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GLOBALCOMPETITION

REVIEWVolume 8 • Issue 3 • April 2005

The international journal of competition policy and regulation

Must tryharder?

The initial verdict on

modernisation

00 Front cover 29/3/05 11:22 am Page 1

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22 GLOBAL COMPETITION REVIEW

Anumber of developments havealtered the landscape of anti-cartelenforcement since Global Competi-

tion Review’s last roundtable in this area.Penalties connected with cartel offences inthe US have increased vastly. The maximumterm of imprisonment is now 10 years (fromthree). The US hasn’t only brought in aheftier ‘stick’. It has brought in a fatter,brighter carrot. A company that applies for‘leniency’—blowing the whistle on a cartelin return for immunity—will now benefitfrom far less exposure to private litigation.The company will face only ‘normal’ dam-ages, while its co-conspirators face trebledamages. The leniency applicant will alsoescape joint and several liability, which is realboon if the company is small.

In Europe, the rate of leniency applica-tions has climbed after an improved policy

Cutting-edge issues in cartels

GCR convened a roundtable todiscuss cutting-edge issues incartels. David Samuels moderatedWith thanks to Julius Cavendish, reporter

was released three years ago. Worryingly,many of the companies that have since beenthrough the Commission’s process appeardissatisfied with the outcome. They’velaunched appeals against their fines—sug-gesting that their expectations were in someway unmet.

What effect will the changes in the UShave on overall cartel defence strategy? Is theEuropean Commission failing to meet theexpectations it has created?

These and other fascinating subjects are discussed below. The day’s panel consisted of:

Gary Spratling (GS)Partner, Gibson Dunn & Crutcher LLPGary was previously deputy assistant attor-ney general, US Department of Justice, incharge of criminal enforcement

Martin Low QC (ML)Partner, McMillan BinchMartin was previously senior general coun-sel to Canada’s Competition Bureau, wherehe oversaw criminal enforcement

Martin Klusmann (MK)Partner, Freshfields Bruckhaus DeringerMartin is a German Rechtsanwalt and prac-tises EU and German competition law, aswell as unfair trade law. He works out ofDüsseldorf

Stephen Kinsella OBE (SK)Stephen was until recently head of the Brus-sels office of Herbert Smith. Stephen chairsthe antitrust committee of the IBA's Sectionon Antitrust and Trade Law. He is also a coun-cil member of the British Chamber of Com-merce in Belgium and is a past president ofthe Chamber.

05 Cartel roundtable s 22-32 29/3/05 9:08 am Page 22

GCR: Do you foresee any unintended conse-quences from the higher penalties that havebeen introduced in the US? GS: Only time will tell. We can’t predict theimpact of the legislation, and there are tworeasons. First, we don’t know if or how theUnited States Sentencing Commission willamend the sentencing guidelines to correspondto the increased penalties in the new legisla-tion. And second, we don’t know what theDepartment of Justice will do with respect totheir practice of making 5K motions for down-ward departure based upon cooperation andsubstantial assistance. If their 5K practiceremains the same as it is now, the sentenceswouldn’t necessarily significantly increase. Butthe DoJ may choose to ratchet up the mini-mum sentences it will agree to under a 5Kdeparture. We just don’t know.

GCR: Was there anything like an impactassessment or a discussion document beforethese new penalties were introduced?GS: No. I think that the justification for thenew penalties was in the fact that, given theseriousness of the offence, the maximum sen-tences were all out of whack.ML: The DoJ was constantly having to usethe alternative sentencing statute to get thefindings up to a level that was thought appro-priate.GS: Yes, as to fines. This was not actually thecase with respect to the jail sentences. Overall,there was just a sense that there was a discon-nect between antitrust offences, which manyhave called the most serious of white-collarcrimes, and other white-collar offences whichhad penalties of 10 or more years.

GCR: But what are people actually receiving?Weve heard people saying that they’re goingto raise the tariff, but the reality is that they’renot really giving out sentences that are close tothe upper limit—for now anyway. GS: It’s hard to look into judges’ minds to seewhether or not they are influenced by what themaximum sentence is and whether or not theprobation officer is influenced by the maxi-mum. ML: If you look at recent experience, therereally is only the Andreas-Wilson prosecutionsin the Lysine case where they got close to themaximum. That was after trial and those werepretty egregious circumstances.

GCR: What is the average prison sentence fora US antitrust offence?GS: The average was 21 months in 2003.

GCR: Why have I picked up the impressionit is about three months?GS: You have to distinguish between averagesentences for foreign individuals and averagesentences for US individuals. There is a big dif-

ference. For foreign individuals, currentlyyou’re looking generally at something betweenthree and six months.

GCR: Is the US’s record of incarcerating for-eign executives flattered by cooperation fromthose execs—will harsher penalties reduce saidcooperation? MK: Yes. There is a big difference betweenconsidering an agreed sentence of three to sixmonths and looking at an agreed sentence of,say, three years. If it’s up to 10 years of jailtime, I think nobody will be willing to do that.Even three to six months in a US jail is a hugedecision to take for foreign nationals.ML: There’s a tension at play here. Theincreased jail exposure is a huge incentive forparties to be ‘first in’. If you are party numbertwo or number three, almost by definitionindividuals are going to face personal expo-sure. On the other hand your ability to comein depends on the willingness of their individ-uals to step off the plane. An eight-month sen-tence is one thing, and three years is somethingelse. Maybe these executives will now thinkabout changing careers…GS: That’s a great point. There’s a lot that acompany can do to encourage their executivesto come forward, if the length of the term ofincarceration is acceptable. The company holdthe job open for them, they can agree to paytheir fine, they can support them in a numberof ways. If you get much past six months jail,as Martin said, and you start approaching oneyear, you change the ability of the person tocome back to his job.MK: And it has to be seen in connection withthe new practice of cartelists coming in as sec-ond or third parties. If you cooperate as thesecond-in, today, the DoJ basically asks for atleast three months for several individuals andwill not even discuss no-jail sentences. Thisalienates people anyway, so if you apply Gary’sargument on top of that, I think you will see alot more litigation in such cases.SK: Does it bite already? If you’re in andyou’ve already begun pleading are you underthe old rules?GS: No. There is no retroactivity of the newsentencing maximums.

GCR: I love this idea of a negotiationbetween the individual and their employer: “Ifyou agree to take a jail term we will give youa promotion.” SK: Eventually it will be written into execu-tives’ contracts. “You will be expected to goon secondment and serve up to two years, ifneeded, in a US jail.”

