Vol. XIV No.11
November 2009



Leniency for Cooperative Anti-Competitive Offenders...

Collusion among competitors in a market severely affects the economic environment, particularly for consumers and is a breach of competition rules that can result in severe punishment. But since secret cartels are often difficult to detect and investigate without the cooperation of undertakings or individuals involved in them, the European Commission has developed a leniency policy that rewards undertakings involved in such illegal practices that are willing to end their participation and cooperate in the investigation of the illegal cartel. A decisive contribution by an undertaking to the opening of an investigation or to the finding of an infringement of competition rules may justify granting the undertaking immunity from or a reduction in the fine that might otherwise have been imposed for their wrongdoing.

Following leniency reform by the European Commission in 2006, the Romanian Competition Council adopted the Guidelines on the Conditions and Application Criteria of a Leniency policy, in force since September 7, 2009 (the “Guidelines”). This article describes that policy.

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General Considerations
The Romanian Competition Council’s Guidelines for its leniency policy applies to cartels, which are defined as horizontal agreements and/or concerted practices between two or more competitors aimed at and having as effect the coordination of their competitive behavior on the market and/or influencing the relevant parameters of competition, by fixing the purchase or selling prices and the commercial terms, the allocation of production or sales quotas, the market-sharing, restrictions of imports or exports and/or other anticompetitive deeds against some competitors.

The Guidelines also apply to vertical agreements and/or concerted practices among undertakings regarding the conditions in which the parties may purchase, sell or re-sell certain services and products that have as their object the restriction of the freedom of the purchaser to determine its sale price and/or the restriction of the territory or of the clients, that grant complete territorial protection. The Guidelines provide, however, that the Competition Council will evaluate the effectiveness of including this latter category of vertical agreements and concerted practices into its leniency policy. Therefore, we cannot assess at this point if the leniency policy will, in fact, also be enforced in regard to vertical agreements.

Basically, the leniency policy offers companies involved in a cartel - which self-report and hand over evidence to a competent authority - either total immunity from fines or a reduction of fines which the Competition Council would otherwise have imposed upon them.

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Common General Conditions
The Guidelines have provided clarifications with regard to the general conditions that must be met in order for undertakings to qualify for immunity or reduction of fines. Based on the concept of genuine cooperation, the Guidelines set up the following: the undertakings should not destroy, falsify or conceal relevant evidence, and they should not disclose to other cartel members the existence or the content of their immunity request until the transmission of the investigation report to the parties, unless otherwise requested by the Competition Council.

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Immunity from Fines

Criteria for Immunity
In order to obtain total immunity under the leniency policy, a company which participated in a cartel must be the first one to inform the Competition Council of an undetected cartel by providing sufficient information to allow the Competition Council to launch an inspection at the premises of the companies allegedly involved in the cartel.

If the Competition Council is already in possession of enough information to launch an inspection or has already undertaken one, the company must provide evidence that enables the Council to prove the infringement. Furthermore, at the date the undertaking provides the relevant evidence, the Competition Council must not be in possession of enough elements to carry out the respective investigation or inspection.

In all cases, the company must also fully cooperate with the Competition Council throughout its procedure, provide it with all evidence in its possession and put an end to the infringement immediately. The cooperation with the Council implies that the existence and the content of the application cannot be disclosed to any other company. Also, the company may not benefit from immunity if it took steps to coerce other undertakings to participate in the cartel.

In addition to the conditions described above, the following cumulative conditions must be met to qualify for immunity: (i) the undertaking cooperates fully, truly, on a continuous basis and expeditiously throughout the Competition Council's investigation by: supplying all the relevant information and evidence it holds or could hold, remaining at the disposal of the Competition Council for any requests, not destroying, forging or hiding relevant information or evidence and not revealing the existence of the leniency request or its content before the Competition Council sends its investigation report to the parties; (ii) the undertaking discontinues its involvement in the suspected infringement at the request of the Competition Council; and (iii) the undertaking has not revealed its intention to submit a leniency request or elements in a leniency request to any other party than other competition authorities.

Content of Immunity Application
The Guidelines provide that an undertaking making a formal immunity application must either: (i) provide the Competition Council with a statement and also with all information and evidence related to the alleged breach available to it, or (ii) initially present this information and evidence in hypothetical terms, in which case the undertaking must present a detailed descriptive list of the evidence it proposes to disclose at a later agreed date.

This list should accurately reflect the nature and content of the evidence, while safeguarding the hypothetical nature of its disclosure. Copies of documents, from which sensitive parts were removed, may be used to illustrate the nature and content of the evidence. Following the disclosure of the evidence no later than on the date agreed and after verification that it corresponds to the description made in the list, the Competition Council will grant the undertaking conditional immunity from fines in writing.

