Verbatim report of proceedings

Wednesday, 6 October 2010 - Brussels

16. Commission fines in antitrust cases (debate)

  President. – The next item is the Commission statement on Commission fines in antitrust cases.

  Michel Barnier, Member of the Commission. – (FR) Madam President, it is, as ever, a great pleasure to be here with you day and night, and I speak on behalf of my colleague and friend, Mr Almunia, who has been held up as we speak at the working dinner between China and the European Union. Your House has asked the Commission to voice its policy on fines in the fight against anti-competitive practices. On its behalf, therefore, I am delighted to make this presentation.

As you know, the Commission is duty bound to fight anti-competitive practices and to penalise them when they are detrimental to companies and consumers in the internal market.

The primary tool that we have at our disposal is our power to impose fines on companies involved in these cartels, which adopt restrictive business practices or abuse their dominant position. These fines are fixed in accordance with our guidelines on the method of setting fines. The version currently in force was adopted just four years ago.

We also offer reduced fines for companies willing to cooperate in our investigations, for example, when they draw our attention to the existence of a cartel, and also for companies agreeing to reach a settlement with the Commission. This saves a great deal of time and resources for all parties. In any event, companies cannot be forced to shell out more than 10% of their total annual turnover, which is the ceiling for the level of fines that can be imposed.

Fines, therefore, honourable Members, are our primary tool. However, the introduction of sanctions for individuals should not be ruled out in the future, in particular, administrative sanctions. A number of Member States actually authorise such sanctions. We want to look closely at the legal and political implications of this kind of development.

Is there a need for a formal legal framework? Article 23 of Council Regulation (EC) No 1/2003 provides the legal basis for fines imposed by the Commission but not the guidelines on the method of setting fines. Article 23 sets out the basic principles, including the turnover ceiling, which I have just mentioned, whereas the guidelines give details of how they are applied.

It is relatively standard practice in many European legal systems to have a wide range of possible sanctions laid down by law as well as administrative guidelines on the method of setting the definitive penalty. This is true of Germany, the United Kingdom and the Netherlands when it comes to the application of competition rules. Based on this situation, we see no reason to propose new legislation on the fines imposed by the European Union in competition cases.

The second question is whether the guidelines need to be revised before looking at the level of fines imposed. I would like to give you an idea of what cartels cost the European economy. According to our estimates, the damage caused by the 18 cartels dismantled between 2005 and 2007 ran to almost EUR 8 billion. Studies have also shown that cartels led to a 10 to 30% increase in prices, a tempting prospect which would be hard to resist were it not for vigorous implementation of competition legislation, which is our job.

Our fines are set at a level that fairly punishes past unlawful behaviour. They are high but they reflect the damage caused and the unlawful gains achieved by members of the cartel. Our fines must also effectively deter companies from engaging in such anti-competitive practices in the future. That is why, I repeat, we see no reason to amend the 2006 guidelines on the method of setting fines.

The third and final question is whether fines should be reduced during the crisis. Rest assured that we look very closely at the financial situation of companies which, in some cases, claim their inability to pay and that we have significantly reduced our fines for a number of them. For example, during recent decisions on sanitary ware for bathrooms, or high-tensile steel, we have applied reductions ranging from 25 to 75%.

It is not in our interest, honourable Members, to exclude companies from the market. In fact, it is quite the opposite. Competition rules are often applied so as to enable new companies to break into the market and go about their normal business on a level playing field.

  Klaus-Heiner Lehne, on behalf of the PPE Group. – (DE) Madam President, Commissioner, first of all, I would like to thank the Commission for the flexibility it has just shown. Commissioner Barnier made reference to the fact that, in certain industries, in the construction industry, given the fact that there has been a substantial economic slump in the sector, there has been considerable movement when laying down penalties and granting – you cannot say ‘allowances’ – deferred payment options. I believe that to be a reasonable reaction on the Commission’s part, given the special economic situation in which many companies find themselves. Irrespective of this welcome flexibility on the Commission’s part, however, there is nonetheless clearly a need to ask the fundamental question of whether the system of determining penalties that we are currently looking at still, in any way, corresponds to the principles of the rule of law.

