EU cartel fines - raw data, patterns and trends

For the past two months, GCR has compiled and analysed EU cartel cases decided between 2005 and now. Ron Knox describes the project and findings.

“These revised Guidelines will better reflect the overall economic significance of the infringement as well as the share of each company involved. [They] send three clear signals to companies. Don’t break the anti-trust rules; if you do, stop it as quickly as possible; and once you’ve stopped, don’t do it again.” – Neelie Kroes, former EU commissioner of competition, 28 June 2006.

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In 2006, with Neelie Kroes at its helm, the European Commission’s Directorate General of Competition ratified – somewhat defiantly – a new set of fining guidelines for competition law breakers.

Those guidelines ushered in three significant changes. First, DG Comp gained the power to peg the fine to 30 per cent of the value of sales affected by the cartel. Second, it gained the power to multiply fines according to the duration of the conspiracy – the longer the conspiracy, the more offenders could expect to pay. Finally, offenders would face a new penalty, termed the “entry fee” – a one-off hit for entering the illegal agreement in the first place.

The guidelines weren’t universally popular at the time – and to some degree, remain unpopular today – but under Kroes’s stewardship, the commission pushed them through, ushering in an era many believed would see cartelists and other offenders paying fines that would dwarf prior DG-comp fines.

"The new guidelines are likely to significantly increase fines because of the multiplier effect, particularly for cartels which take place over a number of years, Tom McQuail, former Lovells LLP partner and current partner at Howrey LLP, told GCR in September 2006.

But now, more than four years later, has that prediction held up? Or have DG Comp's cartel fines remained more stable than observers would have imagined when Kroes made her announcement?

Over the past two months, GCR has combed information from every DG Comp cartel decision since 2005, looking both for raw data about the commission’s fining practices and for patterns and trends that may shed light on the commission's recent fining practice.

GCR’s project included reviewing more than 30 cartel decisions and fines against dozens of individual companies. Many of those companies were fined using factors Kroes touted when announcing the guidelines, including steep increases for recidivism and other factors, reductions for good behaviour, and multipliers for cartel duration.

In all, the analysis gives observers perhaps the first comprehensive view of what the commission’s recent fining practice has meant for lawbreakers – and what lessons can be gleaned from the commission’s aggressive use of what is essentially its only deterrent against cartels.

Those lessons are multifold. GCR’s review found that:

• As a percentage of annual turnover, European Commission fines punish small, emerging and one-product companies at a much higher rate than major, multinational corporations that enter into illegal cartel activities. The more damaging fines for smaller companies have the potential to hamper a company’s ability to compete, or eliminate competitors altogether, in markets where DG Comp’s decisions are intended to preserve vigorous competition.

• Over the past five years, the commission has been markedly more likely to increase a company’s fine for aggravating factors than to accept a request for a reduction in a fine due to mitigating circumstances. In the period our data set covers, DG Comp has granted a reduction in fines only 25 times out of almost 300 occasions where companies sought reduced fines.

• Of the 43 cartel investigations within the period our data covers, only 23 were spurred on by leniency applications. While leniency is still a major tool in DG Comp’s fight against cartels, its recent record shows the commission has had success discovering and investigating cartels without the aid of whistleblowers.

The following sections are our attempt to provide some context and understanding of the past five years of DG Comp cartel decisions. Many of the sections break down the numbers as presented in the commission’s published documents relating to each cartel case.

The sections also include interactive illustrations of the data, powered by Tableau Software, that allow users to explore the data in-depth by hovering the cursor over specific points on the illustration, and using the drop-down boxes to sort the data for a more focused view.

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