GCR: And in return you will be getting X, YZ.GS: We can’t deceive ourselves here. There isoften no connection between what the indi-

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WWW.GLOBALCOMPETITIONREVIEW.COM 23

vidual does, what the company does, and whatthe company would want the individual to do.On the one hand, it is fear of what their exec-utives will do independently that causes manycompanies to come forward. On the otherhand, many executives agree to plead guiltyand serve jail-time long after the company hasmade its deal and is sentenced.MK: I think it will be a big boost for amnesty-plus applications because companies who findthemselves in second, if there are multipleoffences, will have all the more reason to bringthese out in the open and avoid the latecomer-scenario for other offences.GS: One problem with amnesty-plus regard-ing multiple offences is that there are decreas-ing returns for each additional amnesty-plus,because the enforcement authority thinks thereis some minimum appropriate sentence nomatter how many amnesty-pluses you havegiven them. The recent rubber chemicals pros-ecution is a great example in which one defen-dant reportedly turned in an additional fiveproducts and another defendant turned in anadditional four products ...MK: It will be interesting to see whether ithelps the amnesty-plus programme in the USor not. I don’t think it’s clear. We can’t predict.GS: I definitely think the increased maximumsentences are a boost to the amnesty-plus pro-gramme.ML: I agree. It is a boost to the amnesty-plusprogramme especially in conjunction with thede-trebling of damages. Together these createtremendous incentives for breaking away fromcartels. SK: It certainly slows you on going in any-where, doesn’t it, because you have to reallydo your due diligence.

GCR: We’ve just mentioned the de-treblingof damages for leniency. What are yourthoughts on this and its effects? Has anyoneactually seen how the idea works in practiceyet?GS: Not that I know of. But anybody whohas sat through the deliberations of a clientdeciding what to do and whether to self-reportwill confirm that the potential impact of tre-ble damages is often an obstacle. De-treblingremoves that exposure and thereby removes asignificant impediment to reporting. The long-term value of the de-trebling legislation isgoing to depend upon a couple of things. Thefirst is what the courts are going to require interms of cooperation by the amnesty applicantwith the private plaintiffs. The second iswhether it applies to indirect purchaser cases.These are two big issues. If there are positiveresults in the courts on both of those issues,de-trebling is going to be a very big factor.

GCR: Presumably, those issues will both haveto be litigated?


GS: They will. A bigger factor—which a lotof people don’t appreciate—is that not only isthere a limitation on damages, there is also alimitation on joint and several liability. If youare a small player in a cartel, this limitation isa huge additional incentive to report. It canreduce damages exposure 50– to 100–fold. I’mnot exaggerating. If you’re a 6 per cent player,the statute says you are limited to single dam-ages on 6 per cent of the volume of commercein the United States, as opposed to joint andseveral liability for three times the damages on100 per cent of the volume. So it is an enor-mous difference.ML: 300 per cent.MK: It won’t make a big difference in myview for European decision-makers whetheryou have single damages or treble damagesbecause the real issue is that you suddenly have21 class actions against you, and how do youhandle that? That has in my experience reallybeen the biggest issue in the decision-making.It will take time until what you’ve justexplained, Gary, will be understood, and willbecome an important factor in the decision-making. SK: Isn’t there also a move by some states—France, for example—to permit class actionsas well?GS: I appreciate what you’re saying, but I stillthink it has to make a difference, even for

European decision-makers. The Departmentof Justice spokespersons, when they talkedabout this, said that it would make a differ-ence “at the margins”. They didn’t think itwould make a wholesale difference. I agreewith that. If you are a company that thinks itsexecutives might go to jail, if you are facinghundreds of millions of dollars in fines, if youthink that your executives may report youbefore you manage to self-report, thenwhether you are exposed to single or trebledamages is not the primary criterion in yourdecision-making process. It only becomesimportant when you don’t have considerationscompelling you to get in. But if things are morefinely balanced, and your outside counsel tellsyou that your likely exposure in the UnitedStates is either $75 million in single damages,or $1.3 billion in joint and several damages,that will have a big impact on the decision-making.

GCR: What’s the size of the population ofcases falling in this margin?GS: I couldn’t give a percentage, but there aredefinitely cases where a company is givingserious consideration to whether to go in, andthe amount of treble damage exposure is amajor, perhaps determinative, consideration inthe decision.ML: It’s a hard thing to predict in the abstract

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but we know that there are a number of par-ties who have stayed out in the US truly justbecause of their civil exposure. SK: Do you mean even after one companyhas gone in and blown the whistle?ML: Yes. I’m thinking of a case where a com-pany had a clear slam-dunk amnesty-plus toapply for. It took a dive on product numberone and didn’t disclose product number two,essentially because it just couldn’t face the risk.They were close to the limitation period expir-ing in the United States, and there were allkinds of considerations that made it a very del-icate business call.

GCR: Historically, the US is thought of as the‘über jurisdiction’ in which one faces the mostserious exposure. Is that changing?GS: There are some recent cases that indicatethe EU is charging longer time periods than theUnited States, and that the EU is imposingfines that are a higher percentage of the vol-ume of affected commerce. I have a couple ofexamples. In the MCAA case, the US chargedfour years, the EU 15 years… Akzo’s fine inthe US was $12 million, in Europe €84 mil-lion… Atofina’s fine in the US was $5 million,in Europe €58 million. In organic peroxides,the duration for Atofina was two years in theUS, but 28 years in Europe. Now there arelikely underlying facts that justify a portion ofthose differentials, but those of us involved ina lot of these matters believe that the EU ispushing the time periods back further than theUS, and it is charging a higher percentage ofthe volume of affected commerce as the fine.

Scott Hammond has said in speeches thathe thinks it is reasonable the EU imposes finesthat are a higher percentage of commerce,indeed that it may have to do it, because theEU does not have an incarceration penalty—so it lacks that deterrent effect.

All the same, I do not think that the EU isgoing to be anybody’s first stop. And I say thatrespectfully to EC officials. I strongly believethat international cartel enforcement aroundthe globe is driven by the jail sentences in theUnited States.MK: I think that the focus has shifted a bitaway from the US now that there is the Euro-pean Competition Network, because peoplecan no longer be sure that they will be treatedon the EU level by the Commission for whatused to be ‘an EU case’. There are cases wherethe EU simply doesn’t take up the case. So youend up in a number of member states, some ofwhich have criminal sanctions too. Then thefocal point shifts to all of these countries, dri-ven by the same factor, jail time.GS: I think such jurisdictions have to estab-lish a record of actually using their jail poten-tial before approaching the status of the US asthe first-stop in responding to internationalcartel exposure. Australia, for example, has

Gary SpratlingGibson, Dunn &Crutcher LLP


announced criminal penalties that in someways are far more aggressive than the UnitedStates. But we also have to wait to see whatAustralia does with them. ML: I tend to agree. Any time you have anindividual, who holds the keys to the offenceand who faces going to jail in North America,you have to go to the United States andCanada first. I’ve seen a case in which thecompanies went to the Commission first andit didn’t work well. SK: I think we are all agreeing here that stillthe US is going to be far ahead in all consid-erations but—for a range of reasons—we areseeing Europe take greater prominence. I thinkthough that when you look at the discrepan-cies between duration and level of fines a lotof that will be explained by the fact that in EUcases you’re looking at the decision rather thanthe appeal. The Commission only has to per-suade itself. So it persuades itself of long dura-tion and it imposes high fines. One of thedownsides of leniency, in my view, has beenthat we get fewer or more limited appeals. Butwhen you look at how often the court cutsdown the duration in particular, or cuts downthe fines, I think the EU and the US move quitea bit closer together.MK: It is really just the amnesty applicantsaying ‘Yes, I think it went back to the early1970s’, and then you get a 10 per cent sur-charge for every single year since then. In manycases duration is the most important factor inthe whole process because it is applied afterthe Commission has set the base fine. So, a 200per cent surcharge for a long duration bringsup some big fines without any need for theCommission to discuss whether it was actually15 or 16 years or 14 years, or what the vol-ume of commerce was. The amnesty applicantis always happy to confess because he doesn’twant to fall short in any way.

