Immunity and leniency in the EU Is the tail wagging the dog

1. Immunity and leniency in the EUIs the tail wagging the dog? Johan Ysewyn, Linklaters LLP Annual GCLC Conference, Brussels, 19 June 2008 JY When I asked Ewoud whether he wanted to turn this into a duo presentation, he basically told me that, if I wanted to go ahead on that basis, he expected genuine and full cooperation, expeditiously and on a continuous basis. I never thought I would get a laugh on a leniency joke. One general caveat : Ewoud�s views do not represent those of the Commission. My views even less so. Ewoud: my views do not represent those of Linklaters�JY When I asked Ewoud whether he wanted to turn this into a duo presentation, he basically told me that, if I wanted to go ahead on that basis, he expected genuine and full cooperation, expeditiously and on a continuous basis. I never thought I would get a laugh on a leniency joke. One general caveat : Ewoud�s views do not represent those of the Commission. My views even less so. Ewoud: my views do not represent those of Linklaters�

2. Outline Some statistics The marker system Conditions for immunity/leniency Evidence End cartel participation Cooperation obligation Leniency The race in practice ��The dog and the tail�� JY The last year and a half has been most interesting year in terms of cartel enforcement: 1. record fining year the first year of the operation new 2006 Leniency notice, with the first markers there were a number of very interesting learning points coming out of the Courts relating to the running and handling of investigations � not to mention the Akzo judgment highly mediatised public consultation on settlements first cases under the 2006 Guidelines on fines interesting judgments both at the CFI and the ECJ internationally, there have been some very interesting developments with coordinated raids, e.g. in marine hoses and in cathode ray tubes JY The last year and a half has been most interesting year in terms of cartel enforcement: 1. record fining year the first year of the operation new 2006 Leniency notice, with the first markers there were a number of very interesting learning points coming out of the Courts relating to the running and handling of investigations � not to mention the Akzo judgment highly mediatised public consultation on settlements first cases under the 2006 Guidelines on fines interesting judgments both at the CFI and the ECJ internationally, there have been some very interesting developments with coordinated raids, e.g. in marine hoses and in cathode ray tubes

4. Immunity and leniency applications � 2002 Notice

5. 60% of decisions are based on immunity applications�

6. Conditional immunity decisions end 2005 : 87 immunity applications end 2005 : 51 conditional immunity decisions Explanation not provided the necessary information and evidence time between application and decision national cases

8. Markers � The law To secure place in the queue while immunity applicant is gathering information Discretionary system (�Commission services may grant a marker�) Need to provide details of cartel (parties; product and territory; duration; nature) To perfect marker within particular time limit Information will be deemed to have been submitted on date of marker EWS + some stats 2: applicant has to justify its request for a marker. The Commission services may grant the marker 3: identity of applicant, affected product and territory, other participants, duration, nature of the cartel 4: Commission will determine deadline by which the marker has to be perfected: based upon detailed request. Short periods. 5: Result EWS + some stats 2: applicant has to justify its request for a marker. The Commission services may grant the marker 3: identity of applicant, affected product and territory, other participants, duration, nature of the cartel 4: Commission will determine deadline by which the marker has to be perfected: based upon detailed request. Short periods. 5: Result

9. Markers � The practice Some markers rejected (10/17 granted � Commissioner Kroes San Francisco ABA Cartel conference) Important to go beyond what is required by the list and give examples of the evidence that could become available explain the internal steps to be taken during the marker period explain and justify the time needed for each step Often very short deadlines between marker and perfection

10. Markers � Some thoughts Synchronise procedure with US/Canada/other marker jurisdictions Need for detailed information at the marker stage? Need for Commission discretion? Synchronise perfection timeline with US/Canada/other marker jurisdictions? Argument : Commission�s loss of an opportunity � Is that really true?

