Is the Continued Success of Leniency in Cartel Cases in Danger? Some Comments from a Private Practitioner’s Perspective

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Romina Polley, Sep 16, 2015

For many years leniency has been the most successful tool in uncovering secret hardcore cartels, both at the level of the European Commission and national competition authorities in the European Union. Hardly any cartels have been prosecuted without input from an immunity applicant and, apart from evidence collected during inspections, the authorities obtain all the evidence from leniency applicants including lower-ranking ones, e.g., written evidence resulting from detailed electronic review and personal statements. Not surprisingly, the competition authorities continue to praise the effectiveness of the leniency tool.

However, some recent developments, combined with disincentives that have always existed, risk gradually undermining the existing leniency system. While it is unlikely that it will collapse any time soon, companies are already weighing more carefully than ever the pros and cons of applying for leniency. This trend will likely continue in the future because, in recent years, the risks and frustrations of cooperation with the authorities have increased. Three main groups of threats or disincentives to leniency can be distinguished:

  1. The first group of threats lies in the companies’ sphere and relate to the increasing difficulty of uncovering smoking-gun evidence as well as growing challenges to organize internal investigations in such a way as to obtain a reliable set of underlying facts as a basis to make an informed decision on whether to apply for leniency.
  2. The second group relate to the application of leniency rules by the enforcers. CAs that apply the existing leniency rules have great discretion in how they handle applications and can therefore encourage or discourage leniency applicants. In this context, key questions are (i) how much applications by lower-ranking applicants are rewarded, (ii) whether the procedure offers predictability and reliability with regard to leniency status, and (iii) the interpretation of what cooperation with the authority means.
  3. The third group of threats result from policy decisions to stimulate private enforcement, which conflicts with public enforcement in the area of leniency. In this context, it matters how the Commission and NCAs handle third-party access to file (“TPA”) requests and how the national courts will order disclosure of incriminating documents after the implementation of the Damages Directive into national law. In light of the increasing number of follow-on damages actions launched by private plaintiffs,companies considering leniency may well wonder whether voluntarily incriminating oneself before the CAs becomes too dangerous in times where leniency documents are no longer safe from disclosure to private plaintiffs by CAs or the courts.