Dare I say, there may be some doubt about this. The reason is that, in laying down such a broad determination framework without specific criteria being laid down in the legislative instrument itself, Council Regulation (EC) No 1/2003 clearly does give the Commission such a free hand that you could almost suspect that the decisions behind it are not necessarily based on law making, but could instead very much involve certain elements of randomness. Unfortunately, the European General Court has so far gone along with this practice and this method of determination and has not been critical of it.

I could imagine, however – and we do face a changed situation, as we will now very soon accede to the European Convention on Human Rights and the Treaty of Lisbon has now made the Charter of Fundamental Rights binding – that, potentially, the case-law could change in light of this. I therefore think that consideration really should be given to this and I welcome the fact that the Commission is thinking about amending the provisions of Council Regulation (EC) No 1/2003 in this area with regard to criteria and other types of sanctions, making the provisions more specific and laying down tougher criteria including in relation to the penalty measures to be laid down. Personally, I believe this to be necessary in order to counter the deficits in the rule of law that many experts see in Europe.

  Antolín Sánchez Presedo, on behalf of the S&D Group. – (ES) Madam President, Commissioner, the subject of fines is a very important one. It is about responding to anti-competitive conduct, and that response must be effective and firm. A weak, inadequate response will be an incentive and stimulus for infringements. Therefore, fines must deter those who infringe the rules but also act as a general deterrent for all operators. It must be clear that illegal competition is not going to provide any advantages or benefits for those who do it.

It is true that the Commission has a broad margin of discretion in the application of fines. However, discretion does not mean acting arbitrarily, because there are rules, limits and criteria, there is a procedure with guarantees and, in any case, there is judicial control.

The treaty, Regulation (EC) No 1/2003, the 2006 guidelines and the Communication on the leniency programme – also from 2006 – all constitute a framework that is working reasonably well.

The system could, however, be improved. Experience of applying the system, recommendations from experts and the concerns legitimately expressed by institutions and some operators advise us to tackle certain issues. Transparency and predictability could be improved and its impact on small and medium-sized businesses, employment and the sustainability of businesses could also be discussed. Flexibility regarding the amount and payments should also be considered, along with the connection with leniency programmes, and even how to overcome the differences between the systems in the various Member States.

Moreover, the system would be complete if other relevant tools were added: for example, stressing individual liability, considering other types of remedy – not only in order to put an end to anti-competitive conduct, but also to prevent it from re-occurring – and launching private actions for compensation for both individuals and groups.

All these issues must be tackled rigorously, systematically and positively, without raising doubts about the way that competition policy works.

  Sophia in 't Veld, on behalf of the ALDE Group. – Madam President, I agree with much of what has been said by the previous speakers. I welcome the Commissioner’s statement because, if I listen carefully, the Commission is actually open to the Parliament’s request, which was included in last year’s report on competition policy, for a more sophisticated toolkit with regard to antitrust policies.

The focus has been very much on fines and the size of the fines, but we should be careful that this does not turn into an ideological debate. This is very much about having a toolkit which is an effective deterrent to anti-competitive practices. As you rightly pointed out, the damage to our economy and also to consumers is considerable. I think that fines should be reasonable but, if companies are complaining about fines, then the one thing they should not do is engage in cartels. That is the best guarantee that they will not face excessive fines.

Last year, we asked for proposals by the Commission for more sophisticated instruments. We asked you to come forward with proposals that would cover issues like individual responsibility (which you mentioned), transparency and accountability of firms, shorter procedures, the right to defence and due process, and mechanisms to ensure the effective operation of leniency applications, but also corporate compliance programmes and the development of European standards. I would like to know if the Commission intends to come forward with such proposals. We realise that this is very complicated, as we are looking at national competences and EU competences. But I think we share the common objective of making the market function properly.

  Jean-Paul Gauzès (PPE). – (FR) Madam President, Commissioner, I recall a few years ago asking the then Competition Commissioner whether she was aware of any evaluation being carried out on the effectiveness for consumers of fines set, and on this matter, the then Commissioner indicated at the beginning of our committee meeting that she had managed to claw back so many million euro in fines. And so the answer was that it had not been considered. It would appear that since then, you have carried out studies to find out what damages were actually incurred.

