applications are not foreseen. TheOffice is, however, obliged to treat any source of information asconfidential upon request, provided that such source demonstratesthat disclosure would cause significant damage to it, and that suchsource also submits to the Office a version of documents notidentifying it as the source.


For the respective condition under article 76 of the Competition Actto be fulfilled, the offender has to cooperate with the Officethroughout the entire duration of the proceedings, i.e. until the finaldecision of the Office is issued.


Leniency plus and penalty plus policy do not exist in Slovenia.



Any individual may report cartel conduct or provide the Office withinformation or evidence of cartel conduct; however the CompetitionAct foresees no special procedures in this respect.



Settlement or plea bargaining procedures are not foreseen. Anyundertaking being prosecuted by the Office may, however, proposeto the Office commitments aimed at eliminating the allegedviolations. Such commitments may be proposed after the issuanceof the order on the commencement of procedure and before theexpiry of term to respond to the summary of the relevant facts, and,if proposed, may be accepted by the Office in its decision.

7 Appeal Process


Decisions and orders of the Office may not be appealed inadministrative procedure. Judicial protection is ensured against alldecisions of the Office and, unless explicitly excluded, also againstthe orders of the Office. The Supreme Court of the Republic ofSlovenia decides upon requests for judicial protection in a panel ofthree judges. Facts and evidence that have not been broughtforward in the procedure before the Office may not be broughtforward in the judicial protection procedure. Decisions of theSupreme Court may not be appealed.Decisions on penalties under the Competition Act that are imposedby the Office in a separate misdemeanour procedure may beappealed before the first instance criminal court pursuant to theprovisions of the Minor Offences Act. Decisions of the first-instance criminal court issued in relation tocartel-related criminal offences may be appealed before thecompetent higher court pursuant to the provisions of the PenalCode.


As a general rule, the Supreme Court of the Republic of Sloveniadecides without a hearing. If a hearing is held, however, andwitnesses are examined in spite of the prohibition of bringingforward new facts and evidence, the cross-examination of witnessesis also allowed.

8 Damages Actions


Persons who have suffered loss as a result of any cartel conductprohibited under the Competition Act or the EC Treaty may claimcompensation in accordance with the general principles of tort.Such actions can be brought regardless of whether the Office hasalready adopted any decision in respect of the prohibited conduct.The courts are, however, bound by final decisions of the Office orof the European Commission finding infringements. As regards monetary damages, the court should, as a general ruleand also taking into account circumstances arising after thedamages were caused, award compensation in the amount which isnecessary to ensure that the plaintiff’s financial situation is as it

WWW.ICLG.CO.UK221


Slov

enia


would have been had the tort not taken place. The person sufferingloss is entitled to ordinary damages and to the lost profit (the profitwhich could have been justifiably expected in the normal course ofevents or taking into account special circumstances, but which wasnot achieved as a result of cartel conduct). Non-monetary damagesare only available for expressly enumerated injuries, of which theonly potentially applicable type in actions for damages arising as aresult of cartel conduct would be damages to the reputation orgoodwill of a legal entity. In damages actions, the burden of proof is shifted to the defendantas concerns fault (fault of the wrongdoer is presumed unless provenotherwise). In lawsuits for damages arising from cartel conduct,therefore, the injured party has to prove the existence of:

an unlawful damaging act; damages; andcausation (i.e. that the damaging act of the wrongdoer wasthe cause of damages),

while the alleged wrongdoer has to prove that the damages werecaused without his fault (intent or negligence).


As each plaintiff is required to demonstrate an interest in bringingdamage claim proceedings, there is in principle no possibility underSlovenian law to file a representative action or a class action, i.e. anaction where the plaintiff also claims in the interest or on behalf ofother persons or entities that are not a formal party to theproceedings.Damage claims may be consolidated in a single summons bypersons claiming to have suffered injury as a result of the sameinfringement, or proceedings may be joined after the filing ofclaims. In all such cases, the claims remain separate, so that eachplaintiff may freely dispose over its claims, and the court may findsome claims grounded and others not. Moreover, if several actions are lodged at the court and theseactions have the same or similar factual basis as well as the samelegal basis, the court may after receiving the defence plea in oneaction carry out a “model procedure” and at the same time suspendother procedures until the “model procedure” is finally completed.Finally, claims for monetary damages may be assigned so thatseveral damaged parties could assign their claims to a singleplaintiff.


Non-contractual damage claims shall become statute-barred threeyears after the injured party learned of the damage and of the personthat caused it, but in any event after the expiry of five yearsfollowing the occurrence of damage. An important provision of theCompetition Act states that the applicable limitation periods do notrun in the period from the commencement of proceedings before theOffice or the European Commission and until final completion ofsuch proceedings.


Each party to litigation shall advance the payment for costs incurredby procedural acts performed or caused to be performed by it.Generally, the successful party is entitled to recover its costs,provided that such recovery is properly required (the loser paysrule). In case both parties are partially successful, the court may,considering the degree of success of each party, determine that eachparty bears its costs or else order one party to pay to the other partya proportional part of the costs. In case one of the parties loses onlywith respect to an insignificant part of its claim and there were nospecial costs related to such part of its claim, the court may alsoorder that such party has a right to recover its entire costs from theother party.Furthermore, there are certain provisions ensuring equity. Forinstance, irrespective of the outcome of the litigation, each party isallowed to recover any costs incurred due to a fault of the otherparty or due to coincidence on the other party’s side.


No information on successful civil damages claims for cartelconduct is publicly available.

9 Miscellaneous


The Competition Act that entered into force on 26 April 2008drastically increased the possible amount of fines and gave theOffice certain new investigative powers. The Office recentlybecame more active in the field of cartels and in November 2008the European Commission’s anti-trust officials for the first timevisited a Slovenian undertaking (in the course of an investigationfocused on collecting information within industry analysis of thepharmaceutical market and analysis of competition on this market).Please see question 2.7 above concerning the possible futureamendment of the Competition Act.

9.2 Please mention any other issues of particular interest inSlovenia not covered by the above.

A review of the constitutionality of the Competition Act (inparticular provisions on investigation) has been recently requested.The Constitutional Court rejected the petition on formal grounds(failure to exhaust legal remedies), but a new petition may beexpected in the near future which could lead to a decision of theConstitutional Court on the merits.



Slov

enia

Nataša Pipan Nahtigal

Odvetniki Šelih & partnerji, o.p., d.n.o.Komenskega ulica 361000 LjubljanaSlovenia

Tel: +386 1300 7650Fax: +386 1433 7098 Email: [email protected]: www.selih.si

Nataša Pipan Nahtigal is a partner with Odvetniki Šelih & partnerjiheading the competition practice. She graduated at the Universityof Ljubljana and completed her LL.M. at Harvard University,Cambridge, Massachusetts, USA. In addition to competition andantitrust law, her areas of practice include corporate andcommercial law, mergers and acquisitions, intellectual property,insurance & banking law and securities law. She is the author ofseveral articles on Slovenian competition law.

Ziva Zoric

Odvetniki Šelih & partnerji, o.p., d.n.o.Komenskega ulica 361000 LjubljanaSlovenia

Tel: +386 1300 7660Fax: +386 1433 7098 Email: [email protected]: www.selih.si

Ziva Zoric graduated at the University in Ljubljana and received anLL.M. at the College of Europe, Bruges, Belgium. She works as anassociate with Odvetniki Šelih & partnerji engaged in competitionand antitrust matters, as well as corporate and commercial lawmatters.

The Law firm Odvetniki Šelih & partnerji, o.p., d.n.o. has its roots in 1961 and we have since then developed into oneof the leading Slovenian commercial law practices, thereby maintaining our commitment to excellent legal services. Ourclients have access to a team of professional lawyers who can offer legal assistance on all aspects of commercial lawincluding: competition law, corporate law, M&A, insurance and banking law, intellectual property, securities law, realestate and transactions, litigation and arbitration, telecommunications & energy law, labour law, procurement law andenvironmental law.

Our membership in SEE Legal ensures better cooperation within the SEE region and our membership in Lex Mundi givesus access to a global network of excellent independent law firms in the key markets around the world. We also maintainlong-term working relationships with other prominent international law firms.


v v

v v



Chapter 38

Webber Wentzel

South Africa



Currently, cartel behaviour is regulated by the provisions of section4 of the South African Competition Act No. 89 of 1998 (asamended) (“the Competition Act”). Cartel conduct is currently nota criminal offence, but the Competition Act is being amended tointroduce criminal liability for directors or managers of companieswhich are involved in cartel conduct.


Section 4(1)(b) of the Competition Act prohibits the followingpractices between competitors:(i) “directly or indirectly fixing a purchase or selling price or

any other trading condition;(ii) dividing markets by allocating markets, suppliers,

territories, or specific types of goods or services; or(iii) collusive tendering.”


The Competition Act establishes a specialist competition hierarchyfor the enforcement of the provisions of the Competition Act, eachwith distinct functions. The Competition Commission (“theCommission”) is the body which is entrusted with theresponsibility to investigate and prosecute cartel behaviour. TheCompetition Tribunal (“the Tribunal”) is the primary adjudicatingbody and cartel conduct will be prosecuted by the Commission inthe Tribunal. The Competition Appeal Court (“the AppealCourt”), a statutory court with the status of a high court and staffedby High Court judges, hears appeals and reviews against decisionsof the Tribunal. In certain circumstances a right of appeal lies fromthe Appeal Court to the Supreme Court of appeal.Once the Competition Amendment Bill comes into force, the SouthAfrican National Prosecuting Authority will, where there has beena finding that a company has engaged in cartel conduct, be taskedwith prosecuting the relevant directors or managers of the companyconcerned in the ordinary criminal courts.


The Competition Act provides that any member of the public, includingan individual or firm, may submit a complaint to the Commission inrelation to any prohibited conduct, including cartel behaviour. Inaddition, the Commission itself may initiate such a complaint. Once a complaint has been initiated, the Commission must directmembers of the Commission’s Investigations Division toinvestigate the basis of the complaint. It may also publish a noticein the Government Gazette inviting any person who has beenaffected by the alleged conduct to contact the Commission.In circumstances where an individual or firm has initiated acomplaint, the Commission has a period of one year within whichto investigate the complaint. This period may be extended byagreement with the complainant. Where the Commission hasinitiated the complaint, the Commission has an unlimited period oftime to investigate the complaint. Once the Commission hascompleted its investigation, it has discretion either to refer thematter to the Tribunal for determination, alternatively to issue anotice of non-referral where it does not believe that there is asubstantive basis for the complaint to be referred to the Tribunal. Once the matter is referred to the Tribunal, the Tribunal mustconduct a hearing and make any order permitted in terms of theCompetition Act, and must issue written reasons for its decision.Where it makes a finding that a firm has been involved in cartelconduct, the Tribunal may impose an administrative penalty notexceeding 10% of the firm’s annual turnover in the Republic ofSouth Africa (“the Republic”) and its imports from the Republic,during the firm’s preceding financial year.


There are no sector specific exemptions. However, the Minister ofTrade and Industry may designate an industry, after consulting theMinister responsible for that industry if a particular agreementbetween competitors or prohibited practice concerned contributesto the economic stability of that industry. This designation formsthe basis for the Commission to grant exemption for specific cartelconduct in relation to that particular industry. In addition, a firm orindividual may apply to the Commission to be exempt from theapplication of certain provisions of the Competition Act, where theeffect of an agreement or prohibited practice contributes to themaintenance or promotion of exports; promotion of thecompetitiveness of small businesses or firms controlled or ownedby historically disadvantaged persons; or changing the productivecapacity to stop decline in an industry.

Anthony Norton

John Oxenham



Sout

h A

fric

a

Webber Wentzel South Africa

1.6 Is cartel conduct outside South Africa covered by theprohibition?

Section 3 of the Competition Act provides that the Competition Actapplies to all economic activity within or “having an effect within”the Republic. Thus, cartel conduct occurring outside of theRepublic may be covered by the prohibition, where it can be said tohave an effect in the Republic.



As discussed above, the Competition Amendment Bill introducescriminal liability for managers or directors of a firm which isinvolved in cartel activity. Although the Commission investigatesthe cartel activity, the National Prosecuting Authority will havefinal discretion as to criminal prosecution of individuals involved incartel conduct.




As in other comparable jurisdictions, the Competition Actempowers the Commission to investigate any firm or personconnected or associated with an anti-competitive act. TheCommission is granted extensive powers to investigate the cartelbehaviour. In particular, these powers include the right to conductunannounced visits and to carry out so-called “dawn raids” at thecompany’s business premises, pursuant to obtaining a warrant or, inlimited circumstances, without a warrant.


While the Commission has far-reaching powers to investigate firmsand obtain information where it believes that a prohibited practice

has been committed or is taking place, it may only monitor orconduct surveillance of communications if authorised to do so by acourt of law in terms of the provisions of the Regulation ofInterception of Communications and Provision of Communication-Related Information Act No. 70 of 2002. In terms of this Act,unauthorised surveillance is not permitted and may be regarded asan offence.


A person who is authorised in terms of the Competition Act to enteror search premises may:

search any person on such premises who they believe haspersonal possession of an article or document that has abearing on the investigation;examine any article or document that has a bearing on theinvestigation;request information about the article or document from theowner of, or person in control of the premises or from anyother person;take extracts from, or make copies of any book or documentthat is on the premises and has a bearing on the investigation;use any computer system on the premises; and attach, and if necessary remove from the premises forexamination and safekeeping anything that has a bearing onthe investigation.

An individual may also refuse inspection and removal of anydocumentation on the grounds of legal privilege and further refuseto answer self-incriminating questions.


A judge of the High Court of South Africa, regional magistrate ormagistrate may issue a warrant to an inspector or police officer toenter and search any premises (business or residential) if there arereasonable grounds to believe that a prohibited practice has takenplace, is taking place, or is likely to take place on or in thosepremises; or anything connected with an investigation in terms ofthe Competition Act is in the possession of, or under the control ofa person who is on or in those premises. An inspector who is not authorised by a warrant may only enter andsearch business premises with the permission of the person on suchpremises. If the owner or person in control of the premises does notgive permission, the search may only be conducted if the inspectorbelieves there are reasonable grounds that a warrant would beissued if applied for and the delay in applying for one would defeatthe object or purpose of the entry and search.A person authorised to enter and search premises (either with orwithout a warrant) may request information about any article ordocument from the owner of, or person in control of the premises,or from any person who has control of the article or document, orfrom any other person who may have the information after advisingsuch person of their right to be assisted by a legal representative,and allowing the person to exercise that right.The South African Supreme Court of Appeal has held that section49(3) (a) and (b) of the Competition Act (which regulates theconduct of entry and search) will “enjoin the person executing thewarrant to allow the person in control to exercise the right of beingassisted by an advocate or attorney”. Thus such persons have theright to be assisted by a legal representative throughout theexecution of the warrant.


Order the production of specific documents orinformation Yes* Yes*

Carry out compulsory interviews with individuals Yes* No




Yes* Yes*



Yes* No


Yes* Yes*

WWW.ICLG.CO.UK225


Sout

h A

fric

a



A person may refuse to permit the inspection or removal of anarticle or document on the grounds that it contains privilegedinformation. Privileged information includes any communication(e-mail, documents, etc.) with the company’s actual legal advisersin respect of or relating to pending or threatened litigation, providedthat the in-house counsel acted in a professional capacity.


Immediately before commencing with the execution of a warrant,the investigator must identify himself and explain the contents ofthe warrant to the owner or person in control of the premises andhand a copy of the warrant to that person or to the person named init; or if none of those persons are present, affix a copy of the warrantto the premises in a prominent and visible place.During the search, a person may refuse to permit the inspection orremoval of an article or document on the grounds that it containsprivileged information. In this regard, the investigator conductingthe search may request the registrar or sheriff of the High Court thathas jurisdiction to attach and remove the article or document forsafe custody until that court determines whether or not theinformation is privileged.The Commission may further compensate anyone who suffersdamage because of a forced entry during a search when no oneresponsible for the premises was present.


It is a criminal offence to hinder, oppose, obstruct or undulyinfluence any person exercising a power or performing a delegatedduty under the Competition Act or to act contrary to a warrant toenter and search. To our knowledge, there have been noprosecutions for obstruction of any investigations to date.



Cartel behaviour in respect of a company is punishable through theimposition of an administrative penalty, which may not exceed 10%of the company’s annual turnover in the Republic and its exportsfrom the Republic, during the company’s preceding financial year.In addition, individuals or companies, who have suffered loss ordamage as a result of cartel behaviour or other conduct prohibitedin terms of the Competition Act, may institute civil proceedingsagainst the members of the cartel in order to recover the losssuffered.


Until recently, the Competition Act did not provide for criminalsanctions or penalties in respect of cartel conduct, except incircumstances where persons involved in cartel behaviourknowingly provided false information to the Commission orattempted to mislead the Commission in the cause of theirinvestigation. However, the proposed amendments to theCompetition Act introduce personal liability for directors and

managers, who had actual knowledge of the firm’s cartel behaviouror were involved in the cartel behaviour. Such individuals will beliable for a period of up to 10 years’ imprisonment and/or a fine ofup to R500,000. In addition, convicted individuals will be barredfrom holding senior management positions.


In terms of section 67 of the Competition Act, a complaint inrespect of a prohibited practice may not be initiated more than threeyears after the prohibited practice has ceased.


In terms of the proposed amendments to the Competition Act, a firmmay not directly or indirectly pay any fine that may be imposed ona person convicted of an offence in terms of the Competition Act,or indemnify, reimburse, compensate or otherwise defray theexpenses of a person incurred in defending against such aprosecution, unless the prosecution is abandoned or the person isacquitted.



In May 2008, the Commission introduced a revised CorporateLeniency Policy, which replaced the 2004 corporate leniencypolicy. The revised Corporate Leniency Policy facilitates theprocess through which firms participating in cartel behaviour areencouraged to disclose information in return for immunity from theprosecution. Unlike its predecessor, where instigators of cartelactivity were not allowed to apply for immunity, the revisedCorporate Leniency Policy extends an opportunity to cartel leadersor instigators of cartel activity to apply for immunity. TheCommission has discretion to grant total or partial immunity to aparticipant which:

is involved in cartel activity which the Commission isunaware of or which the Commission is aware of but doesnot have sufficient evidence to prosecute;is first to apply;honestly and truthfully provides the Commission withevidence, information or documentation relating to the cartelactivity;immediately stops the cartel activity or acts as directed by theCommission; does not alert other cartel participants or third parties that ithas applied for immunity; and does not destroy, falsify or conceal evidence, information ordocuments relating to the cartel activity nor does it make amisrepresentation regarding material facts of any cartelactivity.


In keeping with international best practice, the Commission hasintroduced the marker system in terms of the Corporate LeniencyPolicy. The marker system allows a potential applicant theopportunity to reserve its place as the first applicant through the



Sout

h A

fric

a


door for purposes of seeking immunity. An applicant’s place in thequeue is protected for a given period of time by way of the markersystem, which is granted by the Commission at its discretion. Aslong as a firm is granted a marker for particular cartel conduct, noother firm involved in the same cartel can leapfrog the applicant’splace in the immunity queue, even a firm which is able to satisfy allconditions for leniency immediately.The marker system allows the applicant to gather necessaryinformation and evidence to meet relevant requirements forimmunity. In granting the marker, Commission will determine on acase-by-case basis the period of time within which the applicantmust provide the necessary information/documentation needed.


In terms of the Corporate Leniency Policy, an applicant mayprovide information regarding the alleged cartel orally, at thediscretion of the Commission. However, even where permission toprovide an oral statement is granted, the applicant will still berequired to provide the Commission with existing writteninformation/documents/evidence in its possession regarding theparticular cartel in question.


The Corporate Leniency Policy process is undertaken on aconfidential basis. The disclosure of any information submitted bythe applicant prior to immunity being granted would only be madepublic with the consent of the applicant, provided such consent isnot unreasonably withheld. A party may apply to the Tribunal toprotect the confidentiality of the relevant information, should theCommission be of the view that such information should bepublished. If a party makes an application to the Tribunal in thisregard, the Commission may not publish the information until theTribunal or the Competition Appeal Court, as the case may be, hasmade an order regarding the matter.


An applicant for immunity under the corporate leniency policy willqualify for total immunity provided it meets certain requirements.Among others, the applicant must offer full and expeditious co-operation to the Commission concerning the reported cartel activity(which should be continuously offered until the Commission’sinvestigations are finalised and subsequent Tribunal/CompetitionAppeal Court proceedings are completed). In this regard, suchapplicant must co-operate with the Competition authorities untilimmunity is granted or denied.


There is no “leniency plus” or “penalty plus” policy in terms of thecorporate leniency policy. The corporate leniency policy providesfor only two different types of immunity, principally conditional ortotal immunity. Conditional immunity is granted at theCommission’s discretion at the initial stages of the corporateleniency application, pending finalisation of the Commission’sinvestigation and the referral of the complaint against the othercartel members to the Tribunal. The Commission may revoke

conditional immunity at any time until total immunity is granted,although the Commission may only do so when the applicant hasfailed to comply with the provisions of the leniency agreement.Total immunity will generally be granted once the Tribunal orCompetition Appeal Court have reached a final decision in respectof the alleged cartel, and is only granted to an applicant who hasmet all the conditions for total immunity. Once granted, it cannotbe revoked. It is important to note that total immunity granted pursuant to thecorporate leniency policy does not shield the applicant from anycivil liability resulting from its participation in a cartel. In otherwords, corporate leniency policy does not limit the rights of anyperson who has been harmed by cartel activity to institute civilproceedings for damages, even if a firm has been granted leniencyby the Commission.



There are no specific provisions within the Competition Act forindividuals to report cartel conduct independently of theiremployers. However, the Protected Disclosures Act No. 26 of 2000makes provision for procedures in terms of which employees inboth the public and private sector who disclose information ofunlawful or corrupt conduct by their employers or fellowemployees, are protected from occupational detriment.



Yes, parties may enter into a consent order in terms of sections 49Dand 58(1)(b) of the Competition Act. A consent order is essentiallywhere the Commission and the relevant firm settle the matter byway of agreement and the agreement is confirmed by the Tribunal.The agreement may be entered into at any time prior to the Tribunalhanding down its final order on the merits. In terms of the consentorder, the respondent is placed under a positive obligation to engagein certain conduct to try and minimise the risk of a repeat offence.Although the Competition Act does not provide for informalsettlement agreements, the Commission has entered into a numberof such agreements with private parties.

7 Appeal Process


In the normal course, an appeal from the Tribunal to the CompetitionAppeal Court against a finding by the Tribunal that a firm orindividual has engaged in cartel conduct, requires the applicant toprepare a Notice of Appeal to the Competition Appeal Court. Thisnotice must also be filed on any person who was a party to theproceedings before the Tribunal. A copy of the Tribunal Record mustthen be served on the Commission and all relevant parties and fourcopies must be filled with the registrar of the court. The registrar willthen inform the parties of the date, time and place of the hearing. Theparties must then file their Heads of Argument with the court.

WWW.ICLG.CO.UK227


Sout

h A

fric

a



The appeal process does not allow for the cross-examination of awitness as the appeal judge is constrained to decide the case purelyon the record.