GCR: Let’s look at the EU oral leniencyprocess. Was the draft policy on file access aresponse to US discovery considerations?MK: Well, not only US discovery, it’s alsoEuropean discovery. SK: Looking at the draft notice published inOctober, there isn’t actually specific recogni-tion of this issue, which I thought was odd.They don’t talk about problems of discover-ability, and actually at one point, for instance,where they’re talking about what would be aninternal document—an inaccessible docu-ment—they say if the Commission is keepinga record of your testimony then you will beentitled to access to it, which of course is theone thing you won’t want as it could then bediscoverable. MK: They consciously decided against con-sidering discovery issues and now they are try-ing to ease some of the pain that it brings tocompanies and to some extent to the Com-

mission itself because clearly it is not helpingtheir amnesty programme. This practice islikely to fail because the legislative support forit is missing. Furthermore, it is a problemwhich is difficult to solve because nobody canreally tell you what US discovery rules reallyare. As long as we don’t have a clear provisionin European law stating that in these cases cor-respondence is protected from third-partyaccess, the Commission and the defendantswill not be able to hold this firmly against pri-vate plaintiffs who could ask for EU docu-ments in other jurisdictions. SK: To be fair, there’s a limit to what theCommission can do. The Commission can’titself brand a document non-accessible in a UScourt. If under the US rules it’s accessible toyou, then presumably the US court can insistthat you produce it, under their own discov-ery rules. So the problem is caused by the USlaw on discovery… GS: The basic problem is that the EU, as dis-tinguished from the North American jurisdic-tions, insists on using evidence provided by anamnesty applicant, or an informant, as evi-dence, rather than as a ‘roadmap’ to collect-ing the evidence in more traditional ways. Theproblem does not exist in the Unites States, itdoes not exist in Canada. This is because nei-ther Canada nor the United States use thesepresentations by amnesty applicants as evi-

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dence. Never have, never will. The Commis-sion is shortcutting the investigative process,perhaps for very good reasons, but they’reshortcutting and insisting upon the submissionbeing of evidentiary quality. That’s the prob-lem.

GCR: Who agrees the commission has verygood reasons for shortcutting the investigativeprocess?SK: I don’t agree. GS: Let the record show that none of usagreed. SK: What happens in the States? When acompany comes in and says: “Ok, this was avery well-managed cartel, so everybody reallyobserved the rules, nobody took any notes,nobody took anything away, there are no con-temporaneous documents, but we’re comingin, and we’ve reconstructed an account ofwhat happened, but it’s just our account”? Sothere’s your roadmap. But that roadmap isn’tgoing to lead you anywhere, because you cango out and make all the enquiries you like, youwon’t find any documents. Of course you’ll beable to observe what happened to prices, andmake assumptions, but there are no smokingguns.GS: But you can do it another way. The com-pany will produce the documents as theamnesty applicant. The US and Canada will

Martin Low QCMcMillan Binch


receive all those documents and the enforce-ment agencies would rely on them if put totheir proof in court. However, in an amnestyapplication, the key is often the company state-ment, which ascribes the value of the evidence,its interconnectivity, and so on. In the UnitedStates, if officials were required to go to courtto prove all of the statements of individualsincorporated in the oral company statement,they would go out and get proper statementsfrom those witnesses. So then those witnessstatements would be in a form that would beultimately discoverable by the private parties.But what would be discoverable would bequite different than the detailed information,evaluation, nuances, and interconnectionsexplained in the company’s oral presentation.The process that the EC is now looking at willnegatively affect the completeness and thevalue of the information it receives. Because aparty can fully satisfy the requirements of theEC without going that extra step, and explain-ing all the nuances and interconnections. It isthat interconnectivity which leads the enforcerto know what else to go look for, and who totalk to. MK: But it also depends on what your posi-tion is in this game. If you come in first, I tendto agree with what you say, If you are secondor third, I tend to disagree… GS: I’m talking about being first. All myremarks were limited to being first. Second andthird applicants have to provide the famous‘significant added value’ and nobody knowswhat that means. It could mean interconnec-tivity or it could mean more evidence, betterevidence, more colourful pictures, etc. Nobodytells you, nobody knows. ML: I agree with Gary that the true problemis in the nature of the process of the Commis-sion. In North America, as Gary says, theinformation that is provided by the amnestyapplicant provides a basis for the authoritiesto go out and investigate and to find proof thatthey would eventually expect to produce in atrial.

I accept Stephen’s point that there mightbe no evidence, but the reality is that in everycase that I’ve ever encountered, however care-ful the participants thought they were being,once the enforcers went out and required pro-duction of information with proper direction,smoking guns appeared. As for the Commis-sion’s paperless processes, I’ve seen a numberof cases in which the official recordings andnotes of results of presentations were subse-quently found to have some very serious dif-ferences from what was meant to becommunicated. A disagreement about whatwas said can affect the relationship betweenthe enforcers and the amnesty party, and inparticular, the enforcers and counsel. Andwe’ve also seen a couple of cases in whichthere was some uncertainty after the fact about

who was first, and I think that is particularlythe case in Europe. If that ever materialisedinto a situation where no definite answer onwho was in fact first could be produced thenan enforcement agency would have some veryserious credibility issues. SK: There’s one case going through at themoment where that is an issue, BASF. One ofthe companies is saying: “We were in, we gavethis evidence, it should have been decisive orsignificant.” And the Commission hadn’ttaken notes at that meeting.ML: Something that is absolutely critical toyou or me may not be a matter of importanceor decisive to the people on the other side ofthe table.SK: There’s also the story going the roundsin Brussels about a serious argument betweentwo companies both claiming to have been infirst and the Commission has lost the entirefile.MK: One thing I think is coming out of thisis that the Commission should be producingmore notes than it actually does, and shouldbe giving more generous access to such notes,to show that proper procedures have been fol-lowed. ML: Let me ask you guys if this has this beenmore of a problem since the modernisationexercise and the abolition…SK: No. I don’t think modernisation is rele-vant to this. MK: I agree. SK: But I fundamentally agree with Gary. Ifthey use these statements as the road map, andthen went and found real evidence, so thatwhat went into the statement of objections andthe decision was the real evidence, thingswould be much improved. We all know frominterviewing our own clients that when you’rein first, or in later, you have every incentive to‘stretch the boot’, to make sure that nobodycan add a year either side to the duration ofthe offence which might undermine your posi-tion going in first. Also, why not paint every-body else as black as you can? They are yourcompetitors, so the heavier the fines they face,

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and subsequently the damages they may face,the better off you are.GS: I applaud the EC for the time it is takingto decide what the procedure is going to be. Ipersonally think that they ought to be con-sulting with an informal group of counsel whodo a lot of cartel work, one that includes USpractitioners. The underlying principle for theEC has to be the same as in the United States:the immunity applicant cannot be put in aworse position by reporting than those whodo not report.