According to the provisions of the Guidelines, the evidence and information that needs to be submitted by an undertaking consists of a statement including: (i) a detailed description of the manner in which the respective collusive agreement/concerted practice is organized, including its purpose, activities, manner of functioning, the products and services involved, the territory, duration, an estimate of the affected market share, the dates and meeting places, the content of discussions and participants to the respective meetings and all relevant explanations in regard to the supplied evidence; (ii) the name and address of the undertaking filing the request and of all the other undertakings that participate or have participated in the respective agreement/concerted practice; (iii) the names, positions, offices locations, domiciles, as the case may be, of the persons involved in the agreement, including the representatives of the undertakings; and (iv) information regarding other competition authorities that have been contacted in regard to the breach. Furthermore, any other evidence that is available to the undertaking at the moment of the submission of the leniency request, especially evidence regarding the duration of the breach, should be included.

The Competition Council considers that any statement submitted to it within the context of its leniency policy forms part of the Council’s file and may therefore not be disclosed or used for any other purpose than the Council’s own cartel proceedings.

The Marker System
The Guidelines provide that an undertaking may contact the Competition Council manifesting its intent to cooperate with it. The undertaking can also request at this point that it be granted a marker for the supply of the respective information for the purposes of ensuring its priority in regard to the order of registration of immunity requests. The request for a marker needs to be properly grounded.

The marker is granted for a period that the Competition Council considers necessary, on a case by case basis, for the relevant evidence and information to be collected. To obtain such a marker, the undertaking needs to provide the Competition Council with its name and address, the parties to the alleged agreement/concerted practice, the affected products and territories, the type of agreement, the estimated duration of the breach, as well as a short description of how it operates. The undertaking must also inform the Competition Council in regard to other leniency requests it has submitted or it intends to submit to other competition authorities.
When providing a marker, the Competition Council also provides for a term in which the undertaking needs to provide all the relevant evidence and information in support of its request for leniency. 

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Reduction from Fines
Companies which do not qualify for immunity may benefit from a reduction of fines if they provide evidence that represents "significant added value" to that already in the Competition Council’s possession and have terminated their participation in the cartel. Evidence is considered to be of a "significant added value" for the Council when it reinforces its ability to prove the infringement.

In case the undertaking does not fulfill the conditions for immunity it could benefit from a reduction of the fine as follows: the first undertaking to provide evidence bringing significant added value gets a reduction of 30-50%; the second undertaking to provide significant added value receives a reduction of 20-30%; and subsequent undertakings that provide significant added value obtain a reduction of up to 20%.

In order to determine the actual level of reduction within each of these ranges, the Competition Council will take into account the time at which the evidence was submitted and the extent to which it represents added value. Such evidence of an alleged infringement must represent significant added value, as compared to the evidence which is already available to the Competition Council. If the applicant is the first to submit evidence which the Competition Council uses to establish additional facts leading to an increase in the gravity or the duration of the infringement, the Competition Council would not take such additional facts into account in imposing any fine upon the undertaking which provided such evidence.

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Various Other Considerations
When an undertaking is party to a cartel, it should firstly conduct a preliminary analysis in order to assess the potential infringement of the competition legislation. Such an analysis must take into consideration the particularities of the specific cartel in relation to the potential breach of competition rules. If a thorough assessment demonstrates an infringement of the competition regulations, then the impact on the business of the infringer of a public disclosure of such infringement should be assessed.

If it is decided that an application for clemency is the best way to proceed, the application should be submitted as soon as possible. Also, it is necessary to gather enough information to ascertain that the undertaking satisfies the requirements for leniency.

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The Guidelines increased the transparency of both the leniency procedure and of the conditions on which immunity is granted. As the Guidelines were recently enacted, the Competition Council does not have a consolidated approach or a common practice yet regarding its leniency policy in general. However, at the level of the EU, the leniency policy benefits from an ever increasing practice and has allowed the European Commission to discover and prosecute very serious cartel cases.

However, based on the new Guidelines, the Council is allowed not only to reveal the secrecy in which cartels operate, but also to obtain inside evidence on cartel infringement. Consequently, the implementation of the leniency policy should have a discouraging effect on cartel formation and would represent a further safeguard for the competitive environment.

By resorting to the transparent leniency procedure established by the Guidelines, and with proper and specialised legal guidance, undertakings will benefit from a clearer path if they decide to leave a cartel and cooperate with the Competition Council. The evolution of Competition Council case law will be very interesting to follow especially in regard to the enforcement of leniency on vertical agreements and the marker system.

Overall, the establishment of a leniency policy in Romania to deal with anti-competitive cartels is a further example of the benefits afforded by the European Union to new entrants who, without such EU mandated requirements, might have taken another generation to expand the rule of law to cover such matters.

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Editors Note: It is our policy not to mention our clients by name in The Romanian Digest™ or discuss their business unless it is a matter of public record and our clients approve. The information herein is correct to the best of our knowledge and belief at press time. Specific advice should be sought from us, however, before investment or other decisions are made.

Copyright 2009 Rubin Meyer Doru & Trandafir, societate civila de avocati. All rights reserved. No part of The Romanian Digest™ may be reproduced, reused or redistributed in any form without prior written permission from the publisher.

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