8 Damages Actions


Section 65 of the Competition Act enables parties (individuals orcompanies) which have suffered loss or damage as a result of cartelbehaviour or other conduct prohibited in terms of the CompetitionAct, to institute civil proceedings against the members of the cartelin order to recover any loss the claimant allegedly may havesuffered as a result. The South African Competition Authorities donot have jurisdiction to make orders relating to damages, and theseclaims are accordingly brought in the ordinary civil courts. In suchproceedings, it is not necessary for the claimant to prove theexistence or nature of the cartel behaviour or other prohibitedconduct again. It is sufficient for the claimant simply to provide thecourt with a notice from either the Chairperson of the Tribunal orthe Judge President of the Competition Appeal Court certifying thatthe conduct which forms the basis of the civil claim for damageshas been found to be a prohibited practice in terms of theCompetition Act. It is however, necessary to prove the quantum ofthe damages which the claimant has suffered.


There is no express provision under the Competition Act for classactions and our competition authorities have yet to determine thecompetency of such an action. However, the South AfricanConstitution does allow for class actions to be brought by arepresentative of a group where a constitutional right has beeninfringed. In this regard, other members of the class action whowere not formally and individually joined benefit from, and arebound by the outcome of the litigation.


In terms of the Prescription Act No. 68 of 1969, a party is requiredto institute civil proceedings in a civil court within three years fromthe date of which the cause of action arose. In addition, any intereston a debt in relation to a claim for damages in terms of theCompetition Act will only commence on the date of issue of acertificate by the Tribunal or the Competition Appeal Courtcertifying the basis of the claim.


Neither the Competition Act nor the Uniform Court Rules makeprovision for the ordering of costs in a general way. This isgoverned by the Common Law. The basic rule is that all costs arein the court’s discretion, which must be exercised judicially afterconsidering the facts of the specific case.


There has only been one civil claim for damages instituted in SouthAfrica since the Competition Act came into force in September1999; however, it was in respect of an abuse of dominancecomplaint, and did not involve a cartel. The claim was brought byNationwide Airlines against South African Airways, following adecision of the Tribunal which found that South African Airwayshad engaged in an unlawful abuse of dominance by offeringinducements to travel agents to book passengers on South AfricanAirways flights, rather than on those of its competitors. The claimwas settled for an undisclosed amount and Nationwide Airlines hassubsequently been placed in liquidation.

9 Miscellaneous


As discussed, the revised corporate leniency policy which cameinto effect in May 2008, introduces a marker system, makesallowances for oral applications for leniency and it also allowsinstigators of cartels to apply for immunity. The Competition Amendment Bill has been approved by theNational Assembly and requires only presidential assent to comeinto force, which is expected to occur before the end of this year.The Competition Amendment Bill introduces criminal liability fordirectors or managers engaging in cartel conduct. Section 73A ofthe Competition Amendment Bill states that a person commits anoffence if, while being a director of a firm, or while engaged orpurporting to be engaged by a firm in a position havingmanagement authority within the firm, the person:

was responsible for causing the firm to engage in aprohibited practice in terms of section 4(1)(b) (which sectiondeals with prohibited cartel conduct, which includes pricefixing, dividing markets and collusive tendering); orknowingly acquiesced in the firm engaging in a prohibitedpractice in terms of section 4(1)(b).

To “knowingly acquiesce” has been defined as having acquiescedwhile having actual knowledge of the relevant conduct by the firm.In terms of the Competition Amendment Bill, any person convictedof a contravention of section 73A is liable to a fine not exceeding R500,000, or to imprisonment for a period not exceeding 10 years, orto both a fine and imprisonment.

9.2 Please mention any other issues of particular interest inSouth Africa not covered by the above.

There have been no other issues of particular interest, other thanthose issues already mentioned above, with regards to cartelregulation in South Africa.



Sout

h A

fric

a

John Oxenham

Webber Wentzel 10 Fricker Road, Illovo BoulevardJohannesburg, 2196South Africa

Tel: +27 11 530 5835Fax: +27 11 530 6835Email: [email protected] URL: www.webberwentzel.com

John Oxenham is a partner in Webber Wentzel Bowens’ CompetitionPractice. He holds both BA and LLB degrees from the University ofCape Town and completed a Diploma in Competition law at theUniversity of the Witwatersrand. Currently his principal areas ofpractice are in competition law, including industry restructuringinitiatives, joint ventures, cartel investigations, leniency applicationsand merger control and merger intervention and general competitionlitigation before the South African competition authorities andCourts.

Anthony Norton

Webber Wentzel 10 Fricker Road, Illovo BoulevardJohannesburg, 2196South Africa

Tel: +27 11 530 5272Fax: +27 11 530 6272Email: [email protected] URL: www.webberwentzel.com

Anthony Norton is a partner and head of the Competition Practice atWebber Wentzel. He has considerable experience in all aspects ofcompetition law including merger control, joint ventures, cartelinvestigations, prohibited practices, advice in respect of horizontaland vertical restrictive practices, abuse of a dominant position andgeneral competition litigation before South African courts andcompetition authorities. Anthony has been involved in numeroushigh profile merger decisions and is the first South African attorneyto appear before the Competition Appeal Court in South Africa.Anthony has a BA LLB, cum laude, from the University ofWitwatersrand, MLit (Oxford) and a Diploma in Competition Law(World Bank).

Founded in 1868, Webber Wentzel is one of the largest full service law firms in South Africa, with a network of lawyers,nationally and internationally, representing some of the country’s major mining, commercial, financial and industrialinstitutions.

As a leading authority on competition law in this country, the Webber Wentzel Competition Law Department employsmore competition law specialists than any other law firm in South Africa, amongst them the former DeputyCommissioner and former Chief Economist of the South African Competition Commission.

The Department has an enviable reputation as a provider of world-class legal services across the full spectrum ofcompetition law, including merger filings, cartel investigations, competition litigation, exemptions and compliance andregulatory advice. We gave, at various times represented a number of South Africa’s most recognisable companies,amongst them: AECI, Anglo American, BA/Comair, BP,Chemserve, De Beers, Diageo plc, Ford, GlaxoSmithKline,Heineken, Law Society of South Africa, LNM Holdings, Mittal, Netcare, Nu Metro and Omnia.




Chapter 39

SJ Berwin LLP

Spain



The Spanish Competition Act (hereinafter, the Competition Act)entered into force on 1 September 2007 (Law 15/2007, 3 July, onDefence of Competition) and replaces former Law 16/1989, 17 July.In addition, the Spanish Government has recently adopted theRoyal Decree 261/2008 of 22 February 2008, for theimplementation of the Regulation on Defence of Competition (the“Royal Decree”), which came into force on the 28 February 2008and deals with the execution of some essential aspects of Law15/2007: e.g. conduct de minimis, leniency, promotion ofcompetition, proceedings, etc.The NCC also recently published Provisional Guidelines relating tothe handling of exemptions and applications for the reduction offines with the aim of serving as a reference for leniency applicants.The enforcement system is also supplemented by Law 1/2002 oncoordination of competencies between central and regional bodies(see question 9.2). The Competition Act aims at reinforcing existing mechanisms andproviding the tools and optimal institutional structure to protectcompetition in the market. At the same time, it takes into accountthe changes introduced at EC level, notably Regulation 1/2003, andthe powers of regional governments in this field. The new systemis based on the experience gained in the past 15 years in theapplication of both Spanish and EC law. Law 1/2002 has beenslightly amended by the Competition Act in order to reflect some ofthe new changes.Spanish competition law has two different aspects: public andprivate. As for the nature of the cartel prohibition, the Spanish competitionlaw aims at regulating free trade and it has thus an administrativenature. Besides, the regional and national authorities in charge ofapplying the antitrust provisions belong to the State and RegionalAdministration respectively. On the other hand, Spanish competition law has traditionally had acommercial nature, as it seeks to regulate undertakings involved ineconomic activities. Similarly, the Commercial Courts are incharge of the private enforcement of Spanish competition law. The cartel infringement entails an administrative sanctionconsisting of a fine if it is imposed by the regional or nationalcompetition authorities or a fine and compensation for damages ifimposed by the Commercial Courts.

Even though the cartel prohibition has an administrative/commercial nature, the Spanish Penal Code also contains a limitednumber of provisions regarding unlawful competition conduct. Forinstance, article 282 refers to price distortion impeding freecompetition, providing imprisonment penalties from 6 months up to2 years together with fines from 1 up to 2 years and article 262refers to bid rigging in auctions and public tenders, providingimprisonment penalties from 1 up to 3 years together with dailyfines from 1 up to 2 years and loss of licence for public bidding.


The prohibition of anti-competitive agreements is enshrined inarticle 1 of the Competition Act, which prohibits any agreement,decision or collective recommendation or any concerted orconsciously parallel practice which has as its object or effect theprevention, restriction or distortion of competition in all or part ofthe Spanish market, and in particular those that:

directly or indirectly fix prices or any other commercial orservice terms;limit or control production, distribution, technicaldevelopment or investments;share markets or sources of supply;apply dissimilar conditions to equivalent transactions incommercial or service relations, thereby placing somecompetitors at a competitive disadvantage; andmake the conclusion of contracts subject to the acceptance ofsupplementary obligations which, by their nature oraccording to commercial usage, have no connection with thesubject of such contracts.

It also sets forth a definition of a cartel as “a secret agreementbetween two or more competitors which have as object fixingprices, production or sales quotas, sharing markets including bid-rigging or restricting imports or exports”. Finally, apart from the fines which can be imposed by the (centralor regional) antitrust authorities (see section below on fines),agreements or any other decision prohibited by article 1 shall bedeemed void.


The Competition Act has reshaped the institutional structure of thecentral government competition authorities. As from the entry into force of Law 15/2007, a new singleindependent authority, the Comisión Nacional de la Competencia orNational Competition Commission (NCC), is in charge of applying

Marta Arias Díaz

Ramón García-Gallardo Gil-Fournier



Spai

n

SJ Berwin LLP Spain

the Competition Act at a national level. The NCC is integrated bythe chairman, the Council and the Investigation Directorate. The chairman is entrusted with managerial and representation duties.The Investigation Directorate is in charge of conducting investigationsinto cases and preparing files as well as studies and reports. The Council, empowered with the final decision-making power, iscomposed of the chairman of the NCC and six members. All ofthem are appointed for a non-renewable six-year term by thegovernment following a proposal by the Ministry for Economics,after a hearing takes place in the Committee for Economics of theCongress. A majority vote of the Council is required for theappointment of the director of the Investigation Directorate, who isalso appointed by the government following a proposal by theminister for economics. The NCC is controlled by the parliament. It is foreseen that the NCCwill draft an annual report and its chairman will appear before theparliament regularly. In addition, the Competition Act includesprovisions on transparency (i.e., publication of reports and decisions).One of the most important changes introduced by the CompetitionAct is the possibility that certain provisions may be directly appliedby the Commercial Courts (i.e., prohibition of anti-competitiveagreements and abuse of dominant position). Furthermore, theCommercial Courts will be able to award damages based on theCompetition Act without requiring a prior administrative decisionfinding an infringement. In view of the increased importance ofCommercial Courts, the Competition Act introduces an amicuscuriae system inspired by Regulation 1/2003 under which the NCCand the antitrust regional bodies may submit observations regardingthe application of the Competition Act. (See section 8 below.)As already mentioned, since the enactment of Law 1/2002,enforcement of Spanish competition rules (except for mergercontrol) is shared with the regional governments. This law also setsout some rules on coordination. Spanish competition rules can beapplied by regional authorities provided the conduct at stake hasregional scope. For this purpose, regional governments have toassume these competencies. To date, nearly all Spanish regionshave enacted rules but not all of them have established ad hocauthorities. The Competition Act establishes that the NCC will beunder the duty to request a non-binding report of a regionalauthority on a particular case regarding the application of theCompetition Act provisions or even article 81 and 82 of the ECTreaty, provided there is a significant impact of the infringement onthe regional territory.Finally, the Competition Act confirms that the sectoral regulators(i.e., telecommunications and energy) cannot apply the CompetitionAct provisions; they have to refer the case to the NCC.Nevertheless, sectoral regulators have to draft non-binding reportsfor the NCC in certain cases. Finally, the Competition Act aims atincreasing coordination with the sectoral regulators setting out amechanism of regular meetings.


The Competition Act sets up a two-phase procedure: investigationcarried out by the Investigation Directorate and the resolution bythe Council. Proceedings are initiated by the Investigation Directorate on thebasis of a non-binding complaint, of its own motion or on theinitiative of the NCC. Before opening formal infringementproceedings, the Investigation Directorate can proceed with aninitial investigation (información reservada). During thispreliminary phase the Directorate can carry out inspections.

Once proceedings have been formally initiated, the investigatedcompanies are heard, and have the chance to submit observationsregarding the statement of objections. The Directorate’s fact-findingpowers have been reinforced in line with Regulation 1/2003 (i.e.,inspection of homes of directors, managers and other members of staffand the possibility of sealing any business premises and books orrecords for the period and to the extent necessary for the inspection,see section 2 below). The Council can adopt interim measures at anytime during the course of the proceedings and without a maximumduration period. Once the Directorate has finished its investigationand concludes there is a potential infringement, it will refer the case tothe Council. This Council will then assess the case and adopt a finaldecision on the infringement and fines. The Competition Act states the maximum length of the procedure is18 months (although under certain circumstances this deadline canbe extended). The Royal Decree determines the maximum lengthof each stage of the procedure (investigation and resolution).


One of the main features of the Competition Act in this field is theabolition of the system of individual exemptions in line withRegulation 1/2003. Therefore, the prohibition described above willnot automatically apply provided the same criteria set out in article81.3 of the EC Treaty are met. Furthermore, the EC BlockExemptions will also apply to those agreements even in the absenceof cross border impact. In addition, the government can adoptblock exemptions, e.g. under the former Act the Governmentadopted Royal Decree 602/2006 implementing the block exemptionon information exchange agreements relating to late payments. The Competition Act also includes a provision whereby findings ofinapplicability may be made similar to article 10 of Regulation1/2003.Nevertheless pursuant to article 4, the prohibition set out in article1 does not apply to conduct resulting from the application of a law.However, this inapplicability is without prejudice to the applicationof the EC competition law provisions. Similarly, the prohibition will not apply to conduct of minorimportance that qualifies as “de minimis”, according to criteria setout in Royal Decree 261/2008. Nevertheless, taking into accountthe practice and experience acquired in this respect, as well as theEuropean Commission Notices on this matter, the NCC mayprepare a Communication to clarify the afore said criteria.

1.6 Is cartel conduct outside Spain covered by the prohibition?

The Competition Act does not include any particular provisionssetting out its extraterritoriality enforcement on cartel conducttaking place outside of Spain. However, as article 1 states, aprohibition of any conduct “which has as its object or effect theprevention, restriction or distortion of competition in all or part ofthe Spanish market”, cartel conduct carried out outside Spain whichhas effects in all or part of the Spanish market, has the potential tobe covered by the cartel prohibition.



The Investigation Directorate, in charge of the enquiries, is theauthority invested with the powers referred below, since theCouncil is only empowered with the final decision-making power.

WWW.ICLG.CO.UK231


Spai

n

SJ Berwin LLP Spain


Please Note: * the investigatory measure requires authorisation bythe corresponding Court for Contentious AdministrativeProceedings where the defending party has its registered office ordomicile. In practice, the NCC usually asks for the judicialauthorisation before acting in order to avoid delays or/and denials.


Within the powers of inspection attributed to the NCC, theauthorised personnel will be able to enter not only any premises ofthe undertakings, but also all land and means of transport owned bythem.They can enter not only the private homes of the entrepreneurs, butalso those of managers and other members of staff of theundertakings concerned.They will have the right to verify copy, retain (for a maximumperiod of 10 days) and seal the books and other records relating tothe business activity, under investigation irrespective of the mediumon which they are stored.Furthermore, the seal of the NCC will not be restricted to thebusiness premises; it will also be possible to seal other businessassets.As regards the compulsory interviews with individuals, this meansany representative or member of staff of the undertaking inquestion.


The Competition Act enables the NCC to monitor the fulfilment ofobligations, resolutions and decisions adopted there under.Monitoring shall be carried out under the terms established byregulations and by resolutions of the NCC itself. The Competition Act does not include any provision regardingbugging. It is worth mentioning that all powers of investigation(e.g. bugging) are subject to compliance with the constitutional andjurisdictional rules.


The Royal Decree points out that the NCC personnel may beaccompanied by experts or specialists (e.g. experts in informationtechnologies) duly authorised by the Director of Investigation.


The entries made into business and residential premises will becarried out by NCC personnel duly authorised by the Director ofInvestigation acting as agent of the authority with the correspondingjudicial authorisation in the event the affected party fails to give hisconsent (in conformity with the European Court of Justice case law,namely Dow Chemical Judgement of 17 October 1989).Inspections of private domiciles will only take place in cases wherethere are well founded indications that books or other documentsmay be found which can be used to prove a serious or very seriousinfringement.In principle the NCC personnel are not bound to wait for any legaladvisor in order to start searching.


Spanish legislation and case law do not explain explicitly whetherin-house legal advice is protected by the principle of Legal privilegeor not. Nevertheless, even though there have not been Spanishcases recognising Legal privilege for in-house counsel, pursuant toa decision of 22 July 2002 of the former Spanish CompetitionTribunal, it appears that the Spanish practice would be in line withthe EC practice (Akzo Nobel, decision of the European CFI of 12December 2007, appealed before the ECJ on 3 March 2008) notcovering in-house counsel by Legal Professional Privilege.


The exercise of the power of interviewing individuals and enteringpremises, private homes, land and means of transport shall requirethe prior express consent of the affected party or, failing this,judicial authorisation.The investigations carried out by the NCC personnel are restrictedto the concerned matter.


The Competition Act considers the following to be an obstructionof investigation: (i) the lack of submission and the incorrect,misleading or incomplete submission of documents requested bythe NCC; (ii) the refusal to answer or answers that are incomplete,inexact or misleading to the questions formulated by the NCC; and(iii) breaking seals affixed by the NCC personnel.These infringements will be treated as minor infringements andsanctioned with a fine of up to 1% of the total turnover of theundertaking concerned and in the event it is not possible to makesuch a calculation with a fine of between €100,000 and €500,000.In the decision of 24 July 2008 “CASER-2”, the CNC condemnedan insurance company for obstruction of inspection causing delayand ordered them to pay a fine of €133.500.







Yes No



Yes No


Yes* No



Spai

n

SJ Berwin LLP Spain



For the first time, the Competition Act includes a classification ofinfringements depending on seriousness (minor, serious and veryserious). Cartels between competing undertakings are classified asvery serious and vertical agreements as serious.The fine will depend on the seriousness of the infringement, and themaximum fine will amount up to 10 per cent of total turnover.When turnover cannot be calculated, the Council can impose a fineof up to €10 million. The Competition Act sets out the criteria that are taken into accountwhen calculating the exact amount of the fine (scope andcharacteristics of the affected market; market shares of responsibleundertakings; scope of the infringement; duration; effects of thebreach on consumers or any other undertaking; unlawful profit).The Act also lists a series of mitigating and aggravating factors.The Competition Act states that the NCC will also be able to punishthe participants of any group or association of enterprises. In theevent that an association does not have sufficient funds to pay thefine, the members of the association will be held liable. Payment ofthe fine can be demanded from any of the member companieswhose representatives are members of the government bodies of theassociation in question or, alternatively, any member of theassociation operating in the market in which the infringement tookplace.Subsidiaries may also be forced to pay for conduct carried out bytheir parent company.The Competition Act establishes a general threshold of 10% of totalturnover for companies belonging to associations which committedinfringements, regardless of whether the infringement was minor,serious or very serious. The NCC has recently published draft guidelines on the method forcalculating fines in cartel and abuse of dominant position cases. Itis expected that the final version will come into force early 2009.


Individuals (i.e. legal representatives or members of themanagement body) may be subject to a personal fine of up to€60,000.


As of the day when the infringement was committed or ceased (inthe case of continuous infringements), the limitation periods arefour years for very serious infringements, 2 years for seriousinfringements and 1 year for minor ones. Likewise, the Competition Act lays down two cases in which thelimitation period may be interrupted (by any act of theAdministration with formal learning of the interested partyintending to comply with the Act and by the acts carried out by theinterested parties complying with the corresponding resolutions).


Spanish law does not expressly include any provision in thisrespect; therefore companies are not prevented from doing so.



One of the major changes introduced by the Competition Act is theintroduction of a leniency system both for total immunity andreduction of the amount of fines in cartel cases. This system has beenimplemented by the Royal Decree, which regulates the procedures.Immunity is reserved for the first company or individual whoprovides evidence which, in the NCC view, will enable it to carry outan inspection or to find an infringement of article 1. Those who haveadopted measures obliging other undertakings to participate in theinfringement are excluded from claiming immunity. In addition, theapplicant is required to: cooperate fully, on a continuous basis andexpeditiously throughout the investigation; end its involvement in thealleged cartel immediately following its application, except for whatwould, in the NCC’s view, be reasonably necessary to preserve theeffectiveness of the inspections; not destroy relevant evidencerelating to its application; and not disclose to third parties other thanthe European Commission or any other national authorities itsintention to submit an application or its content.Companies or individuals who subsequently provide additionalevidence may have their fines reduced by up to 30 per cent (seequestion 4.6). Reduction can be granted when the undertakingprovides the NCC with evidence of the alleged infringement whichrepresents significant added value with respect to the evidencealready in the NCC’s possession. Furthermore, the applicant mustmeet the cumulative conditions set out above.If the applicant for a reduction of a fine submits evidence whichallows for the establishment of additional facts with a direct bearingon the amount of the fine, the NCC will take such additional factsinto account when setting the fine to be imposed on the undertakingwhich provided this evidence.Leniency applications may also be submitted before the regionalcompetition authorities in regions where a leniency system is inplace. The regional competition authorities shall communicate tothe NCC all leniency applications submitted to it.Legal representatives or members of management bodies who haveparticipated in the alleged infringement will also benefit fromimmunity and reduction of fines granted to a company providedthey cooperate with the NCC.When more than one Member State is affected by the infringementand, subsequently, more than one Competition Authority is wellplaced to act against the infringement, the Commission encouragesapplying for leniency to all Competition Authorities affected. TheEuropean Competition Network Model Leniency programme waslaunched in order to avoid lack of application to all NCAs affectedas a result of discrepancies between the existing leniencyprogrammes within the ECN. Its aim is to harmonise leniencyprogrammes throughout the Community.In those cases where the Commission is particularly well placed todeal with a case (those affecting three Member States or more) theapplicant filing for immunity with the Commission may file summaryapplications with any NCAs which might also be well placed to act.


The Royal Decree provides a “marker” granted by the Directoratefor Investigation; a prior reasoned request from the applicant forexemption provides the means of which the filing date for the

WWW.ICLG.CO.UK233


Spai

n

SJ Berwin LLP Spain

application will be considered as the initial date of the markerapplication.Nevertheless, in view of obtaining the marker, it is necessary toprovide the Directorate with the necessary information required forthe normal exemption application (applicant and cartel participants’name and address, description of the cartel, applications to othercompetition authorities) except the evidence relating to the cartelwhich might be presented subsequently in order to give theapplicant time to gather more information.


In order to ensure the effectiveness of the leniency system, theCompetition Act establishes that the NCC cannot provide theCommercial Courts with the information obtained via the immunityor reduction of fines applications. This provision affords someprotection to applicants in case of damages actions.At the applicant’s request, both exemption and reduction of finesmay be submitted orally, accompanied by the relevant informationand evidence, recorded at the NCC premises, with a transcriptthereof being entered in the register.The NCC agrees that only the interested parties may have access tothe transcript. Copies of the oral submission may not be madeeither mechanically or electronically.


