Leniency Regimes

Boekel De Nerée NV Frederieke J Leeflang

1. What is the relevant legislation containing the leniency policy and what is the enforcing body?

According to section 56(1) and sections 88 and 89 of the Netherlands Competition Act (‘the Competition Act’), in the event of an infringement of article 6(1) of the Competition Act, the Board of Directors (‘the Board’) of the Dutch Competition Authority (‘the NMa’) may impose a fine on natural or legal persons who are responsible for such infringement. The Board has discretionary powers with regard to the imposition of a fine. It may offer undertakings, which are or have been involved in a cartel, the chance not to be fined (‘fine immunity’) or a reduction in such fine (‘fine reduction’) under the Competition Act. ‘Fine immunity’ and ‘fine reduction’ are also referred to as ‘leniency’. The NMa has created special Leniency Guidelines (‘the Guidelines’) laying down its leniency policy. There is also a supplementary notice to the Guidelines, applicable only in relation to certain investigations of the construction sector (ie earthworks, road works and hydraulic engineering).

2. What are the basic tenets of a leniency/immunity programme?

Background

According to paragraph 3, for an undertaking which is or has been involved in a cartel wishing to cease its involvement and wishing to inform the NMa of the existence of the cartel, concerns regarding the imposition of significant fines may prevent it from doing so. In order to encourage such undertakings to inform the NMa of the existence and the activities of the cartel, the Board of the NMa may grant the undertaking leniency.

Interest

Lenient treatment of a member of a cartel is justified if the cartel member informs the NMa of the existence of the cartel, makes an investigation into the cartel possible, or substantially contributes to the investigation, because in the view of the NMa this is in the interests of the investigation, sanctioning and termination of infringements of the Competition Act and/or European competition rules. This promotes the efficient functioning of markets and prevents or reduces the damage cartels may inflict on buyers and consumers.

A further important consideration is the fact that the European Commission and many other competition authorities in and outside the European Union maintain somewhat similar guidelines. The possibility of granting leniency is regarded as an important instrument in investigating (international) cartels.

3. How many cartels have been unveiled and punished since the adoption of the leniency policy?

Since the adoption of the Guidelines in 2002 at least 38 cartels have been exposed and punished. In 2002 four cartel cases were exposed and punished. In 2003 the NMa exposed and punished nine cartel cases. In 2004, 11 cartel cases were exposed and punished. In 2005 the NMa exposed and punished six cartel cases. In 2006 eight cartel cases were exposed and punished.

A good example of cases in which the leniency programme has been applied is those in the construction sector. In 2004 the NMa fined many undertakings in the construction sector for their participation in a cartel within the infrastructure and civil engineering sector between 1998 and 2001. The fines imposed varied from €1,363 to €18,842,290 per undertaking. In order to gather evidence and to speed up procedures, the NMa applied an accelerated sanction procedure. Prior to the investigation the NMa summoned all undertakings that had been involved in bid rigging in the construction sector to apply for leniency. All companies that responded were granted a reduction of the fine that was eventually imposed. Before the end of 2006, the NMa will complete current sanction procedures in all relevant subsectors of the construction industry. The NMa has granted leniency in many instances.

4. What is needed to be a successful leniency applicant? Is documentary evidence required or is testimonial evidence sufficient?

The undertaking has to provide the NMa with all information, documents and other evidence relating to the cartel. Oral statements about the infringement are accepted but not sufficient.

TIMING

5. What are the benefits of being ‘first in’ to cooperate?

Under paragraph 5 and 6 of the Guidelines, ‘fine immunity’ and ‘fine reduction’ of at least 50 per cent are only available to the first undertaking to provide the NMa with information regarding the cartel.

6. What are the consequences of being ‘second’? Is there an ‘immunity plus’ or ‘amnesty plus’ option?

Under paragraph 7 of the Guidelines, an undertaking that informs the NMa of the existence of a cartel in which the undertaking participates but which is not the first to inform, will be granted a reasonable reduction in the fine of between 10 and 50 per cent of the amount finable under sections 56 and 57 of the Competition Act if, in the opinion of the Board of the NMa, the following cumulative conditions are met:

No ‘immunity’ plus or ‘amnesty plus’ is available.

7. Are subsequent firms given any beneficial treatment if they make a useful contribution? How are ‘useful contributions’ defined?

