ICN Cartels Working Group Application of leniency to individuals

1. ICN Cartels Working Group Application of leniency to individuals Stephen BlakeCartels and Criminal Enforcement Group UK Office of Fair Trading 27 January 2013

2. Contents • Essential ingredients for an effective leniency policy • Background – UK cartel regime and leniency programme • Meeting requirements for an effective policy • Challenges

3. Essential ingredients for an effective leniency policy

4. Leniency – essential ingredients • Maximum ‘up-front’ certainty for applicants • Especially for those blowing the whistle • Trust in the authority • Transparency – including published guidance • Reputation for fairness, accessibility and approachability

5. Incentives to maintain cooperation • Record of robust enforcement • Track record of successful cases and stiff penalties

6. Background

7. UK cartel regime • Dual regime • Civil (administrative) regime directed at ‘undertakings’ • Article 101 TFEU and/or Competition Act 1998 • Criminal regime directed at individuals • Enterprise Act 2002

8. Regimes complementary • Enforcement action may be taken under both regimes • Against undertakings AND individuals • May include parallel UK criminal enforcement where Article 101 is being applied by the European Commission • Or only under one regime

9. UK Leniency programme - outline • Scope of leniency programme • Limited to cartel conduct (but including RPM) • Corporate immunity or leniency • Immunity from fines or fine reduction (civil) • Individual immunity • Immunity from prosecution (criminal) • Immunity from director disqualification

10. Conditions • Genuine intention to confess • Evidential threshold – depends on whether there is a prior OFT investigation • Complete and continuous cooperation • In the case of immunity, the applicant must not be a coercer

11. Criminal immunity for individuals • Where undertakings apply – three types of applicant • Type A – ‘First in’ and no pre-existing investigation: automatic immunity (not available for coercer) • Type B – ‘First in’ but pre-existing investigation: discretionary immunity or leniency • Type C - Not ‘first in’ and pre-existing investigation: reduction in fine up to 50%

12. Availability of individual immunity where undertakings apply • Automatic ‘blanket’ criminal immunity for cooperating employees in Type A cases • No automatic ‘blanket’ criminal immunity in Type B cases – may be available on a discretionary basis • No automatic criminal immunity in Type C cases but scope for individual immunity

13. Where there is no guarantee of individual immunity • Availability of confidential guidance • Whether the case is being or likely to be investigated criminally • Whether individual immunity may be available • Individuals may apply in their own right

14. Director disqualification • Immunity from director disqualification • For all cooperating current and former directors • Irrespective of whether applicant is Type A, B or C

15. Meeting requirements for an effective leniency policy

16. Maximum ‘up-front’ certainty • Clear guidance on evidential thresholds and other conditions • Including when individuals will be required to admit participation in cartel offence, including dishonesty • Narrow definition of when an undertaking or individual will be considered a ‘coercer’ • OFT in the process of revising its leniency guidance to make the process as clear and accessible as possible

17. Maximum certainty on interaction between the regimes for undertakings and individuals • Including in Type A cases guaranteed immunity for all cooperating current and former employees and directors • Even if an undertaking is found to be a coercer, individuals within the undertaking who did not play coercing role will not be denied criminal immunity • Availability of informal ‘no names’ guidance • Availability of markers

18. Scope for anonymity when exploring availability of immunity

19. Trust in the authority • Transparency • Detailed published guidance • Separate ‘quick guide’ to leniency for individuals currently being drafted • Accessibility and approachability • Informal ‘no names’ guidance available • Leniency contact persons named on OFT website

20. Fairness • Commitment to erring in favour of the applicant where there is genuinely a ‘close call’ • Stated aim of achieving reputation for fairness in application of published guidance

21. Incentives to maintain cooperation • Clarity regarding scope of requirements • Must be genuinely to assist the agency in efficiently and effectively detecting, investigating and taking enforcement action against the cartel • Clarity regarding consequences of failure to maintain cooperation

22. Timing of leniency agreement/no action letter • Shortly prior to issue of SO or charging with cartel offence • OFT considering requirement for a senior representative of the applicant to sign a written commitment to cooperate at marker stage

23. Robust enforcement record • Civil enforcement against undertakings • Examples of recent fines: • BA fined £58.5 million in Airline fuel surcharges case • RBS fined £28.5 million in Loans for professional services firms case • Criminal enforcement against individuals • Two prosecutions to date • Convictions in Marine hose cartel – prison sentences of between 2 ½ and 3 years • Further cases in pipeline

24. Director disqualification • Between 5 and 7 years in Marine Hose case as part of criminal proceedings • No standalone director disqualification cases to date

25. Challenges

26. Challenges • Non-alignment of incentives – individuals vs undertakings • Current requirement of ‘dishonesty’ for criminal offence • Absence of ‘plea bargaining’ for Type C cases • Obtaining cooperation from former employees, in particular if they are now employed by a competitor not covered by leniency

27. Maintaining integrity of evidence • Electronic evidence • Witness evidence • Reliance on accomplice evidence – credibility • Creating an enforcement record • ‘Chicken and egg’ • Avoiding sole reliance on leniency

28. ICN Cartels Working Group Application of leniency to individuals Stephen BlakeCartels and Criminal Enforcement Group UK Office of Fair Trading 27 January 2013