The Leniency Trap

25/04/14

One of the most popular buzz words of competition policy is soft harmonisation, designed to bridge the gap between mandatory harmonisation of substantial rules pursuant to Regulation 1/2003 and Member States’ liberty as to procedural rules. The paradigm of soft harmonisation is leniency. The European Competition Network (ECN) encourages applications to all national competition authorities (NCAs) which may be considered well placed to act and, logically, focuses on the issues of multiple leniency filings as well as attractiveness and effectiveness attractiveness and effectiveness of Member States’ leniency programmes.
Since the ECN published the Model Leniency Programme (MLP) in 2006,this focus relates, in particular to ever increasing private damages actions, which pitch access to file by claimants against the protection of leniency material.
Much has been written about this aspect, which is no doubt crucial to the success of leniency programmes. Conversely, another attractive feature of leniency programmes is seldom mentioned, namely possible perverse effects of the incentive offered. Since the applicant accuses itself, it benefits from increased credibility according to the case-law. It is only human for an applicant to take advantage and maximise the gap with its competitors. Every additional cent the latter are fined increases the applicant’s competitive advantage. So why should the leniency applicant not use its imagination in describing a competitor’s contribution to a cartel?
One theoretical disincentive to falsely blackening a competitor’s name is that, if the NCA finds out, it might not consider the applicant to have cooperated ‘fully’ as reads point 13(2) of the MLP. Mind you, NCAs want to foster leniency applications by all means and will, therefore, hardly be too picky. After all, Germany and Greece do not rush either to apply the provision that excludes ring-leader from the benefit under their respective national programmes. Moreover, disregarding any particular false statement would weaken the entire case to the extent it relies on the applicant’s statements. On the contrary, authorities may even overstretch leniency applications and use sparse data on a handful of cartel meetings to ‘taint’ legitimate routine gatherings over long periods of time to find a ‘single and continuous infringement’ as, some would argue, the Commission did in Copper fittings. So we had rather not rely on this disincentive.
A much stronger disincentive is a criminal sanction, be it only because the applicant’s competitor could seek such sanction directly. Criminal sanctions exist in certain Member States, e.g. under Section 117 of the UK Enterprise Act 2002 as amended (2 years’ imprisonment and/or a fine). They do not in Spain, where an applicant’s false statement to the NCA does not infringe a single provision of the Criminal Code.
We emphasised the need for redressing this lacuna in response to the 2013 public consultation on a draft new notice about the Spanish NCA’s leniency programme. Yet the new notice was published almost a year ago without a hint at any safeguard. Now, a court case which raises the issue of false statements before the NCA is pending. One may look forward to clarification as to how such statements affect the value as evidence of the entire leniency application and indeed as to what defence the applicant’s victim has against such statements.