EU/UK Competition Law Newsletter - June 2010

June 2, 2010

First EU Cartel Settlement

On May 19, 2010, the European Commission used its cartel settlement procedure for the first time to settle a case. The case concerned price fixing by 10 producers of memory chips, nine of which are based outside the EU.

The settlement procedure involves an admission of a cartel infringement by the parties, in return for which they receive a 10% reduction in the fine imposed, but are still exposed to potential civil damages claims since a decision (albeit in short form) is still published.

The Commission is very keen on settlements as it reduces its workload during the investigation phase, and unlike virtually all recent cartel decisions, are unlikely to be appealed by the parties which settle. Despite the reductions obtained by the settling parties in the memory chip case, and full immunity for Micron, which blew the whistle on fellow cartelists, total fines still reached EUR331 million.

Opinion remains divided over the appropriateness of the cartel settlement procedure, in particular due to worries about the rights of the defence (although the Commission is careful to point out that rights of defence are in theory the same as under a normal cartel procedure). However, it is certain that the procedure will become a standard part of EU competition law enforcement, and indeed the Commission has indicated that several more settlements are in the pipeline.

New EU Rules Proposed for Horizontal Cooperation Agreements

On May 4, 2010, the Commission launched a public consultation on its draft revised rules for the assessment of horizontal cooperation agreements under EU competition law. These important rules set out the EU competition law treatment of a range of agreements between actual or potential competitors active at the same level of the market. Comments are invited by June 25, 2010.

The rules include revised drafts of: (1) guidelines on the application of EU competition law to the various types of horizontal agreements; (2) the Specialisation Block Exemption; and (3) the Research and Development Block Exemption. The two block exemptions set out the conditions under which specific types of agreements benefit from an automatic exemption from EU competition law.

The guidelines are of most general interest. The Commission has introduced two principal changes to existing guidelines. First, there is entirely new guidance on information exchange, which in particular seems to attempt to narrow the scope of the European Court of Justice’s 2009 judgment in the T-Mobile Netherlands case by indicating that only certain types of information exchange should be treated as giving rise to an automatic or “object” restriction of competition (as opposed to a restriction the effects of which need to be analysed for an anticompetitive effect).

These types of information exchanges are those made between competitors and including individualized data regarding intended future prices or quantities (or a combination of data allowing for a deduction to be made as to such prices or quantities), or including details of current conduct that reveal intentions as to future behaviour, or including market shares where the aim is to restrict competition on the market.

Secondly, the Commission has substantially revised the section on standardization, which now covers standardization agreements (building on a range of recent EU case law), and standard terms and conditions of sale set out by trade associations or directly by competing companies. The latter analysis will clearly be of interest to a wide range of companies.

OFT Defeated in First Full UK Criminal Competition Law Trial

On May 10, 2010, the first full UK criminal competition law trial under the UK Enterprise Act 2002 cartel offence collapsed. The UK Office of Fair Trading (OFT), as prosecutor, failed to disclose evidence to the defence, and the judge therefore ordered the jury to acquit the four individual defendants – all current or former British Airways (BA) executives.  The failure of this case is a serious blow to the OFT and may have implications for the leniency applicant, which had a duty to provide the material in question to the OFT.

The case started Aug. 7, 2008, when the OFT announced the four individuals had been charged with the cartel offence in connection with its investigation into price fixing of fuel surcharges for long-haul passenger flights between BA and Virgin Atlantic. In August 2007, the OFT imposed a GBP121.5 million fine on BA under the UK Competition Act 1998, in relation to the same price-fixing activities.

Since the defendants in the present case had pleaded not guilty, the case would have required a UK jury for the first time to decide on the applicability of the cartel offence, in particular its requirement of "dishonesty" on the part of the individuals charged. If they had been found guilty of the cartel offence, they faced up to five years in prison and/or an unlimited fine, as well as the possibility of a director disqualification order. As part of the OFT's leniency programme, Virgin Atlantic was granted full immunity from Competition Act fines since it blew the whistle. In addition, its employees qualified for immunity from criminal prosecution. 

The failure of this case is a serious blow to the OFT and may also affect Virgin Atlantic.  The OFT indicated in its statement that it "will . . .  be reviewing the role played by Virgin Atlantic and its advisers in light of the airline's obligations to provide the OFT with continuous and complete cooperation. This may have potential consequences for Virgin's immunity from penalties." In the OFT's view, this development in the criminal case will have no other implications for its civil case (to date, the decision to fine BA). Whether that is the case remains to be seen.

Additional EU/UK competition law news coverage can be found in our news archive.

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