Companies involved in cartels can receive severe penalties: a leniency system means that the company disclosing the existence of the cartel can receive full immunity, and companies not benefitting from full immunity can receive fine reductions by disclosing insider evidence of the cartel infringement, if that evidence represents significant added value in the authorities’ task to prove the infringement. Experience shows that leniency programmes by competition authorities are a crucial tool in uncovering cartels, both in the EU and in the U.S.
As described in further detail here,these leniency programmes not only aim to detect secret cartels but also to deter companies from entering into such agreements. Leniency programmes typically only apply to hard-core secret cartels involving direct competitors, but some jurisdictions make leniency available for hub-and-spoke cartels (involving both horizontal and vertical features), and for resale price maintenance (RPM). In the EU and the U.S., horizontal agreements covered by these leniency programmes generally involve price fixing among competitors, bid rigging, capacity restrictions, or market, customer, sale or production allocation. These anticompetitive agreements are considered per se or hardcore infringements, meaning that competition authorities do not need to prove the anticompetitive effects stemming from them. Purely vertical agreements are much less often included in the scope of leniency programmes: when leniency programmes include vertical agreements, the scope is generally limited to the most severe vertical infringements such as RPM.
However, not all undertakings involved in the cartel may be entitled to benefit from these programmes. For instance, under the ECN Model Leniency Programme (“MLP”) and the Commission’s 2006 Notice or the U.S. DOJ Leniency Program, immunity or leniency is not available to undertakings which have taken steps to coerce others to participate in the cartel. Some EU jurisdictions even take a stricter approach and exclude the initiator or the sole ringleader from immunity. In addition, some competition authorities extend leniency programmes to individuals for two main reasons. First, this allows individuals involved in the cartel to be protected against criminal or financial penalties for their involvement in the cartel when they blow the whistle. Second, it increases incentives for managers and employees to blow the whistle. Some jurisdictions go still further in having incentives for individuals by financially rewarding whistleblowers. Immunity protection for individuals is increasingly popular, because competition authorities consider this as a very important tool to tackle decreasing leniency applications. It is important to note that in many jurisdictions, leniency programmes cover criminal sanctions and fines, but not other administrative penalties to which an individual can be exposed or civil procedures. For instance, in some EU jurisdictions and in the U.S., a third party can bring action for follow-on damage against the leniency applicant. But damage claims against leniency applicants in the U.S. are limited to single damages, not the treble damages that are generally available to claimants.
On the procedural side, the timing of a leniency application and the quality and nature of the evidence provided are essential elements. First, the timeliness of the application will define whether an undertaking obtains full immunity or a partial reduction of the fine (if any). Mere minutes can make the difference here. Second, when assessing the quality and nature of the evidence, competition authorities will consider whether the information is sufficient to allow them to launch an investigation or to prove the existence of a cartel infringement (in case the authority has sufficient information to launch an investigation). Competition authorities will then grant leniency when the evidence provides “significant added value” which reinforces its cartel case.
In Europe, the Model Leniency Programme lists several requirements for an applicant to benefit from immunity or leniency. First, the applicant must cooperate fully, genuinely, expeditiously, on a continuous basis and in a sincere spirit of cooperation. Second, it must terminate its participation in the infringement as of the date of the application. Third, the applicant must ensure that no evidence is destroyed. Finally, the applicant cannot reveal the existence of the leniency application.
In the U.S., the DOJ Leniency Program requires that the leniency applicant terminates its part in the activity, cooperates with the DOJ’s investigation, confesses to the wrongdoing and provides restitution to parties injured by its involvement in the cartel. In addition, in cases in which the DOJ already has knowledge of the relevant conduct, the DOJ will determine if leniency would be unfair to others, considering several elements, such as the applicant’s role in the cartel, the nature of the cartel and the applicant’s timing when revealing the cartel.
