June 16, 2016
On January 20, 2016, the Court of Justice of the European Union (ECJ) issued a judgment on a reference for three preliminary rulings from the Italian Consiglio di Stato (Council of State, Italy). The ECJ clarifies about the legal status of instruments of the European Competition Network (ECN) and the relationship between applications for immunity submitted to the European Commission, and those submitted to the national competition authorities (NCAs). EU and Member State leniency programmes are fully autonomous, so that obtaining leniency or immunity in an EU cartel investigation does not entitle the leniency/immunity beneficiary to similar treatment in related national investigations. The ECJ substantially confirms what it handed down in Pfleiderer (C‑360/09, EU:C:2011:389) about the not-binding nature of ECN instruments and Commission Notices.
On 5 June 2007, DHL Express (Italy) Srl and DHL Global Forwarding (Italy) SpA (together, ‘DHL’) submitted to the European Commission an application for immunity from fines concerning several infringements of EU competition law in the sector of international freight forwarding services, that is to say, as regards maritime, air and road transit. In June 2008, the Commission decided to pursue only the part of the cartel concerning international airfreight forwarding services, leaving NCAs the possibility of pursuing the infringements in relation to the sea and road freight forwarding services.
In parallel, on 12 July 2007, DHL submitted to the Italian Competition Authority (‘the AGCM’) a summary application for immunity under the national leniency programme but the application did not specifically cover the road transport sector. On 23 June 2008, DHL submitted an additional summary application for immunity to the AGCM, supplementing the application initially submitted on 12 July 2007, in order to expressly extend that application to the international road freight-forwarding services.
In the meantime, on 12 December 2007, Schenker submitted a summary application for leniency to the AGCM, providing information on road freight forwarding in Italy.
On 18 November 2009, the AGCM opened a procedure concerning possible infringements of Article 101 TFEU in the international freight transport sector.
In that decision, the AGCM recognised that Schenker was the first company that applied for immunity in Italy for road freight forwarding services. Under the national leniency programme, no fine was imposed on that company. DHL, however, was ordered to pay a reduced fine.
DHL brought an action for partial annulment of the AGCM decision before the Tribunale amministrativo regionale per il Lazio (TAR). DHL argued that they should have been accorded the first place in the queue for the national leniency programme and therefore immunity from fines. According to DHL, the principles of EU law require that the NCA that receives a summary leniency application must assess it while taking into account the main application for immunity that company submitted to the Commission. Moreover, DHL argued that the summary application submitted by Schenker to the AGCM was inadmissible.
The TAR rejected the action brought by DHL on the basis that the different leniency programmes and their applications were each other autonomous and independent.
DHL lodged an appeal before the Consiglio di Stato, which decided to stay the proceedings and to refer three questions to the ECJ for a preliminary ruling.
THE REASONING OF THE COURT :
The Consiglio di Stato asked the Court:
- Whether the instruments adopted in the context of the European Competition Network (the ECN), in particular the ECN Model Leniency Programme, are binding on national competition authorities.
The ECJ states in favour of the nonbinding nature of the Commission Notices on Cooperation, and the Commission Notice on immunity from fines and reduction of fines (para. 33). The ECN, being intended to encourage discussion and cooperation in the implementation of competition policy, does not have the power to adopt legally binding rules. Moreover, in the absence of a centralised leniency system at the EU level, the treatment of leniency applications sent to a NCA is determined by that authority under the national law of the Member State in question (para.36).
- Whether (i) there is a legal link between the application for immunity to the Commission and the summary application submitted to a national competition authority in respect of the same cartel requiring that authority to assess the summary application in the light of the application for immunity, where the summary application accurately reflects the content of the application for immunity submitted to the Commission and, (ii) in the event that the summary application has a more limited scope than the application for immunity, the national competition authority is required to contact the Commission or the applicant to establish whether that applicant has found specific examples of unlawful conduct in the sector allegedly covered by the application for immunity, but which is not covered by the summary application.
The ECJ holds that there is no connection at all between the two applications. It specifies that in the absence of a European Union-wide system of fully harmonised leniency programmes, an application for leniency to a given NCA cannot be considered as an application for leniency to any other NCA (para. 55). In that respect, paragraph 1 of the ECN Model states that it is in the interest of undertakings to apply for leniency to all competition authorities which have competence to apply Article 101 of the TFUE in the territory which is affected by the infringement in question, and which may be considered well placed to act against that infringement (para.56). The ECJ also points out that NCAs are free to adopt leniency programmes and each of those programmes is autonomous, not only vis à vis other national leniency programmes, but also in respect of the EU leniency programme (para. 57).
- Where a first undertaking has submitted an application for immunity to the Commission, whether only that undertaking may submit a summary application to a national competition authority or if other undertakings, which had submitted an application for a reduction of the fine to the Commission, are also entitled to do so.
The doubt nonetheless sits to the fact that the ENC Model of 2006 indicated that the system of summary applications for immunity at the national level was opened to the undertakings that had applied to the Commission for immunity from fines, whereas it was not clear whether that system was also opened to undertakings that had applied to the Commission for a mere reduction of fines. Only in 2012, the amendments to the ECN Model clearly states that also an undertaking that submits a leniency application for a reduction of fines before the Commission could also submit a summary application before an NCA to obtain the total immunity.
The ECJ holds that, due to the non-binding nature of the ECN Model, such Model does not prevent NCAs from accepting also a summary application for immunity from an undertaking that already applied for a reduction of fine before the Commission.