Just going back to the comment about lostnotes and files, it gives me real pause, becausewhen the EC used to say to me, “we want youto read this transcript, and sign it as beingaccurate,” I looked at it largely as a device toconvert their notes into ‘evidence’, and what Iwould say is, “I have complete confidence inyour ability to take accurate notes, I have nodoubts about it whatsoever”. We’ve been deal-ing with the North American authorities orallyfor years and never had a problem with theirnotes. Maybe I shouldn’t be so sanguine.

[A debate follows on how some EC officialsrequest parties to sign notes and others donot.]GS: Something that should come out oftoday’s roundtable is our consensus view thatthere is absolutely no consistency between staffat the EC in the process that’s being used.

GCR: Let’s do a straw pole; who’s had prob-lems, and are they problems of inconsistencybetween teams in the process officials use, orare they always the same problems?MK: The problem is that you need to knowwhat the implications are of what you do ordon’t do, whereas sometimes Commissionofficials are unaware of the issues—for under-standable reasons. After the dissolution of theCartel Task Force, nobody can be blamed fornot knowing every detail of US discovery.

GCR: So the problem arose with the disso-lution of the task force?SK: Yes. This isn’t a criticism of non-spe-cialised Commission officials as individuals—they have not been trained. They don’t havethe training; they don’t understand the impli-cations of, for example, procedural and dis-covery issues. Nor do we—but we can bringin our litigation or ‘white-collar’ colleagues.ML: This phenomenon is not limited toEurope. The problem is one of institutionalintegrity, and that means consistency in theapplication of the rules, consistency in theprocess, and care and management in handlingfiles. And there is a degree of… I say ‘sloppi-ness’ because I can’t think of another word.There is some imprecision in the handling ofdocuments and I think it has been generatedto some degree by the fact that for eight or 10

A big problem with Commissionprocedure is you

can’t access exculpatory

material as of rightStephen Kinsella


years there has been very little litigation of car-tel files by authorities. The history has been ofconsensual resolution, in Europe and theUnited States, and in Canada. And I think thatthat has tended to cause a little loss of sharp-ness in the way people handle things. MK: Well, there is litigation, but it takes toolong. The average appeal takes about threeyears to be decided first instance, and anothertwo years if you escalate it to the ECJ. Thismeans it takes five years after a fine decision isadopted, which itself is usually adopted yearsafter the case was taken up. In a number ofcases you have to wait 10 years before youknow whether the process was acceptable.ML: The commission learned its lesson on themerger side as a result of the courts …

GCR: Stephen, you raised an issue aboutaccess to the file. Can you elaborate? SK: Yes, there’s a problem, I think. Forinstance, if Company A goes in and makes astatement, that might be exculpatory for Com-pany B. They may say, “Well, I was involvedwith this cartel, I think it went on for 15 years,and people were there from B, C, D and E.However, I don’t remember seeing B there veryoften. I remember seeing somebody from B inthe early days, and then they didn’t show upmuch after that.” Now if that is just an oralstatement that may not be made accessible.But if you’re Company B, then you wouldreally want to have access to that. The fact thatsomeone else has gone on record saying thatthey don’t recall seeing you around much—not that you were innocent, or weren’tinvolved, but just weren’t there very much—Iwould think you should be able to get accessto that. A big problem with Commission pro-cedure is you can’t get access to such exculpa-tory material as of right. MK: I couldn’t agree more. I think that wehave a lot of nations throughout Europe whereyou get full access to everything, and it does-n’t harm the proceedings, and I think there’sno reason really why the Commission would-n’t be able to show its files to the defence

GCR: So once the investigative stage is over,open the file?MK: Yes.SK: At the very least, you could have muchmore active involvement from, let’s say theHearing Office or somebody else, who wouldscrutinise the file, looking to see is there any-thing there that other companies have a legit-imate interest in seeing…MK: It’s very difficult for the hearing officerto dive in and do that exercise. He has tounderstand the full case and background,which is difficult to do when you have a lot ofongoing cases. I think the only solution is thatreally the defence itself is able to make deci-sions as to what is exculpatory—and that is,

by the way, what the court has said a numberof years ago in the soda cases: it is not for theCommission to decide what is exculpatory.How could the Commission know what yourdefence is, before it happens? I think definitelywe need some more openness on that end, andthe current drafts don’t reflect that, in my view. SK: The point we come back to is what wewere saying about how much better it wouldbe if you had a dedicated cartel team. Martinand I were involved in a case a while ago,which I think was an example of the systemworking very well. My client came in andasserted that another company was also amember of the cartel. And my client was givencredit for that, quite a lot of credit. The Com-mission said, “Here is an example, you arecoming in, we believe, bona fide, trying to addvalue to the case, and we will give you sub-stantial credit for adding value”. But afterlooking at the quality of the evidence, theysaid, ‘This is not corroborated by anythingelse, so we will not bring the other companyinto the net”. And I thought that was reassur-ing. An official had the confidence to say “Onthe one hand you’re doing your best to co-operate, but no-one else has substantiatedwhat you say. That doesn’t devalue your con-tribution, but equally, the other company isentitled to the benefit of the doubt.”MK: Yes, but equally I’ve had a similar situ-ation, where actually I had the feeling that myclient’s contribution was devalued because itwas not taken up by the Commission.

GCR: In the EU procedure, what is workingand what is not?MK: For amnesty candidates, the system isclearly working, and working well. The Com-mission has reduced expectations as to whatan amnesty applicant has to bring, which isgood and workable, and there is a dialogue. Idon’t think it works for all the subsequent par-ties cooperating. The Commission treats theamnesty applicant and leniency applicantsvery differently.They are not telling the latterwhere they are in line. So the defence has to

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follow a dual approach, because you don’tknow whether and when you won the leniencyrace or not. It takes a long time until you getthe first message where you are, and until thenyou have to do a lot of work, to create ‘sig-nificant added value’, and then at the end ofthe day, you get in many cases a discountwhich is much lower than what you wouldhave hoped for, and maybe what you deserve.If the Commission were more lenient on thefollow-up cooperating parties, I think it couldsave a lot of follow-on court work, and I thinkit could also incentivise people to come in evenwhere full amnesty is not or no longer avail-able. I’ve seen several companies decideagainst going in subsequently because theycouldn’t see a real benefit in it: they would becertain to face negative consequences on thecivil side, and at the same time the adviserscouldn’t tell them how it would actually payoff. I think the Commission´s resistance tooffering good or better deals to follow-up co-operating companies is wrong.

