What Is a Cartel Investigation?

Speaking to Anne Wegner, we learn more about cartels.

Often associated with drug lords, Anne touches on cartels relate to antitrust law, how investigations are led in companies and what needs to happen in order for a settlement to occur.

Are all cartels illegal?

This is a question of definition. Nowadays, the term “cartel” is commonly used for an illegal agreement between competitors – such as price fixing or market sharing. However, in its origin, the term cartel was used for any cooperation between competitors. Such cooperation can in principle be exempted, if the conditions of Art. 101 (3) TFEU are met – unlikely though for hard core cartels (e.g. price fixing). The German Antitrust Act still uses the term “Mittelstandskartell” for an exempted cooperation between small and medium sized undertakings.

An investigation is often triggered by a whistle-blower using the authority’s leniency program, under which the first undertaking to reveal a cartel can escape a fine.

What happens in a cartel investigation?

A cartel investigation can be initiated by the European Commission or any national antitrust authority in or outside the EU. The authorities investigate whether there has been an illegal cartel. If so, they conclude the investigation with fines imposed on the cartelists. Fines in the EU may be as high as 10% of the groups’ turnover.

An investigation is often triggered by a whistle-blower using the authority’s leniency program, under which the first undertaking to reveal a cartel can escape a fine. In most cases, the authorities raid the premises of the undertakings under suspicion (possibly even private homes) thereby gaining access to evidence stored on the company’s servers or on paper. In many cases, undertakings decide to cooperate with the authorities after the dawn raid, thereby significantly reducing their fines. Undertakings will usually start their own internal investigation conducting e-mail searches and interviews with their employees. This is not only the right thing to do when cooperating, but also when defending the case. It is essential to clarify the scope of possible infringements and evidence and to secure future compliance.

 The authorities can impose administrative fines under the “normal” procedure.

What usually occurs for a cartel settlement to occur?

The authorities can impose administrative fines under the “normal” procedure. Alternatively, they can enter into a settlement with the undertakings under investigation. A settlement under EU law requires the undertaking to accept the facts and the amount of the fine as laid out by the authority. The undertaking in return receives a deduction of 10% because it allows an efficient closing of the investigation. Settling is popular with undertakings already cooperating, but also possible for undertakings that have not cooperated with the authorities so far.

 Undertakings are well advised to avoid cartel behaviour by setting up an efficient compliance program and organising their undertaking accordingly – including periodical checks.

Do you see a trend in cartel enforcement and compliance?

We have seen a decreasing willingness of undertakings to be the first to repel a cartel which is not yet investigated. This is due to the high likelihood of follow-on damages claims that any cartelist is highly likely to face after a fining decision. As damages may by far exceed fines, “just” escaping the fine has made blowing the whistle less attractive. However, authorities are still investigating cartels. They have found other ways for detecting illegal conduct – such as anonymous whistle-blower-hotlines (“popular” with [former] employees), sector inquiries and complaints by customers, suppliers or competitors.

Undertakings are well advised to avoid cartel behaviour by setting up an efficient compliance program and organising their undertaking accordingly – including periodical checks. Apart from fines and damages, being subject to a cartel investigation will be time consuming, reputation damaging and a highly stressful experience for any organisation and employee involved.

 

Anne Wegner, LL.M. (EUI, Florenz)
Rechtsanwältin
Partnerin

Luther Rechtsanwaltsgesellschaft mbH

Graf-Adolf-Platz 15, 40213 Düsseldorf, Germany
Phone: +49 211 5660 18742
Fax: +49 211 5660 110
Mobile: +49 152 016 18742
anne.wegner@luther-lawfirm.com
www.luther-lawfirm.com

Anne Wegner is a Partner at Luther and is the head of Luther’s antitrust practice. She specialises in antitrust law and distribution as well as related litigation. Her scope of antitrust advice covers in particular compliance, vertical agreements, cartels, merger control, joint ventures and other corporations.

Luther is a leading German full-service commercial law firm with more than 380 lawyers and tax advisors. It is represented at 10 German economic centres and at important investment locations and financial centres in Europe and Asia with international offices in Brussels, London, Luxembourg, Shanghai, Singapore and Yangon.

 

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