Leniency Regimes

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

In Cyprus the policy and procedures involved in applying for immunity from fines and reduction of fines (ie, leniency) in cartel cases are contained in the ‘Cartel immunity and reduction of a fine programme’ (‘the programme’).

The programme came into effect on 1 February 2003 and it closely mirrors the Commission Leniency Notice.

The enforcing body for the programme is the Commission for the Protection of Competition (the CPC). The Protection of Competition Law 207(I) of 1989 as amended 1999 and 2000 (the Competition Law) establishes the CPC and sets out its duties and powers. The CPC is an independent body responsible for administering and enforcing competition rules and policy. This includes the Competition Law, section 4 of which prohibits any agreement having as its object or effect the elimination, restriction or distortion of competition. The CPC has extensive powers to obtain information where it suspects an abuse of the Competition Law and for this purpose its officials are empowered to enter all premises and means of transport used by an enterprise and to obtain explanations and information.

The CPC considers that secret cartels between two or more ostensible competitors aimed at fixing prices, production or sales quotas, sharing markets including bid rigging or restricting imports or exports to be amongst the most serious restrictions of competition possible, and recognises the intrinsic importance of schemes that contribute to the detection and investigation of cartels and remove their harmful effects. Consequently the CPC introduced the programme in order to provide a detailed guide to its approach to the granting of immunity from a fine, or a reduction of a fine, where undertakings which have violated the Competition Law volunteer information to the CPC in respect of the other undertakings within the cartel.

The definitive text of the programme is in the Greek language but an indicative English translation of the programme is available on the website of the Commission for the Protection of Competition of the Republic of Cyprus at: www.competition.gov.cy.

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

The basic tenet of the programme is that an applicant may be granted immunity from a fine which would otherwise be levied on it for breach of section 4 of the Competition Law if it provides information which makes a decisive contribution to:

• the opening of an investigation into a cartel; and/or
  • the finding of an infringement of competition law. It must also meet certain requirements as detailed in question 4 below. Additionally, it is acknowledged that cooperation with the CPC investigations by one or
  • more undertakings may justify the reduction of any fine which would otherwise be levied on it for breach of section 4 of the Competition Law. Reductions in any fine are:
• linked to the quality and timing of the cooperation vis-a-vis the establishment of a competition infringement; and
• limited to undertakings which provide the CPC with evidence that adds significant value to that already in the CPC’s possession.
  Again there are additional requirements to be met as detailed in question 7 below.
  

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

The programme is a relatively new one and as yet there have been few incidences of it assisting in the unveiling or punishment of a Cyprus based cartel.

In February 2006 the CPC imposed a financial penalty of CY£100,000 (approximately €171,000) on three commercial banking institutions (Bank of Cyprus, Cyprus Popular Bank and Hellenic Bank) for effecting concerted practices with regards to the location of ATMs owned by JCC Payment Systems Limited in contravention of section 4 of the Competition Law. This followed a previous ruling against the same three banks in 2004 for breach of section 4 and the imposition at that time of an aggregate fine of CY£5million (approximately €8,550,000).

In determining the level of the penalty in 2006 the CPC took into consideration:

• the commitment undertaken by the banking institutions to disassociate themselves from the process of deciding the locations of the ATMs of JCC Payment Systems Limited;
• their co-operation with the Commission under the leniency programme;
• the acknowledgement on the part of the banks that they had entered into exchange of information and recommendations with regards to the location of the ATMs of JCC; and
• the declaration by their legal counsellors that there was no intention on their part to distort competition and that any such incidents will be avoided in the future.

However, since its inception the majority of the activity of the CPC has focused on investigating allegations of the abuse of a dominant market position and the assessment of proposed concentrations of undertakings rather than allegations of cartel activity. This is possibly a consequence of the relatively small size of most Cyprus domestic markets, which renders it possible for a single undertaking to achieve dominance in many of the local market sectors without needing to enlist the aid of a cartel.

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

In order for an applicant to obtain benefits under the programme the following conditions must be satisfied. The applicant must:

• present its application before the CPC has sufficient evidence to reach a prima facie finding that there has been an infringement of section 4 of the Competition Law;
• take effective steps to terminate its participation in the illegal activity. Such steps must be agreed with the CPC;
• keep its immunity application secret from other cartel members; and
  • not have been the instigator or leading participant in the illegal activity, nor must it have coerced another undertaking to participate in the illegal activity.
  • Additionally throughout the course of the CPC investigation and any subsequent proceedings the applicant must cooperate fully and promptly with the CPC. Specifically, the applicant must:
• make full disclosure of all infringements of the Competition Law with which it has been involved; and
• make full and frank disclosure of all evidence and information known or available to it under its control relating to the CPC’s investigation. This includes all documentary and other records irrespective of location. In making its disclosure the applicant must not misrepresent any material facts. If the CPC is satisfied that the applicant has met its conditions, full immunity from fines will be granted.