However, I would like to draw your attention to two matters. The first being that prices are fixed on the basis of a group’s turnover. However, the company that may have violated competition rules, and I am not condoning it, may be a relatively small company within the group. That is what bothers me, especially when there are separate legal entities involved.

Secondly, Commissioner, and it is you who said so and not your colleague, you often talk about the need for prevention, saying that prevention is better than repression and, in any case, more effective. So the question I ask is whether these huge fines, which always make the front page of the newspapers in which they are delivered, really have any role in terms of prevention. And I wonder whether it might not be more effective in terms of prevention to focus more on the number of checks rather than on the level of fines.

As has recently been the case in France, sentences can clearly be passed for sums of money requiring 4 or 5 000 years to be paid off. I think that we should not become fixated on these figures. We need to look specifically at the repercussions for the company, at a time of uncertain economic circumstances.

Skewing the rules of competition is not right. It is quite right that a penalty is applied but this penalty needs to be truly proportional, which is why we wanted to know whether or not the Commission would amend its rules. I think you said that this would not be the case, which is a shame.

  Peter Skinner (S&D). – Madam President, I do not know about companies having 400 years to pay off fines, but that does sound rather draconian. Nonetheless, Commissioner, I realise that you are not necessarily in a position tonight to make policy on the hoof either. To that effect, I will be submitting some questions to Commissioner Almunia on the issues that we are talking about tonight.

I would like to make two brief points. Firstly, I would request that the Commission deliver on the impact assessments for the 2006 guidelines. I understand Mr Almunia’s staff have already indicated that this can be done. I am looking forward to seeing them. Perhaps I just need to be up-to-date on that, but I would be reassured if that was the case.

Secondly, we have heard tonight that all the focus is on fines – and fines that are imposed on companies which violate the terms of competition. There may be a graduation of fines, but these do not seem to deter them. They still do it.

We may have to be inventive about what we do. In the case of price fixing, for example, quite often, small enterprises further downstream may be affected by the consequences of companies having done this and, through no fault of their own, fall foul of these particular fines.

What if the Commission was to think about the social impact for a minute? What if the Commission was to think about adopting different approaches? In the UK, for example, the arrangements allow for the disqualification of directors, instead of imposing the fines, which actually deals with the culprits involved and allows the workforce and the companies to survive – an intelligent philosophy perhaps, and one we might borrow from as a model of what we could do, or even just as a pilot.

There are other examples – as we have heard from around the floor, from other countries – where I am sure we could do the same. If we apply some intelligence to this, we can do a lot to secure that workforces for the companies out there are not equally affected by the bad practices of the directors who adopt this cartel philosophy.

  Catherine Stihler (S&D). – Madam President, I will be brief. I want to welcome what colleagues have said this evening. The power that we have in terms of fines in antitrust cases is a real power to break cartels, to prevent anti-competitive practices, and to put the consumer first.

There are three questions I want to ask the Commission, like Mr Gauzès and others. Firstly, what can we do better in terms of prevention? Secondly, are we looking – as Mr Skinner said – at best practice in the different Member States? Mr Skinner’s suggestion concerning board complicity, and what we can do about directors, is essential. Thirdly, can we have a timescale for the prospective proposals?

  Seán Kelly (PPE). – Madam President, Articles 81, 101 and 102 all deal with these issues, under cartels, price fixing, predatory pricing, etc. Certainly it is something that we should be concerned about, but often, it is difficult to prove that they actually exist. For instance, I have here a headline which says ‘Antitrust: car prices fell only slightly in 2009’, whereas prices for repairs and maintenance continue to rise despite the crisis, despite a reduction in wages and despite deflation, rather than inflation. Is that a cartel?

In my own country, if there is a shower of rain, the price of cattle drops automatically. I think there is certainly a need to look at the guidelines, both in terms of establishing trends over a long period of time and also in the actual punishments you are going to apply. I think Mr Skinner made a very interesting suggestion when he said ‘make the directors pay’. I would say that we should also have a fine: do both. There is a certainly a lot of work to be done, but we are going the right way.

