Challenges in dealing with cross-border cartel cases – why is this so relevant right now?

The multitude of different jurisdictional frameworks at a national level as well as the rules of the European Union can lead to uncertainty for companies when dealing with cross-border competition law issues. Particularly, when anti-competitive behaviour with actions or effect in various countries is brought to light within a firm (be it during a dawn raid or an internal investigation), companies face the challenge of how to deal with different legal systems, in particular leniency applications and their consequences. The main reason is that leniency applicants that provide sufficient information about a cartel in which they have participated to the competition authority may receive full or partial immunity from fines.

In general, a leniency application to one competition authority has no binding effect for authorities in other jurisdictions. Therefore, in cross-border cartel cases, companies regularly have to file several applications in different countries under different legal regimes. In contrast to other areas of antitrust law (e.g. European merger control) a “one-stop-shop” has not (yet) been established. Thus, the different regimes for the applicability and the procedure of leniency applications make it often very difficult for companies to assess whether and to what extent such applications are worthwhile, all the more taking into account possible harmful consequences such as possible applications of access to file by victims of a cartel and the likeliness of follow-on damages claims. Moreover, companies bear the risk of disclosing facts to one authority to gain immunity from fines, on the basis of which they might be penalised by an authority of another country.

In the European Union, leniency rules had to be harmonised by 4 February 2021 implementing the ECN+Directive. The ECN+-Directive set out formal and substantive conditions for leniency applications and for immunity of cooperative individuals from sanctions imposed in administrative and non-criminal judicial proceedings. In addition, Member States should accept so-called “summary applications” (outlining only the basic facts of the anti-competitive misconduct, such as scope of wrongdoing and companies/individuals involved, and making reference to the leniency application to the European Commission) which cover more than three Member States as affected territories. However, there is still a multitude of different jurisdictional frameworks, especially because the implementation of the ECN+Directive has not yet taken place in all member states (for further details see here).

Therefore, challenges for companies in handling cross-border cartel cases still mainly arise from legal questions concerning the applicability, requirements, and effects of leniency applications. In this context, a typical risk results from the exchange of information with the authority or authorities respectively.

The first issue is related to the different substantive and formal requirements for leniency. In a scenario, in which a company has detected anti-competitive behaviour (e.g. via whistle-blowing or an internal investigation), it must decide whether the employees involved should or should not continue with the anti-competitive behaviour that has been disclosed. Background is that in some jurisdictions leniency requires that the applicant continues in the cartel if the competition authority requires it (e.g. Austria). This bears the risk that companies may be obliged under different jurisdictions to terminate their participation in the cartel at different times. The extent of immunity can also differ significantly. Whereas some jurisdictions grant immunity solely to the first applicant (e.g. Ireland), in other jurisdictions subsequent applicants may also benefit from partial immunity/reduction from fines (e.g. Spain or Germany). This might also have a huge impact on possible future follow-on damages claims and the amount a wrong-doer has to pay (the damage caused is typically related to the duration of a cartel).

Moreover, within a leniency program the protection of individuals participating in a cartel can differ as well as the possible types of sanctions for individuals (administrative, civil, criminal or mixed). For example, most competition authorities cannot provide leniency for criminal sanctions (e.g. Spain) while others can (e.g. Russia or Ireland). The differences in the formal requirements must also be taken into account. In some countries cooperating individuals are automatically included in the immunity effect by a simple corporate application (e.g. Germany, Poland, Hungary, or Sweden). Other jurisdictions allow (or even demand) individuals to request leniency on their own, irrespective of whether their employer has done so or not (e.g. USA, UK, or Spain). This may cause a conflict of interest which can be avoided if identified at an early stage.

Another key issue of cross-border leniency applications is the confidentiality of leniency related information. The scope of protection of information provided by a leniency applicant can vary between jurisdictions – causing risks in two ways: On the one hand, third parties may obtain leniency-related information by the application for access to file under the law of one country in order to claim damages in another one. On the other hand, the exchange of information between authorities is an essential aspect to be considered. If, for example, the company is subject to reporting obligations to a specific industry regulator (e.g. in the banking or telecommunications sector), the competition authority might share information obtained via the (competition law related) leniency application with the regulator which could then initiate further sanctions against the company (e.g. withdrawal of a licence). This may also be the case the other way around when a domestic regulator shares information with the competition authority which it has obtained in the course of its own parallel investigations. For this reason, possible regulatory sanctions should also be taken into account when deciding on whether to blow the whistle. Depending on the national legal framework, regulatory sanctions can lead to a debarment from public tenders or even to a removal of licenses resulting in the market exit of the company concerned. As jurisdictions vary widely in their respective sanctions, it is wise to quickly assess the possible legal impact of a leniency application, while at the same time being swift in view of the described benefits (only) for fast-movers. At the same time, one should also have a look at possible contractual impacts (i.e. confidentiality agreements with third parties which demand not to disclose certain type of information – exactly what might need to be done to be eligible for (full) leniency from administrative fines).