12. Conditions � Notice 2006 Be the first (point 8) � only for immunity To submit evidence enabling EC to carry out a targeted inspection or to find an infringement (point 8) Not to have coerced other undertakings (point 13) 4. To end involvement in the infringement (point 12 b) To cooperate throughout the procedure (point 12 a) Not to destroy, falsify or conceal evidence while contemplating application (point 12 c) JY This is the list of conditions. The terms that have been underlined are those we will spent a few minutes on. JY This is the list of conditions. The terms that have been underlined are those we will spent a few minutes on.

13. 1. Evidence What needs to be provided? Corporate statement applying for immunity (often oral) � excruciating detail Other evidence: contemporaneous documents Targeted inspection (maps; names; dates; etc.) Explanation of the documents: to take position (new) JY 1: Providing details on alleged cartel arrangements, includes: - aims, activities and functions, - product, geographic scope, duration, meeting dates, people), - name and address of entity submitting the application, names and addresses of other participants, - information on which other competition authorities have been notified 2: copies of documents establishing the facts 3: sending documents without explanation is not sufficient: applicant needs to take position Underline that �taking position� is important to the CommissionJY 1: Providing details on alleged cartel arrangements, includes: - aims, activities and functions, - product, geographic scope, duration, meeting dates, people), - name and address of entity submitting the application, names and addresses of other participants, - information on which other competition authorities have been notified 2: copies of documents establishing the facts 3: sending documents without explanation is not sufficient: applicant needs to take position Underline that �taking position� is important to the Commission

14. 2. End cartel participation� �immediately following application Tension between the requirement to cease participation and the risk of signaling ��except for what would, in the Commission�s view, be reasonably necessary to preserve the integrity of the inspections.� JY Critical moment/concern: raids 1: Leniency Notice provides ��except for what would, in the Commission�s view, be reasonably necessary to preserve the integrity of the inspections��; 2: Friction with investigations by other competition authorities: e.g. Marine Hoses and citric acid. Especially the US DOJ may require continued assistance ��to nail�� the other participants; But: should not be seen as �continuation of the infringement itself�JY Critical moment/concern: raids 1: Leniency Notice provides ��except for what would, in the Commission�s view, be reasonably necessary to preserve the integrity of the inspections��; 2: Friction with investigations by other competition authorities: e.g. Marine Hoses and citric acid. Especially the US DOJ may require continued assistance ��to nail�� the other participants; But: should not be seen as �continuation of the infringement itself�

15. 2. End cartel participation (cont�d) In practice� Before raids : Stall presence at cartel meetings, send employees on holidays, �internal organisation�, etc. � If risk of tipping off, discuss with Commission After raids: take structural measures to dissociate from the cartel Issue a new price list Offer new agreements to customers Offer employees other positions, preferably in other areas of the business Don�t fire employees Practical advice: always discuss this with the Commission - confirm in writing JY Prior to raids: make sure employees that are involved in contacts are shielded from contacts, without it raising suspicion Don�t fire employees because the company needs to keep them available for EC interviews.JY Prior to raids: make sure employees that are involved in contacts are shielded from contacts, without it raising suspicion Don�t fire employees because the company needs to keep them available for EC interviews.

16. 3. Cooperation obligation To cooperate �genuinely, fully, on a continous basis and expeditiously� No disclosure to anyone without agreement from the Commission � no tipping off! (Italian Raw Tobacco) Not to to destroy, falsify or conceal evidence while contemplating the evidence Respond to questionnaires; make staff available for interviews JY Applicant should not communicate to the outside world that it applied for immunity Practical info � maps of sites; precise location of offices; names and positions of individuals Can the applicant be sure it has all the relevant information? Scope of the duty to cooperate? Best efforts. The company has to be able to show that it has done everything in its power to obtain the necessary info. What about �rogue� employees? In a recent case, where one of the employees, who actually had some key information had not provided it to the company, the company was able to maintain its immunity status by showing that it had done everything in its power to obtain the necessary information. Raises interesting question : role of individual in destroying evidence � look at professional videotape � aggravating circumstance to destroy evidence � but what happens if, as a company, you do everything you can when the raid happens. JY Applicant should not communicate to the outside world that it applied for immunity Practical info � maps of sites; precise location of offices; names and positions of individuals Can the applicant be sure it has all the relevant information? Scope of the duty to cooperate? Best efforts. The company has to be able to show that it has done everything in its power to obtain the necessary info. What about �rogue� employees? In a recent case, where one of the employees, who actually had some key information had not provided it to the company, the company was able to maintain its immunity status by showing that it had done everything in its power to obtain the necessary information. Raises interesting question : role of individual in destroying evidence � look at professional videotape � aggravating circumstance to destroy evidence � but what happens if, as a company, you do everything you can when the raid happens.