  Michel Barnier, Member of the Commission. – (FR) Madam President, I have now heard all the arguments and requests and I will report them carefully to my colleague, Mr Almunia, who has told you, through me, that he sees no reason now to propose brand new legislation on fines, since the current Regulation (EC) No 1/2003, which I have already mentioned, may be of great use to us in the foreseeable future.

As for the guidelines, the Commission constantly monitors their application and it is open to any suggestions for improvement and, from this point of view, what has been said by some would be extremely helpful.

Mr Lehne, Mr Gauzès, Mr Skinner, we have nothing against a certain degree of flexibility in our practices controlling the application of regulations, within the limits set by the guidelines of case-law, in order to take into account an economic situation that is still challenging. However, for the time being, I repeat, Mr Almunia sees no need to revise the 2006 guidelines. He is satisfied with the way that these guidelines are working. They have proved adequately flexible during the current crisis, enabling us to take into account the difficult financial situation faced by some companies, as mentioned by some of you.

The Commission is bound by these guidelines on the method of setting fines. This means that they provide companies with legal certainty as the Commission cannot depart from them without good grounds. If the Commission does depart from the guidelines, it runs the risk of having the courts annul its decisions.

Mrs in ’t Veld, regarding different sanctions other than fines, we should assess to what extent it would be possible, if necessary, to integrate them into our current legal framework. Although alternative sanctions are in place in Member States, they only seem to be used in a minority of cases and fines remain the primary form of sanction.

This debate should be steered by two principles. Firstly, individual sanctions must not call into question our current system for controlling infringements, in particular, the leniency programme. Secondly, the fact that directors or employees of a company have been individually penalised, which is therefore possible, does not in any way diminish the company’s responsibility where it has broken the rules of competition.

Lastly, the Commission believes that the current level of fines and uniform application of the European Union’s competition law are a good deterrent against anti-competitive behaviour within the internal market.

One point, Mr Lehne. We have an administrative system for ensuring the proper implementation of competition rules. What is more, this system has many advantages. We also have the case-law of the Court which supports this system.

Mr Sánchez Presedo mentioned transparency, and this does not surprise me considering the other debates with him regarding supervision. There are possible improvements. We have flexible guidelines, as I have just mentioned, and, in particular, this year has seen the introduction of best practices.

Lastly, Mrs in ’t Veld and Mrs Stihler brought up the issue of more sophisticated programmes and more sophisticated instruments. We can raise this issue through the compliance programmes. They are very welcome. I am well aware, in our view, that companies take these compliance programmes seriously and that can help prevention which, in fact, Mr Gauzès, is still cheaper than compensation or punishment.

Finally, Mr Skinner and Mr Kelly talked about the companies that sometimes suffer as a result of these punishments and the social problems that that can cause. It is with keen interest that we follow developments in Member States, in particular, in small and medium-sized enterprises. That is why we are keen to propose, as indicated in our White Paper, that we will act on damages actions to check how effective they are and to assess their impact. For this reason, the Commission will soon be launching a public consultation on this matter.

  President. – The debate is closed.

Written statements (Rule 149)

  George Sabin Cutaş (S&D), in writing. – (RO) The European Commission is imposing increasingly more frequent and higher fines on the cartels and companies which abuse their position on the market. The amount of fines imposed by the Commission passed the EUR 2 billion mark in 2009. I welcome the swift response from the European executive. At the same time, we must ask ourselves whether the current system of sanctions is sufficiently comprehensive. The Commission plays the dual role of prosecutor and judge. Furthermore, the adverse effects of the fines imposed also entail employees at the companies which have been penalised losing their jobs. This means that people who have not broken the law become collateral victims. Consequently, I believe that a set of more sophisticated measures needs to be drawn up for antitrust cases, aimed at both promoting more transparent procedures, through appointing an independent judiciary, and introducing the option to punish on an individual basis directors responsible for companies’ illegal behaviour.