The fact of filing the application is confidential. A special separaterecord of all documents and data deemed to be confidential(including the applicant’s identity) will be organised. However, theinterested parties have access to all non-confidential informationnecessary for responding to the statement of objections (withexception of obtaining copies of any applicant’s oral statement).The Competition Act does not specify how long the leniencyapplication will be treated as confidential for.


The Competition Act requires full, continuous and expeditiouscooperation of the leniency applicant throughout the administrativeinvestigation procedure together with other conditions (bring to anend the alleged conduct, not destroy evidence not discloseinformation to third parties and not to have obliged other parties totake part in the infringement) in order to be able to benefit fromexemption or reduction of fines. However, although theCompetition Act does not expressly contain any provision regardingthe termination of the obligation of “continuous cooperation”, theRoyal Decree states in a general way that cooperation should takeplace over the entire course of the proceedings.


Reduction of fines is based on a percentage based system dependingon the timing of the provision of information: by 30 per cent to 50per cent reduction for the first undertaking to provide significantadded value; 20 per cent to 30 per cent reduction for the second; anda maximum reduction of up to 20 per cent for the subsequentundertakings.



The Competition Act expressly states that the exemption granted toan undertaking shall also benefit its legal representatives or thepersons comprising the management bodies providing they havecollaborated with the NCC. However, neither the Competition Actnor the Royal Decree expressly provide for the opposite case, beingthe “whistle-blower”. This might be understood in such a way thatin cases where an employee reports cartel conduct independently ofhis employer, he alone will benefit from the exemption and not theundertaking. To date, we are not aware of any whistle-blowingprocedures brought before the NCC.



Following the proposal of the Directorate, the Council mayterminate proceedings concerning sanctions when the offenderspropose commitments which put to an end the anticompetitiveeffects of their conduct. The period during which commitmentsmay be submitted has been extended and the procedure is moreflexible now. In any event, the parties may offer commitments atany time before the referral by the Directorate of its proposal reportto the Council, whose adoption is not conditional on the agreementof the rest of the interested parties in the proceedings. Thesecommitments shall be binding on the offenders. To date, we are not aware of any settlement procedures havingtaken place.

7 Appeal Process


The resolutions and acts of the Directorate leading to non-defendable or irreparable damage can be appealed before theCouncil within 10 days (administrative appeal).The resolutions and acts issued by the Chairman and Council maybe appealed before the Administrative Courtroom of the NationalAudience within two months (judicial appeal) and in a secondreview appeal under certain particular cases (e.g. amount of fines)before the Chamber for Contentious Administrative Proceedings ofthe Supreme Court.


The Competition Act establishes no specific rules regarding thecross-examination of witnesses during the appeal process. Therules governing the Common Administrative Process (Law 30/92)need to be applied and, subsequently, the regulation for theContentious Administrative jurisdiction (Law 29/1998).



Spai

n

SJ Berwin LLP Spain

8 Damages Actions


Pursuant to the Competition Act and Judiciary Act 6/1985, theMercantile Courts (already competent for the enforcement of article81 and 82 EC according to the Regulation 1/2003) for the first timehave jurisdiction in civil actions concerning the private enforcementof Articles 1 (cartel prohibition) and 2 (abuse of dominant position)of the Competition Act.The interested parties may bring a complaint before the MercantileCourts claiming compensatory damages for any loss suffered as aconsequence of anticompetitive cartel conduct without therenecessarily being a prior firm decision of the NCC declaring theexistence of a cartel law infringement.


In principle, under Spanish law class-actions as such are notavailable. The law of civil procedure recognises the right of consumers and usergroups who have suffered loss deriving from cartel conduct to bringa claim for compensation when the individuals are determined oreasily determinable. Where collective interests are defended before aCourt, it will be essential to demonstrate that all the necessary stepshave been taken in order to identify all the interested partiesrepresented, so that they can intervene in the process. When the consumers or users are undetermined or not easilydeterminable, only the statutory users and consumers associationare able to bring a claim for damages. In order to avoid abusive claims on behalf of user groups, only thoseaffected by the infringement in question will be allowed to file a claim(e.g. a consumer group for food products would not be allowed to filea claim against a prohibited practice in the car sector). According to Spanish law, affected groups may also bring a jointaction (for instance an association of companies claiming damagesafter the abuse of dominant position by a competitor).Only the parties represented during the proceedings will be affectedby the judgment.


In the case of actions based on non-contractual obligations, theapplicable limitation period one year since the injured party wasaware of the harm (article 1968 Civil Code). Under the formerCompetition Act, in order to take account of when the party hasbecome aware of the harm, it was necessary to wait for a firmdecision by the Competition Authority. However, nowadays theMercantile Courts may directly apply the competition provisionsand consequently award compensation for damages. Therefore, theone year limitation period effectively starts to count from themoment the party is aware of the harm. There is no settled case law,however, according to some authors, this “awareness” must bedefinitive and thus, if there is an ongoing investigation or an appealof a competition authority decision, the one year period does notstart to run until the decision finding harm becomes definitive.On the contrary, in the case of actions based on contractualobligations, there is no time limit for an agreement to be considerednull and void.


Since no specific rules are contained in the Spanish CompetitionAct, the regulations contained in the Spanish Civil Procedure Actwill apply. According to article 241 of said Act, each party will paytheir own costs, unless the Court orders differently (usually whenthe Court accepts all the other party’s claims).


As the follow-on rule applied under the former Competition Actrequired a firm prior decision (not subject to appeal) of theCompetition Authority, it was difficult for private parties to bringactions based on antitrust infringement proceedings since a finaldecision might only be available after several years. There have only been a few (if not only one) successful follow-onantitrust actions before the Spanish Courts (e.g. Court of FirstInstance of Madrid of 7 June 2005 Antena 3 against the SpanishProfessional Football League condemning the LNP to pay €25.5million. It took almost 15 years to complete the whole procedure.However it was appealed before the Provincial Court of Madrid,decision of 18 December 2006, which rejected the initial argumentthat the lost profit was not properly and rigorously proved).It is worth mentioning the Judgment of the Fifth Mercantile Courtof Madrid of 11 November 2005 “Telefónica case” (subsequentlyappealed and confirmed before the Provincial Court of Madrid in itsdecision of 25 May 2006). In this Judgment, a successful damagesclaim (€639,003) was brought against Telefonica for itsinfringement of article 82 EC. The proceedings before theMercatile Court took less than 10 months to complete. (At thattime, according to Regulation 1/2003 articles 81 and 82 EC werealready enforceable by the Mercantile Courts.) Under the current Competition Act, individuals may bring an actionfor antitrust infringements before the Mercantile Courts. Therefore,the number of successful civil damages claims is expected toincrease significantly in the near future.

9 Miscellaneous


The Royal Decree recently came into force on the 28 February 2008implementing some essential aspects of the Competition Act,among them the leniency system laid down in article 65 and 66.The Competition Act introduced for the first time a leniency systemin Spain for both total immunity and reduction of fines in cartelcases. However the operation of the new leniency system wasconditional on the entry into force of the Royal Decree, which tookplace on the 22 February 2008.On the first day of the operation of the new leniency system inSpain, 6 leniency applications were submitted.

9.2 Please mention any other issues of particular interest inSpain not covered by the above.

The Spanish enforcement system is supplemented by Law 1/2002on the coordination of competencies between central and regionalbodies, adopted in response to a Constitutional Court judgment,

WWW.ICLG.CO.UK235


Spai

n

SJ Berwin LLP Spain

which held that regional governments are also competent in thefield of enforcement. Pursuant to Law 1/2002 the regional governments in Spain areentitled to enforce the antitrust provisions of the SpanishCompetition Act when the effects of the prohibited conduct arerestricted to the region concerned. In case the cartel or abusivebehaviour has effects beyond the territory of a single region, the

NCC will be competent.Besides, the NCC will be competent to enforce the antitrustprovisions in regions which have not set up their own regionalcompetition authorities. Up to date, only the following regionshave instituted an autonomous competition authority: Andalusia;Galicia; Castile and Leon; Catalonian; Community of Madrid; andthe Basque Country.

Ramón García-Gallardo

SJ Berwin LLPSquare de Meeûs 11000 BrusselsBelgium

Tel: +32 2 511 5340Fax: +32 2 511 5917Email: [email protected]: www.sjberwin.com

Ramón García-Gallardo has been practising law since 1989,specialising in competition, corporate law and litigation. Ramónjoined the firm as a partner in 1999. He manages the Brussels officeand is also head of the Spanish competition law practice group inthe Madrid office.He specialises in European Community and Spanish competitionlaw in a wide range of industry sectors, including air and maritimetransport, energy and agri-food. As a competition lawyer, his mainactivities involve a broad range of issues including a variety ofcompetition issues, such as dominance, cartels, dawn raids, pricing,refusal to supply, etc. He has provided competition law compliancesupport to a large number of international clients and has particularexpertise in cartel defence work and leniency issues, both atSpanish and EU level. Ramón regularly represents clients before theSpanish Antitrust Authority and the European Commission, and alsohas particular expertise in litigation cases before the Court of FirstInstance (CFI) and the European Court of Justice (ECJ) inLuxembourg.Ramón regularly advises on mergers under Spanish and EU law,acting for either one of the merging parties or third parties such ascomplainants or investors.Educated at the University of Valladolid, Spain, Ramón later studiedfor his Masters in EU law at the Instituto de Estudios Europeos atthe University of Salamanca, at King’s College, London and at theFree University of Brussels and is fluent in Spanish, English andFrench. He participates regularly in working sessions, seminars andconferences on EU & Spanish competition matters.

Marta Arias Díaz

SJ Berwin LLPSquare de Meeûs 11000 BrusselsBelgium

Tel: +32 2 510 8627Fax: +32 2 511 5917Email: [email protected]: www.sjberwin.com

Marta Arias Díaz qualified in Spain as an “abogado” and is anassociate in the EU & Competition Department in Brussels,specialising in EU and Spanish competition law. In the field of EU law, Marta has experience in advising on EU andSpanish merger cases, state aids, competition complianceprogrammes, and defence of cartel. She also deals with generalcommercial law issues including commercial distribution (agency,distributorships and franchise). She has also gained experience onEU and Spanish law matters in a wide range of fields such asenergy, maritime transport and trade.Prior to joining SJ Berwin LLP, Marta worked as a case-handler atthe European Ombudsman in Strasbourg (France), where she mainlydealt with calls for tenders, access to documents, environmentallaw, staff contracts and disability rights cases.Marta holds a Spanish law degree from the Autonomous Universityof Barcelona, graduating first in her year, and later obtained a MA inInternational and EU law from the Radboud Universiteit Nijmegen,the Netherlands (first-class).




236

Chapter 40


Setterwalls

Sweden



According to chapter 2, section 1, of the Swedish Competition Act(SFS 2008:579) (the “Competition Act”), agreements betweenundertakings are prohibited if they have as their objective, or effect,to an appreciable extent, the prevention, restriction or distortion ofcompetition within the Swedish market. The provision correspondswith Article 81(1) of the EC Treaty.Infringements of competition law are not criminalised in Swedenand the regulation of cartels is therefore civil in its nature.However, in relation to certain cartel activities it is possible for acourt to order an injunction against trading in relation to anindividual who has been involved in competition lawinfringements.


The Competition Act does not specifically mention cartels, insteadthe regulation of cartels is included in the general prohibitionagainst anticompetitive agreements in chapter 2, section 1, of theCompetition Act.


The Swedish Competition Authority (the “SCA”) is the stateauthority that has been given the mandate to safeguard competitionin Sweden. One of the SCA’s main objectives is to initiateinvestigations into alleged cartels. The SCA has four competition departments dealing with differentsectors of the economy. Department 1 specialises in the building,food (incl. non-durable goods) and agriculture sectors. Department2 specialises in the financial services, telecommunications, mediaand IT sectors. Department 3 deals with transport, energy, healthcare/pharmaceuticals and the chemical-technical industry.Department 4 was established mid December 2008 and deals withcompetition problems that arise when agencies, municipalities orcounty councils operate in the same markets as private businesses.In addition, the Legal Department is involved in court actionsinitiated by the SCA. Furthermore, the SCA has support functionsto ministries working with economic and legal issues.The SCA has been given the power to order an undertaking to cease

an infringement of the Competition Act. Such order can be madeunder the penalty of an administrative fine (Sw: vite). The SCA canalso impose interim measures on undertakings.Upon application by the SCA, the Stockholm District Court mayimpose an administrative fine (Sw. konkurrensskadeavgift) on anundertaking that has been found guilty of competition lawinfringements. If the fines are not paid, the SCA can seek recoveryby turning to the Swedish Enforcement Authority.In cases where the SCA is of the opinion that the facts of the caseare clear it may, instead of a court action, suggest that theundertaking pays a fine (Sw. avgiftsföreläggande). If the fine is notapproved by the undertaking within the set time limit the SCA mayinstead initiate a court action. If the undertaking approves the finethe SCA is barred from initiating a court action.Decisions by the Stockholm District Court may be appealed to theSwedish Market Court.


The SCA can initiate an investigation ex officio or on the basis of aleniency application or a third party complaint. The SCA starts bycarrying out a preliminary assessment and if such assessmentresults in the SCA pursuing the case, the authority starts collectingevidence. As will be described in detail below, the SCA has widereaching powers to conduct dawn raids, order companies andindividuals to furnish documents and other information, carry outinterviews etc. for this purpose.The SCA’s fact finding results in a Statement of Objections. Theconcerned undertakings have the possibility to comment upon thisdocument.The newly introduced settlement procedure has not been used sofar. If an undertaking accepts the fine calculated by the SCA, nocourt action can be taken. In this case the SCA thus has the powerto impose fines on its own.If a case is not settled, or in cases in which this possibility does notexist, the SCA must initiate a court action in the Stockholm DistrictCourt in order for the court to impose fines on an undertaking. Thecourt’s decision can be appealed to the Swedish Market Court,which is the court of highest instance.


The Competition Act does not contain any sector specific offencesas such. There are sector specific exemptions relating to taxiservices and the agricultural sector. Furthermore, all EC Block

Maria Lehmann-Horn

Ulf Djurberg

WWW.ICLG.CO.UK237


Swed

en

Setterwalls Sweden

Exemptions have been implemented into Swedish law throughvarious acts.

1.6 Is cartel conduct outside Sweden covered by theprohibition?

Cartel conduct outside Sweden is only covered by the CompetitionAct to the extent that the cartel conduct has an effect on the Swedishmarket or parts of it. Thus, the cartel activities may take placeabroad and the participating companies may be foreign. However,the exercise of extraterritorial jurisdiction is restricted by publicinternational law and unless the SCA is able to enforce an actionagainst foreign companies it is unlikely to take such action.






None.


No, surveillance powers may only be used in investigationsconcerning criminal offence. Hence, since competition lawinfringements are not criminal offences there are no generalsurveillance powers available.


In order to be able to fulfil its tasks under the Competition Act, theSCA may order an undertaking to furnish documents andinformation. Furthermore, the SCA may order an individual who isbelieved to be able to provide information concerning the matter to

appear for questioning at a certain time and place. The orders maybe imposed under penalty of an administrative fine. The SwedishEnforcement Agency (only) has the power to e.g. access lockedpremises and to seal premises.


The searches are carried out by SCA officials, often accompaniedwith IT-specialists and staff from the Swedish EnforcementAuthority. The SCA has the power to search residential premisesbut this has so far never been done. The undertaking is entitled tohave legal advisors present and the SCA is required to wait untillegal advisors arrive. However, this obligation does not apply ifthere is a risk that the search would be undermined if delayed. Ingeneral, the SCA does not wait for the undertaking’s legal advisorsto arrive.


No, in-house legal advice is not protected by the Swedish rules ofprivilege.


A person who could be the subject of an injunction against tradingwill before examination be informed that information provided canbe of importance for the SCA’s decision whether an injunctionagainst trading will be imposed or not.


Court orders concerning searches of premises (dawn raids), andorders by the SCA concerning furnishing of documents orappearing for questioning may be imposed under penalty of anadministrative fine. Obstruction of the investigation or breaking ofa seal constitutes a criminal offence which can result in fines orimprisonment for a period of maximum one year. Sanctions for theobstruction of an investigation have not been used so far.



An undertaking may be ordered by the Stockholm District Court,upon application by the SCA, to pay a fine of up to 10 per cent ofthe undertaking’s annual turnover for the preceding financial year.The starting point for the SCA when calculating the fines is thesales value on the relevant market. Factors such as the seriousnessand the duration of the cartel are taken into account. Furthermore,if the company has forced another undertaking to participate in thecartel or if it has played a leading role in the cartel this is recognisedas an aggravating circumstance. On the other hand, if theundertaking has only taken limited part of the cartel this is regardedas a mitigating circumstance. Factors that are not taken intoaccount are whether a company was forced by another undertakingto participate in the cartel or if the cartel was detrimental to theundertaking. Finally, factors not referable to the case at hand canbe taken into account. Previous infringement of chapter 2, section


Order the production of specific documents orinformation Yes* No

Carry out compulsory interviews with individuals Yes* No




Yes* No



Yes* No


Yes* No



Swed

en

Setterwalls Sweden

1, of the Competition Act or Article 81(1) of the EC Treaty can thusbe regarded as an aggravating circumstance. The undertaking’sfinancial situation may also be taken into account, either as anaggravating or mitigating circumstance.


There are no criminal sanctions on individuals in Sweden.However, the new Competition Act, which entered into force as of1 November 2008 introduced the possibility to order an injunctionagainst trading for a period of three to ten years for an individualwho has been involved in certain competition law infringements.Only certain horizontal cooperation such as price-fixing, marketsharing or controlling of production can lead to an injunctionagainst trading. The prohibition can be imposed on e.g. partners,board members, managing directors or any person who in fact hasconducted the management of a business.In order to facilitate whistle blowers no injunction is imposed on aperson who could be the subject of such injunction if he or she hassubstantially contributed to facilitate the SCA’s cartel investigation.


A fine for competition law infringements may only be imposed incases where the SCA’s application commencing proceedings incourt has been served on the party concerned within 5 years oftermination of the infringement. However, if the party within thistime period has been notified of a search order or has been given theopportunity to comment upon the SCA’s draft applicationcommencing proceedings the time is instead calculated from thatday. In such cases a fine for competition law infringements mayonly be imposed where the SCA’s application commencingproceedings in court has been served on the party concerned within10 years of termination of the infringement.


Apart from an injunction against trading, no personal liability existsunder Swedish competition law. In general, a company can pay thelegal costs occurred for a former or current employee in connectionto a cartel proceeding.



Sweden operates a leniency programme. The general framework isprovided in chapter 3, sections 12 to 15, in the Competition Act.Under these provisions an undertaking can receive immunity or areduction of the fines if it discloses its participation in aninfringement of chapter 2, section 1, of the Competition Act orArticle 81(1) of the EC Treaty. The SCA has also issued guidelineson reduction and immunity from fines which further shed light onhow the SCA interprets and applies the provisions in theCompetition Act (KKVFS 2008:3).Only one company can be granted immunity from fines. A decisionby the SCA to grant immunity is binding for the SCA and the courtsin the court proceedings, provided that the company cooperateswith the SCA and fulfils its obligations during the whole process.Immunity cannot be granted if the undertaking has played the

leading role in the infringement. Whether or not the undertakinghas played the leading role will be decided on a case-by-case basisreviewing factors such as whether the undertaking has initiated thecartel, forced other undertakings to participate in the cartel, etc. There are three possibilities for granting immunity. In the firstsituation, the SCA does not have sufficient evidence to take actionagainst the infringement. An undertaking may then be grantedimmunity if it is the first to notify the infringement to the SCA and theinformation provided gives the SCA enough evidence to take actionagainst the cartel. The two other possibilities for immunity concernsituations where the SCA already has sufficient evidence to take actionagainst the infringement, but the undertaking either provides evidenceor information of crucial importance to the investigation or otherwisefacilitates an investigation in a very significant manner. The thirdpossibility for immunity is to be used restrictively. If the undertaking cannot fulfil the criteria for immunity, it may stillget a reduction of the fine if it offers assistance of significantimportance and it adds considerable value to the investigation. Thefirst undertaking that fulfils the requirements for leniency gets areduction of the fine of 30 to 50 per cent, the second undertakinggets a reduction of 20 to 30 per cent, and the following undertakingsget a reduction of up to 20 per cent each. To be able to get immunity or reduction of fines the undertakingmust (i) provide the SCA with all information and evidence towhich the undertaking has access concerning the infringement, (ii)actively cooperate with the SCA during the entire investigation ofthe infringement including proceedings in court, (iii) not destroyevidence or in another way obstruct the ongoing or any futureinvestigation, and (iv) cease or immediately after its notificationcease to participate in the infringement.


No. Although discussed, a marker system was not introduced in theCompetition Act of 1 November 2008. However, a company thatconsiders applying for leniency can contact the SCA on a no-namesbasis and describe the cartel in hypothetical terms. Based on theinformation given, the SCA can inform the company whether theinformation is enough to fulfil the criteria for immunity.


According to the SCA’s guidelines (KKVFS 2008:3) applicationscan be made orally or in writing. Public records are taken of all oralstatements and form part of the SCA’s file. The file is keptconfidential during the SCA’s investigation until proceedings incourt are initiated. (See also question 4.4.)


The confidentiality rules are found in the Swedish Secrecy Act (SFS1980:100). Under these rules any information with regard to theSCA’s planning and preparation phase can be kept confidential.Furthermore, information related to the SCA’s investigation is keptstrictly confidential if it is exceptionally important that theinformation is not disclosed. If the Competition Authority decidesto initiate court proceedings an application is submitted to theStockholm District Court. This application contains information onthe leniency applicants and reasons for why immunity and/or

WWW.ICLG.CO.UK239


Swed

en

Setterwalls Sweden

leniency was granted. The application is public apart from suchinformation that would lead to the undertaking suffering substantialdamage or other substantial detriment if the information is revealed.Risk for civil damages is not regarded as a substantial detriment tothe undertaking.Court proceedings are generally open to the public. A leniencyapplicant can however request limiting the access to a hearing.


The undertaking must continuously co-operate with theCompetition Authority during the investigation as well as during theproceedings in court. The cooperation does thus not cease to apply.


No. There is neither a leniency plus nor penalty plus policy.However, when the fines are being calculated the SCA can take intoaccount as an aggravating circumstance whether an undertaking haspreviously infringed chapter 2, section 1, of the Competition Act orArticle 81(1) of the EC Treaty.



Individuals may anonymously report cartel conduct to the SCA.There is no leniency available for individuals since individuals arenot subject to fines. In cases where an individual may be subject toan injunction against trading the SCA can refrain from suchinjunction if the individual has contributed substantially to facilitatethe SCA’s investigation (see question 3.2).



A settlement procedure was introduced in the Competition Act of 1November 2008. In cases where the SCA is of the opinion that thefacts of the infringement case are clear it may, instead of a courtaction, suggest that the undertaking pays a fine. If the fine is notapproved by the undertaking within the set time limit the SCA mayinstead initiate a court action. However, if the undertakingapproves the fine the SCA is barred from initiating a court action.

7 Appeal Process


A cease-and-desist order by the SCA can be appealed to theSwedish Market Court.As previously explained under question 1.4, the SCA must initiateproceedings in the Stockholm District Court in order to imposefines on any cartel member. A judgment by the Stockholm DistrictCourt may be appealed to the Market Court. The decisions of theMarket Court are final.

