Cartels and leniency policy – Why and how to report a cartel?

Secretary general of the ICC Croatia, Sunčana Skupnjak Kapić, noted at the very beginning of the interactive discussion that the ICC objective was to inform the business community of the benefits of the leniency policy and to offer the ICC tools for the companies in working out their compliance programmes. At the same time, she stressed the role of the International Chamber of Commerce (ICC) whose goal is to promote international trade and investment, responsible business conduct and to eliminate the barriers by trade liberalization.

Mladen Cerovac, president of the Croatian Competition Council, referred to the importance of this topic considering that cartels share markets and thereby constitute the most severe violation of competition rules. A cartel is a collusive arrangement between direct competitors that decide to fix prices or share markets. Such an agreement harms the consumers since it limits their freedom of choice whereas it keeps the price of goods or services 20 % higher than the competitive price. Therefore, the Croatian Competition Act provides for the highest fines for cartel members, whereas some countries also bring criminal charges against such offenders. The Croatian competition rules stipulate the imposition of a fine for each cartel member not exceeding 10 % of the total turnover of the undertaking concerned realized in the year preceding the infringement. These are, as a rule, collusive agreements between undertakings. Interestingly, the very members of a cartel occasionally show off in public about how they reached an agreement and fixed the price of a certain product. Somewhat easier part of the procedure is to detect a cartel, the harder part is to provide solid evidence about the collusive practices in question. The CCA worked out the tools for collecting evidence – such as surprise inspections, even though competition authorities and European Commission often need some insider backup – inside knowledge from a cartel member in detecting harmful practices. Therefore, leniency programmes have been introduced and encourage companies to hand over inside evidence of cartels to the competition authority in exchange for immunity from or reduction in fines.  However, immunity may be granted only to the first company in any cartel who “blows a whistle”, comes forward and submits evidence on a cartel unknown to or unproved by the CCA, or directs the CCA where it could find such evidence. “Given the fact the Croatian undertakings seem not to care much about the reputation risk and their name being published relating to their participation in a cartel in my view only high fines can have deterrent effect in combating cartels. High fines are also incentive for the ones that have already participated in a cartel to “blow the whistle” and report it to the CCA” – said Mladen Cerovac in conclusion.

Professor Siniša Petrović, the chairman of the Croatian Association for Competition Law and Policy confirmed the importance of the leniency policy for the enforcement of competition rules in the EU where this tool significantly contributed to the detection of cartels. Until 2000 the total fines imposed by the European Commission in cartel cases were indicated in millions of euro. Yet, after the whistle-blower tool was introduced the fines rose to three billion euro in 2004 and later on to 10 billion – the level that has not changed much ever since.

Marcin Trepka, K&L Gates legal advisor and co-chairman of the global ICC cartels and leniency task force, presented the ICC Leniency Manual– A user-guide for filing leniency applications worldwide that explains the application for leniency procedure in different countries in the world at the local and international level.

Mirta Kapural, PhD., senior advisor in the CCA, presented the criteria and the procedure for application for immunity from or reduction of fines applied by the European Commission and pointed out that leniency programmes proved indispensable in practice. For example, the use of the whistle-blower tools resulted in detection and sanctioning of some of the biggest cartels in the EU. It is therefore important to promote the application for leniency programmes but not to rely exclusively on them. There is no “one-stop-shop for whistle-blowers” in the EU and the European Commission works on convergence in the area concerned so as to ensure more legal certainty for whistle-blowers.