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
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
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
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
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.
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