November 10 2011
On October 25 2011 the Court of Justice of the European Union annulled two European Commission decisions dating from 2000, which themselves were substantially identical in content to decisions rendered in 1990. The decisions relate to alleged breaches of EU competition rules by Solvay in the soda ash market, for which Solvay was fined a total of €22 million. Although the length and complexity of the Solvay cases is highly unusual, the fact that a fine imposed by the commission could be annulled 21 years after its imposition reveals a serious fault in the legal process.
The heart of Solvay's successful appeal related to due process rights and rights of defence; in particular, the defence focused on the right of access to the commission's evidentiary file and the right to be heard. On the same subject, and perhaps not coincidentally, on October 17 2011 (a few days before the court's ruling) the commission formally issued a package of measures aimed at strengthening the mechanisms for safeguarding parties' procedural rights. The commission's Best Practices Package comprises three elements:
The first and the last of these are the final versions of provisional notices which were published in January 2010 for public consultation.
The antitrust best practices notice reflects the commission's practice while taking into account comments made by stakeholders during the consultation. Its 27 pages provide an insight into how the commission manages cases and how a company can formally engage with the commission during the procedure. A key tool used by the commission is the so-called 'state of play meeting', which is a voluntary meeting at which the company and other parties to the proceedings can engage in open and frank discussion with the commission and make their points of view known. Although it is acknowledged that the antitrust best practices notice "does not create any new rights or obligations", the transparency it provides is to be welcomed, since the commission is bound to adhere to its own notices according to the principle of legitimate expectations.
The strengthened role of the hearing officer is also to be welcomed. The hearing officer might be regarded as the guardian of procedural rights. Outside of the oral hearing – which has hitherto been the hearing officer's area of activity – his or her decisions, observations, recommendations and reportage are expected to be far more influencial under the revised mandate.
However, the package fails to address certain factors adequately. For example, a company that is subject to an investigation should be provided with sufficient information to allow it to defend itself properly. In relation to cartel proceedings, the formal means of making allegations is through the issuance of a statement of objections, which is supposed to provide this information. However, commentators have argued that even during the initial phase, a company which is subject to investigation should be able to gather information on potential allegations against it.
Dawn raids have an impact on companies that have been raided as soon as they are carried out, since the fact that a raid has been carried out can rarely be concealed. As a result, companies that have been raided often have to issue press releases, and public companies must report the status of the investigation to listing regulatory authorities. Given that most cartel investigations are commenced following an immunity/leniency application or a complaint, it is usually the case that relatively clear allegations have been made against the companies which are the subject of the investigation. Furthermore, before a dawn raid the commission will have undertaken an initial assessment of the matter at hand. As the antitrust best practices notice points out, if a dawn raid has been carried out, this means that the case merits further investigation, since "it appears likely that an infringement may be found".
The question thus arises: what does a company which has been subjected to a dawn raid know? The decision to authorise a raid briefly identifies the nature of the investigation (ie, product market, period and offending conduct). After the dawn raid, the company becomes subject to an investigation procedure (which can last for several years and involve significant legal fees) before a decision is taken by the commission as to whether there is a case to answer. Only when the commission decides that the company has a case to answer does it issue a statement of objections.
For companies that recognise their culpability, the immunity/leniency process and the settlement process provide opportunities to engage with the commission meaningfully. However, a company that is not pursuing such procedures (ie, a company which maintains its innocence) remains very much in the dark. Outside its own internal inquiries, in order to obtain information that might clarify the situation, companies might:
Analysing information requests to determine the precise nature of allegations made by the commission is extremely difficult because, in asking questions, the commission is seeking to complete its evidence, rather than describe the case to be made against the company.
The commission is willing to meet a company during the initial phase of an investigation, although there must be a reasonable purpose for the meeting. However, such meetings are not considered to be 'state-of-play' meetings. Also, in particular for publicly listed companies, a meeting may not be desirable, given that if it is reasonably concluded that relevant information on the case has been obtained, the company may be required to report this to the listing regulatory authorities.
As identified in the antitrust best practices notice, during the initial phase and therefore before the possible issue of the statement of objections, the company may inquire about the status of the investigation. Furthermore, if the company later considers that it was not properly informed of its procedural status, it may refer the matter to the hearing officer.
In practice, these three sources of information shed little light on a company's situation. It is likely that non-confidential copies of complaints or immunity/leniency applications exist, but for cartel cases the antitrust best practices notice provides that a company may not obtain copies of these before the statement of objections is issued. As noted in the antitrust best practices note, this position is not aligned with the practice in relation to other alleged breaches of EU competition rules.
Given the seriousness of cartel cases and the level of fines that may be imposed on companies as a result, it seems that there is room to argue that, in cartel cases, more information should be provided to companies during the initial phase of investigation on the precise nature of the allegations which have been made against it.
The recently adopted Best Practices Package describes the commission's practice and procedures, thereby informing companies of their rights of defence in antitrust cases. This is particularly welcome and important, especially in light of the ruling in the Solvay cases, which provides a reminder that commission decisions may be upheld or annulled in the courts based on whether a company's procedural rights were properly observed during an investigation.
For further information on this topic please contact Kiran Desai at Mayer Brown International LLP by telephone (+32 2 502 5517), fax (+32 2 502 5421) or email (firstname.lastname@example.org).
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Kiran Simon Desai