Malta: Immunity From Fines In Cartel Cases For Whistleblowers

Last Updated: 11 July 2013
Article by Neville Gatt

Office for Competition publishes proposed Leniency Regulations

On 14 June 2013, the Maltese Office for Competition within the Malta Competition and Consumer Affairs Authority published for consultation proposed Regulations providing for the power to waive or reduce the applicable fine in cartel investigations ("Leniency Regulations").

The proposed Leniency Regulations offer companies that self-report their participation in a secret cartel and provide evidence about it, either total immunity or a reduction of fines which the Office for Competition would have otherwise imposed on them.

Background

Cartels are prohibited under Article 5 of the Competition Act and Article 101 of the Treaty on the Functioning of the European Union ("TFEU").

A cartel is an agreement or a concerted practice between competitors not to compete with each other so as to eliminate the risks of competition amongst them. Cartel agreements are automatically null and unenforceable.

Competition law enforcement is on the increase. The 2011 amendments to the Competition Act strengthened its deterrent effect by widening the powers of the Office for Competition. Globally, co-operation by competition regulators is becoming more commonplace.

The prosecution of cartels is one of the main areas of competition law intervention. In this regard, leniency programmes have allowed competition authorities to prove the existence of a large number of cartels.

Malta is so far the only EU member state which does not have a leniency programme. In June 2013, the Office for Competition published proposed Regulations to introduce such a programme.

The risks of being involved in a cartel

  1. Fines of up to 10% of total annual turnover.
  2. On the spot investigations (so-called 'dawn raids') and requests for information by the Office for Competition.
  3. Business disruption resulting from regulatory attention.
  4. Damage to brand and reputation.
  5. Persons who have suffered damage as a result of a cartel may institute a civil action for damages before the Maltese courts. Class actions have also been introduced in Maltese legislation.
  6. Personal liability in cases of non-compliance with requests and orders by the Office for Competition..
  7. New risk – The proposed introduction of a leniency programme in Malta will create a strong incentive to blow the whistle on competitors.

Main features of the proposed Leniency Regulations

Scope

The leniency programme will apply to secret cartels. It will not apply to other forms of competition law infringements. The proposed Leniency Regulations provide the following examples of practices that constitute a cartel: the fixing of purchase or selling prices; the allocation of production or sales quotas; the sharing of markets, in particular bid-rigging.

The leniency programme will also apply to cartels involving elements of a vertical nature, as well as to cartels in which participants that are active in a different market may be contributing to, even if only in a subsidiary, accessory or passive role.

Immunity from fines

An applicant that discloses its participation in an alleged cartel will be granted immunity from fines if all the following conditions are met:

  • It is the first to submit a leniency application containing the required information and evidence to the Director General of the Office for Competition;
  • The submitted evidence will enable the Director General to carry out an inspection, or is sufficient to find an infringement of Article 5 of the Competition Act or Article 101 TFEU, in connection with the cartel – provided that the Director General did not already have sufficient information or evidence;
  • The applicant ends its involvement in the alleged cartel immediately following its application, unless the Director General instructs otherwise;
  • The applicant must actively cooperate with the Office for Competition throughout the investigation;
  • The applicant must not have destroyed, falsified or concealed evidence which
  • falls within the scope of the leniency application;
  • The leniency application and its contents must be kept confidential; and
  • The applicant was not a 'coercer' in the cartel, i.e. it did not coerce other companies to participate in the cartel.

An applicant which plans to apply for immunity but is not yet in possession of evidence to submit a complete application may apply for a 'marker', which protects the applicant's place in the queue of applications for a given period of time.

Reduction of fines

A company that does not qualify for immunity from fines – including a 'coercer' – may benefit from a reduction of any fines that would otherwise have been imposed. In order to qualify for a reduction of fines, an applicant must disclose its participation in an alleged cartel to the Director General of the Office for Competition, and:

  • It must submit information and evidence of the alleged cartel, which represents significant added value with respect to the evidence already in possession of the Director General at the time of the application; and
  • The applicant must comply with the conditions relating to ending its involvement in the cartel, cooperating with the Office for Competition, not destroying/hiding evidence, and confidentiality.
  • The fine shall be reduced as follows:
  • 30-50% for the first applicant;
  • 20-30% for the second applicant; and
  • 20% for subsequent applicants, which provide information of significant added value in connection with the same alleged cartel.

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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