Paragraph 7 of the Guidelines makes no distinction between the second or any subsequent undertaking that provides the NMa with information regarding the cartel. If in the opinion of the Board of the NMa the two cumulative conditions set out under question 6 are met, then the undertaking will be granted a reasonable reduction in the fine (between 10 and 50 per cent).

The Guidelines do not use the term ‘useful contributions’ but rather ‘added value’. Under paragraph 9 of the Guidelines, information shall have added value if based upon it the NMa can obtain evidence of the alleged infringement and the NMa did not have such evidence already.

SCOPE/FULL LENIENCY

8. Is it possible to receive full leniency? And, if so, what are the conditions required to receive full leniency?

The NMa will grant full immunity from a fine of an undertaking if it informs the NMa of the existence of such a cartel and its participation in it before the NMa commences an investigation, if the following cumulative conditions are met:

• the undertaking is the first to provide the NMa with information regarding the cartel, the NMa did not have such information at its disposal before such disclosure, and this information provides sufficient reason to commence an investigation into the cartel;
• the undertaking has not coerced any other undertaking into participating in the cartel;
• the undertaking provides the NMa with all information, documents and other evidence relating to the cartel as soon as it has them at its disposal, or acquires or is able to acquire them, until a decision has been taken with regard to the imposition of a sanction, as referred to in section 62 of the Competition Act;
• the undertaking cooperates fully with the NMa, in so far as this may reasonably be required of the undertaking, including issuing statements by management, employees and bodies belonging to the legal person until a decision has been taken with regard to the imposition of a sanction, as referred to in section 62 of the Competition Act; and
• the undertaking refrains from any practice that may obstruct the NMa’s investigation until a decision has been taken with regard to the imposition of a sanction, as referred to in section 62 of the Competition Act.

Another possibility for receiving full leniency is set out in paragraph 6 of the Guidelines.

A reduction of at least 50 per cent in the fine, which could otherwise have been imposed in accordance with sections 56 and 57 of the Competition Act, will be granted to an undertaking which, after the NMa has commenced an investigation into the cartel but before it has completed its investigation by means of a report, as referred to in section 59 of the Competition Act, informs the NMa of the existence of the cartel and its participation in it. This reduction of at least 50 per cent may be increased to full (100 per cent) immunity, if the Board of the NMa deems this to be effective given the value of the information provided, the stage of the investigation, and any other circumstances that may be appropriate in the case. Furthermore, the following cumulative conditions must be met:

• the undertaking is the first to provide the NMa with information regarding the cartel and this information has added value;
• the undertaking has not coerced any other undertaking into participating in the cartel;
• the undertaking provides the NMa with all information, documents and other evidence relating to the cartel as soon as it has them at its disposal, or acquires or is able to acquire them, until a decision has been taken with regard to the imposition of a sanction, as referred to in section 62 of the Competition Act;
• the undertaking cooperates fully with the NMa, in so far as this may reasonably be required of the undertaking, including issuing statements by management, employees and bodies belonging to the legal person until a decision has been taken with regard to the imposition of a sanction, as referred to in section 62 of the Competition Act; and
• the undertaking refrains from any practice that may obstruct the NMa’s investigation until a decision has been taken with regard to the imposition of a sanction, as referred to in section 62 of the Competition Act.

9. How many companies have received full immunity from fines to date?

On 28 December 2006 in Case 4253 (‘verzinkerijen’), the Board of the NMa granted full immunity to the undertaking Koninklijke Bammens BV. This case was the first and until now the only one in which the NMa has granted full immunity to an undertaking.

PROCEDURE/CONFIDENTIALITY

10. What are the practical steps required to apply for leniency?

An undertaking that wishes to be considered for leniency should contact the NMa’s leniency office. In its contact with the leniency office, the undertaking must be represented by a person who has the authority to enter into binding agreements on its behalf.

Step 1: notification

In its initial contact with the leniency office, the undertaking must give the most comprehensive view possible of the nature of the information to be provided. The following information is required:

• name of the undertaking and legal representatives of the undertaking;
• a description of the facts constituting the possible infringement;
• the relevant product market in which the infringement took place;
• the duration of the infringement; and
• the relevant geographical market in which the infringement took place.

Step 2: confirmation

The leniency office will send the undertaking in question prompt written confirmation of the date and time of receipt of its notification. This confirmation will include the fact that the undertaking was the first to provide notification if this is indeed the case.

