Is DG Comp more likely to raise a fine than to lower it?

Arguments for mitigating circumstances are one of the only possibilities a business has to reduce a fine for cartel activity. If persuaded that a cartelist didn’t have a major role in a price fixing conspiracy, or that the firm acted as a “nuisance” to the cartel, DG Comp has slashed the fine by as much as 75 per cent. But reductions of that scale remain rare.

Since 2005, DG Comp has agreed to reduce fines in 13 cartel cases in which firms argued that they didn’t deserve the cartel fine their sales may have suggested. In all, 24 businesses saw their fines reduced for myriad reasons, including extensive cooperation with the investigation and limited participation in the scheme. That’s out of 158 requests for a reduction, and 278 fines in all – a 9 per cent success rate.

Those two reasons were the most successful arguments for undertakings over the period GCR reviewed. On eight occasions, they received reductions for cooperation above and beyond what’s required for leniency, winning reductions of 21 per cent on average. Seven firms were given a reduced fine for their limited involvement in a conspiracy, although those reductions tended to be slightly lower – only 13 per cent on average.

In all, mitigating circumstance reductions handed out by DG Comp have averaged 25 per cent.

As you can see above, the fines against the banana cartel, handed down in 2008, appear to be something of an outlier. DG Comp reduced fines against the three companies involved in the cartel – Dole, Del Monte/Weichert and Chiquita – by at least 60 per cent, chiefly because the industry was governed by a regulatory regime based on quotas and import tariffs. Also, Del Monte received a further reduction after the commission found the company was unaware of any pricing discussions between Dole and Chiquita. No other reductions have topped 50 per cent over the past five years.

Here, we’ve graphed two separate but slightly related data points – increases in fines for aggravating circumstances, and increased fines for deterrence. While both increase fines over the base level that DG Comp determines at the outset of its fining process, they typically serve two different functions. Higher fines for aggravating circumstances are intended to punish behaviour that either exacerbates the impact of a cartel or shows some disregard for EU competition laws, such as recidivism. Meanwhile, deterrence increases are added punishments intended to send a clear message to European companies – the Union's competition laws will be enforced vigorously. These fines are often reserved for large firms that are affected less by basic antitrust fines – companies such as Shell, Total and Eni, as the graph above shows.

The dual-axis graph makes two facts immediately apparent: DG Comp handed out far more increases for aggravating circumstances than it did to deter wrongdoing. In all, 47 fines out of 278 were increased because of some type of aggravating behaviour – a rate of 17 per cent.

Among those, the most common reason for DG Comp to increase fines was recidivism, which has resulted in increased fines 35 times over the past five years. The commission also increased 10 fines because a company took an obvious and notable leadership role in a cartel, the data shows.

Additional fines for deterrence, however, were more likely to be higher than fine increases for aggravating circumstances. Indeed, while the majority of aggravation increases hovered around 50 per cent, DG Comp increased fines for deterrence by 200 per cent – twice as much as the nearest increase for aggravation – on three occasions and more than doubled fines on a handful of others.

By almost all measurements, increases in fines for aggravating circumstances were more severe, and occurred more often, than instances of the commission lowering fines because of mitigating circumstances.

According to GCR’s analysis, the average increase for aggravating circumstances was 53 per cent, while the average of DG Comp’s mitigation reductions was 25 per cent. What’s more, DG Comp increased penalities in the 278 fines GCR reviewed more often than it reduced fines in the 158 cases in which a company pleaded for a lesser penalty.

Dirk Schroder, partner at Cleary Gottlieb Steen & Hamilton LLP in Cologne, says that the gap between instances of reductions because of mitigating circumstances, and increases because of aggravating circumstances, is about what he expected from the commission.

“It has always been pretty useless to plead mitigating circumstances,” Schroder says. “The percentage for cooperation is probably only so high because it includes the 50 per cent that were granted to the failed immunity applicant in the Italian Raw Tobacco case,” he says, referring to the discount awarded to Deltafina after it lost immunity by informing its rivals that an investigation was under way.

While recidivism has become a staple issue in aggravation increases for DG Comp fines, he says, “I am glad to see that leadership was only a used a few times. It is a particularly difficult concept, and it is for good reason that the leniency notice does not use leadership as a criterion.”

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