Private enforcement actions follow the general procedural rules fordamage claims. The law suit is filed where the defendant has itslegal seat or in the Stockholm District Court, which always hasjurisdiction over damage claims under the Competition Act. Adecision by a District Court may be appealed to the Court of Appeal(leave to appeal is required), which decision in turn may beappealed to the Supreme Court (leave to appeal is required).


If witnesses are to give oral testimony in the appealed case, cross-examination is allowed. However, it should be noted that witnessesdo not always testify on appeal, instead a video recording of theinitial oral testimony may be shown. When giving his/her oral statement in court a witness may beconfronted with his/her statement to the SCA (if the witnesspreviously has been called in for questioning) if the witness on thewitness stand deviates from his/her statement to the SCA. Thispossibility did not exist under the previous Competition Act.

8 Damages Actions


A company that intentionally or negligently infringes chapter 2,section 1, of the Competition Act, or Article 81 (1) of the EC Treatyis liable for damages.The procedure for civil damages actions for loss suffered as a resultof cartel conduct does not differ from other civil damages actions.A suit can be filed to the ordinary district courts; typically a law suitis filed where the defendant has its legal seat. Stockholm DistrictCourt always has jurisdiction over damage claims for infringementsof the Competition Act. Appeals are made to the relevant court ofappeal (leave to appeal is required), which in turn may be appealedto the Supreme Court (leave to appeal is required).Only single damages are available in Sweden.


Yes. There are three forms of class actions set out in the SwedishGroup Proceedings Act (SFS 2002:599):(a) A private group action may be instituted by a natural or legal

person that has a claim which is subject to the action.(b) An organisation action may be instituted by a non-profit

association that protects consumer or wage-earner interestsin disputes between consumers and a business operator.

(c) A public group action may be instituted by an authority that issuitable to represent the members of the group. TheGovernment decides which authorities are allowed to institutepublic group actions. A public class action is intended for caseswhere a litigation process is of interest for the public.


According to Chapter 3, section 25, paragraph 2 of the CompetitionAct, the right to damages lapses if no action is brought within tenyears from the date when the damage was caused. The ten-yearlimitation period entered into force on 1 August 2005. A limitationperiod of five years applies to claims that arose before 1 August 2005.



Swed

en

Ulf Djurberg

Setterwalls Arsenalsgatan 6, P.O. Box 1050SE-101 39 StockholmSweden

Tel: +46 8 5988 9017Fax: +46 8 5988 9090Email: [email protected]: www.setterwalls.se

Ulf Djurberg is a partner and the head of Setterwalls’ EU &Competition group. Ulf specialises in Swedish and Europeancompetition law as well as public procurement and state aid. Ulfhas wide experience in advising companies on competition mattersbefore the competition authorities as well as litigation in courtincluding the EC Court of Justice. He regularly advices clients onanti-trust matters including compliance programmes, dawn raidsand the structuring of cooperation agreements and joint ventures. Inaddition, Ulf devotes a lot of his time to public procurementproceedings in Swedish Courts and merger control cases before theSwedish Competition Authority and the European Commission.

Maria Lehmann-Horn

Setterwalls Arsenalsgatan 6, P.O. Box 1050SE-101 39 StockholmSweden

Tel: +46 8 5988 9111Fax: +46 8 5988 9090Email: [email protected]: www.setterwalls.se

Maria Lehmann-Horn is an associate in Setterwalls EU &Competition group. Prior to joining Setterwalls, Maria worked withleading law firms in Munich and Brussels. She specialises inSwedish and European competition law and has been deeplyinvolved in a number of complicated cases covering all aspects ofcompetition law. She focuses on representing clients in cartelinvestigations, in preparing compliance programmes and in carryingout internal competition audits. In addition, Maria has wideexperience in preparing merger notifications to the SwedishCompetition Authority and the European Commission as well ascoordinating multi-jurisdictional filings.

Setterwalls is one of Sweden’s leading commercial law firms. We have over 150 lawyers, including 44 partners,working from offices in Stockholm, Gothenburg and Malmoe.

We offer legal advice within all branches of commercial law. Setterwalls’ EU & Competition department is an importantpart of the firm’s full-service practice. 14 lawyers in our three offices provide legal advice in all areas of EU lawincluding anti-trust, merger control, public procurement, state aid and general advice on other areas of EU law such astrade and free movement of goods.

The EU & Competition department has wide experience in cartel investigations and represents clients in front of thecompetition authorities and during dawn raids. The group advises on all aspects with regard to cartels such ascompliance programmes, internal audits, leniency applications and actions for damages. The team has also wideexperience in litigation before both national and international courts.

Setterwalls Sweden


The general rule in the Swedish Code of Judicial Procedure statingthat the losing party shall reimburse the opposing party for litigationcosts also applies to civil damages follow-on claims.


There have not been any judgments with regard to follow-on orstand alone civil damages claims for cartel conduct in Sweden.Follow-on civil damages claims have been filed by several Swedishmunicipalities in relation to the asphalt cartel (see question 9.2below). These cases are still pending.

9 Miscellaneous


On 1 November 2008 the new Competition Act entered into force.The new Act introduced a settlement procedure and an injunctionon trade for individuals. Furthermore, the rules on how the

administrative fines are being calculated were adjusted and newguidelines for leniency were introduced. The new rules are beingdiscussed in greater detail in the various questions above.

9.2 Please mention any other issues of particular interest inSweden not covered by the above.

On 10 July 2007 the Stockholm District Court issued its judgmentin the asphalt cartel, the largest cartel case in Sweden. The courtimposed fines on the cartel members of approx. SEK 460 million(approx. €45 million). The case was appealed to the SwedishMarket Court by six of the nine companies and a judgment isawaited for Spring 2009. Several follow-on damage claims havebeen filed by Swedish municipalities in relation to this cartel.On 11 September 2008 the Swedish Market Court found eightdealers selling Volvo and Renault cars in southern Sweden guiltyfor price fixing and market sharing. The Stockholm District Courtfound the dealers not guilty but the Swedish Market Court ruled infavour of the SCA and imposed a fine amounting to SEK 21 million(approx. €2 million) on the cartel members. The judgment is final.

AcknowledgmentThe authors would like to thank their colleagues Moa Klason andFredrik Olsson for their contribution to this chapter.



Chapter 41

Schellenberg Wittmer

Switzerland



The cartel prohibition under Swiss law is primarily based on theFederal Act on Cartels and other Restraints of Competition (“CA”)of October 6, 1995, and amended as per April 1, 2004. CA iscompleted by the Federal Council’s Ordinance on the Control ofMergers (“OCM”) of June 17, 1996, and the Federal Council’sOrdinance on Sanctions (“OS”) of April 1, 2004. Finally there havebeen adopted the Ordinance regarding Procedural Costs as well asa Regulation on the Swiss Competition Commission’s internalorganisation. The Swiss Competition Commission further releases a number ofCommendations on specific subjects, which have, in practice, a defacto force of law. At this time, the Swiss Competition Commissionhas released Commendations on the following subjects:

Commendation on the Cartel Law Treatment of VerticalRestraints (2nd revision, July 2, 2007); this importantcommendation regarding vertical agreements provides,amongst other regulations, a safe harbour rule for verticalagreements, which is based on a threshold of 15% marketshare, under exclusion of black-listed agreements; thisCommendation was elaborated with strong inspiration fromthe EU block exemption regulation.Commendation and Explanation regarding the Trade withAutomobiles (October 21, 2002).Commendation on Agreements with limited Effects on theMarket regarding SME (December 19, 2005).Commendation on Homologation and Sponsoring inConnection with Sporting Goods (December 15, 1997).Commendation on Conditions for the Admissibility ofAgreements regarding the Use of Calculation Aids.

The cartel prohibition under Swiss law is of a mixed civil andadministrative law nature, with the administrative part includingpenal elements. Possible sanctions are divided into administrativeand penal sanctions. Art. 96 of the Swiss Constitution provides for a basis for CA as itstipulates a federal competence for legislation against damagingeffects of cartels and other restraints on competition. Consequentlymaterial Swiss competition law is, in contrast to e.g. Europeancompetition law, based on the principle of abuse.


Unlawful restrictions on competitions are e.g. agreements orconcerted acting of parties appreciably affecting competition.Pursuant to the general rule in Art. 5 Para. 1 CA, any suchagreement, either bilateral or multilateral, binding or non-binding,between parties on the same level of the market or on differentmarket levels can qualify as anti-competitive if it has the purpose orthe effect to significantly affect competition, and if it eithercompletely excludes or significantly impairs effective competitionwithout economic grounds for justification. Such justification maybe granted based on grounds of economic efficiencies if necessaryin order to reduce production or distribution costs, improveproducts or production processes, promote research into ordissemination of technical or professional know-how, or exploitresources more rationally (Art. 5 Para. 2 CA).According to Art. 5 Para. 3 and 4 CA, hard-core cartels and hard-core vertical restraints, i.e. horizontal agreements which directly orindirectly fix prices, restrict quantities of goods or services to beproduced, bought or supplied, or allocate markets geographically oraccording to trading partners, as well as vertical agreements, whichstipulate minimum or fixed resale prices or completely isolategeographical markets, are, according to the Swiss system based onthe principle of abuse of cartels, presumed to completely eliminateeffective competition and thus are deemed unlawful. These legalpresumptions can be rebutted if it can be proved that effectivecompetition does exist despite such agreements. This may be thecase if some competition parameters are not entirely affected. Oncethe presumption of complete elimination is successfully rebutted,the Competition Commission will perform economic efficiencytests to assess justifiability.


The cartel prohibition is enforced by the Competition Commissionthrough its instruction body, the “Secretariat”. The CompetitionCommission is composed of 12 members who are elected by theFederal Council; the number of members of the CompetitionCommission has recently been reduced. The majority of the membersof the Competition Commission are independent experts, usually lawor economy professors, with the remaining seats being given torepresentatives of business and consumer organisations. TheSecretariat consists of approx. 50 specialist staff and is of preparingfunction to the Competition Commission and counselling function tocompanies and other interested parties. Generally, the CompetitionCommission and its Secretariat are treated as two separate bodies.Both Authorities are seated in Berne, the federal capital of Switzerland.

Michael Vlcek

Dr. Jürg Borer



Switz

erla

nd

Schellenberg Wittmer Switzerland

Decisions by the Competition Commission may be appealed beforethe Federal Administrative Court and the Federal Supreme Court. The Federal Council (Federal Government) has scatteredcompetences and is, e.g., empowered to decide on exceptions to theprohibition of cartels based on arguments of predominant publicinterest.Finally, the federal Price Inspector has subsidiary jurisdiction insome fields of competition law; with regard to state-regulatedprices, the Price Regulator holds exclusive competences.


After the opening of a preliminary investigation by the Secretariatof the Competition Commission, the Secretariat, in accordance witha member of the Competition Commission’s Presidency, formallydecides whether a formal investigation shall be opened or theassessment shall be discontinued. The opening of an investigationis to be publicly announced. The Competition Authorities disposeof an important level of discretion in this regard. After the openingof a procedure, the Competition Authorities may imposepreliminary measures.A formal investigation is carried out by the CompetitionCommission through its Secretariat and finished either by a formaldecision or by settlement based on mutual understanding with theparties. Before the Commission formally adopts its decision, theSecretariat submits a draft-decision to the involved parties forreasons of due process. A final formal decision by the Commissionmay include a prohibition of cartels or cartelistic behaviour as wellas sanctions imposed on involved companies. It is not unusual that investigations by the Competition Commissionlast for over a year.


Neither the CA nor the respective Ordinances do contain sector-specific offences or exemptions. The general justification ofagreements for economic reasons is available for all sectors. Sectors where statutory law explicitly excludes competition, suchas in the case of some official market or pricing systems orenterprises performing duties of public interest, are out of the scopeof CA. Furthermore, in the field of intellectual property, the CA isonly applicable when intellectual property rights are abused to e.g.foreclose the national market (Art. 3 CA). The Competition Commission has, however, publishedCommendations, of which some are focused on particular sectors ofeconomy; to date Commendations with regard to distributionsystems, calculation aids, the automotive and sporting goodsindustry and SME have been published (cf. above, question 1.1).

1.6 Is cartel conduct outside Switzerland covered by theprohibition?

The Swiss cartel prohibition is governed by the so-called effectsdoctrine. According to Art. 2 Para. 2 CA, the CA is applicable assoon as cartel conduct has effects on Swiss markets. Cartelsconcluded outside Switzerland but having an appreciable impact onSwiss economy are, therefore, subject to Swiss anti-trustproceedings. Enforcement of a decision by Swiss CompetitionAuthorities against parties located exclusively outside Switzerlandmay, however, be complex.





The Competition Commission’s investigatory powers are limited tosearching of premises, seizure of evidence and examination of partiesand witnesses. Generally, applied means of proof are documents,expert opinions and on-premise inspections. All investigatorymeasures are to be requested by the Secretariat and to be approved bya member of the Competition Commission’s Presidency.Particular powers of the Swiss Competition Authorities regardingdawn raids are outlined below.


Particular general surveillance powers are not granted to theCompetition Commission or its Secretariat.


Any corporation or individual may either formally or informallyinform the Competition Commission about possible infringementsof competition law. The Competition Authorities dispose of animportant level of discretion in their decision whether to open a(preliminary) investigation or not.Since the revision of CA effective as of April 1, 2004, theCompetition Authorities may effectively conduct dawn raids; theCompetition Commission has published a notice regarding theprocedure for dawn raids.


Any searches of business and, where appropriate, residentialpremises are carried out by representatives of the Secretariat





Carry out an unannounced search of residentialpremises Yes No


Yes No



Yes No


Yes No

WWW.ICLG.CO.UK243


Switz

erla

nd


accompanied by a member of the competent cantonal police. Theagents in charge of a search must produce a search warrant andupon request provide the company with a copy of such warrant.Companies subject to a dawn raid have the right to call for anexternal lawyer who, however, has a purely advising function anddoes not represent the company vis-à-vis the Secretariat. If noexternal lawyer is present, the search of the premises willnevertheless start, with the documents gathered before the arrival ofexternal lawyers separated to be screened by the external lawyersupon their arrival.


According to the Secretariat’s view, an in-house lawyer is to betreated like any employee of a company due to his lack ofindependence from the company. In-house lawyers are, therefore,not privileged. Despite recent case law by the Federal SupremeCourt, this question has not been entirely resolved.


Due to the right against self-incrimination, correspondence betweenthe company and its defence lawyer concerning an ongoinginvestigation is protected and its content may not be seized asevidence. Any other documents found on the company’s premises,even if produced by an external lawyer, may be seized andpotentially be used as evidence. In case of disaccord regarding the nature of seized documents andthe legality of their seizure, the Commission’s agents shall seal suchdocuments. These documents are to remain sealed until a decisionof the Chamber of Appeal of the Federal Penal Court is rendered.It is to be noted that all investigatory actions by the CompetitionAuthorities are subject to the principle of proportionality, andconsequently dawn raids are permissible only if a sufficientsuspicion of anti-competitive behaviour is given and it is probablethat a search of premises will produce usable evidence.


Art. 50 et seq. CA provide for administrative sanctions for theobstruction of investigations if companies infringe orders of theCompetition Commission or a Court. The sum of suchadministrative fines may amount up to CHF 100,000 in the case ofnon-compliance with official orders to produce documents or tosupply information. Individuals violating official orders may befined with a penal sanction amounting up to CHF 20,000. Finally,disciplinary fines of up to CHF 500 may be laid upon parties ortheir representatives otherwise obstructing investigations.In case of a sanction, impeding official investigations will usuallybe weighted negatively and result in a higher monetary sumpayable.



Administrative sanctions for companies infringing the cartelprohibition are provided in Art. 49a CA and in the OS (cf. above,

question 1.1). These so-called “direct sanctions” were introducedto CA in its revision in the year 2003 and are in force as of April 1,2004.Generally, administrative - not criminal - sanctions may amount upto 10% of the group turnover generated in Switzerland during thelast three business years.Administrative sanctions for companies will be of such amount inorder to have a significant impact on the companies. They areassessed according to the OS and taking into account thecircumstance of the individual case, with duration and gravity of theinfringement being of particular relevance and the gains derivingfrom the infringement being considered as well. Further elementstaken into account by the Competition Commission are thewillingness of the company’s corporate bodies to cooperate, arepeated infringement of the cartel prohibition, attemptedobstruction of the Competition Commission’s investigationactivities, etc. In this regard, administrative fines may be reduced,e.g., if the company ceases the unlawful activity after anintervention of the Competition Commission. Finally, the possibility to formally inform the CompetitionCommission of agreements exists, when in doubt of theircompliance with CA. Pursuant to Art. 49 Para. 3 CA, such noticeto the Commission must be made prior to the agreement in questionfactually becoming effective. This procedure is to be distinguishedfrom the leniency as described below as it is applicable to plannedagreements or activities only.


Art. 54 et seq. CA state a number of penal sanctions, which aresolely applicable on individuals and only in cases of non-compliance with official Competition Authorities’ orders.Individuals such as, e.g. members of the board of directors,executives and de facto bodies, involved in unlawful behaviourwith regard to the cartel prohibition may face aforementionedcriminal sanctions. These can only be issued by the CompetitionCommission and depend on the individual’s role in the course of theinfringement. Particularly the degree of intent of the respectiveindividuals is taken into account.


According to Art. 49a Para. 3 lit. b CA, no fine will be imposed ifthe restraint of competition in question had in fact not beenexercised for at least five years at the moment of the opening of theinvestigation. Since the CA only entered into force on April 1, 2004, thislimitation will first be relevant as of April 1, 2009. Penal sanctions for individuals are time-barred by a period of fiverespectively two years since occurrence of the infringement.


As this question is not treated in the CA, companies are free to payany legal costs incurred by their employees according to generalrules on administrative proceedings. Criminal fines, however, needto be paid by the convicted individual personally according to Swisslaw.



Switz

erla

nd




The CA contains a leniency programme for companies pursuant toArt. 49a, Para. 2 CA, which is further defined in the OS.Companies cooperating with the Competition Authorities in orderto discover and eliminate a restraint of competition are granted totalor partial immunity. Anonymous reporting is admitted. A totalimmunity may only be granted by the Authorities if the Authoritieshave not had any previous information on a case reported andexclusively to the first party reporting. The Competition Commission has released a Form of Notification forapplication for leniency on April 1, 2005. This form provides detailsabout the course of action and defines the details of notification.


Notifications may be submitted by fax, courier or in person or byoral testimony. Notification by mail is not advised due to thepossibility of inaccurate records of its time of reception. Asubmission via e-mail or telephone is not possible. The Secretariatadopts a first-come-first-serve practice.With regard to the possibility of civil-court proceedings in someforeign jurisdictions and the respective use of written statements,e.g. notifications to the Competition Commission, as evidence, theOS provides for the possibility to deposit voluntary reportingnotifications orally vis-à-vis the Secretariat. The Secretariat, inapplication of a marker system, only marks the time of incoming ofsuch notice. The marker system is available to every company reportinginfringements of the cartel prohibition committed by itself.


Applications for leniency can be made either in written form ororally by personal testimony. The oral testimony is taped asminutes by the Competition Commission. Similarly, the Competition Commission accepts also anonymousdenunciations on a case-by-case basis.


An application for leniency is treated confidential at least until theofficial opening of investigation. In order to protect cooperatingcompanies, the right to access relevant documents of theinvestigation, such as e.g. witness statements and minutes ofhearings, can be limited. Such limitation has to be adequate withregard to its extent in time and concerning the persons who arerestricted from accessing the documents. Any access to businesssecrets will be prohibited.


Companies cooperating with the Competition Commission are

granted immunity only if the cooperation is on a continuous levelthroughout the whole administrative procedure of the CompetitionCommission and is carried out in an expeditious manner.


Going second in providing information to the CompetitionCommission may not lead to a total immunity, but is treated by theAuthorities as element of discharge in order to get a partialimmunity. A fine can therefore, in application of the OS, be reducedup to 80%.



The Secretariat conducts a preliminary investigation procedureaccording to Art. 23 et seq. CA upon notification and/or ex officio. Even tough the CA does not contain any specific provisionsconcerning notifications by individuals, such notifications arepossible and can be made either formally or informally. As soon asthe Secretariat gains knowledge about an obvious and appreciableunlawful behaviour, it is supposed to conduct a preliminaryinvestigation procedure. In case of a later criminal procedure against the respectiveindividual, a notification of the Secretariat may be treated asmitigating circumstance in order to reduce a potential sanction.



Plea Bargaining Arrangements and similar incentives tocooperating companies are not provided for in the Law. TheSecretariat may, however, offer to settle an infringement of thecartel prohibition amicably (cf. Art. 29 CA). This amicablesettlement needs to be in writing and is valid only if approved bythe Competition Commission. With introduction of direct administrative sanctions theCompetition Commission informed to no longer offer amicablesettlements in cases where the behaviour in question is subject todirect sanctions. However there have been cases where amicablesettlements were offered under such circumstances.

7 Appeal Process


The appeal process in matters regarding the cartel prohibitionfollows the ordinary rules of Swiss administrative law. Any appealagainst final decisions of the Competition Commission is to beaddressed to the Federal Administrative Court. The FederalAdministrative Court disposes of full discretion of case review andcan thus reverse due to dissenting on legal, factual orreasonableness bases. Decisions of the Federal AdministrativeCourt are subject to appeal before the Federal Supreme Court,which in principle limits its reviews to legal questions.

WWW.ICLG.CO.UK245


Switz

erla

nd


After a decision by the Competition Commission ruling anagreement unlawful or, at a later stage, after an unsuccessful appeal,parties may request the Federal Council for an exemption based onpredominant public interest.


Since the appeal process in matters regarding the competitionprohibition follows the ordinary rules of Swiss administrative law,witnesses are not cross-examined. In general, appeal proceedingsin competition law matters are conducted in written form only.

8 Damages Actions


According to Art. 12 et seq. CA, loss suffered as a result of a cartelcan be claimed in civil proceedings, i.e. before civil courts, by wayof damages and action on account of profits.


Damage actions according to Art. 12 CA can be raised in principleby all participants to competition. The CA does not provide for thepossibility to raise class-actions and class-actions are generally notimplemented into Swiss procedural law. Swiss doctrine is controversial whether professional associationsand consumer organisations may raise representative claims.Leading doctrine allows professional associations to raise classactions based on the CA on behalf of their respective membersinsofar as the organisation is mandated by its by-laws to exercisesuch rights for its members and the members have the right so raisesuch damage action individually. Consumers and consumer organisations are consequently notentitled to raise claims under the CA. Doctrine is scarce on thequestion whether such damage claims might be raised based on Art.41 of the Swiss Code of Obligation (“CO”), i.e. as tort action. Consumer organisations are, however, allowed to participate ininvestigations before the Competition Commission.


Claims for damages and the account of profits are, by general rulesof prescription, limited to one year after knowledge of the damage,and to 10 years after the damaging activity, i.e. the cartel conduct.Under circumstances of criminal conduct, a prolongation of theprescription period is possible pursuant to Art. 60 Para. 2 CO.


The cost rules for civil damage claims, according to Art. 12 et seq.CA following infringements of the cartel prohibition, are governedby the procedural law of the respective Canton by whose civilcourts the claim is handled. Competition law claims are handled bya single commercial or appeals court in the respective Canton.Territorial jurisdiction is defined by the defendant’s seat, thedamaged parties’ seat or the place where damages occurred.

