Australia: Disclosure of leniency documents

EU national courts given free rein to decide whether to disclose leniency material to cartel damages

A judgment by the EU's Court of Justice on 14 June 2011 has the potential to affect the legal position of whistle-blowers in EU cartel investigations who face subsequent damages claims from customers.

In essence, the Court of Justice refused to confirm that self-incriminatory documents submitted by a leniency applicant to a competition authority were protected from disclosure to third party claimants who are suing the leniency applicant for damages. Instead, it is left to EU national courts to decide whether and, if so, what documents must be disclosed, opening the way to possible diverging decisions across the EU, thereby increasing the uncertainty faced by prospective leniency applicants and potentially deterring whistle-blowing to the detriment of effective cartel enforcement.

Leniency applicants face uncertainties

Companies that commit serious infringements of the antitrust or competition rules - namely "cartel activity", such as price-fixing, limiting supply, bid-rigging and market-sharing - can protect themselves from fines (and, in the UK, their relevant employees from personal sanctions) by seeking full, or partial, immunity (referred to as "leniency") from the relevant competition authorities.1

However, any leniency applicant remains exposed to possible damages actions brought against it by a third party who alleges they have been harmed by the anti-competitive conduct. By seeking leniency, a company potentially increases its damages risk as the leniency application to the competition authorities:

  • Requires an admission that the company has been involved in potentially unlawful practices as well as the submission of self-incriminatory statements and relevant documentary evidence; and
  • Significantly increases the likelihood that the infringement will become public.2

To date, leniency applicants have faced uncertainty about whether material submitted in support of a leniency application can be obtained by potential third party claimants and used against it in a damages action. While competition authorities have said that they will resist disclosure to protect whistle-blowers (to incentivise them to come forward and hence increase the detection of cartels),3 this position had not previously been tested before the Court of Justice.

We discuss the Court of Justice's decision further below and the impact this uncertainty is already having in related cases.

Pfleiderer AG v Bundeskartellamt

The Court of Justice held on 14 June - in Pfleiderer AG v Bundeskartellamt 4 - that damages claimants may be able to obtain access to materials submitted as part of an application for leniency, but that this is for national courts to decide on a case-by-case basis. Accordingly, leniency applicants now face greater uncertainty in this regard: it is for national courts to decide whether and when disclosure will be allowed and different national courts in different EU Member States may not take the same approach.

This case followed a reference from the German courts relating to the Bundeskartellamt's January 2008 decision imposing fines totalling €62 million on three manufacturers and five individuals for price- and capacity-fixing of decor paper. In February 2008, Pfleiderer - a purchaser of decor paper - sought full access to the material on the Bundeskartellamt's case-file with a view to preparing a damages claim against the cartel participants. Although the Bundeskartellamt agreed to provide partial access to its file, Pfleiderer wanted full access and brought an action before the German courts. The German courts, in turn, asked the Court of Justice to decide whether a company claiming damages arising from a breach of EU competition law is entitled to access documents submitted by a leniency applicant in relation to that infringement:

  • In line with its previous position of protecting the leniency programme, the European Commission submitted that claimants should be denied access to leniency applicants' voluntary presentations (so-called "corporate statements") setting out their knowledge of, and role within, a cartel - but access to other documents (including contemporaneous evidence of the infringement) should be assessed on a case-by-case basis.
  • The Advocate General in the case, Ján Mazák, agreed in part stating that claimants:

    - Should not be given access to self-incriminating statements voluntarily provided by leniency applicants as this could seriously damage the leniency programme and consequently effective cartel enforcement in the EU; but

    - Should be given access to other pre-existing documents (i.e. contemporaneous evidence) submitted by a leniency applicant which would assist a damages claimant.
  • However, the Court of Justice disagreed and held that:

    - The EU competition rules should be interpreted as not precluding a party seeking damages relating to an infringement of those rules from accessing documents relating to a leniency procedure involving the perpetrator of that infringement.