The programme does not explicitly state that testimonial evidence alone would be insufficient to satisfy the criteria for granting full immunity. However, it is probable that the application would be more favourably received if ultimately it is supported by documentary evidence.

TIMING

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

Subject to the conditions detailed above the principal benefit of being the ‘first in’ to cooperate is that the applicant will receive a full immunity from the fines to which it would otherwise be subject. This can represent a significant financial benefit. It should also be noted that the CPC will not entertain joint applications for immunity by two or more cartel members. This gives a cartel member a significant incentive to be first to cooperate.

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

The CPC will not consider other applications for immunity in respect of the same infringement until it has taken a position on an existing application. If, however, the CPC decides that the first or ‘previous’ applicant does not fulfil its criteria a subsequent application for immunity may be considered. The criteria to be fulfilled by a subsequent applicant are as previously detailed in question 4.

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

Participants which subsequently make a ‘useful contribution’ to the investigations and consequent hearings relating to a section 4 infringement are eligible to receive a reduction in the fine that would otherwise be imposed on them as a consequence of their anti-competitive practices. A ‘useful’ contribution is defined as being one which provides the CPC with information of significant ‘added value’ in relation to the evidence already in its possession. Specifically the evidence supplied must strengthen the CPC’s ability to prove the facts of the case. Additionally the undertaking must terminate its involvement in the infringement under investigation according to the terms and conditions set by the CPC.

If the CPC determines that the evidence supplied has been useful in unveiling or proving an infringement of the Competition Law it will apply a reduction in the fine imposed on the participant in accordance with the following scale:

• first undertaking to cooperate – reduction in fine of between 50 and 70 per cent;
• second undertaking to cooperate – reduction in fine of between 30 and 50 per cent; or
  • subsequent undertakings to cooperate – reduction in fine of up to 30 per cent.
  • When determining the specific level of fine reduction to be granted the CPC will consider the following factors:
• the timing of the submission of evidence;
• the extent to which the evidence ‘added value’ to the CPC case; and
• the extent and continuity of the co-operation provided by the undertaking following its submission of evidence.

SCOPE/FULL LENIENCY

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

It is possible for an undertaking to receive full leniency from fines which would otherwise have been levied upon it as a result of its infringement of section 4 of the Competition Law. As stated previously in questions 2 and 4 above in order to obtain full leniency an undertaking must proactively provide information that leads to the opening of an investigation of a cartel or, to the actual finding of an infringement of section 4 of the Competition Law. Additionally the applicant:

• must not have acted as the instigator or played a lead role in the infringement;
• must approach the CPC before the CPC has sufficient evidence to reach a preliminary finding that section 4 has been infringed;
• must take effective steps as approved by the CPC to terminate its role in the illegal activity;
• must not alert other cartel participants that it has applied for immunity under the programme (and hence alert them to any possible investigation); and
• must cooperate fully and promptly with the CPC throughout its investigation and any subsequent hearings.

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

To date there are no incidences of companies receiving full immunity from fines. See question 3 above.

PROCEDURE/CONFIDENTIALITY

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

The practical steps to be taken by an applicant seeking full immunity are as follows:

Initial contact

Any undertaking wishing to apply for leniency should first contact the CPC or the Competition and Consumer Protection Service (‘the Service’), which is an agency of the CPC. Upon making contact the applicant will be asked to present an outline of the facts of the case to the ‘designated officer’ of the Service. This initial presentation may be made on behalf of the applicant by legal consultants in order to protect the anonymity of the applicant. The officer will conduct a preliminary review of the case and if it is apparent that the application will not satisfy the criteria required to receive full immunity the applicant will be immediately informed of this fact.

Qualified guarantee of leniency

If the applicant decides to proceed with its application it must provide the Service with a description of the illegal activity which the Service considers to be adequate for its purposes. The case will then be referred to the CPC. If the CPC concurs with the Service’s view that the application falls within the scope of the programme a conditional immunity decision will be issued.