The costs of a civil damages procedure consist (i) in the court feesand (ii) the legal fees of both parties. The amount of court fees dueis governed by the relevant ordinance of the Canton in which theprocedure is taking place, and depending, i.a., on the amount indispute. According to the procedural laws of all the Swiss Cantons, thelosing party of a civil damages procedure bears the costs of theclaim. The costs are, however, subject of the verdict and, as such,within the span of discretion of the judge. They may therefore beallocated differently in cases with particular circumstances.As of January 1, 2011, a new Swiss Federal Civil Procedural Codeis planned to enter into force. The cost rules will, however, notmaterially change.


Neither follow-on nor stand alone civil damages claims based onunlawful cartel conduct have been numerous in recent Swiss caselaw. The Federal Supreme Court decided, however, on a civildamages claim in 2007 in regard to abuse of a dominant position inthe telecommunication industry. Swisscom, the national incumbent, did not allow competitors underformer telecommunication law to use its still bundled “last mile”telephone network. One competitor raised action for damage andrestitution of profits gained due to this competitive advantage. TheFederal Supreme Court, however, stated that the incumbent’srefusal to offer the use of its “last mile” network to its competitorsdid not constitute an abusive behaviour as formertelecommunication legislation allowed such exclusion.

9 Miscellaneous


In 2008 the Competition Commission issued a new Commendationon Verticals (“Vertikalbekanntmachung”). The Commendation onVerticals contains, as main introduction, a blacklist of verticalswhich are qualified as considerable restraint of competition due totheir subject. This blacklist is drafted in line with the correspondingregulations issued by the European Union’s CompetitionAuthorities and, therefore, shall secure a uniform treatment ofseveral situations on Swiss and a EU level. The Commendation onVerticals also includes regulations for price recommendations,which have been a highly disputed subject amongst Swiss Cartellaw practitioners. The Competition Commission assures theseregulations to be in line with the European Union Authorities’concept of price recommendations in order to provide for aconsistent and compatible approach within Europe. The Competition Commission has, furthermore, issued aCommendation concerning SME which aims at facilitating SME’sactivities and development by certain liberalisations defining de-minimis thresholds (“KMU-Bekanntmachung”).

9.2 Please mention any other issues of particular interest inSwitzerland not covered by the above.

The Swiss Cartel Law, in general, provides for comparatively highthresholds for merger control. This, as a consequence, leads torelatively late notifications of planned mergers to the Competition



Switz

erla

nd


Authorities. The Swiss Federal Court recently confirmed leadingdoctrine that qualified market dominance is required for interdictionof mergers or approval of mergers under conditions only. TheCourt’s ruling emphasised that only mergers with foreseeablepotential to create or strengthen market power and to eliminatecompetition are subject to prohibitions or conditions.

In Switzerland, a specific price surveillance authority, the so-calledPrice Inspector, exists, who is competent to assess prices and priceincreases on consumer goods and services. The Price Inspector iscompetent to order a price decrease or forbid a planned priceincrease for a specific product or service. Regarding markets withstate-regulated prices, which are excluded from the application ofCA, the Price Regulator is exclusively competent.

Dr. Jürg Borer

Schellenberg Wittmer Löwenstrasse 19, P.O. Box 18768021 ZurichSwitzerland

Tel: +41 44 215 5252Fax: +41 44 215 5200Email: [email protected]: www.swlegal.ch

Jürg Borer is a partner in Schellenberg Wittmer’s competitionpractice group in Zurich. He was admitted to the Swiss bar in1990. His main areas of practice are Swiss and Europeancompetition law. Jürg Borer studied law at the University of St. Gall(first degree 1982, doctorate 1988). He was an assistant with theSwiss Federal Supreme Court in Lausanne and conducted legalresearch at the Max-Planck-Institut in Hamburg, Germany. Beforejoining Schellenberg Wittmer in 2006, he worked as an associate inLondon and Zurich and became a partner in another business lawfirm in Zurich in 1998. As a leading expert in Swiss and Europeancompetition law, he regularly advises clients in high-profilecompetition investigations. Jürg Borer’s professional languages areGerman, English and French. He is a lecturer at the University ofZurich and University of Lucerne and has authored severalpublications on Swiss and European competition law, among othersalso a commentary on the Swiss Federal Act on Cartels.

Michael Vlcek

Schellenberg Wittmer Löwenstrasse 19, P.O. Box 18768021 ZurichSwitzerland

Tel: +41 44 215 5252Fax: +41 44 215 5200Email: [email protected]: www.swlegal.ch

Michael Vlcek is an associate in Schellenberg Wittmer’s competitionand corporate / M&A practice groups in Zurich. He was admitted tothe bar in Switzerland in 2005. He graduated from the Schools ofLaw of the Universities of Fribourg and Strasbourg and was visitingstudent at the University of Alabama, School of Law, in 2002.Before joining Schellenberg Wittmer as a junior associate in 2003,Michael Vlcek gained court experience at the District Court in theCanton of Zug. After working as a research and teaching assistantwith Prof. Dr. Rolf H. Weber, Chair of private, commercial andEuropean law at the University of Zurich, School of Law, MichaelVlcek rejoined Schellenberg Wittmer as an associate in 2008. Themain areas of practice of Michael Vlcek are competition law,corporate and contract law as well as ICT-law. Michael Vlcekpublished works in various fields including annual issues of thenjus.ch review on Swiss competition law.

Schellenberg Wittmer is one of the leading business law firms in Switzerland, with offices in Zurich and Geneva offeringthe expertise and specialisation of more than 100 lawyers. It is a major full-service business law firm with a largeinternational practice that advises and represents Swiss and international clients in matters of dispute resolution,corporate law, mergers and acquisitions, banking and finance, tax law as well as private capital and estate planning.

Schellenberg Wittmer’s competition practice group comprises highly specialised professionals in Zurich and Geneva andprovides comprehensive advice to clients on the impact of Swiss and EC competition law on their commercial practicesand agreements. In addition, our competition law specialists defend clients in administrative proceedings brought bythe Swiss Competition Commission, and prepare notifications to the Swiss Competition Commission in the context ofmergers & acquisitions and joint-ventures.



Chapter 42

ELIG, Attorneys-at-Law

Turkey



The statutory basis for cartel prohibition is the Law on Protection ofCompetition No. 4054 dated 13 December 1994 (“CompetitionLaw”). The Competition Law finds its underlying rationale inArticle 167 of the Turkish Constitution of 1982, which authorisesthe government to take appropriate measures and actions to securefree market economy. The Turkish cartel regime is “administrative”and “civil” in nature, not criminal. The Competition Law applies toindividuals and companies alike, if and to the extent they act as anundertaking within the meaning of the Competition Law. (Pleaserefer to question 1.5 for the definition of “undertaking”.)


The applicable provision for cartel-specific cases is Article 4 of theCompetition Law, which lays down the basic principles of cartelregulation. The provision is akin to and closely modeled afterArticle 81 (1) of the EC Treaty. It prohibits all agreements betweenundertakings, decisions by associations of undertakings andconcerted practices which have (or may have) as their object oreffect the prevention, restriction or distortion of competition withina Turkish product or services market or a part thereof. Similar toArticle 81 (1) of the EC Treaty, the provision does not bring adefinition of “cartel”. It rather prohibits all forms of restrictiveagreements, which would include any form of cartel agreement.Therefore, the scope of application of the prohibition extendsbeyond cartel activity. Unlike the EC Treaty, however, Article 4does not refer to “appreciable effect” or “substantial part of amarket” and thereby excludes any de minimis exception as of yet.Therefore, for an infringement to exist, the restrictive effect neednot be “appreciable” or “affecting a substantial part of a market”.The practice of the Competition Board (“Board”) to date has notrecognised any de minimis exceptions to Article 4 enforcementeither, though the enforcement trends and proposed changes to thelegislation are increasingly focusing on de minimis defences andexceptions. Article 4 also prohibits any form of agreements which has the“potential” to prevent, restrict or distort competition. Again, this isa specific feature of the Turkish cartel regulation system,recognising a broad discretionary power to the Board.

As is the case with Article 81 (1) of the EC Treaty, Article 4 bringsa non-exhaustive list of restrictive agreements. It prohibits inparticular agreements which:

directly or indirectly fix purchase or selling prices or anyother trading conditions;share markets or sources of supply;limit or control production, output or demand in the market;place competitors at a competitive disadvantage or involveexclusionary practices such as boycotts;aside from exclusive dealing, apply dissimilar conditions toequivalent transactions with other trading parties; and/ormake the conclusion of contracts, in a manner contrary tocustomary commercial practices, subject to acceptance bythe other parties of supplementary obligations which, bytheir nature or according to commercial usage, have noconnection with the subject of such contracts.

The list is non-exhaustive and is intended to generate furtherexamples of restrictive agreements. The prohibition on restrictive agreements and practices does notapply to agreements which benefit from a block exemption and/oran individual exemption issued by the Board. To the extent notcovered by the protective cloaks brought by the respective blockexemption rules or individual exemptions, vertical agreements arealso caught by the prohibition laid down in Article 4. The block exemption rules currently applicable are (i) the BlockExemption Communiqué no. 2002/2 on Vertical Agreements, (ii)the Block Exemption Communiqué no. 2005/4 on VerticalAgreements and Concerted Practices in the Motor Vehicle Sector,(iii) the Block Exemption Communiqué No. 2003/2 on R&DAgreements, (iv) the Block Exemption Communiqué No. 2008/3for the Insurance Sector, and (v) the Block ExemptionCommuniqué No. 2008/2 on Technology Transfer Agreements,which are all modeled on their respective equivalents in the EC.Restrictive agreements that do not benefit from (i) the blockexemption under the relevant communiqué or (ii) individualexemption issued by the Board are caught by the prohibition inArticle 4.A number of horizontal restrictive agreement types such as pricefixing, market allocation, collective refusals to deal (groupboycotts) and bid rigging have consistently been deemed to be, perse, illegal.The Turkish antitrust regime also condemns concerted practices,and the Competition Authority easily shifts the burden of proof inconnection with concerted practice allegations, through amechanism called “the presumption of concerted practice”. Thedefinition of concerted practice in Turkey does not fall far from the

Gönenç Gürkaynak



Turk

ey

ELIG, Attorneys-at-Law Turkey

definition used in the EC law of competition. A concerted practiceis defined as a form of coordination between undertakings which,without having reached the stage where an agreement properly so-called has been concluded, knowingly substitutes practical co-operation between them for the risks of competition. Therefore,this is a form of co-ordination, without a formal “agreement” or“decision”, by which two or more companies come to anunderstanding to avoid competing with each other. The co-ordination need not be in writing. It is sufficient if the parties haveexpressed their joint intention to behave in a particular way, perhapsin a meeting, a telephone call or an exchange of letters. The specialchallenges posed by the proof standard concerning concertedpractices are addressed under question 9.2.


The national competition authority for enforcing the cartelprohibition and other provisions of the Competition Law in Turkeyis the Competition Authority. The Competition Authority hasadministrative and financial autonomy. It consists of the Board,Presidency and Service Departments. Four divisions with sector-specific work distribution handle competition law enforcementwork through approximately 110 case handlers. A researchdepartment assists the four technical divisions and the presidency inthe completion of their tasks. As the competent body of theCompetition Authority, the Board is responsible for, inter alia,investigating and condemning cartel activity. The Board consists ofseven independent members. The Presidency handles theadministrative works of the Competition Authority.A cartel matter is primarily adjudicated by the Board.Administrative enforcement is supplemented with private lawsuitsas well. In private suits, cartel members are adjudicated beforeregular courts. Due to a treble damages clause allowing litigants toobtain three times their loss as compensation, private antitrustlitigations increasingly make their presence felt in the cartelenforcement arena. Most courts wait for the decision of theCompetition Authority, and build their own decision on thatdecision (see Section 8 for further background on private suits).


The Turkish cartel regime does not recognise de minimis exceptionsand there is currently no threshold for opening an investigation intocartel conduct. The Board is entitled to launch an investigation intoan alleged cartel activity ex officio or in response to a notice orcomplaint. A notice or complaint may be submitted verbally orthrough a petition. In the case of a notice or complaint, the Boardrejects the notice or complaint, if it deems it not to be serious. Anynotice or complaint is deemed rejected in case the Board remainssilent for 60 days. The Board decides to conduct a pre-investigation, if it finds the notice or complaint to be serious. Itmay then decide not to initiate an investigation. At this preliminarystage, unless there is a dawn-raid, the undertakings concerned arenot notified that they are under investigation. Dawn raids(unannounced on-site inspections) (see Section 2) and otherinvestigatory tools (e.g. formal information request letters) are usedduring this pre-investigation process. The preliminary report of theCompetition Authority experts will be submitted to the Boardwithin 30 days after a pre-investigation decision is taken by theBoard. The Board will then decide within 10 days whether tolaunch a formal investigation or not. If the Board decides to initiatean investigation, it will send a notice to the undertakings concernedwithin 15 days. The investigation will be completed within 6

months. If deemed necessary, this period may be extended onlyonce, for an additional period of up to six months by the Board. The investigated undertakings have 30 calendar days as of theformal service of the notice to prepare and submit their first writtendefences (first written defence). Subsequently, the maininvestigation report is issued by the Competition Authority. Oncethe main investigation report is served on the defendants, they have30 calendar days to respond, extendable for a further 30 days(second written defence). The investigation committee will thenhave 15 days to prepare an opinion concerning the second writtendefence (additional opinion). The defending parties will haveanother 30-day period to reply to the additional opinion (thirdwritten defence). When the parties’ responses to the additionalopinion is served on the Competition Authority, the investigationprocess will be completed (i.e. the written phase of investigationinvolving claim/defence exchange will close with the submission ofthe third written defence). An oral hearing may be held upon therequest by the parties. The Board may also ex officio decide to holdan oral hearing. Oral hearings are held within at least 30 and atmost 60 days following the completion of the investigation process.The Board will render its final decision within: (i) 15 calendar daysfrom the hearing, if an oral hearing is held; or (ii) 30 calendar daysfrom the completion of the investigation process, if no oral hearingis held. It usually takes around two months (from theannouncement of the final decision) for the Competition Board toserve a reasoned decision on the counterpart.


There are no industry-specific offences or defences in the Turkishjurisdiction. The Competition Law applies to all industries, withoutexception. To the extent they act as an undertaking within themeaning of the Competition Law (i.e. a single integrated economicunit capable of acting independently in the market to produce,market or sell goods and services), state-owned entities also fallwithin the scope of application of Article 4. Due to the“presumption of concerted practice” (further addressed underquestion 9.2), oligopoly markets for the supply of homogenousproducts (e.g. cement, bread yeast, etc.) have constantly been underinvestigation for concerted practice. Nevertheless, whether thistrack record (over 15 investigations in the cement and ready mixedconcrete markets in 10 years of enforcement history) leads to anindustry specific offence would be debatable. There are somesector-specific block exemptions (such as the block exemption inthe motor vehicle sector and the block exemption regulations in theinsurance sector).

1.6 Is cartel conduct outside Turkey covered by theprohibition?

Turkey is one of the “effect theory” jurisdictions where whatmatters is whether the cartel activity has produced effects onTurkish markets, regardless of (i) the nationality of the cartelmembers, (ii) where the cartel activity took place, or (iii) whetherthe members have a subsidiary in Turkey. The Competition Boardrefrained from declining jurisdiction over non-Turkish cartels orcartel members (see e.g. Sisecam/Yioula 28.02.2007; 07-17/155-50; Gas Insulated Swithchgear 06.24.2004; 04-43/538-133) in thepast, so long as there is an effect in the Turkish markets. It shouldbe noted, however, that the Competition Board is yet to enforcemonetary or other sanctions against firms located outside of Turkeywithout any presence in Turkey, mostly due to enforcementhandicaps (such as difficulties of formal service to foreign entities).

WWW.ICLG.CO.UK249


Turk

ey







The Competition Law provides a vast authority to the CompetitionAuthority on dawn raids. A judicial authorisation is obtained by theBoard only if the subject undertaking refuses to allow the dawnraid, which would also result in a monetary fine. While the merewording of the Competition Law allows verbal testimony to becompelled of employees, case handlers do allow delaying ananswer so long as there is a quick written follow-upcorrespondence. Therefore, in practice, employees can avoidproviding answers on issues that are uncertain to them, providedthat a written response is submitted in a mutually agreed timeline.Computer records are fully examined by the experts of theCompetition Authority, including but not limited to the deleteditems. Officials conducting an on-site investigation need to be inpossession of a deed of authorisation from the Board. The deed ofauthorisation must specify the subject matter and purpose of theinvestigation. The inspectors are not entitled to exercise theirinvestigative powers (copying records, recording statements bycompany staff, etc.) in relation to matters which do not fall withinthe scope of the investigation (i.e. that which is written in the deedof authorisation).


No there are not.


No there are not.


The sole category of people participating in on-site inspections isthe staff of the Competition Authority only. The staff have no dutyto wait for a lawyer to arrive. That said, they may sometimes agreeto wait for a short while for a lawyer to come but may imposecertain conditions (e.g. to seal file cabinets and/or to disrupt e-mailcommunications).


No it is not.


None.


The Board may request all information it deems necessary from allpublic institutions and organisations, undertakings and tradeassociations. Officials of these bodies, undertakings and tradeassociations are obliged to provide the necessary information withinthe period fixed by the Board. Failure to comply with a decisionordering the production of information may lead to the impositionof a turnover-based fine of 0.1 per cent of the turnover generated inthe financial year preceding the date of the fining decision (if this isnot calculable, the turnover generated in the financial year nearestto the date of the fining decision will be taken into account). Theminimum amount of a fine is TRY 10,000 (around EUR 5,650). Incases where incorrect or incomplete information has been providedin response to a request for information, the same penalty may beimposed. Similarly, refusing to grant the staff of the CompetitionAuthority access to business premises may lead to the imposition ofa daily-based periodic fine of 0.5 per cent of the turnover generatedin the financial year preceding the date of the fining decision (if thisis not calculable, the turnover generated in the financial year nearestto the date of the fining decision will be taken into account). Theminimum amount of fine is TRY 10,000 (around EUR 5,650).



In the case of a proven cartel activity, the companies concernedshall be separately subject to fines of up to 10 per cent of theirTurkish turnover generated in the financial year preceding the dateof the fining decision (if this is not calculable, the turnovergenerated in the financial year nearest to the date of the finingdecision will be taken into account). Employees and/or members ofthe executive bodies of the undertakings/association ofundertakings that had a determining effect on the creation of theviolation are also fined up to 5 per cent of fine imposed on theundertaking/association of undertaking. After the recentamendments, the new version of the Competition Law makesreference to Article 17 of the Law on Minor Offences to require theBoard to take into consideration factors such as the level of faultand amount of possible damage in the relevant market, the market







Yes No



Yes No


Yes No



Turk

ey


power of the undertaking(s) within the relevant market, durationand recurrence of the infringement, cooperation or driving role ofthe undertaking(s) in the infringement, financial power of theundertaking(s), compliance with the commitments etc., indetermining the magnitude of the monetary fine. In addition to themonetary sanction, the Board is authorised to take all necessarymeasures to terminate the restrictive agreement, to remove all defacto and legal consequences of every action that has been takenunlawfully, and to take all other necessary measures in order torestore the level of competition and status as before theinfringement. Furthermore, such a restrictive agreement shall bedeemed as legally invalid and unenforceable with all its legalconsequences. Similarly, the Competition Law authorises theBoard to take interim measures until the final resolution on thematter, in case there is a possibility for serious and irreparabledamages.The sanctions that could be imposed under the Competition Law areadministrative in nature. Therefore, the Competition Law leads toadministrative fines and no criminal sanctions. That said, therehave been cases where the matter had to be referred to a publicprosecutor after the competition law investigation is complete. Onthat note, bid-rigging activity may be criminally prosecutable underSections 235 et seq. of the Turkish Criminal Code. Illegal pricemanipulation (i.e. manipulation through disinformation or otherfraudulent means) may also be condemned by up to two years ofimprisonment and a civil monetary fine under Section 237 of theTurkish Criminal Code. (See also Section 8 for private suits, whichmay also become an exposure item against the defendant.)


The sanctions specified in question 3.1 may apply to individuals ifthey engage in business activities as an undertaking. Similarly,sanctions for cartel activity may also apply to individuals acting asthe employees and/or Board members/executive committeemembers of the infringing entities in case such individuals had adecisive influence concerning the creation of the violation. Otherthan these, there is no sanction specific to individuals.


The Board’s right to impose administrative monetary finesterminates upon the lapse of five years from the date ofinfringement. In the event of a continuous infringement, the periodstarts running on the day on which the infringement has ceased orlast repeated. Any action taken by the Board to investigate analleged infringement cuts the five-year limitation period. Theapplicable periods of limitation in private suits (see Section 8) aresubject to the general provisions of the Turkish Code ofObligations, according to which the right to sue violators on thebasis of an antitrust-driven injury claim terminates upon the lapseof ten years from the event giving rise to the damage of the plaintiff.Prosecution of offences of criminal nature (such as bid-riggingactivity and illegal price manipulation) is subject to the generallyapplicable criminal statutes of limitation, which would depend onthe gravity of the sentence imposable.


Yes. This does not constitute advice on tax deductibility or theaccounting/bookkeeping aspects of such payment.



The Competition Law has recently undergone significantamendments, which have been enacted in February 2008. The newlegislation brings about a stricter and more deterrent fining regime,coupled with a leniency programme for companies. However, thesecondary statutory regulations that would specify the details of theleniency programme are yet to be enacted. The timing of theenactment of such statutory regulations remains to be seen.Even in the absence of a secondary statutory basis, the Board hasbeen quite cooperative and understanding in leniencycircumstances, and this has even triggered at least two leniencyapplications even in the absence of a detailed regulatory groundwork for leniency. Apart from these leniency applications, theBoard in some other cases also made sure that the first cooperatingentity in a cartel investigation benefits from a lenient treatment byreceiving lesser fines than the others. While the risk analysis on thispoint varies significantly according to the facts of each case,companies contemplating to use leniency programs in otherjurisdictions increasingly spend extra effort to keep the Boardinformed at the maximum possible extent of the outcome of theirown investigative efforts to be shielded against the self-incriminating effects of such cooperation.


There is no “marker” system in Turkey as of yet.


The statutory regulations that would specify the details of theleniency programme are yet to be enacted so there is no definiteanswer to this question. That said, our office has been involved inoral disclosure for leniency purposes before.


The statutory regulations that would specify the details of theleniency programme are yet to be enacted so there is no definiteanswer to this question.


The statutory regulations that would specify the details of theleniency programme are yet to be enacted so there is no definiteanswer to this question.


The indications in practice suggest that the Board is more inclinedtowards a “penalty plus” policy, which is demonstrated by the factthat the Board has escalated the applicable monetary fines for cartelactivity.

WWW.ICLG.CO.UK251


Turk

ey




There are no specific procedures for whistle-blowing by employees.However, any person, including employees of a corporation, isentitled to file a notice or complaint before the CompetitionAuthority to report cartel activity. There are no financial rewardsfor incentivising confessions.



The Board does not enter into plea bargain arrangements. A mutualagreement (which would have to take the form of an administrativecontract) on other liability matters have not been tested in Turkeyeither.

