The leniency rules allow undertakings having entered into unlawful cartel agreements to apply for leniency relief in the form of exemption from or reduction of fines. The rules have recently been applied by the French, Swedish and UK competition authorities, which provides an opportunity to shed light on the rules.
The possibility of applying for leniency in general
The leniency principle means that undertakings may obtain leniency for participating in a cartel by applying for exemption from or reduction in the fine that would otherwise have been imposed on the undertaking for its participation in the cartel, provided that the applicant fulfils a number of conditions.
The Leniency Programme was last amended by EU Directive 2019/1 to empower the competition authorities of the Member States to be more effective enforcers and to ensure the proper functioning of the internal market (ECN+ Directive). Articles 17 to 19 of the Directive require Member States to ensure that national competition authorities have implemented leniency schemes and lay down general conditions that an undertaking must fulfil in order to qualify for leniency. In Danish law, this is ensured by sections 23 d – 23 i of the Danish Competition Act.
Overall, the leniency programme has a preventive aim. The aim of the scheme is to facilitate the detection and prosecution of cartels – which are a major and resource-intensive challenge for competition authorities – by encouraging undertakings to confess to illegal collusion and also to cease participating in them.
However, a number of conditions must be met before an undertaking can benefit from an exemption from or a reduction in fines:
- The undertaking must comply with the general conditions,
- The undertaking must disclose its participation in a secret cartel, and
- The undertaking must provide evidence with significant added value to the evidence already held by the national authority about the alleged secret cartel.
The general conditions include, inter alia, that the applicant (i) cooperates sincerely, fully, permanently and promptly, (ii) terminates its participation in the suspected cartel immediately after the application for leniency has been submitted, and (iii) has not destroyed, falsified or concealed evidence. Moreover, the detailed content of the conditions varies according to whether the leniency will be n exemption from or a reduction in the fine.
Whether an exemption from or a reduction in the fine is obtained depends on whether the undertaking is the first to expose the cartel. As a general rule, the cartel participant who first notifies of the collusive cooperation and provides sufficient information to allow the national Competition Authority to open an investigation obtains full immunity from fines. The other participants may benefit from a reduction of fines if they subsequently effectively cooperate and provide evidence with significant "added value". However, it is not clear how much it will take to meet these conditions, including whether the conditions may be met if the undertaking provides evidence that helps fill any "gaps" in, for example, the description of the cartel's operation.
The very purpose of the leniency institute suggests that there should not be (too) large and opaque requirements for the value-added requirement as it may create doubts as to whether there are any advantages at all for undertakings when applying for leniency. At the time of application, the undertaking does not know whether the competition authority has already received other leniency applications and, if so, how many.
The French competition authorities have granted leniency for the first time
In April 2023, the French competition authority, Autorité de la concurrence, announced that the company Ellisphere had been fined EUR 3.5 million for participating in an illegal cartel with the company Bureau van Dijk (BvD). The cartel was exposed when BvD's parent company approached the competition authority in July 2019 and requested leniency.
The two companies, both active in the sale of subscriptions to economic intelligence and business information products, had cooperated for a period of more than 30 years on prices and concluded market-sharing agreements, in particular by organising a system of joint pricing of products and sharing of markets.
The Autorité considered that the conditions for immunity from fines were met and both the BvD and its parent company were granted full immunity. Ellisphere, on the other hand, was imposed a fine, which was, however, relatively low in view of the length and extent of the infringement.
From a leniency perspective, the case is interesting as the case marks the first successful application of the French leniency scheme following the changes under the ECN+ Directive in 2020.
The Swedish Patent and Market Court upholds a fine of SEK 1.2 million in a cartel case prompted by a leniency application
In Sweden, the Swedish competition authority, Konkurrensverket, has similarly recently considered whether a company met the conditions for obtaining immunity from fines – and found that this was the case. Back in December 2022, Konkurrensverket granted the company Sanerings Companiet complete immunity from fines, while the other cartel participant, Sopkärlstvätt i Malmö AB, was fined SEK 1.2 million. The latter had appealed the decision to the Swedish Patent and Market Court, but withdrew its appeal on 17 April 2023, which is why the court dismissed the case and upheld the Competition Board's decision.
The two companies had entered into a written market-sharing agreement under which they would refrain from competing with each other and instead cooperate against other competitors. The cooperation lasted from 2014 to 2019, during which time the companies were not allowed to perform services that competed with each other's business areas.
In 2020, Sanerings Companiet revealed to the Swedish Competition Agency that the two companies had entered into an illegal collaboration and applied for leniency. Konkurrensverket considered that the conditions for immunity from fines were met. In that connection, the Swedish Competition Agency emphasised, inter alia, that Sanerings Companiet, which was the first to reveal the cartel, had in fact cooperated and that the information provided by the undertaking had sufficient added value.
CMA has opened an investigation into a suspected cartel following leniency application
The UK Competition and Markets Authority (CMA) announced on 24 May 2023 that it has issued a statement of objections provisionally finding that the banks Citi, Deutsche Bank, HSBC, Morgan Stanley and Royal Bank of Canada have unlawfully shared sensitive information. The alleged conduct took place between 2009 and 2013.
According to the CMA, a small group of traders employed by the five banks exchanged information through one-to-one online chat rooms. The information related to purchases and sales of UK government bonds, including the banks' price information and trading strategies.
Deutsche Bank disclosed its involvement in the cartel to the CMA and applied for leniency. In the context of the CMA's investigation of the case, Citi also applied for immunity from fines. The statement of objections is only provisional and therefore no decision has yet been reached in the case, but if Deutsche Bank and Citi continue to comply with the leniency conditions, they will receive full or partial immunity from fines, respectively.
The impact of the leniency programme at EU level
Since 1996, the European Commission has been offering leniency to undertakings through the leniency programme, and the practice is therefore extensive. The three cases are just a few of many in which leniency has played a role in exposing a cartel.
Between 2010 and 2017, 23 out of 25 cartel cases before the Commission stemmed from leniency applications. This means that only two of the cases were the result of the Commission's own work, which underlines that the leniency programme is a crucial tool for the Commission's ability to solve cartel cases. However, figures from the OECD show that the number of leniency applications has been decreasing in the period 2015-2020. The number of applications in Europe in 2020 was 70.5% lower than in 2015.
Margrethe Vestager, Commissioner for Competition and Vice-President of the European Commission, stated in 2021 that a leniency application poses a significant risk and that potential leniency applicants could be deterred by the growth of private compensation claims and the development of cartel enforcement in new jurisdictions. In the same context, she stressed that the Commission had launched a dialogue with undertakings to obtain their views on how the leniency programme worked in practice, and that there was also an ongoing dialogue with other competition authorities with a view to exchanging experiences.
In view of the challenges addressed by the leniency programme, the Commission implemented the ECN+ Directive with effect from 2019 and provided guidance on its leniency practices in the area of exemption from or reduction in fines in the form of a Frequently Asked Questions document in 2022. It is this regulation that Member States are still implementing at national level.
Another reason why the number of leniency applications is decreasing may be that undertakings estimate that the risk of being discovered is very small.
Furthermore, the time horizon for closing the case can act as a deterrent for undertakings as it often takes several years before a final decision on exemption from or a reduction in the fine is made. While the case processing is ongoing, the undertaking is subject to a cooperation obligation, which means that the undertaking is obliged to answer inquiries and make employees available for questioning, etc. Finally, the people involved risk being locked into their current position for a long period of time.
Originally published 23 June 2023
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