Step 3: offer of leniency

• If fine immunity is granted, the leniency office will inform the undertaking which has invoked the Guidelines and provided all the information at its disposal, in writing and as soon as possible that the Board of the NMa has granted immunity.
• In the event that a fine is reduced, the leniency office will inform the undertaking in writing of the percentage reduction in the fine offered by the Board of the NMa, and will do so as soon as possible after the undertaking has provided all the information at its disposal.
• In the event that a fine is reduced, as defined in paragraph 7, the leniency office will inform the undertaking in writing that the Board of the NMa has granted a reduction in the fine of at least 10 per cent, and will do so as soon as possible after the undertaking has provided all the information at its disposal. The undertaking will be notified in writing of the exact percentage reduction in the fine at the moment that the report referred to in section 59 of the Competition Act is published or, if possible, at an earlier date, depending on the circumstances of the case.

: Correspondence address The Netherlands Competition Authority (NMa) Leniency Office PO Box 16326 2500 BH The Hague

Visitors’ address Wijnhaven 24 2511 GA The Hague

T: +31-70-330 17 10

F: +31-70-330 17 00

E: NMa_clementie@nmanet.nl

W: www.nmanet.nl

11. Is there an optimal time to approach the regulatory authority?

In order to become eligible for immunity or to receive a fine reduction of at least 50 per cent, the application should be made before the NMa starts an investigation. Undertakings that provide notification after the NMa has started an investigation into the cartel but before it has completed its investigation by means of a report as referred to in section 59 of the Competition Act, can under certain conditions receive a fine reduction of 10 to 50 per cent.

12. What guarantees of leniency exist if a party cooperates?

The NMa will send the undertaking that has provided notification a conditional offer of Leniency (as set out above under question 10). This offer is conditional in the sense that it depends on the undertaking fulfilling the relevant conditions.

If an undertaking which has been offered fine immunity complies with the conditions, the Board of the NMa will honour the offer and no fine will be imposed on the member of the cartel in question. If an undertaking has been granted a reduction in the fine and has complied with the conditions subject to which the offer was made, the Board of the NMa will reduce the fine by the percentage reduction offered.

But if in the opinion of the NMa an undertaking has not complied with the conditions subject to which leniency is offered, the offer made by the Board will lapse. The undertaking involved will be informed in writing and the Board will set the fine for the undertaking in question in the same way as it sets the fines for the other members of the cartel who were not eligible for leniency.

13. Is confidentiality afforded to the leniency applicant and other cooperating parties? If so, to what extent?

Information provided in relation to an application for leniency – which information may be deemed to be information in terms of section 10 of the Government Information (Public Access) Act – shall be treated confidentially, unless the NMa is obliged by law to hand over such information and/or make it available for inspection. The identity of the undertaking that has provided information will not be made public before the report referred to in section 59 of the Competition Act, except in cases in which there is a legal obligation to do so. In such cases, the undertaking will be notified before the information is made available.

CONSEQUENCES

14. What effects does leniency granted to a corporate defendant have on the defendant’s employees?

Managing directors and employees cannot be held personally liable for any violation of section 6 of the Competition Act. A proposal for an amendment of the Competition Act is currently being discussed in the House of Representatives. If the proposal is accepted (probably mid 2007), fines of up to €450,000 can be imposed on managing directors who are held liable for violating section 6 of the Competition Act. The Guidelines will apply to managing directors as well.

15. Does leniency bar further criminal or private enforcement?

Granting leniency in accordance with the Guidelines only has consequences with regard to the non-imposition or reduction of fines in cases relating to section 6 of the Competition Act and/or article 81 of the EC treaty and articles 56, 57 and 62 of the Competition Act, but does not protect the cartel member from any other consequences resulting from its involvement in the cartel, such as consequences under civil law or sanctions imposed by other competition authorities.

In the Netherlands no criminal enforcement is currently made under the Competition Act. A proposed amendment to the Competition Act has been submitted which aims to provide for the criminal enforcement of the Competition Act against individuals who have played a leading part in restricting competition. However, the Minister of Economic Affairs recently (July 2007) declared that it does not wish to introduce criminal enforcement of the Competition Act. For this reason it is uncertain whether the Competition Act will be subject to criminal enforcement anytime in the future.