    - However, such access must be permitted or refused on conditions to be determined by EU national courts according to national law and considering the need to ensure the effectiveness of both leniency programmes and damages claims as a means of detecting EU competition law infringements. This should be done on a case-by-case basis, taking into account all the relevant factors of the case.5

In taking this stance, the Court of Justice has confirmed that damages claimants may obtain access to all materials submitted in a leniency process. However, by leaving the final decision to national courts on a case-by-case basis, the Court of Justice has missed the opportunity to provide any certainty about when and in what circumstances such material will actually need to be disclosed.

Consequences of the Pfleiderer decision

The uncertainty and confusion surrounding the Pfleiderer decision was demonstrated the following day by statements made by an English High Court judge in a case management conference concerning a follow-on claim brought in reliance on the European Commission's gas insulated switchgear cartel decision of January 2007 (National Grid Electricity Transmissions Plc v ABB Limited & Ors). The judge had been considering a request by the claimants that the court order the defendants to disclose documents relating to the European Commission's investigation, including leniency documents. Having adjourned to read the Pfleiderer decision the judge said that the Court of Justice's decision had brought him into "new territory", and that he would have to ask the European Commission to state its position on the disclosure of the relevant documents, and possibly need to seek further clarification from the Court of Justice.6

It will therefore be interesting to see what the EU's General Court will decide on this issue in CDC Hydrogen Peroxide v Commission.7 In this case, a damages claimant is seeking disclosure of the index to the European Commission's case-file in relation to its decision of May 2006 to impose a total fine of €388 million on seven companies for fixing the price of hydrogen peroxide. The European Commission is vehemently opposed to the disclosure - emphasising in the General Court hearing last week the importance of protecting information provided by leniency applicants to ensure that whistle-blowers continue to come forward and cooperate, and that general transparency rules should not trump specific rules on access to file and leniency procedures. These are the same arguments that did not succeed in the Pfleiderer case, although here the General Court will actually have to make the decision as to whether the interests of the leniency regime or the damages claimant take precedence on the facts of the case.

A further example of this conflict playing out is the recent US case where a Federal court8 refused the disclosure of leniency documents on the case-files of the European Commission and the Japan Fair Trade Commission submitted as part of ongoing investigations into the TFT-LCD market. The disclosure was denied as the European Commission and Japan Fair Trade Commission's interests in maintaining the confidentiality of documents regarding their ongoing investigations (regardless of any leniency applications) outweighed the US interest in allowing disclosure.9 In addition, the court decided that the evidence largely duplicated material already obtained by the third party claimants so that any disclosure benefit was marginal. While the case therefore provides some comfort to leniency applicants, the court might have concluded differently had the investigations not been ongoing and/or the evidence been of significant value to the claimants.


The Court of Justice's decision in the Pfleiderer case could perhaps be seen as a pragmatic approach - balancing on the one hand a desire not to discourage leniency applications which are vital to uncovering cartels, while on the other hand not wanting to stymie third party damages actions. However, by leaving the question of whether claimants should have access to leniency material to be decided by national courts on a case-by-case basis (and with no indication of what factors would point in favour of disclosure), the Court of Justice has in fact created greater uncertainty in this regard. To the extent that the threat of disclosure discourages leniency applications, this increased uncertainty will have the same effect, and given how heavily competition authorities rely on leniency applicants to uncover cartel cases (and how heavily damages claimants rely on competition authority decisions), this decision risks weakening cartel enforcement and will be a disappointment to the competition authorities.

Leniency applicants may be encouraged to see that competition authorities are still fighting their corner, but the question of disclosure would now appear to hinge on whether the relevant court deciding the issue is sufficiently persuaded by the arguments raised by the relevant competition authority in that particular case. The decision of the German court that raised the question in the Pfleiderer case, as well as the outcomes of the National Grid and Hydrogen Peroxide cases are therefore awaited with interest.

One would hope that national courts across the EU would adopt a consistent approach regarding the disclosure of leniency materials - but the lack of leadership on this by the Court of Justice makes this less likely. There is now the very real prospect that businesses seeking leniency regarding EU-wide cartels could find themselves subject to different disclosure rules depending on which authority - or authorities - investigate the case, or where a damages action is brought. An indirect result of the Court of Justice decision therefore may be a further forum-shopping decision for potential damages claimants.