Although the main rules regarding the exchange of leniency related information are specified in the European Commission’s ‘Network Notice‘ (2004/C 101/03, see here), another aspect to consider is that the Commission for example demands the leniency applicant to submit a complete confidentiality waiver immediately using the template of the International Competition Network ("ICN").

Some cases in the past illustrate quite well the dilemma, which companies face when it comes to cross-border cartels, first and foremost the “DHL Express” case of the European Court of Justice (“ECJ”, decision of 20January 2016, case no. C-428/14 – DHLExpress (Italy), available here).

In the case before the ECJ, DHL filed for leniency to the European Commission and the national competition authority in Italy due to agreements restricting competition in the cargo sector (international freight forwarding). The application before the Italian authority only referred to air and sea cargo transport, whereas the application submitted to the Commission concerned three types of transport, including air, sea and road transport. According to the Italian competition authority, DHL failed to file a congruent application which lead to a fine by the national competition authority. DHL challenged the fine decision arguing that the national competition authority under the guidelines of the European Competition Network (“ECN”) would have been obliged to refer to the European Commission to complement their application.

The ECJ, however, ruled that although the applications were interdependent, they were not legally connected to each other. Thus, according to the ECJ, DHL should have submitted a complete application under the national legal framework in Italy as well. In particular, the ECJ ruled that the Italian competition authority was not obliged to assess the Italian summary application in the light of the application in Brussels.

This rather strict line for companies that arises from this ruling seems to continue as the ECJ referred to its DHL-statement in a current case (ECJ, decision of 3 June, 2021, case no. C-563/19 P — Recylex SA, paragraph 58, available here) where the ECJ stated that the leniency programmes are “intended to create a climate of uncertainty within cartels in order to encourage the reporting of them to the Commission”.

On an international level, the ECN and the ICN are two networks of competition authorities which have so far focused on the specific problems of cross-border cartel cases. The ECN is a network formed by the European Commission and national competition authorities in Europe, which enables the authorities to closely cooperate for the protection of Community-wide competition, while the ICN consists of several competition authorities worldwide. On its level, the ECN aims at a harmonised practice of competition law within the European Union by providing guidelines which are, although not legally binding, acknowledged by the members of the ECN.

The ICN’s working papers on ‘Good practices for incentivising leniency applications’ of 30 April 2019 (available here) and ‘Guidance on Enhancing Cross-Border Leniency Cooperation’ of June 2020 (available here) outline typical problems that companies are facing in cross-border cartel cases, such as different applicable legal systems and less predictable consequences of leniency applications. However, the question remains whether the working papers fully solve the specific problems mentioned above when not being legally binding.

The “DHL Express” case shows why the ECN in its ‘Model Leniency Programme‘ (2012) (available here) argues for the instrument of a summary application within the European Union. The summary application is similar to a so-called ‘marker’ securing the position of the applicant in the leniency queue with the national competition authorities concerned. Instead of filing parallel immunity applications, the companies then can file a full immunity application with the Commission and summary applications with the national competition authorities. To enable the effectiveness of such a uniform application, however, a certain degree of harmonisation between EU Member States is required. Hence, the ECN Model Programme is meant to trigger soft harmonisation of existing leniency programmes, especially regarding the requirements and effects of a leniency programme such as the scope of exclusions from immunity, the conditions for the immunity marker and the incentives for filing immunity applications.