Full disclosure

Once the applicant is made aware of the decision to grant immunity it must inform the Service in detail of what evidence it can supply and when and how it can supply it. The disclosure must be complete, frank and truthful. All evidence known or available to the applicant or under its control must be disclosed. The disclosure takes place after the applicant has been reminded of its legal privilege against self incrimination.

An undertaking may subsequently withdraw the evidence disclosed for the purposes of its immunity application or request the CPC to consider it instead as part of an application under section 2 of the programme to obtain a reduction of any proposed fine. However, it should be noted that, under the powers of investigation granted to it by the Competition Law, the CPC may still gain access to the evidence.

The practical steps to be taken by an applicant seeking to benefit from a reduction of a fine are outlined in the following paragraphs.

Initial contact

The applicant should make contact with the CPC or the Service. Following this initial contact an officer of the Service will be designated to deal with the case. Relevant evidence should be submitted to this officer who will issue an acknowledgement of receipt recording the date on which the evidence was submitted. No further action will be taken by the CPC until it has taken a position on any pre-existing applications for a conditional immunity from fines in respect of the same infringement.

Conditional reduction of fine

Once outstanding immunity applications in respect of the same infringement of the Competition Law have been dealt with the CPC will consider the new evidence submitted. If it comes to a preliminary decision that this new evidence does ‘add value’ to its existing case it will write to the undertaking to inform it of its intention to apply a reduction of the fine within one of the bands specified in question 7 above. This communication will take place not later than the date on which the CPC notifies the other alleged cartel members of their alleged violations of the Competition Law.

Final reduction

The final position of each undertaking that has filed an application for a reduction of a fine is evaluated by the CPC at the end of the proceedings. At this stage the CPC is in a position to make a comprehensive assessment of the true worth of the evidence supplied by each party and the appropriate reduction will be applied within the specified bands as previously notified to each.

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

Undertakings that possess information on secret cartels should approach the CPC as soon as it is feasible to do so. As detailed in questions 5, 6 and 7 above there are distinct benefits to be obtained both by being seen to be the first, or amongst the first, to contact the CPC and also by providing information at an early stage of any CPC investigation.

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

Full disclosure on the part of the leniency applicant is conducted on the strict understanding that neither the CPC nor the Service will use the information so obtained against the applicant unless the applicant breaches the terms of the conditional immunity decision. Should there be such a breach the fact that the applicant was previously reminded of its legal privilege against self incrimination allows the CPC to use the information obtained during the course of full disclosure in pursuing its investigations. This may include taking action against the applicant as well as other cartel members.

Failure to meet any of the requirements of the leniency programme at any stage of the CPC proceedings may result in the loss of any favourable treatment which had been conditionally agreed.

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

As stated in question 10 above the initial approach to the CPC or the Service may be made via a legal representative in order to maintain the anonymity of the enquiring party. Thereafter, if the application proceeds the identity of the applicant must be disclosed.

The fact that an undertaking cooperated with the CPC during its investigations and hearings will be indicated in any subsequent decisions made by the CPC. This affords the CPC the protection of providing an explanation for any immunity or reduction of fines granted to participants in the cartel under investigation and protects the CPC from allegations of bias or corruption.

Written statements made to the CPC in relation to the immunity programme are retained on the CPC file. They may not be disclosed or used for any other purpose than the enforcement of the Competition Law.

CONSEQUENCES

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

Leniency granted to a corporate defendant does not automatically extend to its employees. The defendant has the option to initiate a simultaneous application for immunity on behalf of its directors, officers or any other duly authorised persons. The structure of the programme recognises that there may be occasions where, for example, such a person may have caused the company to act in an anti-competitive manner without the full knowledge and consent of the company board or its shareholders. In such circumstances the company may wish to disassociate itself from the employee concerned.

15. Does leniency bar further criminal or private enforcement?

Information obtained by the CPC under the terms of the leniency programme may be used only for the purpose of supporting actions under the Competition Law. Provided that the terms on which immunity has been granted are not breached, information obtained under the programme may not be used against the applicant. Officers of the CPC and its Service are bound to respect this confidentiality and breach of it is a criminal offence.

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

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

The Cyprus programme is based on the 2002 Commission Leniency Notice and does not reflect any of the changes made in the December 2006 amendment of the Commission Leniency Notice.

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

The programme does not address the interaction with applications for leniency in other EU member states.

REFORM/LATEST DEVELOPMENT

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

In due course the programme will be updated to align it with the latest version of the Commission Leniency Notice. However, no concrete proposals have yet been announced.