7 Appeal Process


Final decisions of the Board, including its decisions on interimmeasures and fines can be submitted to judicial review before theHigh State Council by filing an appeal case within 60 days uponreceipt by the parties of the justified (reasoned) decision of theBoard. As per Article 27 of the Administrative Procedural Law,filing an administrative action does not automatically stay theexecution of the decision of the Board. However, upon request ofthe plaintiff, the court, by providing its justifications, may decidethe stay of the execution if: (i) the execution of the decision is likelyto cause serious and irreparable damages; and (ii) the decision ishighly likely to be against the law (i.e. showing of a prima faciecase). The judicial review period before the High State Council usuallytakes about 18 to 24 months. If the challenged decision is annulledin full or in part, the High State Council remands it to the Board forreview and re-consideration. Decisions of courts in private suits (see Section 8) are appealablebefore the Supreme Court of Appeals. The appeal process in privatesuits is governed by the general procedural laws and usually takesmore than 18 months.


The High State Council does not cross-examine witnesses.

8 Damages Actions


Similar to US antitrust enforcement, the most distinctive feature ofthe Turkish competition law regime is that it provides for lawsuitsfor treble damages. That way, administrative enforcement is

supplemented with private lawsuits. Articles 57 et seq. of theCompetition Law entitle any person who shall be injured in hisbusiness or property by reason of anything forbidden in the antitrustlaws to sue the violators for three times their damages plus litigationcosts and attorney fees. The case must be brought before thecompetent general civil court. In practice, courts usually do notengage in an analysis as to whether there is actually a condemnableagreement or concerted practice, and wait for the Board to render itsopinion on the matter, therefore treating the issue as a prejudicialquestion.


Turkish procedural law denies any class action or procedure. Classcertification requests would not be granted by Turkish courts.While Article 25 of the Law no. 4077 on the Protection ofConsumers allows class action by consumer organisations, theseactions are limited to the violations of the Law no. 4077 on theProtection of Consumers, and do not extend to cover antitrustinfringements. Similarly, Article 58 of the Turkish CommercialCode enables trade associations to take class action against unfaircompetition behaviour, but this has no reasonable relevance toprivate suits under Articles 57 et seq. of the Competition Law.


As noted above in question 3.3, the applicable periods of limitationin private suits are subject to the general provisions of the TurkishCode of Obligations, according to which the right to sue violatorson the basis of an antitrust-driven injury claim terminates upon thelapse of ten years from the event giving rise to the damage of theplaintiff.


Any person who shall be injured in his business or property byreason of a cartel activity is entitled to sue the violators for threetimes their damages plus litigation costs and attorney fees. Otherthan this, there are no specific cost rules for cartel cases. Thegeneral cost rules for civil law claims apply also in cartel cases.


Antitrust-based private lawsuits are rare but increasing in practice.The majority of the private lawsuits in Turkish antitrustenforcement rely on refusal to supply allegations. Civil damageclaims have usually been settled among the parties involved, beforethe court rendering its judgment.

9 Miscellaneous


The Competition Law has undergone significant modifications,which resulted in a more deterrent fining regime for cartel activity.More modifications are expected in the near future, which could besummarised as follows:



Turk

ey


The lawmaking body of Turkey and/or the Competition Boardcontemplates to:

Bring the “appreciable effect” test to Article 4 enforcement,recognising de minimis exceptions and defences. Allow: (i) the Competition Authority a 60-day period tofinalise their pre-investigation report instead of 30 days; (ii)the Competition Board a 10-business day period instead of10 calendar days to decide whether to initiate aninvestigation; (iii) the investigation committee a four-monthperiod instead of six months to finalise the investigation; theparties’ obligation to reply (first written defence) will beremoved; (iv) corporations 60 days instead of 30 days tosubmit their second written defence; and (v) other revisionsin the timing-structure of the investigation process.

9.2 Please mention any other issues of particular interest inTurkey not covered by the above.

The most important material issue specific to Turkey is the very lowproof standards adopted by the Board. The participation of anundertaking in cartel activity requires proof (i) that there was sucha cartel activity, or in the case of multilateral discussions or co-operation, and (ii) that the particular undertaking was a participant.With a broadening interpretation of the Competition Law, andespecially the “object or effect of which …” prong, the TurkishCompetition Board has established an extremely low standard ofproof concerning cartel activity. The standard of proof is evenlower as far as concerted practices are concerned: in practice, ifparallel behaviour is established, a concerted practice will readilybe inferred and the undertakings concerned will be required toprove that the parallelism is not the result of a concerted practice.The Competition Law brings a “presumption of concerted

practice”, which enables the Competition Board to engage in anArticle 4 enforcement in cases where price changes in the market,supply-demand equilibrium, or fields of activity of enterprises beara resemblance to those in the markets where competition isobstructed, disrupted or restricted. Turkish antitrust precedentsrecognise that “conscious parallelism” is rebuttable evidence offorbidden behaviour and constitutes sufficient ground to imposefines on the undertakings concerned. This is mostly due to thepresumption of concerted practice introduced by the CompetitionLaw, which reads as follows: “In cases where an agreement cannot be proven to exist, if pricechanges in the market, supply-demand equilibrium, or fields ofactivity of enterprises bear a resemblance to those in the marketswhere competition is obstructed, disrupted or restricted, suchsimilarity shall constitute a presumption that the relevantenterprises are engaged in concerted practice.Any party may absolve itself of responsibility by proving noengagement in concerted practice, provided such proof depends oneconomic and rational facts.”Therefore, the burden of proof is very easily switched and itbecomes incumbent upon the enterprises to demonstrate that theparallelism in question is not based on concerted practice, but haseconomic and rational reasons behind it. Unlike the EC, where the undisputed acceptance is that tacitcollusion does not constitute a violation of competition, theCompetition Law does not give weight to the doctrine known as“conscious parallelism and plus factors”. In practice, theCompetition Board does not go into the trouble of seeking “plusfactors” along with conscious parallelism if naked parallelbehaviour is established.

WWW.ICLG.CO.UK253


Gönenç Gürkaynak

ELIG, Attorneys-at-Law Çitlenbik Sokak No. 12 YIldIz Mahallesi Besiktas34349 Istanbul Turkey

Tel: +90 212 327 1724Fax: +90 212 327 1725Email: [email protected]: www.eliglegal.com

Gönenç Gürkaynak holds an LL.M. degree from Harvard LawSchool, and he is qualified in Istanbul, New York and England &Wales (currently a non-practising Solicitor). Mr. Gurkaynak headsthe competition law and regulatory department of ELIG, whichcurrently consists of five associates. He has unparalleled experiencein Turkish competition law counselling issues with over 10 years ofcompetition law experience, starting with the establishment of theTurkish Competition Authority. He files notifications to and obtainsclearances from the Turkish Competition Authority in more than 35notifications every year, he has led defence teams in tens of written& oral defences before the Turkish Competition Authority,represented numerous multinational companies and large Turkishentities before Administrative Courts and the High State Court ontens of appeals, in addition to coordinating various worldwidemerger notifications, drafting non-compete agreements and clauses,and preparing hundreds of legal memoranda concerning a widearray of Turkish and EC competition law topics. Prior to joining ELIGas a partner close to four years ago, he worked as an antitrust lawyerat the Istanbul, New York, Brussels and again in Istanbul offices ofWhite & Case LLP for more than 8 years. He currently teaches attwo Universities in Turkey, and he has one book published by theTurkish Competition Authority in addition to tens of articlespublished locally and internationally.

ELIG aims at providing its clients with high-quality legal service in an efficient and business-minded manner. Allmembers of the ELIG team are very fluent in English.

ELIG represents corporations, business associations, investment banks, partnerships and individuals in a wide varietyof competition law matters. The firm also collaborates with many international law firms on Turkish competition lawmatters.

In addition to an unparalleled experience in merger control issues, ELIG has a vast experience in defending companiesbefore the Competition Board in all phases of an antitrust investigation. We have in depth knowledge of representingdefendants and complainants in complex antitrust investigations concerning all forms of abuse of dominant positionallegations and all other forms of restrictive horizontal and vertical arrangements, including price-fixing, retail pricemaintenance, refusal to supply, territorial restrictions and concerted practice allegations. Furthermore, in addition to asignificant antitrust litigation expertise, our firm has considerable expertise in administrative law, and is therefore wellequipped to represent clients before the High State Council, both on the merits of a case, and for injunctive relief. ELIGalso advises clients on a day-to-day basis concerning business transactions that almost always contain antitrust lawissues, including distributorship, licensing, franchising, and toll manufacturing.

In 2008, ELIG was involved in more than 35 clearances of merger notifications, more than 9 defence projects ininvestigations, and over 13 appeals at the High State Council; together with approximately 30 antitrust educationseminars provided to the managers and employees of clients.


Turk

ey

254

Chapter 43


SJ Berwin LLP

United Kingdom



The legal basis for the cartel prohibition in the UK is section 2 ofthe Competition Act 1998 (the “Competition Act”) and section 188of the Enterprise Act 2002 (the “Enterprise Act”). In addition,Council Regulation 1/2003 allows the competition authorities andcourts of EU Member States such as the UK to enforce the cartelprohibition under article 81 of the EC treaty (see the EU chapter forfurther details).The cartel prohibitions under the Competition Act and article 81 ofthe EC Treaty are civil/administrative in nature and exclusivelyrelate to the conduct of companies. The parallel cartel prohibitionunder the Enterprise Act is criminal and exclusively relates to theconduct of individuals.


Section 2 of the Competition Act prohibits agreements betweenundertakings, decisions by associations of undertakings or concertedpractices which may affect trade within the UK and which have astheir object or effect the prevention, restriction or distortion ofcompetition within the UK (the “Chapter I prohibition”). TheCompetition Act contains a non-exhaustive list of corporate conductthat is prohibited by the Chapter I prohibition and this includes,among others, agreements, decisions or practices which:

directly or indirectly fix purchase or selling prices or anyother trading conditions; limit or control production, markets, technical developmentor investment; orshare markets or sources of supply.

The Chapter I prohibition applies both to horizontal agreementsbetween competitors as well as vertical agreements between, forexample, a wholesaler and a retailer. There are certain limitedexemptions that are described under question 1.5 below.Under section 188 of the Enterprise Act an individual is guilty of acriminal offence if he dishonestly agrees with one or more otherpersons to make or implement, or to cause to be made orimplemented, arrangements between at least two undertakingsinvolving any of the following:

price fixing;market sharing;

limiting supply or production; andbid-rigging.

The criminal cartel offence only applies to horizontal arrangementsbetween companies which were brought about by the dishonestconduct of two or more individuals.If the cartel arrangements have been made in the UK, it is irrelevantfor both the Chapter I prohibition and the cartel offence whether therestrictive arrangements have actually been implemented in the UK.


In the UK both the Chapter I prohibition under the Competition Actand article 81 of the EC Treaty are enforced by the Office of FairTrading (“OFT”) as the principal competition authority in the UK.In addition, the following UK sectoral regulators have concurrentjurisdiction to investigate cartel conduct in their sectors under theabove provisions: OFCOM (communications); OFGEM (electricityand gas); OFREG NI (energy in Northern Ireland); OFWAT (waterand sewerage); CAA (civil aviation); and ORR (railway services).Investigations and prosecutions under the criminal cartel offenceunder the Enterprise Act in England, Wales and Northern Irelandare conducted by the OFT or the Serious Fraud Office (“SFO”).Private prosecutions may only be brought with the consent of theOFT. In Scotland, prosecutions will be brought by the LordAdvocate through the offices of the International and FinancialCrime Unit of the Crown Office.


The OFT (or a regulator with concurrent jurisdiction) starts aninvestigation on the basis of one or more of the following threegrounds: (i) its own market intelligence; (ii) following a complaint;or (iii) following a leniency application. Investigations started onthe basis of (i) and/or (ii) are referred to as ‘own initiative’ cases.The OFT may also obtain evidence from leniency applicants. TheOFT can exercise its formal powers of investigation (see Section 2below) where there are ‘reasonable grounds for suspecting’ thatcivil or criminal cartel conduct has occurred. In cartel cases, theOFT will usually conduct simultaneous parallel unannouncedinspections (or ‘dawn raids’) of relevant business and residentialpremises to obtain further incriminating evidence. Once the OFT believes that it has sufficient evidence in itspossession to prove the suspected cartel conduct, it will issue astatement of objections to the alleged cartel participants setting outthe facts upon which it relies, its reasoned provisional conclusions

Philipp Girardet

Simon Holmes

WWW.ICLG.CO.UK255


Uni

ted

Kin

gdom

SJ Berwin LLP United Kingdom

and the action which it intends to take (for example, the impositionof fines). The addressees of the statement of objections then havethe opportunity to inspect the OFT’s investigation file, to makewritten submissions and to attend an oral hearing to respond to theallegations advanced in the statement of objections. If, after havinghad regard to the parties’ written and oral submissions, the OFTconcludes that it has sufficiently strong evidence to prove thealleged cartel conduct it will issue an infringement decision to allparties concerned imposing fines. A non-confidential version of thedecision will then be published on the OFT’s website.The OFT investigates all cartel cases in accordance with thestandards required for criminal investigations. This allows the OFTto convert a civil investigation into a criminal investigation.Alternatively, the OFT can decide to open a separate parallelcriminal investigation (in which case a separate investigation teamwill be formed and strict disclosure rules will apply between thetwo investigation teams).In the case of criminal investigations, the OFT or the SFO (or theCrown Office in Scotland) starts the investigation on the same basisas civil investigations. The OFT/SFO’s formal investigatorypowers are similar but more extensive in criminal investigationsthan in civil investigations (see Section 2 below). Where theOFT/SFO believes that it has sufficient evidence to bring asuccessful prosecution it will commence criminal proceedings.Proceedings can be brought in the magistrates’ court or before ajury in the Crown Court.A criminal investigation can be started by the OFT and thensubsequently be transferred to the SFO for further investigationand/or prosecution. The SFO will, however, only prosecute cartelcases, which amount to serious or complex fraud. This would, forexample, exclude smaller bid-rigging cases.


The Competition Act excludes certain agreements from the ChapterI prohibition, for example agreements relating to the production ortrade of agricultural products and agreements that are subject tocompetition scrutiny under other legislation such as the FinancialServices and Markets Act 2000, the Broadcasting Act 1990 and theCommunications Act 2003. Further, the Secretary of State mayorder that the Chapter I prohibition should not apply to anagreement or agreements of a particular description if there areexceptional and compelling public policy reasons to do so. Thispower has been used to exclude certain defence related agreementsfrom the Chapter I prohibition.There are currently no sector-specific exemptions for the carteloffence under the Enterprise Act.

1.6 Is cartel conduct outside the UK covered by theprohibition?

The Chapter I prohibition applies to all restrictive agreements,decisions or practices which are or are intended to be, implementedin the UK. The criminal cartel offence under the Enterprise Actonly applies to agreements struck outside the UK if they areimplemented in whole or in part in the UK. The above‘implementation’ tests are generally accepted to amount to an‘effects’ test.






In civil investigations the OFT can only take originals where this isnecessary to preserve the documents or where it is not reasonablypracticable to take copies. Any originals must be returned withinthree months. In criminal investigations, the OFT/SFO will alwaystake possession of the original documents.


The OFT has the power to authorise ‘directed surveillance’ (forexample watching an office building from a public place toestablish when the office opens and shuts) and to use ‘covert humanintelligence sources’ (i.e. informants) in its cartel investigationsboth under the Competition Act and the Enterprise Act.In criminal cartel investigations the OFT is further granted thepower of ‘intrusive surveillance’ (for example bugging a hotelroom) and the related power of ‘property interference’ which allowsthe OFT, for example, to place listening devices into private places.The SFO has the same powers.


In criminal cartel offence investigations, the OFT/SFO also has thepower to obtain access to communications data (for example,obtaining from the telecommunications provider, records oftelephone numbers called by individuals under investigation). Thispower is not available in civil cartel investigations.The OFT has recently adopted an informants programme, underwhich financial rewards of up to £100,000 are available for




Carry out an unannounced search of businesspremises Yes * Yes *

Carry out an unannounced search of residentialpremises Yes * Yes *


Yes Yes



Yes Yes


Yes Yes



Uni

ted

Kin

gdom


significant ‘inside information’ about the existence of a cartel,submitted by a party who has knowledge of, but is not involved in,the cartel. This is an entirely discretionary possibility available tothe OFT. As a general rule, it is not envisaged that persons involvedin a cartel will be eligible for a financial reward, although they canapply for leniency. Nevertheless the OFT has left open thepossibility of simultaneous application of leniency and financialrewards in cases where, for example, the person concerned wasinvolved in a very indirect way in the cartel.


When entering business or residential premises under a civil orcriminal search warrant, the OFT can make use of outside (thirdparty) investigators and forensic IT specialists to assist the OFTofficers with their search. Any accompanying persons must benamed on the warrant. In practice, having secured the premises, theOFT will usually wait for about 30 minutes for the arrival of legaladvisors before commencing its search.


Where the OFT investigates cartel conduct under its own nationalinvestigatory powers, the UK rules of privilege apply and legaladvice provided by both external and in-house counsel may (subjectto certain restrictions) be protected. This applies to bothinvestigations of the Chapter I prohibition and article 81 and alsocovers investigations where the OFT investigates cartel conduct onbehalf of another EU competition authority or the EuropeanCommission. Where the OFT merely assists the EuropeanCommission with its investigation in the UK, and the Commission’sEC investigatory powers are relied on, the EC rules of privilegeapply and communications containing legal advice provided by in-house counsel are not protected.


The OFT is not entitled to search a person.In civil investigations, the OFT may compel an undertaking toprovide specified documents or specified information but cannotcompel the provision of answers to requests for information whichmight involve an admission on its part of the existence of acompetition law infringement, which is incumbent on the OFT toprove.In criminal cartel investigations, where the OFT/SFO has the powerto compel an individual to answer questions, statements made inresponse to mandatory interview questions may, as a general rule,not be used in evidence against that person on prosecution for thecartel offence.Part 9 of the Enterprise Act imposes limits on the disclosure ofinformation relating to the affairs of any individual or to anyparticular business that is obtained in connection with the exerciseof any function of the OFT under the Act (including both the OFT’scivil and criminal powers of investigation).

2.8 Are there sanctions for the obstruction of investigations?If so, have these ever been used?

There are criminal sanctions (Sections 42 to 44 of the CompetitionAct) for persons who fail to comply with requirements to provide

information, destroy documents or provide false of misleadinginformation in civil cartel cases. If convicted of a criminal offence,a criminal can be punished with a fine and/or imprisonment for amaximum of two years. Financial penalties for undertakings maytake into account a failure to co-operate with the OFT. Criminalsanctions for similar offences are contained in the Enterprise Act inrelation to criminal cartel offence investigations (please seequestion 3.2 below).



Any agreement that breaches the Chapter I prohibition is void andunenforceable. In addition, the OFT may impose financial penaltieson a company which has intentionally or negligently committed aninfringement of the Chapter I prohibition (and/or article 81 of theEC Treaty) of up to 10 per cent of its worldwide turnover.As a general rule, ‘small agreements’ between undertakings whosecombined annual turnover does not exceed £20 million normallybenefit from immunity from financial penalties. However, this safeharbour does not apply to price-fixing agreements and breaches ofarticle 81 of the EC Treaty.Third parties adversely affected by cartel conduct may take actionin the courts to stop the conduct and/or seek damages for any losssuffered as a result of the cartel conduct. See Section 8 for furtherdetails.


Under the Enterprise Act 2002 it is possible to charge individualswith the cartel offence for conduct committed since 20 June 2003.The cartel offence is triable either in a magistrates’ court (summarytrial) or before a jury in the Crown Court (trial on indictment). Anyindividual found guilty of committing the criminal cartel offencebefore a magistrates’ court may be imprisoned for up to six monthsand/or receive a fine up to the statutory maximum (which iscurrently £5,000) and may be imprisoned for up to five years and/orreceive an unlimited fine if found guilty by a jury on indictment inthe Crown Court. Under the normal parole rule, an individual mustusually serve at least one half of the sentence passed by the judge.In addition, where a company has committed a breach ofcompetition law, a director whose conduct in relation to that breachmakes him unfit to be concerned with the management of anycompany going forward, can be disqualified from acting as acompany director or shadow director for up to 15 years (under theprovisions of the Company Directors Disqualification Act 1986 asamended by the Enterprise Act).In June 2008 three UK businessmen became the first individuals tobe convicted under the new cartel offence provisions, and weresentenced to between two and a half and three years imprisonment,and disqualified from acting as company directors for five to sevenyears, for bid-rigging conduct in the field of marine hoses. Two ofthe three individuals were also ordered to surrender assets underconfiscation orders of in total £1 million. More recently in August2008, four British Airways executives were charged with the carteloffence, in relation to the British Airways/Virgin Atlantic Airwaysfuel surcharges for passenger flights cartel.


There is no limitation period for public enforcement action under

WWW.ICLG.CO.UK257


Uni

ted

Kin

gdom


the Chapter I prohibition of the Competition Act or the criminalcartel offence provisions under the Enterprise Act.


The company can, if it so decides, indemnify the legal costs and/orfinancial penalties imposed on a former or current employee.


4.1 Is there a leniency programme for companies? If so,please provide brief details.

The OFT operates a leniency policy for companies in respect ofinfringements of the Chapter I prohibition under the CompetitionAct and of article 81 of the EC Treaty. The policy is contained inSection 3 of the OFT’s Penalty Guidance (the “OFT’s guidance asto the appropriate amount of a penalty”, December 2004). Inparallel, the OFT also operates a ‘no-action’ policy offeringimmunity from prosecution for the cartel offence to cooperatingindividuals (the “OFT’s Cartel Offence Guidance”, April 2003).Both policies are closely linked. The two formal leniency and no-action policy documents are supplemented by the OFT’s draft finalguidance note on the handling of leniency (for companies) and no-action (for individuals - see question 4.2 below) applications (the“Guidance Note for Leniency Applications”). This Guidance is dueto be finalised by the end of 2008.The OFT guidance distinguishesfour basic types of leniency: (a) Type A immunity; (b) Type Bimmunity; (c) Type B leniency; and (d) Type C leniency. Acompany, which has ‘coerced’ another company into participatingin cartel conduct, can only benefit from Type C leniency.Type A immunity: First to come forward and no pre-existinginvestigationTo encourage companies to come forward, the OFT will grant totalimmunity from financial penalties for an infringement of article 81and/or the Chapter I prohibition to a participant in cartel activity whois the first to come forward where there is no pre-existing investigationand where the company satisfies the following requirements. Thecompany must: (a) provide the OFT with all the information,documents and evidence available to it regarding the cartel activity;(b) maintain continuous and complete co-operation throughout theinvestigation and until the conclusion of any action by the OFT arisingas a result of the investigation; (c) refrain from further participation inthe cartel activity from the time of disclosure of the cartel activity tothe OFT (except as may be directed by the OFT); and (d) not havetaken steps to coerce another undertaking to take part in the cartelactivity (“Type A immunity”). Where the above conditions arefulfilled, the OFT will also grant complete criminal immunity underthe cartel offence provisions of the Enterprise Act to all cooperatingformer and current employees of the applicant.Type B immunity: First to come forward but there is a pre-existing investigationAlternatively, if an undertaking is the first to report the cartelconduct (possibly after an OFT inspection) but does not qualify forType A immunity because there is a pre-existing investigation, itcan still qualify for Type B immunity if it fulfils the other conditionsof Type A immunity set out above and is able to ‘add significantvalue’ to the OFT’s investigation. In return for the company’scooperation and to reward the fact that the company was the first toapply for leniency, the company is granted complete immunity fromfines (as under Type A) and complete criminal immunity under the

cartel offence provisions of the Enterprise Act to all cooperatingformer and current employees of the applicant. Type B immunity is,however, not available if the OFT believes that it already has, or isin the course of gathering, sufficient evidence to bring a successfulprosecution against specified individuals. The fundamentaldifference between Type A and Type B immunity is that the formeris available as of right if the necessary conditions are met, whereasthe latter is discretionary. However, the OFT’s Guidance Note forLeniency Applications notes that the grant of Type B immunity(rather than Type B leniency) can be “expected to be the normrather than the exception”.Type B leniency: First to come forward but there is a pre-existing investigation and no immunity is offeredType B leniency refers to the situation where a company is the firstcompany to report the cartel conduct to the OFT (possibly after anOFT inspection) but does not qualify for Type A immunity becausethere is already a pre-existing investigation and the OFT exercisesits discretion not to offer Type B immunity to the applicant. UnderType B leniency the OFT can offer a reduction in fines of up to 100per cent and individual criminal immunity for the applicant’scooperating former and current employees. There is, however, noautomatic criminal immunity for all cooperating employees underType B leniency.Type C leniency: Not first to come forward but can ‘add value’Should the OFT consider that leniency ought to be granted to morethan one party in a case, Type C leniency is in principle available toa company which is not ‘first in’ but can ‘add significant value’ tothe OFT’s investigation. Accordingly, it is available to companieswhich are not the first to apply for leniency and/or which havecoerced another undertaking into participating in the reported cartelconduct. In return for the company’s cooperation the OFT willgrant a reduction of up to 50 per cent of the level of financialpenalty imposed under the Competition Act (or the EC Treaty).Criminal immunity for individual former and current employees ofthe applicant must be agreed on an individual basis with the OFTunder Type C leniency.