17. 3. Cooperation obligation (cont�d) What about the rogue individual? Destruction of evidence When does one start contemplating making an application? Application of condition needs to be assessed very carefully Ultimately Commission only sanctions non-compliance with cooperation obligation in extreme circumstances

19. Significant added value Guidance in the 2006 Notice but still a case-specific evaluation Some examples: facts that enable the Commission to enlarge the scope of its decision (geographic area, duration,�) evidence that strengthens the Commission�s ability to prove the infringement, such as: written contemporaneous evidence, incriminating evidence directly relevant to the facts in question, compelling evidence that does not require corroboration (but compelling nature not precondition) Extremely case-specific EWS Pt 25 of the Leniency Notice Examples from SAV analysis in recent cases: HP, Flat Glass, Plastic bags�EWS Pt 25 of the Leniency Notice Examples from SAV analysis in recent cases: HP, Flat Glass, Plastic bags�

20. Bottomline : be very fast To obtain leniency organic peroxide : 9 days after the raid - YES GIS : 6 days after the raid - NO And to be at the top of the leniency bracket Spanish bitumen � 1 year later EWS Pt 25 of the Leniency Notice Examples from SAV analysis in recent cases: HP, Flat Glass, Plastic bags�EWS Pt 25 of the Leniency Notice Examples from SAV analysis in recent cases: HP, Flat Glass, Plastic bags�

22. The race in action . This is a picture taken on on Thursday 28 February of this year in front of the Spanish competition authority. The Spanish leniency regime entered into force and on that day the registry received about a dozen visitors. Apparently junior lawyers started queing up already on the Friday before � 22nd - with a crate full of papers and four packages wrapped in brown paper. The race in action . This is a picture taken on on Thursday 28 February of this year in front of the Spanish competition authority. The Spanish leniency regime entered into force and on that day the registry received about a dozen visitors. Apparently junior lawyers started queing up already on the Friday before � 22nd - with a crate full of papers and four packages wrapped in brown paper.

23. The case of Hydrogen Peroxide 25 March 2003 - Dawn raids � Immunity 29 March 2003 - Company A applies for leniency 3 April 2003 � morning: Company B calls : we want to make an application and schedule a meeting (confirmed by fax at midday) 3 April 2003 � 15.50: Company C faxes 13 documents and formally applies for immunity/leniency 4 April 2003 Company B has meeting with the Commission 26 May 2003 � Company C explains in detail the content and nature of the documents submitted on 3 April JYJY

24. The case of Hydrogen Peroxide Company A gets 2nd place with 40% Company B gets 4th place with 10% Company C gets 3rd place with 30% Commission Decision: ��Neither the telephone call of the morning of 3 April 2003 nor the fax sent at midday contained any information about the infringement�� JYJY

25. Is this the right outcome? Company B is actually assisting the Commission much more � and faster � than Company C Bottomline : get the documents in � put your marker down Also in cases where the documents are meaningless without detailed explanations? e.g. codenames

27. �The dog? Purpose of immunity programme : uncover cartels Immunity applicants should be encouraged to come forward Make it simple to put markers down Give time to find evidence/interview Make the evidential burden manageable Assess the cooperation obligation sensibly Predictability of outcome is key for clients

28. �The tail? Commission is very much frontloading the process Quantity of evidence drives the process New obligations add complexity to the decision-making process of companies Cooperation obligation is high during process

29. The bottomline� � expectations for immunity applicants are becoming higher? Predictability of outcome lower? Is it becoming more difficult to obtain immunity? Is the Commission making it as easy as they could/should for companies to come forward?