European Union: Top Secret: How Confidential is Your Leniency Application?

Last Updated: 8 July 2011
Article by Gillian Sproul and Kiran S. Desai

Originally published 6 July 2011

Keywords: leniency application, EU, UK, competition authorities, cartel cases, corporate statement

It may no longer be possible to protect leniency applications in cartel investigations from disclosure following recent case law both in the EU and the UK.

Leniency applications

The EU and UK competition authorities may grant a company immunity from fines, or a reduction in fines, in exchange for cooperation in investigations relating to cartel cases. Whether the company is granted full immunity, or a reduction in its fine, depends on the timing of the application and also the quality of the information and evidence provided by the leniency applicant.

Leniency applications include a corporate statement containing the following information:

  • The identity of the entity submitting the leniency application;
  • an admission that this entity engaged in cartel conduct;
  • the identity of all of the other undertakings that participated in the cartel;
  • the identity and home/office addresses of individuals who are, or have been, involved in the alleged cartel (including the individuals who have been involved in the cartel on the applicant's behalf);
  • details of the alleged cartel arrangement, including its aims and activities, the product or service concerned and the geographic scope, duration and estimated market volumes affected by the cartel; and
  • specific dates, locations and content of contact between cartel participants.

Leniency applicants must also provide any evidence relating to the cartel that is available to them at the time of the leniency application, for example, notes of meetings between the cartel members, emails and witness statements.

EU developments: the Pfleiderer decision1

In a judgement on a reference from the district court of Bonn in Germany, the European Court of Justice ("ECJ") ruled on 14 June 2011 that EU Law does not prohibit a third party who has been adversely affected by a breach of competition law from having access to a leniency application by the perpetrator of the breach.

The case concerned an action brought by Pfeiderer to recover damages against the members of a cartel in the decor paper sector. Pfleiderer sought full access to the German competition authority's investigation file, which included a leniency application. The ECJ ruled that access should be determined according to national law, which must weigh the interests in favour and against a disclosure of documents received under leniency. The case is now back before the German court for a decision.

UK Developments: the National Grid case2

In the meantime, on 4 July 2011, the English High Court adjourned an action for damages brought by National Grid against the members of a cartel who fixed the prices of gas-insulated switchgear. National Grid alleged that it had suffered substantial losses resulting from overcharging by the cartel participants. To support its case, it requested access to the leniency documents prepared by one of the members the cartel and to the confidential version of the European Commission's fining decision, which contains information submitted as part of the leniency application.

The court faced a dilemma: the documents National Grid had requested were relevant to the proceedings and were documents to which National Grid would have been granted access under the English rules of disclosure. However, the supervening EU rules provided for the protection of leniency documents.

During the proceedings, National Grid had written to the Commission, asking if it had any objection to the disclosure of the requested documents, including the confidential version of the cartel decision. The Commission did object: it replied that it requires a high level of protection of information that has been specifically prepared by parties for voluntary submission as part of a leniency application. Access to such information is of vital importance to the Commission's ability to perform its tasks. However, the Commission also stated that it does not object to the disclosure of other information, such as pre-existing information and documents in the possession of the parties that were used in the preparation of leniency submissions.

The ECJ judgment in Pfleiderer was handed down the day before the National Grid hearing was due to take place. National Grid applied to amend its application so as to seek disclosure of the leniency application, and the confidential version of the decision containing information from the leniency application, directly from the defendants who received the decision. The High Court decided to postpone the hearing to enable the Commission to make formal submissions in writing, and, if it so wishes, to be represented at the adjourned hearing when all parties can fully address this issue which is of potentially wide implication. There is no indication, for the moment, as to when the adjourned hearing will take place. However, the outcome will be eagerly anticipated in the light of the ECJ's ruling in Pfleiderer.

A balancing act

The national court must balance, on a case by case basis, the interests in favour of disclosure and those in favour of protecting information provided voluntarily by a leniency applicant. Information obtained by competition authorities through the means of leniency applications has an important role in the gathering of evidence needed to curtail and penalise cartel conduct. Allowing access could compromise leniency programmes. On the other hand this principle should not prejudice the right of individuals to bring a claim for losses caused by infringements of competition law.

Rules relating to disclosure are likely to vary between member states, but when preparing private actions for damages, claimants are likely now to focus on gaining access to leniency documents which contain evidence that supports their claims. This will make companies think twice before applying for leniency. Whilst a leniency application may result in immunity from, or a reduction in, fines, it does not protect a company from private actions for damages. Therefore a company considering making a leniency application will have to weight the benefits of obtaining leniency need against the risk that its leniency application could later be used against it and its fellow cartel members, to facilitate a damages claim.


1. Pfleiderer AG v Bundeskartellamt

2. [2011] EWHC 1717 (Ch)

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This Mayer Brown article provides information and comments on legal issues and developments of interest. The foregoing is not a comprehensive treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed herein.

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