Legacy of Vestager’s First Term, Episode 2: Cartel enforcement
But her first term was also characterised by vigorous antitrust enforcement more generally, showing zero tolerance for cartels, and strengthening the powers held by EU Member States’ national competition authorities (NCAs). The number of cases brought and concluded was high and hefty fines were handed down.
This blog post considers the EU cartel enforcement landscape over the past five years and dedicates thought to what is to come.
Cartels in numbers
At her confirmation hearing in October 2014, Commissioner Vestager stated that companies should face fines “so big that they will ruin whatever undue profits” they make from cartels.
A total of €8.3 billion in fines was imposed during Vestager’s first mandate. This is more than the €7.9 billion levied during Vice President Almunia’s term (2010-2014) but less than the €9.4 billion imposed – the highest ever – under Commissioner Kroes (2004-2010). Kroes’ count dwarfed the €3.5 billion fined during Commissioner Monti’s term (1999-2004).
High fines make headlines, but they alone do not tell the full story. For example, amounts are significantly reduced where cartelists are willing to engage in leniency, settlement or broader cooperation with the EC. The flow and timing of investigations during any particular mandate are important as well.
Cooperation with the EC saved companies a total of €5.7 billion during the past five years. This confirms the upward trend: from €1.1 billion under Monti’s leadership, €2,7 billion during Kroes’ term to €5.4 billion under Almunia. In 2016, MAN received full immunity for disclosing the truck cartel, avoiding a fine around €1.2 billion.
26 cartel cases were decided during Commissioner Vestager’s term. This compares to 30 and 33 during Alumnia’s and Kroes’ respective terms. Before Commissioner Kroes took the reins in 2004, the number of decisions was in single digits.
Several headline decisions were handed down under Vestager’s watch. In 2016, the three highest cartel fines ever were imposed in the truck cartel – €752.6 million, €880.5 million and €1 billion respectively for Daimler, Scania and DAF. Also in the automotive sector, maritime car carriers and car parts suppliers were fined over €546 million in relation to three cartels.
In the financial sector, the EC fined five majors banks €1.07 billion for participation in a foreign exchange spot trading cartel.
The broader enforcement agenda
It is important to recall that the EC is not the only cartel cop in the EU. The EC and EU NCAs coordinate enforcement action via the European Competition Network.
NCAs have cracked down on big cartels over the past five years. For instance, Germany’s Bundeskartellamt imposed a €338 million fine in the beer sector in 2014, and the French Competition Authority fined companies in the floor covering sector €302 million in 2017. In September of this year, the Portuguese Authority fined banks €225 million for information exchange. Such cases are facilitated by legislative initiatives at EU level, most notably Regulation 1/2003 and the complimentary ECN+ Directive 2019/1. The ECN+ Directive represents a major achievement for Commissioner Vestager, as it gives NCAs even greater powers to take on antitrust probes.
In recent years, it has been debated whether cartel prohibition enforcement has declined. Statistics do not show a drop in leniency applications in the past decade, but competition practitioners do foresee a decline.
To some extent, companies may be less inclined to apply for leniency, especially where multiple international agencies are concerned. They may seek to avoid having to deal with onerous cooperation obligations and risks deriving from inconsistent approaches between jurisdictions.
Also, the implementation of the EU Damages Directive made it easier for cartel victims to bring damages claims against companies found guilty of antitrust infringements, before national courts. As a result, there has been more litigation and more uncertainty around the pecuniary outcome of damages actions. For instance, the participants in the truck cartel – who already faced the highest cartel fines ever – are defendants to multiple damages claims in various jurisdictions including the UK, Hungary, Germany, Ireland and the Netherlands.
Efforts to instil a culture of antitrust compliance within organisations have led to companies being better able to detect, and therefore prevent, cartels at an earlier stage. To date the EC has been reluctant to treat compliance programmes as a mitigating factor when setting cartel fines. Recently the U.S. DOJ announced that it will offer companies credit for having in place “robust” corporate antitrust compliance programmes, reversing its longstanding policy on this issue (see our Insights).
Ongoing investigations and Vestager’s second term
On 10 September, Commission President-elect Ursula von der Leyen (VDL) sent a mission letter to VP- and Commissioner-elect Vestager. In terms of the competition portfolio, the letter is fairly brief. VDL did make clear, however, that “[c]ompetition rules are only as effective as their implementation.” She requested a focus on strengthening competition enforcement in all sectors, improving case detection, speeding up investigations and facilitating cooperation with and between NCAs, as well as globally.
Cartels are becoming increasingly complex and sophisticated – thus harder to discover. The EC looks closely at new forms of collusion, particularly where new technologies are involved (algorithms and blockchain, for instance). It is rumoured that during next term, DG COMP will launch a sector inquiry into the digital sector.