In a speech delivered at the College of Europe in Bruges on 14 January 2013, Joaquín Almunia, Vice-President of the European Commission, and Commissioner responsible for Competition, stated that the Commission hopes to settle around half of its outstanding cartel investigations in 2013, using the settlement procedure instituted in July 2008.
To date, the European Commission has settled six cartel cases under the 2008 settlement procedure, involving numerous companies. One of the settlements was a “hybrid” case, where not all parties involved pursued settlement. Going forward, many more settlements are to be expected, making it essential for companies under investigation by the Commission to understand the settlement procedure to ensure they are fully prepared to make an informed choice if they are invited to enter into settlement discussions.
For the companies involved, the main benefits of a settlement are a reduction of the fine by 10 per cent and a shorter procedure. The published decision imposing the fine is, moreover, much shorter and does not deal with as much factual detail as would be reported in a contested case, thus reducing the amount of publicly available information that could be used in other proceedings, notably follow-on damages actions.
In turn, the Commission benefits from a shorter administrative process and a reduced number of appeals to the court, allowing for more efficient use of staff in the cartel department. It should be noted that leniency and settlement are not mutually exclusive. The 10 per cent reduction of the fine received for settlement is added to any reduction given as a result of a leniency application.
The European settlement procedure does have a number of downsides. In general, a 10 per cent fine reduction is not a great attraction for companies. By agreeing to settle, a company abandons its chances of contesting the fine before the European courts, whereas the reduction of the fine in successful court challenges can be much more than 10 per cent. In hybrid cases, the decision addressed to those companies that choose not to settle will still contain a full factual description and a full assessment of the facts, which could potentially be used also in damages actions against those companies that did in fact agree to a settlement.
The settlement procedure is not a negotiation process to determine the existence of the cartel infringement, but it is rather an administrative step in the investigation whereby the settling party agrees with the findings of the Commission. This is in contrast with the US-style plea-bargaining practice.
Settling is not a suitable procedure for complex and difficult cases. In general, the Commission would tend to propose a settlement only where it had a strong case on the evidence and there were no difficult or novel legal questions on which the Commission wanted to establish a precedent.
The settlement procedure is driven entirely by the Commission, not the companies under investigation. The Commission has a broad margin of discretion as to whether or not to explore using the settlement procedure. The Commission can also discontinue settlement discussions at any time, either altogether or with respect to a number of parties. On the other hand, a settlement procedure cannot be imposed on a company and, even if other companies involved in the proceedings agree to pursue the settlement, a company may choose not to accept the final settlement.
The Commission’s case team has to follow the rather formalistic settlement procedure because the final decision on the settlement is taken by the College of Commissioners. This leaves the case team—and consequently the companies under investigation—with little room for manoeuvre and negotiations. Companies are expected to admit to their participation in the cartel infringement but, once they have done so, it becomes possible to have useful discussions concerning the application of the Commission’s fining guidelines to the facts of the case.
Given the Commission’s stated interest in settling a considerable number of cartel cases, companies under investigation are well advised to examine the potential benefits and shortcomings of the settlement procedure in order to be ready to make a decision if the Commission invites them to enter into settlement discussions.
Aiste Slezeviciute, a trainee solicitor in the Brussels office, also contributed to this article.© 2014 McDermott Will & Emery