Ultimately, the consequence of the current absence of clear guidance is that a potential leniency applicant must weigh up the benefits of obtaining full, or partial, leniency against the possibility that any submissions might be disclosed to potential damages claimants and (if so) the resulting increase in the risk of litigation. In addition, a potential leniency applicant needs to consider how to limit any new evidential material it might create as part of the leniency application process.

1. Businesses face fines of up to 10 per cent of their worldwide turnover and exposure to possible third party damages actions for cartel activity which infringes the prohibition on anti-competitive agreements under Article 101 of the Treaty on the Functioning of the European Union and/or Chapter I of the UK Competition Act 1998. In addition, in the UK, an individual commits a criminal offence if, broadly, he "dishonestly agrees" with one of more competitors to engage in price-fixing, limiting supply, bid-rigging or market-sharing. Possible sanctions for the individual are: (a) up to five years imprisonment; (b) unlimited fines; and (c) disqualification from being a company director in the UK for up to 15 years. However, businesses and relevant individuals can obtain full, or partial, immunity from sanctions by "blowing the whistle" and self-reporting their conduct.

2. An infringement will unavoidably become public should a competition authority proceed to a finding of an infringement and, as is the norm, publish an infringement decision. However, the fact that an infringement is suspected is also likely to become public much earlier in the investigation - e.g. a competition authority will usually publish a press release when it issues a Statement of Objections (a preliminary document which notifies the parties about, and invites them to respond to, the allegations against them), and at the outset of a case an authority may even confirm that it has conducted dawn raids to gather evidence or otherwise announce that it is investigating a suspected infringement.

3. Paragraph 47 of the explanatory notes to the Model Leniency Programme released by the European Competition Network (which regroups all of the competition authorities in the EU) states that the competition authorities in the EU "consider it inappropriate that undertakings which cooperate with them in revealing cartels should be placed in a worse position in respect of civil damage claims than cartel members that refuse to cooperate. The discovery in civil damage proceedings of statements which have been made specifically to a [competition authority] in the context of its leniency programme risks creating this very result." Similarly, the UK Office of Fair Trading publication "Leniency and no action - OFT's guidance note on the handling of applications", December 2008 (OFT803) states: "As a matter of general policy, the OFT would firmly resist, on public interest grounds, requests for disclosure of leniency material, or the fact that leniency has been sought, where such requests are made, for example, in connection with private civil proceedings whether in the UK or overseas" (paragraph 8.49). The OFT continues that: "... where a court has made an order with which the OFT was bound to comply, the OFT would discharge its duty to the court. Additionally, if disclosure... was genuinely necessary for the OFT to defend general civil proceedings, for example a judicial review on the correctness of the OFT's decision to open an investigation, some limited disclosure may have to be made. However, the OFT would always give utmost consideration to the public interest in maintaining an effective leniency policy" (footnote 77).

4. Case C-360/09 Pfleiderer AG v Bundeskartellamt.

5. The Court of Justice stated (for clarity) that neither: (a) the European Commission Notice on Cooperation within the Network of Competition Authorities (OJ2004 C 101, page 43); (b) the European Commission's Leniency Notice (OJ 2006 C 298, page 17); nor (c) the ECN model leniency programme, were binding on the national courts and tribunals of the EU Member States. It is therefore for the individual Member States to establish and apply national rules on the right of access to documents submitted as part of a leniency procedure by persons adversely affected by the anti-competitive conduct.

6. IHC 123/11 National Grid Electricity Transmissions Plc v ABB Limited & Ors case management conference before Mr Justice Roth, High Court, Chancery Division, 15 June 2011.

7. Case T437-08 CDC Hydrogen Peroxide v Commission.

8. Case M:07-cv-01827-si Re: TFT-LCD (Flat Panel) Antitrust Litigation.

9. The European Commission's Director General for Competition, Alexander Italianer, had written to the court to stress that disclosure was "very likely to seriously undermine" the effectiveness of competition law enforcement in the EU and other jurisdictions, and warned that the European Commission could formally apply to intervene in the proceedings if necessary.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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