Strategic choices in antitrust investigations: litigation versus commitments & settlements. Pranvera Këllezi Attorney at Law, Geneva

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1 Strategic choices in antitrust investigations: litigation versus commitments & settlements Pranvera Këllezi Attorney at Law, Geneva 14 March 2014

2 2 Assessment of the investigation Control over process Design of remedies and enforcement Influence of third parties Influence over final outcome Impact on private claims Cost benefit assessment

3 3 Terminology Commitments (EU) refers to measures/remedies submitted by parties to adjust future behaviour in order to make it compliant with competition rules; TFEU 101 & 102; no establishment of infringement Settlement (EU) refers to an agreement between a participant in a cartel (leniency applicant or not) and the Commission to reduce the fine with approx. (additional) 10 % in exchange of full cooperation, admission of guilt; TFUE 101 (secret cartels) only Amicable agreement/settlement (Switzerland) (accord amiable/einvernehmliche Regelung) consensual solution on how to adjust future behaviour while establishing past infringement and imposing fines. Swiss Cartel Act 5 (agreements) and 7 (abuse of dominance); waiver of the right to appeal; used in cartel proceedings, resulting in additional reduction of up to 25% of the fine

4 4 Assessment of the investigation Where does your company stand? Assessment of the case (strength of arguments, evidence, impact on the business activity) Risk of fines Appeal procedure (tested/untested issue, success rate, suspensive effect, length of the procedure) Costs assessment (incurred, estimate for the future) Duration of the investigation Multi jurisdictional investigation (outcome in one country might impact investigation in another) Risk assessment of follow-on damages claims Reputational policy

5 5 Control over process To what extent your company may control/influence the process? Discretion of authorities by law: readiness to start discussion and power to refuse commitments, settlements EU Commission has wide margin of discretion concerning the choice between a prohibition and a commitment decision ; Commission does not enter into a bargaining process (Competition policy brief, To commit or not to commit?, March 2014) Swiss Competition Commission: has no margin on fining of certain infringements such as cartels, RPM, and abuse of dominant position establishment of infringement Who submits the first draft EU companies Switzerland officials (Secretariat of the Competition Commission)

6 6 Control over process To what extent your company may control/influence the process? Case handlers attitude openness, transparency, readiness to discuss accessibility, fair process Clear criteria for accepting commitments/settlements? EU guidance and rich decision-making practice Switzerland insufficient guidance and inconsistent decision-making practice (although rich decision making practice) Can the authority discontinue discussions at any moment? in principle, interruption of discussions only in case of clearly insufficient commitments what happens with proposals (documents) submitted to the competition authority?

7 7 Control over process To what extent your company may control/influence the process? Settlement procedure in cartel cases clear rules on procedure, access to file, discussion on the range of envisaged fine, scope of infringement and liability issues assessment of the scope of settlement submissions and disclosure protection acknowledgement of liability, main facts and their legal qualification, company's role/participation in the cartel, duration, maximum amount of fine EU Settlement notice: The acknowledgements provided by the parties in the settlement submission would be deemed to be withdrawn and could not be used in evidence against any of the parties to the proceedings. protection rules concerning submitted documents if statement of objections does not reflect company s settlement submission? how many parties are involved in the settlement procedure?

8 8 Control over process To what extent your company may control/influence the process? Do officials with whom you discuss have the authority to approve /accept the final measures? Switzerland discussion with Secretariat, but approval by the Competition Commission, who can impose other measures on the company; no major discrepancies until 2009 (PubliGroupe case) case PubliGroupe (discrimination of trading partners, abuse of dominant position) discussion on an amicable settlement between Secretariat and company, agreement on terms of future conduct, company understands that Competition Commission will close investigation and will approve measures for the future; Competition Commission establishes infringement for the past, fines the company with CHF 2.5 million and imposes conduct agreed in the amicable settlement for the future; appeal rejected by the Federal Administrative Tribunal and Supreme court, by saying Competition Commission did not breach the principle of legitimate expectations; importance of company s communications with Competition Authority; commitments could help the Authority in designing an injunction current practice on fines, Secretariat agrees a threshold for the fine, and company gives commitments subject to fine being within the agreed threshold

9 9 Design of remedies What can the company offer to stop proceedings? Does the investigation impact the essential commercial strategy of the business? What is the impact on further development of the business? Can the measures easily be designed? Complexity (eg rebates, duty to deal) Design of the process (eg divestment) Indemnities to contractual parties (eg termination of exclusivity agreements) Multi-jurisdictional investigations (eg e-book case, or worldwide cartels) Internal approvals of measures to be taken (decision of the commercial unit, board of directors, legal department, approval from members of an association) How many companies are involved in the investigation? Does the final outcome depend on commitments offered by other parties (eg credit card investigation in Switzerland)?

