On June 28, 2006, the Commission adopted new guidelines ("Guidelines") on the method of setting fines for breaches of articles 81 and 82 of the EC Treaty. The Guidelines will replace the current Guidelines adopted in 1998 and seek to increase the deterrent effect for companies engaging in, or considering engaging in, anticompetitive conduct.

The new Guidelines introduce three major changes: the method for determining the "basic amount" of the fine; the imposition of an "entry fee", without regard to past infringements or duration of infringement; and an increase of up to 100% of the fine for repeat offenders (in contrast to the 50% increase under the previous guidelines). The Guidelines do not affect the statutory maximum fine of 10% of a company’s total annual turnover set forth in Regulation 1/2003.

Determining the "Basic Amount"

In contrast to the previous approach which fixed the basic amount of the fine by reference to the gravity and duration of the infringement, the new Guidelines set forth a basic amount calculation that is determined by reference to the value of sales of the relevant products. Generally speaking, the Commission will take into account 30% of the value of sales to constitute the base. This amount will then be multiplied by the number of years of a company’s participation in the infringement, to account for the duration of the infringement.

In determining the exact value of sales percentage to serve as a base, the Commission will take into account a number of factors, including the nature of the infringement, the combined market share of all of the companies concerned, the geographic scope of the infringement, as well as whether or not the infringement has been implemented.

Irrespective of the duration of the infringement, mainly in case of cartels, the Commission may add an additional 15-25% of the value of sales to the basic amount. This fee is introduced in the Guidelines to serve as an additional deterrent to companies from entering into especially harmful anticompetitive practices, such as price-fixing, market sharing, or output limitation agreements; although, there is nothing to prevent the Commission from applying the fee for other infringements.

Aggravating and Mitigating Circumstances

The aggravating and mitigating circumstances under the previous guidelines have been reviewed to take into account Commission practice and case law. The presence of aggravating or mitigating circumstances in a case may imply an increase or reduction of the basic amount. Under the new Guidelines, the aggravating circumstances include:

  • Repeat offenders. Companies that have previously been found to infringe Articles 81 or 82 by the Commission or an EU Member State national competition authority are considered as repeat offenders, for which the basic amount will be increased by up to 100%;
  • Refusals to cooperate with or obstruction of the Commission in carrying out its investigations;
  • Being the leader or instigator of an infringement.

Mitigating circumstances, which require that evidence to such effect be provided, include:

  • Termination of the infringement as soon as the Commission intervened. This mitigating circumstance does not extend to companies participating in cartels;
  • Negligence (in contrast to intentional actions);
  • Competitive conduct. Although party to an offending agreement, the company adopted competitive conduct on the market;
  • Cooperation with the Commission outside the scope of the Leniency Notice and beyond its legal obligation to do so;
  • Authorization or encouragement by public authorities or legislation to undertake the anticompetitive conduct.

Under the new Guidelines, the Commission may increase the fine for companies that have a large turnover beyond the sales or services to which the infringement relates, in order to ensure a sufficiently deterrent effect of the fines. Increases of the fine may also occur where it is possible to estimate the improper gains made as a result of the infringement.

The new Guidelines will apply to all companies receiving a statement of objections from the Commission following the publication of the Guidelines in the European Union Official Journal, which should occur before September 2006. The Commission’s Leniency Notice of 2002 will not be affected by the new Guidelines.

Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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