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Cartel settlement unlikely in cases where inability to pay claim possible

Eleonora Wäktare, PaRR, September 2014

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- Dedicated team of officials handles ITP applications
- 13 successful requests to date, public information shows
- Upcoming litigation likely to clarify ITP conditions

The European Commission (EC) tends to avoid proposing a settlement to cartel members who might claim inability to pay (ITP) the fine, it is understood.

Under the 2006 Fining Guidelines, the EC may exceptionally reduce a cartel fine if it were to jeopardise the existence of the company being sanctioned. That undertaking should "invoke" its inability to pay and provide the regulator with all information it needs to analyse the company’s financial situation and economic context. The assessment will be based on the situation of the group to which the company belongs. The applicant needs to demonstrate the existence of a causal link between the risk of bankruptcy and the fine. In practice, the EC examines whether the fine will entail a significant asset loss for the company. The regulator will also consider the company’s social and economic context.

The EU competition enforcer refrains from proposing a settlement in cases where one or several parties might invoke ITP, it is understood. The regulator tends to avoid entering into negotiations over whether parties could invoke their ITP in exchange for an agreement to settle, it is understood.

Cartel proceedings geared to a settlement are simplified, with only limited access to the file and no oral hearing. The EC holds bilateral rounds of discussions with the defendants. Companies admitting their offence receive a 10% discount on their fine. The regulator does not negotiate the existence of the infringement or the appropriate sanction. While the investigated companies may express an interest in settling, it is for the EC to propose that procedure, as previously reported by PaRR.

EU Competition Commissioner Joaquin Almunia is the first to have granted ITP reductions to companies, the EC case database shows. The possibility to trim a fine for inability to pay also existed under the 1998 Fining Guidelines under slightly different conditions, but it was not used. The EC granted only two reductions on the basis of financial circumstances, in more than 80 decisions.

The economic crisis caused a surge in requests, but also the fact that once a company gets a reduction the others want it too, it is understood.

The EC lightened the financial burden of 13 companies fined between November 2009 and December 2012, the information published on the website of the EC Directorate-General for Competition suggests.

ITP applications were successful in the following six cases: Heat stabilisers (11/2009, one company),Bathroom fittings (06/2010, five companies), Prestressing steel (06/2010, three companies), Animalfeed phosphates (07/2010, one company), Refrigeration compressors (12/2011, one company),Mountings for windows and window-doors (03/2012, one company), and TV and computer monitor tubes (12/2012, one company).

Animal feed phosphates was a partial settlement and Refrigeration compressors was a settlement.

The competition watchdog rejected ITP applications in at least three cases, according to the publicly available information, namely LCD (12/2012, two companies), Shrimps (11/2013, one company) andPower cables (04/2014, one company).

There is no public information on ITP applications for the following cases: DRAMs (5/2010), Airfreight(11/2010), Consumer detergents (4/2011), Exotic fruit (10/2011), CRT glass bulbs (10/2011), Freightforwarding (3/2012), Water management products (06/2012), Automotive wire harnesses (7/2013),Yen interest rate derivatives (12/2013), Euro interest rate derivatives (12/2013), Polyurethane foam(1/2014), Steel abrasives (4/2014), Power exchanges (3/2014), Bearings (3/2014), Mushrooms(6/2014), Smart card chips (9/2014). All cases apart from Airfreight, Exotic fruit, Freight forwarding andSmart card chips were totally or partially settled.

This does not necessarily mean that there were no other requests. There were nine applications in 2008 and 2009 respectively and at least 25 in 2010, two EC officials wrote in the European Competition Policy Newsletter. Also, many more investigations may be on-going than is publicly known. The EC receives on average four leniency applications per month, Competition Commission Joaquin Almunia said, as reported.

At the EC, a dedicated team of eight people work primarily on the assessment of ITP applications, it is understood. The asymmetry of information between the enforcer and the companies requires a lot of resources, it was said.

Court to clarify
The EU courts are likely to further clarify the conditions for being granted an ITP reduction of the cartel fine, the Curia database shows.

In the Shrimps matter, Goldfish has challenged the EC decision rejecting its ITP application.

Companhia Previdente, Emme, Fapricela and Productos Derivatos de Acero sought the annulment of the EC Prestressing steel decision imposing them a fine, arguing among others that the EC misapplied the ITP provision of the 2006 Fining Guidelines.

Finally, also in the context of the pre-stressing steel cartel, Moreda-Riviere Trefilerías, TrefileríasQuijano, and Global Steel Wire asked the court to require the EC to produce the documents, calculations and other matters of law and/or fact that served as the basis to grant the ITP requests ofProderac, CB, ITAS, OriMartin and Siderúrgica Latina Martin and/or to accept the reduction in the fine of ArcelorMittal.

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