Therefore, the Model Leniency Programme contains principles and proposals to achieve a certain degree of convergence between the legal frameworks of their EU Member States. The principles concern especially the scope of leniency programmes, the exclusion of certain applicants from immunity and the type of information the applicants should provide. Regarding the exchange of leniency related information, the programme refers to the ‘Network Notice‘ (2004/C 101/03, see here), which sets out the principle that information provided by the applicant should not be used by other competition authorities to start a new investigation. Exceptions shall be granted if (i) the applicant agrees to the exchange, (ii) applies for leniency for the receiving competition authority in the same case or (iii) the receiving authority commits not to impose sanctions on the applicant on the basis of the transmitted information.

However, like the ECN’s Model Leniency Programme, the Network Notice is not legally binding (see ECJ, decision of 13 July 2011, T-144/07 – ThyssenKrupp Liften Ascenseurs / European Commission, see here), but acknowledged by all Member States excepts Croatia (see here).

Some of these proposals have been taken up by the ECN+Directive. On the other hand, there are still issues that are not addressed (for instance, the exchange of confidential information between competition authorities and their cooperation still has no legal basis). Moreover, the “DHL Express” case would have still existed even if the ECN+Directive had been implemented, since the applications for leniency to the European Commission and the national competition authority in Italy related to different markets.

On an even broader (global) level, the ICN published its ‘Guidance on Enhancing Cross-Border Leniency Cooperation’ in June 2020 (available here). The Guidelines address competition authorities and aim at a more efficient cooperation between them in cases of leniency applications with cross-border impact. However, also this guidance paper is not legally binding for competition authorities or companies. Yet, the guidelines at least may have an indirect effect on companies, if, on their basis, unilateral, bilateral or multilateral arrangements are settled between the authorities, as they are still recognised by the members of the ICN and therefore can have a significant impact as regards for example the sharing of confidential information between competition authorities and cooperation between them and/or other domestic regulators who might have an interest in imposing sanctions on their own. Cooperation between the different authorities and regulators will be vital to ensure that there is an incentive for companies to engage (e.g. via a lenience application) with the authorities in the first place.

For some of the above-mentioned problems of cross-border leniency applications, the ICN’s Guidelines provide general and specific recommendations on how to solve them. It is emphasized that the risk of “double counting” of fines has to be mitigated where possible. Examples are given where coordination between competition authorities led to lower fines in past cases. Regarding possible regulatory sanctions for leniency recipients, astonishingly the guidelines suggest that ‘competition agencies should engage with domestic regulators to work out arrangements (or at least a mutual understanding) on the treatment of leniency recipients with respect to the imposition of regulatory sanctions’. It remains to be seen whether the competition authorities will in future conclude such agreements with other competition authorities in favour of leniency applicants. Nonetheless the recommendations and examples of the guidelines should be used for discussions with the authorities.

Due to diverging national legal systems, cross-border cartel cases entail various challenges with which companies have to deal. So far, international attempts of harmonisation can solve these problems only partially, predominantly without being binding for competition authorities. The future will show whether national competition authorities will follow the legally non-binding recommendations contained in e.g. the ICN’s Guidelines. The ECN+-Directive is also only a small step into the right direction, as the problems of multiple applications – as shown in the DHL Express and Recylex cases – remain.

In any case, the ICN’s Guidelines are limited to pointing out the problems rather than to offer final solutions and important questions still remain unanswered. The harmonisation of leniency programs appears to be difficult due to different national provisions (e.g. on the scope of an applicant’s obligation to cooperate with the authorities and possible sanctions and other legal consequences resulting from it, as outlined above). Nevertheless, enhanced communication and coordination between authorities and a uniform procedure can be used to mitigate unnecessary burdens on leniency applicants. Coordination and legal harmonisation would also be desirable with regard to settlement procedures, leniency policies and sanctions.

Companies and their legal advisors still face the challenge to mitigate such risks by proactively and wisely working on a holistic emergency plan once antitrust infringements are discovered (obviously not to mention the need of having implemented effective compliance measures to prevent such wrongdoing in the first place).

Thus, in case of antitrust law infringements being discovered, e.g. during an internal investigation or by a whistleblower, companies are well advised to assess the scope of the infringement and possible jurisdictions concerned. This should be the starting point to decide if, how and where it should be applied for leniency, by taking into account all PROs and CONs as well as strategic aspects.

Now that the COVID pandemic seems to be – for the time being – a bit more under control in many countries, companies should be prepared for more on-spot enforcement/dawn raids by competition authorities (as just announced by the FCO), which could even more lead to the need to swiftly decide on leniency applications and all the complex issues arising from it as just described.