RELATIONSHIP WITH THE EUROPEAN COMMISSION’S LENIENCY NOTICE AND LENIENCY POLICY IN OTHER EU MEMBER STATES

16. Does the policy address the interaction with applications under the Commission Leniency Notice? If so, how?

The NMa is authorised to provide information or data obtained in the course of the enforcement of the Competition Act to a foreign competition authority if such information is of significance to the performance of that institution’s duties. In this regard the Chairman of the Board of the NMa must be of the opinion that the information provided must be sufficiently protected and sufficient assurances are given that it will not be used in a manner inconsistent with the purposes for which it is provided (section 91 of the Competition Act). The European Competition Authorities (ECA), the umbrella organisation of the European competition authorities, adopted the ‘Principles for Leniency Programmes’ at its meeting in Dublin in September 2001. These principles were taken into account in drawing up the present Guidelines. Furthermore, the Commission Notice on cooperation within the network of Competition Authorities (2004/C101/03) lays down rules for the exchange of documents between European national competition authorities that have been obtained under leniency arrangements.

17. Does the policy address the interaction with applications for leniency in other EU member states? If so, how?

Please see answer to question 16.

REFORM/LATEST DEVELOPMENTS

18. Is there a reform underway to revisit the leniency policy? What are the latest developments?

The NMa has recently (13 july 2007) published a Consultation Document ‘Richtsnoeren Clementie’ (consultation document concerning new Leniency Guidelines). The Consultation Document sets out new and revised rules for leniency. Revision of the leniency policy is of course necessary because the Competition Act will be revised. Both documents should therefore come into force simultaneously. The NMa is currently still in the process of drafting a final version of the new Leniency Guidelines.

The revised Competition Act states that the NMa will have the power to impose fines, up to a maximum amount of €450,000, on natural persons who have given instructions or have exercised de facto leadership with regard to practices in breach of the cartel prohibition.

New rules Natural persons

As set out above the NMa will have the power to impose fines on natural persons who have given instructions or have exercised de facto leadership with regard to practices in breach of the cartel prohibition. Consequently, a natural person will have the possibility to apply for leniency.

Natural persons may apply for leniency in the following ways:

• individual application for leniency, separate from the undertaking;
• application for leniency together with two or more natural persons employed by the same undertaking. The application should be done independent of the undertaking; or
• application for leniency by the undertaking. The appeal for leniency by the undertaking must include an application from the natural persons employed by the undertaking.

Natural persons who apply for leniency should be treated in the same way as undertakings. Therefore the same cumulative conditions must be met in order to qualify for leniency.

Consequently, natural persons and undertakings will compete in the same race to be the first to inform the NMa about a cartel. Therefore leniency and the procedure as stated in the former guidelines remains effective.

Contact with the NMa’s leniency office

Under the new Leniency Guidelines it will be possible to converse with the leniency office confidentially. Furthermore, it will be possible for leniency applicants represented by their attorney to enquire whether ‘full immunity’ is still available. The leniency office may give the attorney information about the availability of ‘full immunity’. If ‘full immunity’ is still available the attorney must immediately send the leniency request to the leniency office. If ‘full immunity’ is no longer available the attorney is free to decide upon a course of action.

Leniency request

Under the new Leniency Guidelines there will be four types of leniency requests:

•  
  • complete leniency request: meaning that the request complies with all cumulative
  • conditions necessary to qualify as a leniency request; • oral leniency request: similar to a complete leniency request but in oral form;
• brief leniency request: see ECN Model Leniency Programme; or
• incomplete leniency request: an incomplete request offers a concrete basis for a reasonable suspicion that the concerned applicant is/was involved in a cartel. An incomplete leniency request does not qualify as a leniency request, but may nevertheless be eligible for a ‘marker’.

A ‘marker’ marks and retains for a limited period of time the applicant’s place in the order of ranking in relation to other leniency requests. After granting a marker, the leniency office will set a deadline before which a complete leniency request must be submitted. If the applicant submits the application within the period given by the leniency office, the applicant will keep his place in the ranking order.

Revised rules

• The material scope of the leniency policy will be limited to horizontal hardcore cartels.
• Fine reduction in category B (paragraph 6) currently amounts to at least 50 per cent. Under the new Leniency Guidelines fine reduction in category B will amount to 60–100 per cent.
• Fine reduction in category C (paragraph 7) currently amounts to 10–50 per cent. Under the new Leniency Guidelines fine reduction in category C will amount to 10–40 per cent.
• In order to receive a fine reduction of 10–40 per cent full cooperation with the investigation of the leniency office is required.
• Information supplied by the applicant must have a ‘significant’ added value. The information must be submitted on time and must clearly contribute to the evidence against the cartel.