Leniency: is it worth it?

Unlawful cartels almost always come to the attention of the authorities as a result of whistle-blowing.

Unlawful cartels almost always come to the attention of the authorities as a result of whistle-blowing: either by an individual (ex)employee or by one of the cartelists themselves seeking immunity from fines. Under the European Commission's Leniency Notice, the first company through the door can (subject to certain conditions including genuine, full and ongoing cooperation) secure immunity from fines. Thereafter, companies can benefit from a reduction in fines if and to the extent they provide "significant added value", as follows:

• First (after immunity applicant) to provide significant added value: potential reduction of 30-50%
• Second to provide significant added value: potential reduction of 20-30%
• Subsequent companies providing significant added value: potential reduction of up to 20%.

 

Deciding whether to confess and cooperate is always a difficult decision that involves balancing a number of variables, known unknowns and unknown unknowns. This is particularly so when the immunity spot has already been taken. The key factors that the Commission has in the past taken into account in setting the level of the reduction are the magnitude of the value added by any evidence provided in proving guilt and the time at which such evidence is provided.

Direct evidence of a new infringement that is submitted promptly will generally be of high value, whilst evidence that corroborates facts about which the Commission was already aware will generally be of low value. A reduction is usually only granted where the evidence enables the Commission to prove something that it otherwise would have struggled to prove. For example, in the paraffin wax cartel (the investigation was triggered by an immunity application from Shell), Sasol was the first leniency applicant and secured a 50% reduction in its fine; Repsol was second and secured a 25% reduction; and ExxonMobil was third and secured a 7% reduction in its fine. The reduction secured by ExxonMobil was attributable to it having provided self-incriminating evidence which made it possible to establish its presence at three specific meetings (out of more than 50 meetings) which would not otherwise have been possible. The additional three meetings enabled the Commission to establish a single continuous infringement for ExxonMobil from 1993-2003.

This meant that ExxonMobil's fine was reduced from €89.8 million to €83.6 million. Whether it would have been better to force the Commission to try to make its case without the benefit of the self-incriminating evidence is difficult to judge.

If you would like to discuss these issues, please do not hesitate to contact me.