GCR: Several of you are clearly big fans ofthe second and third applicant. Is that basedon your experiences while in government?ML: I have never seen a case in which theenforcement authorities can succeed in pro-ceeding against all the parties solely on thebasis of what they get from the amnesty appli-cant. GS: The EC has, after a lot of discussion withmembers of the bar and with other enforce-ment agencies, fully embraced the trans-parency principle in the immunity process.They have not done that in the reduction offines-policy for the second, third and subse-quent parties. When you read the notice, thereis supposed transparency because they identifya series of relevant factors, but this is illusory,because each of the values assigned, and eachof the indexes used in each of those categories,is completely subjective. And I have seen themost experienced practitioners in Europe beoff by tens of millions of dollars in predictingthe fine that is likely to be imposed, even ontheir own client. The EC offers neither trans-parency nor predictability as to fines for thesecond, third, and later cooperating parties.MK: Yes. That’s one of the major obstaclesto cooperation. It doesn’t have to do with theleniency programme as such, it’s merely thequestion of what decision-makers can take asthe factors in their decision-making. Andwhether it’s right of the Commission to thinkthat people can decide to cooperate withouthaving a predictable financial implicationassessment. When the system started off in1998, the situation was completely different,because the Commission then had caught peo-ple who had actually figured in fines into theircartel calculations. I don’t think the deterrenteffect of not being predictable is needed any-

For amnesty candidates the

system is clearlyworking, andworking well

Martin Klusmann


more. It is not needed in the United States. Ascounsellor you have to propose somethingsolid to the board and the board has to justifyits decision afterwards to the shareholders.How do you do that, how can you show thatyou have taken a sound business decision, ifyou cannot say if it’s 10, 50 or 100 millioneuros you’re talking about as a fine? There areseveral recent CFI judgments which actuallyreverse the somewhat too discretionary fine-setting of the Commission. So things are grad-ually moving back to the old system, althoughon a much higher level. In my view, this is agood thing. The Commission should activelythink about reintroducing a more predictablesystem. The structural decision to be trans-parent but not predictable has in practiceclearly proven to be wrong (at least at the cur-rent level of fines).SK: There’s a suspicion sometimes … youhear companies voice it, that the Commissionfactors in a leniency discount to ensure you getthe punishment you are thought, in some gen-eral sense, to ‘deserve’, and therefore theleniency reduction will be slightly illusory. Inother words it’ll look good for the lawyers,because they’ll be able to say to their clients,“Look, through this cooperation, you’re pay-ing 15 million less”—but are you really? If thedecision as to the base fine is only taken afterthe decision as to amount of immunity then…

there must be an interplay between the two.GS: There is a real, growing disenchantmentamong the European practitioners and theirUS co-counsel as to this system, and this is apotential Achilles heel for the commission.We’ve all seen people who don’t come in sec-ond or third, because they can’t foretell thevalue of co-operation.MK: Many case teams hide behind the factthat at the end of the day the College of theCommissioners will decide. Case handlers willtherefore not even enter into discussions aboutwhat the level of fines will be. This is verymuch unlike the situation in North Americawhere likely fines are the basic subject of everyconversation along the way. I must say it isvery helpful to be able to report where theauthority’s current non-binding thinking is inconvincing people that they have to do more,or that there are benefits for them in theprocess. This whole element is missing in theEU. People are telling you until the very lastday, in a three-year period maybe, “We don’tknow what level of fine you will be seeing. Atthe end of the day, you will get the discountyou deserve.”SK: I have had one exception to that. I havehad a case where, at a relatively early stage—again, this was before the break-up of the lastdedicated cartels unit—the official said to me,“I can tell you the base fine is going to be

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within the region of…” and he gave me a rel-atively precise figure, and then said, “Andfrom that, I believe you’re certainly in the run-ning for 50 per cent leniency”. MK: I’ve had the same experience, but rarely.SK: And I was incentivised then to carry oncooperating; of course I was given a caveattoo, “In the end, I can only recommend to thecollege what it will be, so I can’t guarantee, butI can at least tell you that will be my recom-mendation”. And that was enough for me.

GCR: What about the speed of the EuropeanCommission’s process? It seems so slow incomparison with the US, for example.ML: I think it is terrible that they have beenso slow to move cases along. It’s bad for theircredibility and for the parties that are seekingto resolve cartel exposure. GS: When the announcement of a proceed-ing comes three or four years after the sameproceeding closed in another jurisdiction,everybody who reads the report thinks it is asecond violation. They think it’s a differentcartel, so the delayed drop of the second shoeresults in another hit on the reputation andgood will of your organisation. It also raisesmisplaced questions about the compliance andcorporate governance of your organisation.MK: They’re trying to speed things up now.ML: They’re speeding things up. I have seena case recently where they’re first. They’reahead of the United Sates. They’ve done avery, very good job, in this particular case.GS: Ahead on getting to a decision?ML: No. In getting to a statement of objec-tions.GS: I don’t count that!ML: Really? I think that’s a big step forward.MK: But it will still take the EC not less thanone and a half years, even in cases where theyare working day and night, to come to an SO.The question to me is, whether you couldaccelerate things if you were to introduce a dif-ferent concept, namely a plea agreement con-cept. It would make things a lot easier, ifpeople were just agreeing to a guilty plea, andthe Commission would save the work of hav-ing to do a full decision every single time. Butthat, for political reasons, is not desired, Iunderstand.GS: To establish the time differential we’retalking about, a good example is the MCAAlitigation, where the first defendant pled guiltyand paid a fine in the United States in 2001.And the Commission issued a decision in Jan-uary 2005.

GCR: What is the average period between theUnited States finishing something and Europedoing so?ML: MCAA isn’t exceptional. Lysine was thesame.

Martin KlusmannFreshfieldsBruckhausDeringer


GCR: Isn’t the delay due in part to Europeanofficials deciding to wait until evidence hasbeen released in processes in the US? They con-sider that more efficient.SK: I think that’s true—sometimes. In theleniency notice in 2002 they said the averagetime was two to three years, from inception ofa case to a decision. And it hasn’t got shorter.So the answer to our original question—whatcauses the delay—is, it’s institutional. It’sclearly institutional.MK: But I think part of the reason is that theCommission has to spend a lot of time on lit-igating cases, even where people have cooper-ated. On average we now have a situationwhere five parties per case cooperate to someextent. You would think that this means littleto zero litigation, but it is not true. Almosteverybody, even after cooperation, goes on toappeal, primarily challenging the size of thefine that got imposed after all this cooperation,because people are disappointed. And the casehandlers have to work on these cases, not justthe legal service, and they have to write memosand briefs That is a waste of resources. Theycould easily get rid of that by being a bit morelenient in the first place.SK: In a year such as 2001, with a high pointof €2 billion in fines, DG competition shouldbe an enormous profit centre for the Com-mission, and that really should be a justifica-tion for more resources. If the cartel teamissued shares, I would buy them!ML: I take Martin’s point; it may be that it’sjust institutionally impossible for them tomove forward efficiently, as they deal succes-sively with all the participants in the cartel. Iwould have thought that by streamlining pro-cedures and being in a position to agree on aproposed disposition, they would solve a hugepart of their resource problems, by removingthe uncertainty that the parties try to overcomeby delay and excessive precision.