10 10 Enforcement and third party role Internal enforcement Can the company enforce its own undertakings Risk of fines if no compliance with own undertakings competition authority does not need to establish breach of competition law, needs only establish that company did not comply with commitments What is the risk of increase of complaints from competitors/customers? What is the role of third parties (competitors/customers) To what extent will commitments be tested in the market (risk to revert to prohibition procedure) How receptive are officials to third party requests? Have third parties the right to challenge the final outcome?

11 11 Influence over outcome Establishment of infringement Commitment (Article 9) Prohibition (Article 7) «Amicable settlements» (29 Swiss cartel Act) Forward-looking, swift implementation No establishment of infringement Summary of the main facts Identification of concerns Punish for past behaviour Establishment of infringement (fines) Standard of evidence, detailed facts Exhaustive explanation of the theory of harm Swift implementation, but also punishment for past behaviour If fines, establishment of infringement. No infringement if no fine Standard of evidence, detailed facts Exhaustive if establishment of infringement, quite detailed even though no infringement Weak precedent Sets legal precedent Mixed effect, no certainty

12 12 Influence over outcome Who has the final word on the final decision? Form of the final decision (closure of proceedings versus formal decision) Does your company have a say on what is stated in the final document on statements of facts on findings Would that document be published?

13 13 Impact on private claims What is the impact of the decision on private claims? Status of follow-on claims in your jurisdiction and abroad Is the decision binding on a court/arbitral court (facts/findings) EU decision Article 16 Reg. 1/2003; C-199/11, Otis, pt 65: Finally, a civil action for damages, such as the action before the referring court, requires, as can be seen from the order for reference, not only that a harmful event be found to have occurred, but also that loss and a direct link between the loss and that harmful event be established. Whilst it is true that, because of its obligation not to take decisions running counter to a Commission decision finding an infringement of Article 101 TFEU, the national court is required to accept that a prohibited agreement or practice exists, the existence of loss and of a direct causal link between the loss and the agreement or practice in question remains, by contrast, a matter to be assessed by the national court.

14 14 Impact on private claims Decision of a National Competition authority Article 9 of draft directive on actions for damages : effect of national decisions Member States shall ensure that, where national courts rule, in actions for damages under Article 101 or 102 of the Treaty or under national competition law, on agreements, decisions or practices which are already the subject of a final infringement decision by a national competition authority or by a review court, those courts cannot take decisions running counter to such finding of an infringement. What does it mean in practice? Decisions of national competition authorities will constitute full proof before civil courts that the infringement occurred

15 15 Impact on private claims Advantages of commitment decisions in the EU No establishment of infringement Summary of facts, theory of harm briefly presented Reminder Commitment decisions adopted by the Commission do not affect the power of the courts and the competition authorities of the Member States to apply Articles 81 and 82 of the Treaty. (Reg. 1/2003) Advantage of settlement decisions in the EU Reduction of the fine Article 6 (1) of the Draft directive on actions for damages Absolute protection for two types of documents: Leniency corporate statements Settlement submissions A national court can never order disclosure of such documents in an action for damages No admissible evidence in actions for damages claims

16 16 Cost benefit assessment What security offers the law and practice on the outcome? Commitments (EU): remedy restriction of competition, no establishment of dominance/infringement, no fine cost benefit analysis Settlements (EU): acceptance of guilt, fine reduction cost benefit analysis Hybrid systems (Switzerland) : establishment of infringement, fines and amicable settlement for the future cost benefit analysis Conclusions Non-cartel cases commitments or amicable settlements versus litigation Cartels settlements versus litigation

17 Pranvera Këllezi Attorney at Law, Geneva Dr. iur., LL.M. Meyerlustenberger Lachenal Attorneys at Law 65 rue du Rhône 1211 Genève 3 Switzerland 14 March 2014

Antitrust: Commission introduces settlement procedure for cartels frequently asked questions (see also IP/08/1056)

MEMO/08/458 Brussels, 30 th June 2008 Antitrust: Commission introduces settlement procedure for cartels frequently asked questions (see also IP/08/1056) Why does the Commission introduce a settlement procedure?