The OFT does operate a ‘marker’ system. In order to secure amarker, an applicant should be able to identify a ‘concrete basis forthe suspicion’ that cartel conduct has occurred. Normally, theapplicant would be expected to specify the nature and the emergingdetails of the suspected infringement and the evidence uncovered sofar (that is, its form and substance). A discussion of the timing andprocess of perfecting the marker by the prompt provision by theapplicant of relevant information will then follow. In principle, markers are only granted on a named basis, i.e. theapplicant must disclose its identity at the outset. However, in caseswhere the applicant wishes to make a parallel application forimmunity to the European Commission, a no-names marker may beavailable from the OFT for a short period of time until theCommission application has been made.To ‘perfect’ a marker for Type A immunity, i.e. to be grantedconditional immunity, the applicant must be able to provide theOFT with all information available to it in relation to the cartelactivity and, as a minimum, that information must be such as toprovide the OFT with a ‘sufficient basis for taking forward acredible investigation’. In practice, this is a fairly low threshold andthe OFT interprets this to mean that the information is sufficient toallow the OFT to exercise its formal powers of investigation, forexample to carry out on-site inspections.



Uni

ted

Kin

gdom


To ‘perfect’ a marker for Type B immunity or leniency or Type Cleniency, the applicant must provide all information available to itin relation to the cartel and that information must be such as to add‘significant value’ to the OFT’s investigation, i.e. the additionalinformation provided must ‘genuinely advance the OFT’sinvestigation’.


Leniency applications can be made on an oral basis. However, allpre-existing written evidence of the cartel will need to be providedto the OFT and witnesses will also need to be made available forinterview and to sign witness statements.


The OFT will normally disclose the identity of leniency applicantsin its statement of objections to the other parties of a case, i.e. theother addressees. Further, the OFT will reveal the identity ofleniency applicants in its final decision, a copy of which will bemade available on the OFT’s website.


The OFT requires leniency applicants to ‘maintain continuous andcomplete co-operation throughout the investigation and until theconclusion of any action by the OFT arising as a result of theinvestigation’. The OFT considers this to extend to the conclusionof any appeals.


The OFT does operate a leniency plus policy (points 3.16 and 3.17of the OFT’s guidance as to the appropriate amount of a penalty:“Additional reduction in financial penalties”) but not a penalty pluspolicy.Under the OFT’s leniency plus policy, an applicant who alreadybenefits from a reduction of fine under leniency in relation to onecase (case A) and then subsequently makes a distinct leniencyapplication in relation to an unrelated matter and obtains immunityas a result (case B) will be offered a small additional reduction in itsleniency discount in case A.



Individuals can benefit from criminal immunity for the cartel offenceas a result of their former or current employer’s leniency application(see question 4.1) if they cooperate with the OFT’s investigation.However, an individual can also report cartel conduct directly to theOFT in return for a promise of immunity from prosecution for thecartel offence and protection from director disqualification and assetrecovery orders i.e. the grant of a so-called ‘no-action letter’. In orderto be guaranteed a no-action letter, the individual must be the firstindividual or company to report the relevant cartel conduct. Where

an individual applies on his or her own account, the applicant’sidentity may remain secret (the applicant may be a ‘secret source’) ifthe safety of that individual would be in serious jeopardy or otheradverse consequences would follow as a result of disclosure ofhis/her identity.In cases where the individual within an undertaking reports thecartel on his or her own account before the company does, thecompany will lose guaranteed corporate and individual immunitystatus, in circumstances where that company would otherwise havequalified for it. However, the OFT may still grant corporate andindividual immunity in such circumstances, depending on whatstage the OFT’s investigation has reached and the value which it islikely to gain from any additional evidence the company canprovide. This is therefore the only possible exception whereimmunity may still be available even though the applicant is not thefirst to report the cartel conduct to the OFT (c.f. questions 4.1 aboveand 9.1 below).



There are no formal plea bargaining procedures in the UK. TheOFT has however proved willing to explore innovative casesettlement options on a case-by-case basis in the past, recognisingthe benefits they may give rise to in civil cartel cases under theCompetition Act.In December 2007, the OFT reached ‘early resolution agreements’with certain parties in its investigation into Dairy PricingInitiatives. Similarly, in July 2008, the OFT settled with six of theparties in the Tobacco case. In each case, the settlement offerinvolved the admission of part or all of the alleged infringements inreturn for a lower fine than would otherwise have been imposed.

7 Appeal Process


‘On the merits’ appeals (i.e. both on points of fact and law) on bothliability and the amount of any penalty against OFT decisions areheard by the Competition Appeal Tribunal (“CAT”). Cases areheard before a panel consisting of three members: either thePresident or a member of the panel of chairmen and two ordinarymembers. The members of the panel of chairmen are judges of theChancery Division of the High Court and other senior lawyers. Theordinary members have expertise in law and/or relevant fields e.g.economics. The CAT’s jurisdiction extends to the whole of the UK.A further appeal lies from decisions of the CAT either on a point oflaw or in penalty cases as to the amount of any penalty: to the Courtof Appeal in relation to CAT proceedings in England and Wales, andin relation to CAT proceedings in Scotland, to the Court of Session;and in relation to CAT proceedings in Northern Ireland to the Courtof Appeal in Northern Ireland. Such a further appeal may only bemade with the permission of the CAT or the relevant appellate court.


The appeal process does allow for the cross-examination ofwitnesses. However, any cross-examination can be limited to anyextent or in any manner the CAT deems appropriate.

WWW.ICLG.CO.UK259


Uni

ted

Kin

gdom


8 Damages Actions


Under section 47A of the Competition Act (amended by theEnterprise Act) any person who has suffered loss or damage as aresult of an infringement of either UK or European Communitycompetition law may bring a claim for damages or for a sum ofmoney before the CAT in respect of that loss or damage. In general,claims may only be brought before the CAT when the OFT orsectoral regulator or the European Commission has made a decisionestablishing that one of the relevant prohibitions has been infringed,and any appeal from such decision has been finally determined. Indetermining a claim for damages, the CAT is bound by thecompetition authority’s decision that established the infringement.Therefore, at least in theory, the issue of liability should be settled,leaving the CAT to determine causation and quantum (i.e. theamount of any loss and the resulting damages). These claims arereferred to as ‘follow-on actions’.Alternatively, actions for damages suffered as a result of cartelconduct can also be brought in the civil courts. Where there is aprior infringement decision by a relevant competition authority, therules that apply to the CAT (see above) are similar in the civilcourts, i.e. the courts are bound by findings of fact and liability by,for example, the OFT and the CAT provided that the time for appealagainst a decision has elapsed or the appeal has been determined. Where there is no prior infringement decision, the claimant mustcommence an action for damages in the civil courts and must ofcourse establish the infringement itself (i.e. liability) before beingable to claim damages.


Section 47B of the Competition Act (as amended by the EnterpriseAct), creates a specific right for representative actions by ‘specifiedbodies’ on behalf of named consumers in follow-on cases. There isno equivalent right for representative claims for businesses. Atpresent, the UK Consumers’ Association, (Which?) is the onlyspecified body. To date, the Consumers’ Association has broughtone damages action under this new provision against the sportsretailer JJB, which arose from the OFT’s Football Replica Kitsprice fixing decision. (The European Commission criticised theUK procedure in this case as it did not allow identifiable victims tojoin the representative action at a later stage of proceedings.) Inaddition, there are Group Litigation Orders (‘GLOs’) which are ageneric multi-party civil procedural device, which in theory allowsrepresentative claims to be made. However, in practice, it is verydifficult to bring a representative claim on the basis of GLOs.


The limitation period for bringing follow on claims in the UKCompetition Appeal Tribunal is two years from the determination ofany appeals of the underlying infringement decision by theEuropean Commission or the OFT (as recently confirmed in BCLOld Co et al v BASF [2008] CAT 24).

In relation to stand alone actions, the limitation period is six yearsfrom when the cause of action accrued or where there is evidenceof deliberate concealment (as is the case in most cartel cases) fromwhen the claimant could reasonably have known about the cartelconduct.


Rule 55 of the Competition Appeal Tribunal Rules 2003 placescosts at the discretion of the court, taking into account the conductof the parties in the proceedings and the requirements of justice.


While there is clear evidence that claims for damages concerningcartel conduct are increasing, few such cases have actually reachedthe stage of trial and judgment. In the Crehan case, damages wereawarded by the Court of Appeal in 2004 but the decision wasoverturned by the House of Lords in 2006. To date, there have beenno cases in which damages have been awarded by UK courts tothird parties for breach of either the Chapter I prohibition or article81 and ultimately upheld. That said a number of cases have beensettled out of court - some for substantial sums.In November 2007, the OFT published a recommendations paper tothe Government entitled “Private Actions in competition law cases:effective redress for consumers and business” to improve theeffectiveness of redress for those harmed by competition lawbreaches. However, there has been no legislative action as a resultso far.There is currently a claim, which has been brought in the HighCourt in London on behalf of two freight companies against BA inrelation to alleged price fixing conduct for air cargo services, eventhough the European Commission’s investigation is yet to conclude.The claimants are seeking a declaration from the High Court’sChancery Division that BA participated in a freight cartel as a resultof which they caused loss. However, the claimants have also saidthat its case will be stayed pending the decision from the EuropeanCommission.

9 Miscellaneous


As noted above, the OFT is currently finalising its Guidance Noteon Leniency Applications and the OFT’s revised guidance isexpected to be published late in 2008.

9.2 Please mention any other issues of particular interest inthe United Kingdom not covered by the above.

None.



Uni

ted

Kin

gdom

Simon Holmes



Simon Holmes is head of EU & Competition at SJ Berwin in Londonand is an experienced competition and trade lawyer. He isrecognised as a ‘Leading Lawyer’ in Chambers and as a ‘legal expert’in Legal 500, as well as featuring in the Guide to the World’sLeading Competition and Anti-Trust Lawyers and Who’s Who ofCompetition Lawyers.Although based primarily in London, Simon has spent severalextensive periods in Brussels and continues to work there on aregular basis. For over 25 years, Simon has had a broad diet ofcontentious and non-contentious competition law and (unusuallyamong London-based lawyers) international trade and customswork. His competition law work also involves advising clients on abroad range of issues including bringing, defending and settling alltypes of competition disputes, cartels, dawn raids, complianceprogrammes, whistle-blowing and leniency applications,dominance, pricing, discounts, promotions, parallel trade, refusalsto supply, state aid and the application of competition law to a widerange of commercial agreements - both online and offline. Heregularly advises on mergers under UK and EU law, acting for eitherone of the merging parties or third parties, such as complainants orinvestors. Through this latter work, he has advised on a very highproportion of the largest deals. His trade work covers a wide range,from anti-dumping through to customs issues and other forms oftrade protectionism.Simon won scholarships to both Cambridge and BrusselsUniversities. At Cambridge, he obtained a first class honours degreein Economics and Law. In Brussels, he obtained a GrandeDistinction in European Law. He is fluent in French, has written anumber of articles on competition and international trade, and hasspoken in these areas in London, Brussels, Washington DC, Tokyo,France, Italy and Brazil. From 1983 to 1986, he taught EU Law atthe London School of Economics. He is also a former chairman ofthe Law Society’s European Group.

Philipp Girardet



Philipp Girardet is a senior associate in the firm’s EU & Competitiondepartment. Philipp advises on a broad range of competition law and regulatoryissues in a wide range of industry sectors, including telecoms, water,music and film. He has particular expertise in cartel and leniencyissues. Philipp also has experience of advising on complex licensingand merger issues both at EU and national level and has advised oncontentious matters before the Competition Appeal Tribunal, theHigh Court and the Court of Appeal.Prior to joining SJ Berwin LLP, Philipp was the deputy director of theCartel Group at the OFT where he was responsible for the OFT’s civilcartel cases and for developing and operating the OFT’s leniencypolicy. He also worked on criminal cartel offence investigations.Philipp chaired the ECN Leniency Working Group for two years andis the co-author of the ECN Model Leniency Programme. Herepresented the OFT on cartel issues both nationally andinternationally and worked closely with the European Commissionand the US Department of Justice on a broad range of competitionpolicy issues. He frequently publishes and speaks on cartel andleniency issues.







Chapter 44


USA



Section 1 of the Sherman Act, 15 U.S.C § 1, criminalisesagreements in restraint of trade. Both corporations and individualsare subject to criminal prosecution for cartel conduct includingprice fixing, bid rigging, and horizontal market allocation. Thesame conduct can also be separately subject to state enforcementactions and private actions for civil damages.


Section 1 provides, “Every contract, combination in the form oftrust or otherwise, or conspiracy, in restraint of trade or commerceamong the several States, or with foreign nations, is declared to beillegal”. While this broad language could be read to apply to astaggering range of business conduct that arguably “restrains”trade, it is tempered by well-developed case law and prosecutorialpractice. As applied, U.S. criminal cartel enforcement focuses onso-called “hardcore” antitrust offences: price fixing; bid rigging;and market allocation among competitors.


The Antitrust Division of the United States Department of Justice(“DOJ”) is primarily responsible for conducting investigations andprosecuting companies and individuals for cartel violations. For themost part, cartel investigations are conducted according to the samerules as all other criminal prosecutions. DOJ must convene a grandjury to issue subpoenas for testimony and documents, but has alarge degree of discretion as to how best to collect uncompelledevidence. In order to secure a conviction, DOJ must either prove itscase in federal court or negotiate a plea agreement with the accused.


It is Antitrust Division policy to open an investigation only wherethere is credible evidence or suspicion of a significant “hardcore”violation of the antitrust laws. Whether the evidence or suspicion iscredible is a matter of prosecutorial discretion, rather than the subjectof a strict legal standard. Similarly, the significance of a potential

violation is largely a subjective determination based on suchconsiderations as the volume of commerce affected, the geographicarea affected, the potential for expansion of the investigation intoother industries and the deterrent impact and visibility of theinvestigation. After conducting an investigation, DOJ will decide topursue charges only if it believes that it has admissible evidence thatwill probably be sufficient to obtain a conviction. DOJ conducts its investigations in conjunction with a federal grandjury. Federal law makes the grand jury proceeding secret.Accordingly, the target(s) of a grand jury investigation will learnabout the existence of a case only when a subpoena or searchwarrant is served. During the course of its investigation, DOJ will present its evidenceto the grand jury, which can decide to bring formal charges, in theform of an indictment, based on a finding of probable cause tobelieve the defendant committed the alleged offence. Theindictment will describe the charges alleged, but will ordinarily notdescribe the government’s evidence in detail.To secure a conviction on the indictment, DOJ must prove its caseto a jury beyond a reasonable doubt. Of course, defendants have theopportunity fully to present exculpatory evidence during the trial.After conviction, the judge determines the sentence.Nonetheless, very few cartel cases are ever tried. Instead, mostconvictions are the result of plea agreements negotiated between thedefendants and DOJ. Individual and corporate defendants aretypically afforded ample opportunity to cooperate and negotiatewith DOJ officials after receiving a grand jury subpoena.


There are a number of industry-specific exemptions from theapplication of U.S. antitrust laws. For example, there are statutoryexemptions that may apply to industries such as internationalshipping, communications, energy, agricultural cooperatives,organised labour, insurance, and sports leagues. There is also astatutory exemption that allows otherwise competing companies tocoordinate their export sales in certain specific circumstances. These exemptions are narrowly interpreted and generallydisfavoured. Companies should exercise great caution and seeklegal advice before engaging in any coordinated conduct that mayrestrict competition based on a belief that an exemption may apply.There are also several judicially created exemptions and immunitiesfrom the antitrust laws. For example, the Noerr-Penningtondoctrine, which is based on the constitutional right to petition thegovernment, protects companies from allegations that theirlobbying or litigation activities harm competition. Another

Adam Miller

Michael Lazerwitz



USA

Cleary Gottlieb Steen & Hamilton LLP USA

example of a judicially created exemption is the state actionimmunity doctrine, which can protect companies whose allegedanticompetitive conduct is the result of state regulation.

1.6 Is cartel conduct outside USA covered by the prohibition?

Regardless of where it occurs, cartel conduct that has substantialeffects in the United States is prohibited under U.S. law and canresult in criminal prosecutions and civil damages judgments. DOJofficials have repeatedly stressed that the prosecution ofinternational cartels is among the Antitrust Division’s highestpriorities. In that regard, DOJ has successfully prosecutedcompanies and individuals from countries around the world.Individuals from Japan, Korea, France, Germany, the Netherlands,Norway, Sweden, Switzerland and the United Kingdom have servedjail time in the United States for cartel violations. Investigations of non-U.S. conduct do, however, pose at least twosignificant complications. First, it can be difficult for DOJ to obtainaccess to evidence that is physically located outside the UnitedStates. Second, it can be difficult to establish the jurisdictionnecessary to prosecute non-U.S. individuals.DOJ has a number of tools available to help it overcome the firstobstacle. Perhaps most importantly, companies have frequentlysought to take advantage of DOJ’s leniency policy. In exchange foramnesty from prosecution, DOJ expects leniency applicants toprovide evidence of wrongdoing wherever it is physically located.DOJ also has cooperation agreements with antitrust regulators inAustralia, Canada, the European Union, Germany, Brazil, Israel,Japan, and Mexico. Cooperation with these agencies has led tointernational coordination of the timing of dawn raids, searches,service of grand jury subpoenas, drop in interviews, and assistancein obtaining evidence from outside the United States. DOJ has also been aggressive in asserting jurisdiction over non-U.S. individuals. It has coordinated closely with U.S. immigrationauthorities to implement border watches for suspected carteloffenders and material witnesses. These border watches can lead tothe detention, questioning and potential prosecution of suspectedoffenders who try to enter the United States. DOJ has also targeted suspects while they travel outside the U.S. byissuing INTERPOL Red Notices. These notices are in effect arequest that international law enforcement agencies arrest thesuspected cartel offender to allow DOJ an opportunity to seekextradition to the United States. DOJ uses Red Notices specificallyto target non-U.S. cartel participants who might otherwise simplyavoid the United States.DOJ broke new ground in international cooperation and theprosecution of non-U.S. individual in December 2007 when itreached plea agreements with three British nationals thatanticipated criminal prosecutions in the U.K. and in effect allowedthe defendants to serve the agreed jail sentences in the U.K. Thethree defendants have since also pleaded guilty in the U.K. and beensentenced to prison by the U.K. courts.






The primary investigatory tool is the grand jury subpoena, whichcan compel the production of documents or testimony before thegrand jury. DOJ has broad discretion in issuing subpoenas onbehalf of the grand jury.In order to conduct unannounced searches of businesses orresidences, seize or image computer hardware, or secure premises,DOJ must get a search warrant issued by a federal judge ormagistrate judge. The search warrant must describe the documentsor things that DOJ expects to find. Before a search warrant isissued, DOJ must convince the judge or magistrate that there isprobable cause to believe that the property to be seized is evidenceof the commission of a crime.Technically, DOJ cannot compel an individual to participate in aninterview in connection with a criminal investigation. It can,however, issue a subpoena requiring the individual to testify beforethe grand jury. DOJ can also overcome an individual’s FifthAmendment right against compelled self-incrimination by grantingthe witness “use immunity”. Use immunity protects the witnessfrom prosecution based on his own testimony before the grand jury,but does not prevent a prosecution based on independentlydeveloped evidence.In addition to its criminal investigations, DOJ can conduct civilinvestigations and issue Civil Investigative Demands that canfunction as subpoenas for documents and testimony. In general,DOJ does not use its civil investigative powers in cases involving“hardcore” cartel conduct, which as a matter of policy it treats ascriminal conduct.


DOJ cartel investigations can involve surveillance of suspectedcartel activities. There have been several well-publicised cases inwhich a cooperating witness has helped DOJ tape telephone calls orvideotape meetings among cartel participants. When there is acooperating witness who consents to monitoring, no court approvalis needed.Even without a cooperating witness, DOJ can apply for a court



Carry out an unannounced search of businesspremises No Yes*



Yes Yes*

Right to retain original documents Yes Yes*


Yes Yes


No Yes*



WWW.ICLG.CO.UK263


USA


order allowing it to videotape, tap phones, or otherwise interceptoral communications. As with search warrants for documents andthings, DOJ must convince a court that the surveillance mayprovide evidence of criminal violations of the antitrust laws. Nocourt order is needed to observe a person’s movements in public.Finally, as mentioned above, DOJ uses border watches to detectindividuals’ entry into the U.S. and INTERPOL Red Notices totrack suspects’ international movements.


One of DOJ’s most important and effective investigative techniquesis its leniency programme, which is described in detail below. DOJ has also aggressively sought the extradition of individuals whohave been indicted for antitrust offences. Until recently, extraditionfrom any country was highly unlikely because most extraditiontreaties require the conduct in question to be criminal in the countryfrom which extradition is sought. As additional countries treathardcore cartel offences as a crime, the likelihood of extradition forantitrust offences will certainly increase.


Lawyers from DOJ and agents from the Federal Bureau ofInvestigation (“FBI”) will jointly execute search warrants, conductdrop in interviews, and perform unannounced searches. Onoccasion other law enforcement agencies may be involved as well.They will not wait for legal advisors to arrive before executingsearches for documents and other evidence, but cannot continue toquestion individuals after the witness requests to have a lawyerpresent.


Communications involving in-house lawyers are protected by therules of privilege to the same extent as communications withoutside counsel. In general, communications between lawyers andtheir clients for the purposes of giving or receiving legal advice areprotected from discovery by DOJ and civil plaintiffs. If, however,the lawyer’s services are used in furtherance of a crime or fraud anexception to the general rule may apply and the communicationsmay be discoverable.