GCR: Shall we talk about the ‘marker prac-tice’?MK: The ECN we have today is a good idea,and people are in high spirits on the enforce-ment side. Unfortunately, we have a com-pletely unworkable situation for the defencebar. You have 25 member states, with com-pletely different laws and enforcement sys-tems: 12 with criminal laws, and 13 notcriminal. You have countries with leniencyprogrammes, you have countries withoutleniency programmes. You have some whichoperate ‘soft’ leniency programmes, on anadministrative level, and you have 12 lan-guages in which to make simultaneous sub-missions. And the fact that your ability tomanage your case depends on the decision ulti-mately by the Commission of whether it takesup the case—for reasons which are completelysubjective in some cases. This is just not, in my

view, acceptable. It cannot be a discretionarydecision for the Commission, whether youhave one-stop-shopping in a case or not.ML: I’ve encountered a case where the clientwho was being advised by an American lawyerultimately concluded that it was necessary forit to go to the Commission, and six of themember states simultaneously. Now, you andI know what it takes to get just one of theseapplications mounted; as a bystander, itseemed to me that it was obvious that the casehad to be within the exclusive jurisdiction ofthe Commission. But that is not necessarily soanymore; what we have is an absence of clar-ity as to the circumstances where the memberstates are clearly out, and the Commission isclearly in. Again this is a disincentive for peo-ple to step forward, until they can be surethey’ve got all of their ducks in a row. This isa race. It should not be difficult to decidewhere to apply first.MK: This is why a marker system would bea good thing. It could at least be a bridge-building idea, for as long as the systems are sodifferent. There should be a possibility to placea marker, I would say, with the Commission.Your priority of cooperation would then bevalid throughout the network, and you couldfollow up within a reasonably short period oftime, like in the US. You could then spend atleast some reasonable time investigating and

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preparing your submissions, knowing that youhave two weeks to get your act together. Thatwould be a way of managing this problem bet-ter.GS: It may be of interest that the five non-governmental advisers [from EU, US, Canada,Australia and Korea] to the last ICN confer-ence were unanimous in their opinion that foran immunity system to be really effective thereshould be a marker system. In the EU there isnone.

GCR: If one institutes a marker system,should there be time limits on markers?ML: In Canada, the Competition Bureau isproposing to do just that. They say they havealready set tight time limits in some cases. Andthere are some good reasons they want tighttime limits on markers. Because for the lengthof the time that the marker’s outstanding, theenforcer is held back a little bit in its investi-gation. Now the difficulty, in my experience,is that if the marker is treated as indicative—as in, “We’ll give you a month, but you know,we’ll give you an extra week if you need moretime,”—that’s perfectly reasonable. If it is pre-scriptive, if you have a fixed time of 28 days,then that just doesn’t work. And it doesn’twork for all kinds of good reasons, not leastof which is that the company’s lawyers are try-ing to manage its marker application. That

Stephen Kinsella


will include intensive efforts to get informa-tion from people who may or may not be fullycooperative, and it has to be absolutely surebefore it steps up to the plate, that it has theability to sustain what has been said. A fixeddeadline may also distort otherwise reasonablepriorities in dealing with other jurisdictions.MK: I think there also needs to be subjectivefairness in the marker system, because youalways have parties who are more easily in aposition to reconstruct what has happenedand talk to the authorities, and others who arenot, because they are sitting in other parts ofthe world, or have language problems andrelated issues. GS: I think that markers of a fixed durationare a really bad idea. I think they’re a bad ideafor the enforcement agency; I also think theyare bad for reporting companies and theircounsel, but particularly bad for the enforce-ment agency. The US Department of Justicehas considered fixed-duration markers a num-ber of times. Every time it has considered it, ithas rejected the idea. The reason is that a fixedtime that ends up being too short for the cir-cumstances can result in incomplete and mis-leading presentations, as a result of being donetoo quickly in light of their complexity. It isalso at cross-purposes with the entire incentivestructure that an enforcement authority triesto set up with the marker system, which is toensure that everyone comes in as soon as theyknow about the conduct, because they can putdown a marker. If you’ve got a matter that youknow needs to be investigated in five jurisdic-tions, which involves talking to 50 people andsearching for and collecting documents in eachof those jurisdictions, there is no way that youcan accomplish that task in the length of timethat at least some of the jurisdictions are talk-ing about as the fixed time period for themarker. The reason it’s a bad idea, on the otherhand, for the reporting company, is because inthat situation your entire emphasis is on get-ting enough information to redeem the marker,not to get to the bottom of the conduct or todo a thorough investigation. Why is thatimportant? I refer back to something thatMartin said earlier. Sometimes there are dis-putes, later on, as to the scope of the matterdiscovered, and the extent of the anti-compet-itive activity reported. That determines thescope of the amnesty/immunity protection.The goal of company counsel should be toconduct a thorough investigation—expedited,but thorough. The goal of the enforcementagency should be to receive full and complete,high-quality and reliable information when themarker is redeemed, so its subsequent inves-tigative plan is not based on incomplete, unre-liable, or even misleading information. Afixed-time marker system, in my view, onlyundermines the ability of the enforcementauthority to just use its discretion to adjust the

time period to the circumstances. You can’thave a formulaic approach on this. MK: But Gary, I think under European law,it would be difficult to establish a very discre-tionary system, where the authority could lookat the cases and say, “Ok, you get two weeks,in this case” or, “Three months”. People couldfeel that the equal treatment aspect of the pro-cedural guarantees could be violated by this. GS: Martin, the equal treatment in that situ-ation is that each has equal opportunity toobtain a marker and each has equal opportu-nity to move into the immunity position if thefirst party does not redeem the marker. In addi-tion, the enforcement authority can say,“Alright, if we are going to give you a marker,there are going to be some conditions. Num-ber one: if you get contacted by a competitorduring that time period, we want to knowabout it. Number two: if there’s an opportu-nity during marker period for consensual sur-veillance—this wouldn’t happen in the EU, butin a North American jurisdiction—then wewant to know about that. Number three: ifthere’s a price increase that’s coming up dur-ing that period, we want to know about that.”The enforcer can set all the conditions, andsay: ‘This is what we want if we’re going togive you that period of time. We know thedamage to you and to us if it’s not a completereport.” One reason that I’m so stronglyopposed to any set time, is because I think it’sa cop-out by enforcement authorities. Theauthorities don’t need a fixed time limit inorder to bring the things in on time. Myimpression is that some jurisdictions are think-ing about time limits because they feel they’vebeen jacked around by the amnesty applicants.But the authorities have all the power and con-trol they need. If they think they are beingjacked around, then they should pull the chokechain! Yank them in there. Bring the markerholder in and say, “You’ve only got two moreweeks”. That’s what they do in the UnitedStates and, trust me, it works.

