EU Cartel Analysis: Aggravating and mitigating circumstances

At global antitrust heavyweight Linklaters, clients ensnared in cartel investigations ask early on: “What is our potential exposure?”, according to Jonas Koponen, head of the firm’s competition/antitrust practice. 

While the European Commission has become more transparent when deciding on cartel fines in recent years, predicting the value of a fine remains problematic. “It’s often at the mid-to-late stages that lawyers get a good sense of how a case will play out,” Koponen says. “There are so many different factors playing into it.” To help gain some insight into DG Comp’s willingness to adjust a cartel fine, GCR has examined the past decade of Commission cartel decisions, from 2005 to 2014, to gauge when and why the enforcer will raise or lower a fine because of aggravating or mitigating circumstances.

The results are perhaps less than surprising; the data suggests that DG Comp is far more willing to increase a fine above a base level than it is to decrease a fine based on a defendant’s arguments. The data shows that over the past 10 years, companies targeted in cartel cases argued for lower fines due to mitigating circumstances on 203 occasions, but DG Comp agreed to slash fines for only 52 companies. Meanwhile, the Commission raised fines for 108 companies for behaviour it considered beyond simple cartel participation, to further deter the company from violating the competition laws again.

Requests for fine reductions versus reductions granted

The data is fairly clear: if a company wants DG Comp to reduce its fine, it should present the enforcer with ample evidence that it played a limited role in the cartel conspiracy. DG Comp reduced fines for a company’s limited role in a cartel 36 times since 2005, granting an average discount of 14.4 per cent. The largest discount applied was 50 per cent, which three companies received in three separate cartels: Química/Repsol in the rubber chemicals cartel, Snia/Caffaro in the hydrogen peroxide and perborate cartel, and Quinn Plastics in the Methacrylates cartel.

DG Comp granted its most significant reductions in the 2008 banana cartel case, for reasons observers consider exceptional. DG Comp granted Chiquita and Dole a 60 per cent discount, and gave a 70 per cent discount to Del Monte/Weichert, after agreeing that the companies’ actions were governed by a regulatory regime based on quotas and import tariffs. Del Monte received an even greater reduction after the Commission found it was unaware of any pricing discussions between Dole and Chiquita. This remains the only example of reductions over 50 per cent in the years 2005 to 2014 – discounts the commission appears loathe to grant in traditional cartel cases.

Frequency of fine increases by size

Meanwhile, the Commission’s decisions to increase cartel fines beyond base levels supports its long-held – and sometimes questioned – belief that higher fines can stop cartel behaviour from happening again. Of the 108 instances where DG Comp raised fines for aggravating circumstances, 59 were applied to deter future cartel activity, averaging a 74.8 per cent increase. The Commission imposed its highest deterrent increase – a 200 per cent rise over the base fine – in three cases.

In cases where the fine was increased due to recidivism – 39 times in our data – the average uplift was 56 per cent. As Dirk Schroeder, a partner at Cleary Gottlieb Steen & Hamilton in Cologne explains: “Recidivism is important from a policy perspective. If a company has already infringed in the past, it would not send a good message if they were seen to get away with it again.” However, David Wood, at Gibson Dunn & Crutcher in Brussels, says recidivism can be a difficult call to make. “Is the company doing the same thing again or just more bad things?” Wood asks.

In 2009, Dutch industrial powerhouse AkzoNobel absorbed the largest recidivism fine increase in the past decade, of 100 per cent over its base fine, for its role in the calcium carbide and magnesium based reagents cartel. This is the only example of the commission applying the maximum increase for recidivism; at the time of the infringement, AkzoNobel has been found guilty of involvement in four previous cartels. According to Koponen, doling out the maximum fine increase is rare. “There is not yet a pattern, but the Commission does not automatically push this factor to the max,” he says. “Proportionality is a factor also here.”

Fines can also rise due to cartel leadership and non-cooperation. The Commission has only applied increases for leadership 10 times during the research period, averaging a 42 per cent increase in fines, while non-cooperation has been applied in three instances: twice with a 10 per cent uplift, and one 30 per cent increase.

Fine increases due to aggravating circumstances have appeared less frequently in recent years; Koponen posits that the Commission could be keen to limit the potential grounds for appeal. “In many cases, the amount of the fines will be very substantial even without increases of the basic amount. To punish the infringement, the Commission may not need to increase the amount due to aggravating circumstances, which involves exercise of discretion that may be questioned on appeal.”

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