The Fifth Amendment to the U.S. Constitution protects individualsfrom being compelled to give testimony that would incriminatethem in a crime. Individuals who are targets of cartel investigationscan invoke this right in interviews and to resist grand jurysubpoenas for testimony. If a witness invokes his Fifth Amendmentright and refuses to testify before the grand jury, DOJ can overcomehis objection by granting use immunity. With a grant of useimmunity, the witness can no longer invoke a Fifth Amendmentright because his testimony cannot be used directly to incriminatehim.The Fifth Amendment right against compelled self-incriminationdoes not apply to companies and does not prevent the discovery ofdocuments and things.


Obstruction of justice is a separate crime that is separatelypunishable with fines and jail time. Obstruction charges can resultfrom the destruction of documents and other evidence or otherattempts to mislead prosecutors and cover up wrongdoing.Since 2000, DOJ has prosecuted eleven corporations and twenty-three individuals for obstruction offences in connection with cartelinvestigations.



The maximum fine under the Sherman Act (as amended) for acorporation found guilty of cartel conduct is $100 million. Analternative sentencing statute, however, allows for fines up to twicethe gain derived from the criminal conduct or twice the losssuffered by the victims. DOJ has successfully used this alternativesentencing provision to obtain fourteen fines in excess of $100million, with the largest ever fine of $500 million levied against F.Hoffman Laroche, Ltd. in 1999 for its participation in the vitaminscartel. Conviction can also result in debarment from participation incontracts with the U.S. government. For companies that dobusiness with government, this can be a substantial additionalfinancial penalty.


Individuals face fines of up to $1 million and prison sentences of upto 10 years. There is also an alternative sentencing statute thatapplies to individuals that similarly allows fines up to twice the gainto the individual or twice the loss suffered by the victims. Ingeneral, however, sanctions for individual cartel participants havefocused on jail time rather than large fines.


The limitations period for criminal violations of the Sherman Act isfive years. In order to sustain a conviction, DOJ must bring chargesagainst a defendant before the end of the limitations period.Determining precisely when the limitations period ends for a givenconspirator can be a complicated question. In general, the periodruns from the last overt act in furtherance of the conspiracy.


It is common for companies to advance the legal costs of employeesthat are subject to cartel investigations. Whether the employee hasan obligation to return the advanced funds upon conviction dependson the company’s articles and bylaws and the corporate lawapplicable to the company. Unlike other parts of the Department ofJustice, the Antitrust Division has not publicly expressed scepticismabout the quality of a company’s cooperation because of a decisionto advance the legal costs of employees.Sanctions against individuals do include fines, but principally focuson jail time. Under 18 U.S.C. § 3572 a company may not pay thecriminal fines of its employees unless expressly permitted to do sounder state law.



USA




DOJ has widely publicised its leniency programme, whichautomatically provides complete amnesty from prosecution for thefirst company to report anticompetitive conduct if all otherprogramme requirements are met. Under DOJ’s leniency policy(available at http://www.usdoj.gov/atr/public/guidelines/0091.htm),there are two types of leniency, with slightly differing requirementsdepending on whether DOJ already has an ongoing investigation. Type A leniency is available before an investigation has begun. Toqualify for Type A leniency, a company must meet severalrequirements: (1) DOJ must not have received information aboutthe reported illegal activity from any other source; (2) the companymust have taken prompt and effective action to end its participationin the criminal activity upon its discovery; (3) the company mustreport the conduct with candor and provide full, continuing andcomplete cooperation throughout the investigation; (4) theconfession must be a corporate act rather the isolated confession ofa few individuals; (5) where possible, the corporation must makerestitution to injured parties; and (6) the company must not havecoerced others into participating in the conduct, and must not havebeen the leader in or originator of the illegal activity.If the requirements for Type A leniency are not met, a company canstill qualify for Type B leniency, even if there is an existinginvestigation. To qualify for Type B leniency: (1) the companymust be the first to come forward and qualify for leniency; (2) DOJmust not yet have evidence against the company that is likely toresult in a conviction; (3) upon discovery of the activity, thecompany must have taken prompt and effective action to terminateits part in the activity; (4) the company must report the conduct withcandor and provide full, continuing and complete cooperationthroughout the investigation; (5) the confession must be a corporateact rather the isolated confession of a few individuals; (6) wherepossible, the corporation must make restitution to injured parties;and (7) a grant of leniency must not be unfair to others, consideringthe nature of the illegal activity, the confessing corporation’s role init, when the corporation comes forward, whether the companycoerced others into participating in the conduct, and whether thecompany was the leader in or originator of the illegal activity.If the company qualifies for Type A leniency, all current officers,directors and employees who admit their wrongdoing and cooperatewith the investigation will also receive amnesty from prosecution.If the company qualifies for Type B leniency, individuals who admittheir wrongdoing and cooperate with the investigation will beconsidered for amnesty on the same terms as if they had approachedDOJ individually (as described below). As a matter of practice,however, DOJ generally grants leniency to employees of Type Bapplicants in the same manner that it does for employees of Type Aapplicants. While not required to do so by the Corporate LeniencyPolicy, DOJ can also agree to include former officers, directors andemployees that cooperate in the grant of leniency to the company.Legislation passed in 2004 provides an additional incentive for acompany to seek amnesty. Under the Antitrust Criminal PenaltyEnhancement and Reform Act (ACPERA), a company that receivesamnesty from DOJ and cooperates with plaintiffs in civil actions fordamages against other members of the cartel faces reducedexposure to civil damages. Ordinarily, civil plaintiffs in antitrustcases can recover three times their actual damages. UnderACPERA, a company with amnesty is only liable for actualdamages.

Only one company has ever had its amnesty revoked. DOJ revokedits amnesty agreement with Stolt-Nielsen in a dispute over whetherthe company had ended its participation in the illegal activitiespromptly after they came to the attention of the company’s generalcounsel and board of directors. After the grand jury indicted Stolt-Nielsen, the company recently convinced the district court toenforce the amnesty agreement and dismiss the indictment.


DOJ policy includes a marker system that allows a company tosecure its place as the first company to cooperate even if it has notcompleted its internal investigation and is not yet ready to provideall relevant evidence. DOJ will then set a deadline for the companyto complete its investigation, report its findings to DOJ and perfectits amnesty application. A 30-day period for an initial marker iscommon, although the length of the period will vary depending onthe circumstances. There is no requirement that the evidencepresented be sufficient on its own to sustain convictions against theother conspirators. Instead, a company need only report that it hasuncovered information or evidence suggesting a possible criminalantitrust violation.


Initial applications can be made orally, although the requiredcooperation will include the production of relevant documents andinterviews of witnesses with knowledge of the illegal activities. Awritten summary of incriminating evidence is not required.


As a matter of policy, DOJ keeps confidential the identity of theleniency applicant and any information it provides. DOJ will notdisclose the identity of an amnesty applicant unless it is previouslydisclosed elsewhere or the applicant agrees to the disclosure.


The leniency applicant must continue to fully cooperate through theentire course of the investigation and prosecution of the co-conspirators.


Yes. DOJ actively promotes the availability of “amnesty plus,”which allows companies that are already the subject of a cartelinvestigation to get a reduced fine in the existing investigation byapplying for amnesty in a new product area or industry. Companiesthat fail to take advantage of DOJ’s Amnesty Plus programme riskfacing “Penalty Plus”. The Penalty Plus policy applies tocompanies that are the target of an ongoing investigation and thatfail to report illegal antitrust activity in other product areas orindustries. Under the Penalty Plus policy, DOJ may ask thesentencing court to consider the company’s failure to report to be anaggravating factor and to impose a more severe penalty than thecompany would otherwise receive.

WWW.ICLG.CO.UK265


USA




Individuals can report cartel conduct independently of theiremployer and receive leniency for their cooperation. Under DOJ’sLeniency Policy for Individuals (available at http://www.usdoj.gov/atr/public/guidelines/0092.htm), individuals can automaticallyreceive complete amnesty for reported conduct if: (1) DOJ has notalready received information about the illegal activity from anyother source; (2) the individual reports his wrongdoing with candorand provides full, continuing, and complete cooperation throughoutthe investigation; and (3) the individual did not coerce another partyto participate in the activity and was not a ringleader of the illegalactivity.If the individual does not meet these requirements, informalimmunity may still be available on a case-by-case basis. There areno financial incentives available for individual whistleblowers. If an individual comes forward after his employer has soughtamnesty under the Corporate Leniency Policy, his application forleniency will be considered solely under the terms of the CorporateLeniency Policy.



Nearly all convictions of both companies and individuals forantitrust offences are the result of negotiated plea agreementsbetween the defendants and DOJ. Once an investigation becomespublic (either through the service of grand jury subpoenas or theexecution of search warrants), DOJ will typically be in periodiccontact with the defendants’ lawyers. At any point in the life of theinvestigation a defendant can seek to negotiate an agreement toresolve the potential charges against it. In order to do so, thedefendant will have to agree to admit to the charges in court (entera guilty plea) and cooperate with prosecutors if the investigation isgoing to continue. In exchange, the defendant will get varying amounts of credit for itscooperation depending on how far DOJ’s investigation hasprogressed at the time of the negotiation. DOJ has emphasised thatthe second company to cooperate can earn significant credit, eventhough there is no clearly defined reduction in fine for the secondcompany to cooperate.Instead, penalty negotiations begin with a calculation of a fineunder the Federal Sentencing Guidelines (“the Guidelines”). Allaspects of the Guidelines calculation, including the amount ofcommerce affected, are subject to negotiation. If the negotiationsbear fruit, the defendant and DOJ will enter a written agreement thattypically includes a commitment from DOJ as to the sentence thatit will recommend.Regardless of what is agreed between the defendant and DOJ, afederal judge must approve the plea agreement. The judge is free toreject the plea agreement. In those instances, the DOJ or defendantmight seek to revise the original plea agreement. In practice,however, judges typically impose the agreed sentence.

7 Appeal Process


Criminal antitrust convictions are subject to the same appealsprocess as all other federal criminal cases. An appeal challenging aconviction to the relevant federal circuit court of appeals isavailable as a matter of right. Further appeal to the United StatesSupreme Court is at the discretion of the Court. In general, appealsmust be based on procedural or legal errors by the trial judge, ratherthan on the factual conclusions reached by the jury.


In the absence of a plea agreement or civil settlement, criminalsanctions (i.e., fines and jail time) can only be imposed after a jurytrial in open court. The opportunity to cross-examine witnesses attrial is a constitutionally protected right. There is no cross-examination of witnesses on appeal after conviction.

8 Damages Actions


Follow-on litigation for civil damages is an inevitable result of aDOJ cartel investigation. Under Section 4 of the Clayton Act, 15U.S.C. § 15, injured parties can bring suit against cartel membersand collect three times the amount of damage actually inflicted bythe anticompetitive conduct. Each individual cartel defendant can also be held jointly andseverally liable for the damages of the entire cartel, with no right ofcontribution. This means that any single firm can be made to paytreble damages on behalf of all co-defendants. Successful plaintiffscan also recover their reasonable attorney’s fees.Defendants often find themselves facing potential exposure tomultiple claimants. Each link in a company’s distribution chain -direct purchasers, retailers, and consumers - can sue as a class fordamages under antitrust laws in the United States. Additionally,large purchasers and state attorneys general often sue individuallyoutside of a class to maximise their recovery from defendants. Ifthe company is listed on a U.S. stock exchange, there may also beshareholder litigation based on the impact of the antitrust litigationon the share price and the company’s failure to disclose theconspiracy.


Yes, there is well-developed precedent and an active plaintiffs’ barto pursue claims on behalf of classes of injured purchasers. Bothfederal direct purchaser claims and state law indirect purchaserclaims are typically brought on behalf of a class of all similarlysituated purchasers.


The limitations period for private federal damages actions is fouryears. Claims under specific state antitrust statutes vary, and insome instances may be longer. Determining precisely when the



USA


limitations period ends for a given conspirator can be a complicatedquestion. In general, the period runs from the last overt act infurtherance of the conspiracy. There are, however, a number of doctrines available to extend thelimitations period. Perhaps the most frequently invoked is“fraudulent concealment” in which the plaintiff argues that had nonotice of its claim because the defendants acted to deceive thealleged victims of the conspiracy.


Successful plaintiffs can recover their reasonable attorney’s fees.


Yes. Private damages cases regularly result in negotiatedsettlements. Damages in civil cases can quickly eclipse criminalfines. Even for small price effects, calculating damages across allof an industry’s sales over a period of years to the entire U.S. andthen trebling that amount can result in judgments or settlements ofhundreds of millions of dollars or more. For example, after payinga total of $875 million in criminal fines, in 1999 sevenmanufacturers involved in the vitamins cartel settled the follow-onclass action lawsuit for $1.2 billion. More recently, Visa andMasterCard settled a class action antitrust lawsuit for $3.4 billion indamages and injunctive relief valued between $25 to $87 billion.

9 Miscellaneous


The Antitrust Criminal Penalty Enhancement and Reform Act of2004 increased the statutory penalties for corporations andindividuals. The maximum corporate fine under the Sherman Actwas increased from $10 million to $100 million. The maximumfine for individuals increased from $350,000 to $1,000,000 and themaximum jail sentence increased from three years to ten years.

9.2 Please mention any other issues of particular interest inthe USA not covered by the above.

Perhaps more so than anywhere else in the world, there is activepublic and private cartel enforcement in the U.S. DOJ hassuccessfully used its leniency policy to generate cases. As of theend of 2007, there were roughly 135 pending grand juryinvestigations, including more than 50 investigations of suspectedinternational cartel activity, many of which were the result ofamnesty applications. At the same time, an active private plaintiffs’bar has also investigated and brought its own cases, some of whichhave served to spark DOJ investigations. State governments alsoenforce their own antitrust laws, or may seek to apply generalprinciples of fraud or unfair business practices to cartel conduct.The result of this myriad enforcement activity is an increasinglikelihood of exposure of illicit cartel conduct. Coupled with thepotentially profound financial and reputational damage that canresult once illegal conduct is exposed, effective antitrustcompliance policies are of growing value to companies wherever inthe world they are located.

WWW.ICLG.CO.UK267


Michael Lazerwitz

Cleary Gottlieb Steen & Hamilton LLP2000 Pennsylvania Ave NWWashington, DC 20006USA

Tel: +1 202 974 1500Fax: +1 202 974 1999Email: [email protected]: www.cgsh.com

Michael R. Lazerwitz is a partner at Cleary Gottlieb Steen &Hamilton LLP based in the Washington, D.C. office. His practiceincludes a range of commercial, governmental enforcement, andcriminal litigation. In the enforcement context, Mr. Lazerwitz hasconducted internal corporate investigations and representedcompanies and individuals in criminal antitrust investigations andprosecutions brought by the Department of Justice and foreigncompetition authorities. Mr. Lazerwitz served for more than three years as an Assistant to theSolicitor General, U.S. Department of Justice, where he representedthe United States and various federal agencies before the U.S.Supreme Court. Before serving in the Solicitor General’s office, Mr.Lazerwitz was a prosecutor with the U.S. Attorney’s Office for theEastern District of Pennsylvania. He was a law clerk to ChiefJustice Warren Berger of the U.S. Supreme Court and to JudgeHenry Friendly of the U.S. Court of Appeals for the Second Circuit.

Adam Miller

Cleary Gottlieb Steen & Hamilton LLP2000 Pennsylvania Ave NWWashington, DC 20006USA

Tel: +1 202 974 1500Fax: +1 202 974 1999Email: [email protected]: www.cgsh.com

Adam J. Miller is an associate at Cleary Gottlieb Steen & HamiltonLLP based in the Washington, D.C. office. Mr. Miller’s practiceincludes representing corporations and individuals that findthemselves subject to government investigations or civil litigationalleging violations of federal antitrust and securities laws. He hasadvised clients on the conduct of internal investigations of antitrustcompliance, as well as participated in independent investigationsinto potential corporate wrongdoing. Mr. Miller has representedclients through all stages of criminal cartel investigations, fromresponding to initial grand jury subpoenas to cooperation with theantitrust authorities and ultimately to a negotiated plea agreement.

Cleary Gottlieb’s antitrust/competition practice is one of the largest and most established in the world, comprising 27partners and approximately 130 counsel and associates based in Brussels, Paris, London, Moscow, Frankfurt, Cologne,Rome, Milan and Washington D.C. With leading lawyers practicing in most of the firm’s offices, the breadth and depthof Cleary Gottlieb’s competition/antitrust practice is unmatched. Given the growing cooperation among regulators inEurope and the U.S., competition/antitrust lawyers from the firm’s different offices work closely together to meet theneeds of companies with global interests. The firm advises on all aspects of U.S., EU and major European nationalcompetition laws, including merger control, monopolisation/dominance, and restrictive practices. Its lawyers appearregularly before the U.S. Department of Justice, Federal Trade Commission, European Commission, nationalcompetition authorities and courts of law.


USA

268

Chapter 45


Grau Garcia Hernandez & Monaco

Venezuela



The cartel prohibition is established in the Law to Promote andProtect the Exercise of the Free Competition, and it isadministrative in nature.


The specific provisions are contained in numbers 1, 2 and 3 ofArticle 10 of the Law to Promote and Protect the Exercise of theFree Competition.


The Commission to Promote and Protect the Free Competition(“Procompetencia”) enforces the cartel prohibition. It is anAdministrative Agency.


After an investigation has been opened, Procompetencia notify theinvestigated parties that they have 15 working days to present theirdefences and produce evidence. Such period could be extended foranother 15 working days. It should be pointed out that this perioddoes not end in practice until the parties have finished producingevidence, which could usually take one year. Once the evidence hasbeen produced, Procompetencia will have 30 working days to issueits decision. Procompetencia usually takes one year to issue itsdecision. The parties have the right to present their conclusions atany time, but not less than two days before the day that the decisionwill be issued.


No, but the President of the Venezuela Bolivarian Republic couldissue general exceptions, according to Article 18 of the Law toPromote and Protect the Exercise of the Free Competition.

1.6 Is cartel conduct outside Venezuela covered by theprohibition?

Cartel conduct outside Venezuela is covered by the prohibition onlyif the conduct has effects in Venezuela.





Even though Procompetencia does not have the express power tocarry out unannounced searches, it has in practice when retainingoriginal documents. The Courts have not ruled yet about thosesituations.


No, there are not.

Jose Ignacio Hernandez

Miguel J. Monaco




Carry out an unannounced search of businesspremises No N/A



No N/A



Yes N/A


No N/A

WWW.ICLG.CO.UK269


Ven

ezue

la

Grau Garcia Hernandez & Monaco Venezuela


No, there are not.


The Assistant of the Commissioner and his or her deputies carry outsearched of business and/or residential premises. They mustannounce the search in advance in order to allow the parties to beassisted by their attorneys.


No, it is not.


This is not applicable in Venezuela.


There are general criminal sanctions for obstruction of theauthorities, but not specific ones for obstructing antitrustinvestigations. Procompetencia has notified the VenezuelanGeneral Prosecutor about such situations, but there have not beensanctions for such situations to the date.



The sanction is a fine of up to 20% of the company’s gross incomeof the last year. The fine could be raised to 40% if the company issanctioned a second time for the same conduct.


They do not exist.


The statutory limitation for investigating a cartel is one year,counted from the time that the infraction has finished.





No, there is not.


No, there is not.








No, there is not.



No, there are not.



No, there are not.

7 Appeal Process


An “appeal” or a complaint should be filed at an AdministrativeCourt. The decision of such court could be reviewed by theVenezuelan Supreme Court if one of the parties appealed it.


Yes, it does.

8 Damages Actions


After the Procompetencia’s decision has been confirmed by the



Ven

ezue

la

Grau Garcia Hernandez & Monaco Venezuela

court (in the event that it has been appealed), a complaint should befiled against the cartel members in a Commerce Court.


No, they do not.


The limitation period is 10 years.


The legal cost cannot be higher than 30% of the indemnificationallocated to the winning party.


No, there have not.

9 Miscellaneous


The Venezuelan Congress is passing a law where cartels aresanctioned with criminal penalties. There is not a specific time forthe law to be enacted.

9.2 Please mention any other issues of particular interest inVenezuela not covered by the above.

There are no other issues of particular interest not already coveredby the above.

Miguel J. Mónaco

Grau García Hernández & MónacoAvenida Río Caura, Torre HumboldtOficina 08-07, Terrazas del Club HípicoCaracasVenezuela

Tel: +58 212 978 5060Fax: +58 212 976 6083Email: [email protected]: www.ghm.com.ve

Miguel obtained his Law degree in 1994 from Universidad CatólicaAndrés Bello. He obtained an Administrative Law Specialist degreein 1997, from Universidad Católica Andrés Bello, and an L.L.M.degree from Temple University, in 1998. He has been JusticeAssistant and outside counsel at the Political-Administrative Branchof the Supreme Court of Justice. He is author of several studies andarticles, such as The Independent Administrative Agencies in theU.S., and The Venezuelan Antitrust Regulations over the ResalePrice Maintenance Agreements. At the present time he isAdministrative Law Professor of Undergraduate Studies at theFaculty of Law of the Universidad Católica Andrés Bello andAntitrust Professor of Graduate Studies at Universidad de Los Ándes.He is partner of the law firm of Grau Garcia Hernandez & Monaco,and his areas of practice are Public Law; Antitrust & Trade Practices,IP Enforcement & General IP Advice, Pharmaceutical and FoodRegulations.

José Ignacio Hernández

Grau García Hernández & MónacoAvenida Río Caura, Torre HumboldtOficina 08-07, Terrazas del Club HípicoCaracasVenezuela

Tel: +58 212 978 5060Fax: +58 212 976 6083Email: [email protected]: www.ghm.com.ve

Jose Ignacio obtained his Law degree from Universidad CatólicaAndrés Bello with cum laude honours in 1997. He startedpracticing law in March 1997. In 2003, he obtained the Doctor ofLaw degree from Universidad Complutense de Madrid, defending hisDoctoral Thesis on The Constitutional Right to the EconomicFreedom, which received the highest grade: outstanding “cumlaude” by unanimous decision. He is author of more than 50studies, articles and juridical publications, such as The per se ruleand the rule of reason in the Venezuelan Antitrust Law, among otherpublications. At the present time he is Administrative Law Professorof Undergraduate and Graduate Studies at the Faculty of Law of theUniversidad Central de Venezuela and Universidad Monteavila. Heis partner of the law firm of Grau Garcia Hernandez & Monaco, andhis areas of practice are Public Law; Antitrust & Trade Practices,Banking Law; Mining Law, and Food Regulations.

Grau García Hernández & Mónaco was formed by former partners and associates of another Venezuelan law firm. GHMis formed by highly specialised and well known attorneys in different areas of the Law. Its members have successfullyrepresented its clients before the public agencies and courts, on very important issues, and they have been consultedon different and critical legal topics. They have participated in several of the most relevant cases of Venezuela in thelast decade. Partners of GHM teach in the most important Law School of Venezuela, and have been authors of lawbooks and articles. In such condition, they have also been asked to render their independent opinion over projects oflaws and regulations. It brings GHM a unique position to know the regulations that affect the economic activities inVenezuela.

The International Comparative Legal Guide to Cartels and Leniency 2009 (The International...

Documents

Transcript of The International Comparative Legal Guide to Cartels and Leniency 2009 (The International...