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GCR: What about the Stolt Nielsen case—isthere a revocation issue now in the UnitedStates?ML: Not really. The impression that wasafoot in the bar at the time that the announce-ment was made by Stolt Nielsen was that therewas continuing cartel misconduct.The courtsuggested that the DoJ had been a bit quick topull the trigger, after it had received the bene-fits of cooperation, over what might have justbeen a failure of communication. We nowknow, or we think we know, from the decisionof the district court in Pennsylvania, that itmight have been a simple dispute between theamnesty applicant and the DoJ as to whatshould have been disclosed at the time of theapplication. I think it’s not a particularly sig-nificant case because it really turned on its spe-cific facts. And if my guess about the capabilityof the DoJ is right, they will have alreadyestablished clear procedures in their dealingswith applicants, to make sure this never hap-pens again. They will be quite clear as to thelevel of disclosure that they expect. So I’m notsure it’s a particular problem there. It’s a bit ofa black hole in other jurisdictions.GS: I don’t pretend to know all the factsbecause I’m not a part of that litigation, but Ido know there was an impression around thebar that the DoJ might be playing ‘Gotcha’,getting the benefits of cooperation, and thenkicking the person out of the programme—that would indeed be of great concern. Myreading of the full record, not just the court’sopinion, confirms that the DoJ did not do that.One lesson that can be taken from it is that themodel amnesty letter written by the Depart-ment of Justice must be tailored, or customisedto your situation. SK: I think in Europe you could imagineexceptional circumstances where the companymight be booted out of its place, but theleniency grant in the notice is actually quitegenerous when you get it.

GCR: Let’s move to authorities sharing infor-mation. What are the perceptions on that? Do you think it happens as much as it’s adver-tised to?MK: We don’t know, but it will certainly beincreased by the ECN. There are certain clearpaths, and liaison officers who regularly talk.What will it be like in the ECN? I don’t thinkwe have the answer to that yet. I can only sus-pect that there will be a lot of talk going on,and when there is talk, the national rules andprotections for defendants are easily trans-gressed, I think. A bit more transparency inthis whole process would help. If we hadaccess to a file at some point, that would beextremely helpful, and it would at the sametime prevent stuff from happening which Ithink is in danger of happening. SK: If you’re talking about EU-US, the agen-

What is happeningnow is differentfrom the past.

Where they arelawfully able to

share information,they are doing itMartin Low QC


cies need your consent… Once you’re in coop-eration mode you normally give it, but reallythis is a bit of a distraction because you can’trely on it working for you. You never rely onthe Commission to transmit to the US agen-cies what you want the US agencies to see,because it’s a Murphy’s Law thing—you canbe sure that that’s the one thing they will nottransmit. So you do it yourself.ML: I think that what is happening now isdifferent from the past, in that where they arelawfully able to share information, they aredoing it.GS: My experience is that the agencies arecooperating every bit as much as they say theyare, even to the point of visiting one anotherin their offices for informational briefings. I seethat cooperation going in a lot of differentdirections, including all the way to Australia.And I know that at the ICN meeting inNovember, entire sessions of that conferencewere devoted to how they were all going tocooperate and coordinate.SK: All I know is that if there’s something inthe file that tells a good story for you and isexculpatory, you’d better take responsibilityfor getting it posted around.

GCR: This still leaves the question of why theUS will, to this day, raid a target before, say,Canada is ready, so tipping the cartel off. Whydon’t they coordinate those raids? ML: I don’t know. There are sometimes per-sonal relationships that enter into this. I willsay that. But I have seen a couple of caseswithin the last few years where I was mystifiedwhy the DoJ would take action, when doingso would disclose that there was an investiga-tion going on in circumstances where theyknew or should have known there was evi-dence that was available in Canada. But youknow, once again, it’s just a matter of individ-ual cases, and I don’t believe that there’s a sys-temic issue there. GS: I don’t think those little instances shoulddetract from the overall point that the majorenforcement jurisdictions are all reallytogether.ML: They will be punctilious about respect-ing the limitations on their authority to shareconfidential information that they haveobtained by compulsory process. I’m confidentabout that. But they may very well say, “Askyour cooperating party about something thatwas happening on this date” or provide eachother with helpful sign posts. They will helpeach other to the extent that they can, withoutcrossing the line.GS: I agree. An enforcer in one jurisdictionmight tell another, “The executive vice presi-dent of Company A may be a good person totalk to”.

GCR: Stephen and Martin, why don’t you

tell us about private enforcement in the EUand Canada at the moment, because thedegree to which private litigation takes off out-side the Unites States at this point is of increas-ing interest.MK: I think I can be very brief. We have seena number of cases, some of them on a nationalscale, all following very different proceduralrules. So far and under the existing legislation,plaintiffs have not been very successful. In con-tinental Europe there is no big track record ofsuccessful litigation. There is an unknownnumber of out-of-court settlements. In Ger-many, I’m aware of one case (still on appeal)where damages were awarded recently, but I’malso aware of a couple of cases where theplaintiffs were refused damages. We will havea major change in our national law shortly,and one of the ideas of the Federal CartelOffice was to make it easier for plaintiffs tosue for damages. But I don’t expect change toa big extent.SK: What we’ve tended to see is follow-onactions from Commission decisions, wherethird parties have thought it will be easier, par-ticularly post-leniency, because parties willhave at least admitted to the essential facts,and the Commission will have categorised thisas a breach of Article 81 … Unfortunately forthe plaintiffs with cartels, the Commissiondoesn’t have to show any effects, so the plain-tiffs still have to prove causation and quantum.

GCR: Why doesn’t the Commission simplytack on an econometrics stage?SK: Why should they? Should that not be theplaintiff’s cost?ML: Proof of economic effects is a necessarypart of the Canadian offence, but this evi-dence never sees the light of day in cases thatare settled. That’s not to say that Canada isinactive on private damage claims. We nowhave a very well developed plaintiff’s bar, afterabout 15 years of class action legislation. Soyou can bet there will be a claim in Quebec,a claim in Ontario, and a claim in British

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Colombia—and there will be kind of anational class that is run in Ontario. The posi-tion in Canada is really similar for business tothat in the United States, with increasinglywell-organised plaintiff’s lawyers, but theenvironment is a lot friendlier to defendants,and the exchanges between plaintiffs anddefendants include less squeezing money outof defendants on frivolous grounds. There areno treble damages, there are no juries, thereare no significant punitive damages. Class cer-tifications require the plaintiffs to produce evi-dence to show the economic impact of theoffence, at least where there is no criminalconviction. Representative’s plaintiffs may beheld liable for costs.SK: In Europe we see more cases beingbrought or threatened. And there are dealsbeing done, but sometimes what we’ve seen isthe deal being done, not by way of damages,but something else, for example by a guaran-teed discount on future purchases.MK: And a lot of these deals do not dependon legal arguments. SK: Exactly. It is more the case that you did-n’t know that your supplier was screwing you,but you’ve now found out, so you’re going togo back and say, “Look, we need a differentsort of relationship, and I need to be compen-sated over the next few years”.GS: I think the answer to your overall ques-tion as to whether or not civil litigation expo-sure in other jurisdictions is on its way toplaying as big a role in our strategy as it doesin the United States is: no, not any time soon.

GCR: What do you think of the Commis-sion’s plans to inspire more private suits?SK: There’s a limit to what they can do, orhave jurisdiction to do. There’s obviouslyan issue of whether cartel victims are inher-ently more deserving of a speedier, fast-tracked system than any others in the civiljustice systems of these other memberstates. And if so, what are you going to doto help them? Are you going to reduce theburden of proof? Which of the elements areyou going to eliminate though? Causation?Are you going to deal perhaps with ‘pass-ing on’ of price increases, ie so it will not bea defence? You can say that you’d like it tobe quicker, and member states might turnround to the Commission and say, “Wellthen—you take more decisions, morequickly…”MK: One thing is for sure. If the Commissionwere to try to help plaintiffs by finding andproving damages in its decision-making, thiswould slow down its own decision-makingvery considerably.

GCR: Stephen, I think you had an issue tointroduce.SK: Yes. I was just saying… when you go

Appropriatelyrewarding

cooperation.That is what

brings people inthe door

Gary Spratling


in for either leniency, or reduction in fines,you provide the evidence that then formspart of the case against you, and obviouslyyou have a continuing duty of cooperation.Clearly at a later stage before a nationalcourt it will be difficult for you to dispute theevidence that you yourself have provided.But, still, there has to be a question about theextent to which you can challenge some ofthe Commission’s findings. Because of thisduty of cooperation you often go along withsome of the Commission’s findings, or con-clusions, because you don’t want to ruin therelationship at the time. But you may wellsay afterwards, “Well, yes, I did agree, afterall I was the one who provided the evidence.But I challenge the conclusions you drewfrom that, and I challenge the way you’vecategorised that, and now I want to chal-lenge how much you are going to fine me. Imay even challenge the layer of gloss thatyou added in the decision. If the Commissionsays we want to encourage private litigation… you have to accept that that means morechallenges to cartel decisions, because theparties will want to be able to say before anational court, “No, I only accepted ele-ments in the decision, not the whole deci-sion”. I’d like the courts to showunderstanding in such circumstances andrealise, “Yes, of course, you went along withthis process, but that’s because you had youreye on the 50 per cent leniency, and youshouldn’t be taken to have accepted every-thing that was in the decision”.MK: I think what you say is akin to US classactions, where you may settle merely becauseyou think you have a commercial advantage.There is less presumption of guilt in settling inthe US.

GCR: Are all of the things we’ve discussedturning the clock back, to where the strategyis ‘nobody talks, everybody walks’?SK: Leniency has made life less interesting forus. I mean in the good old days, you coulddefend a case all the way. That was much moreentertaining. Now all you’re doing is seeingwho can be most cooperative with theenforcer, and that’s frankly not as much fun.But, if you add all these layers, and theincreased criminal exposure in various unpre-dictable ways in Europe, and civil claims aresomething you are having to at least factor innow, I think there is clearly a greater incentiveto contemplate staying quiet.ML: I’ve only seen one example of that,where there was about eight months left in theUS limitation period, and everybody realisedthey had a common interest. They didn’t talkabout it. They just understood their commoninterest: almost conscious parallelism.GS: I don’t think there is any indication,either in matters coming through my door or

in actions by enforcement authorities, thatpeople are thinking, ‘nobody talks, everybodywalks’. There is still a steady stream of peoplereporting. With the recent legislation in the US,the incentives to report have actuallyincreased. And, the risks remain too high ifyou don’t.SK: I agree, the outcome of your analysisis the same. I think you still get, in the end,to “If we can be sure of getting in first thenit’s in our interests to talk”. But thedilemma is interesting. You’re definitelyticking more boxes on the other side of thebalance now. GS: I think the major risk with enforcementauthorities being able to continue their cur-rent high level of anti-cartel enforcement is therisk of enforcers’ misperception—that is,enforcers perceiving all the parties coming into cooperate as purely the result of their dili-gence in the enforcement process, rather thanas the result of them appropriately rewardingcooperation. That is really what brings peo-ple in the door: appropriately rewardingcooperation.

The enforcers promised to reward coop-eration; they built a record of doing so and,as a result, the cooperation has been forth-coming, in waves. As enforcers experiencedozens upon dozens of instances of self-reporting and cooperation, to the point thatthere are so many applications they can’t evenfind staff to handle them, it is natural todevelop a tougher stance in evaluating theappropriate treatment for cooperating parties.So then, people end up getting offered dealsthat are much different from what theythought they would get offered, different fromthe expectations that enforcers created, anddifferent from the rewards that incentivisedthis era of cooperation in the first place. Thatis a risk to prosecutors: failing to appreciatethat insisting on tougher and tougher dealsmeans offering rewards for cooperation oflesser and lesser value than the rewards thatstarted all this. ML: Sure. They’re pushing people near theedge to the point where they may say, “We’lltake our chances”’MK: There is an inherent conflict. On the onehand, the authorities always want to be highin the fines as they are benchmarked year byyear. But at a certain level fines must reach apoint where they are so high that even withpotential for a leniency reduction nobody willreport. And I think we are at that tippingpoint. GS: We are at a delicate period in that bal-ance—in the US and in Europe.ML: Enforcers need to recognise that thegreatest single generator of cases and resultshas been amnesty, immunity, leniency. Theprogrammes work, because enforcers haveproperly responded to the expectations that

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they’ve created. If ever those expectations arefrustrated, I agree with you: they will find thatthey are pushing people into court, rather thaninto settlements.GS: And the expectations that Martin and therest of us are referring to, are at the level of thesecond, third and fourth applicant.ML: Are we seeing changes in behaviourthat reflect a change in past practices of car-tel behaviour? I still see lots of legacy con-spiracies—historic cartels from the past. Iwonder if we are seeing a change in themindset of managers about the businessacceptability of cartels as deterrence kicks in.My perception is that maybe the message ofdeterrence is beginning to penetrate. Andthey are coming to understand that this isnot really good for business. I’d like to think,for the sake of a competitive economy, thatthat’s the case.GS: I think that all the activity by all theenforcement jurisdictions has to be havingsome effect. All the compliance that com-panies have been engaged in has to havesome effect. At the same time, you still seeviolations. No-one in the enforcement agen-cies, and no-one on the defence side, thinksall cartel activity is being deterred or that allcartels are being caught. And so I expect tocontinue to see new cases. Just by way ofprediction: I believe that extraditionrequests will be made in several jurisdictionsand, if so, even if they are few in number,they will be the most significant advance-ment in anti-cartel enforcement in thisdecade. In some jurisdictions it is wellknown that there are active cartels, as wellas people who have not reported, cooper-ated, and/or responded to charges, in partbecause they think they are safely harbouredinside their home jurisdiction’s borders, withno chance of extradition. Once thatchanges, it really opens up likely sources ofself-reporting, indeed, whole geographicareas of self-reporting that have not previ-ously been active. SK: And the other great trigger to self-report-ing is mergers. GS: Yes.SK: That’s the time you worry if you areorganising one of these cartels: when someonein your cartel gets taken over, or is likely to betaken over. Because if in due diligence it comesout, a larger group has a real incentive to blowthe whistle. GS: It’s interesting. I think that a lot of peo-ple don’t realise just how many of the big car-tel cases came to light because of mergers. SK: Somebody new comes in, and thinks,“Before 10 per cent of the target company’sturnover becomes 10 per cent of our turnover,we’d better clear this up.”

GCR: Thank you all. �


The international journal of competition policy and ... In the News_GlobalCompetitionReview... · The international journal of competition policy and regulation ... ‘leniency’—blowing

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