The judgment of the ECJ was expected to confirm what it stated in Pfleiderer in 2011. Its analysis, based on the non-binding nature of the ECN Leniency Model and, therefore, on the autonomy of leniency programmes, both at the European as well as at the national level, does not help the improvement of the whole leniency system in Europe.
First, it must be borne in mind that the ECN Leniency Model is a product of the ECN, which is composed by both the Commission and the NCAs. The purpose of this model is “to ensure that potential leniency applicants are not discouraged from applying as a result of the discrepancies between the existing leniency programmes within the ECN. […] In addition, the ECN Model Programme aims to alleviate the burden associated with multiple filings in cases for which the Commission is particularly well placed by introducing a model for a uniform summary application system” (ECN Model, para. 2). DHL had no doubt about its legal value, as it seemed to be an agreement involving all the actors of a competition law proceeding. The ECJ, retaining the non-binding nature of the ECN Leniency Model, did not take into account the principle of protection of legitimate expectations, principle already protected by the ECJ in relation to a Commission Guidelines.
In the case at hand, DHL, acting in good faith, followed the entire procedure as described in the ECN Model: a complete application submitted to the Commission on June 2007, a summary application submitted to the AGCM on July 2007. The ECN Model provides a Summary Application in cases where the Commission is “particularly well placed” in accordance with paragraph 14 of Network Notice, that is to say when a cartel have effects on competition in more than three member states. In this case, the undertaking which applies for leniency before the Commission may file summary applications with any NCAs which the applicant considers to be “well placed” to act under the Network Notice in order to guarantee a place in the queue, also at national level, in the event of a case being reallocated.
The NCAs will not process summary application. They will only acknowledge receipt to the applicant, grant the applicant a summary application marker and confirm that the applicant would have a period of time during which it has to complete the application.
In the case at hand, the AGCM did not grant to DHL any marker and, when in June 2008, after the re-allocation of part of the cartel from the Commission to the NCA, DHL supplied the summary application to extend it also to road forwarding sector, for the AGCM was too late: in December 2007, Schenker had still provided information about the road freight forwarding sector.
Furthermore, the ECJ also stated that there is no connection between a “principal” leniency application submitted before the Commission and a summary application submitted before an NCA. Because of that, the NCA is not obliged to refer to the “principal” leniency application in the event that the summary application has a more limited material scope than the “principal” one.
The AGCM considered that in its application of 12 July 2007, DHL had requested immunity from fines only for airfreight and sea freight forwarding services and the application in respect of road forwarding services had been filed only on 23 June 2008.
The marker system responds to this particular necessity: when an application needs to be completed and in order to guarantee a place in the queue however, as explained before, any marker has been granted to DHL.
Moreover, paragraph 43 of the ECN Leniency Model of 2006, expressly stated that: “As long as the CA has not decided to take action in the case, the applicant’s duty to provide further information and generally assist with the investigation only exists towards the Commission”. The AGCM only started its procedure on November 2009, therefore, before this date, DHL had to provide information only to the Commission, as it did on December 2007, concerning the road freight forwarding services.
If this model, according to the ECJ, has not binding effect at all, it is the whole system of leniency that is called into question. Does an undertaking have to follow two different procedures, the European and the national one, in order to apply for leniency? It seems that such uncertainty will discourage undertakings to blow the whistle rather than encourage them.
Furthermore, the ECJ focused, in order to deny any kind of link between the “principal” and summary application, on the autonomy of the various applications (para. 61) and on the duty of cooperation of leniency applicants (para 63). Concerning the autonomy of the various application, I would like to express my scepticism about that. Applications concerning the same cartel, the same infringement, which “may affect trade between member states”, could not be considered independent to each other. In a European system, where 27 Member States apply leniency programmes, where most of the cartels involve the European market (with consequent infringement of Article 101 TFUE), the independence of leniency programmes is simply a myth. If it were so, it should be concluded that a summary application is useless and that such a provision provided by the ECN Model Leniency Programme could be deleted.
Concerning the duty of cooperation, it is interesting to discover that the ECJ refers to it only regarding the leniency applicants but not regarding the Commission and the NCAs. Both article 4(3) TUE and Article 11(1) Regulation 1/2003 state about the duty of cooperation between Commission and Member States, in particular when they apply competition rules. Concerning the summary application, paragraph 44 of the ECN Model Leniency Programme states that NCAs having received a summary application are entitled to exchange information without the consent of the applicant. In this light, NCAs should be obliged to take into account the first leniency application submitted to the Commission: first, it is not difficult inner the ECN system where the exchange of information is easier and, secondly, it is a duty in particular when a company, acting in good faith, follows the procedure established by the ECN.
This is evidently the central problem of the procedure: if the ECN model has a non-binding effect and, therefore, a summary application to a NCA is completely independent from the application submitted to the Commission, this summary application has to fulfil the different conditions of access stated in different national leniency programmes. Although most of national leniency models are based on the ECN Leniency Model, divergences between the twenty-seven national leniency programmes still exist. It is not unrealistic that upon a leniency application before a particular NCA, another NCA starts an investigation against the undertaking, while this NCA has a particular leniency programme (or does not have any leniency programme such as Malta), under which the undertaking does not qualify for a lenient treatment.
It seems that the decision of the ECJ leaves a general uncertainty about the consequences and side effects of a leniency application. As leniency system is considered one of the strongest tool to detect cartels and, in order to guarantee its effectiveness, the existence of these contradictions should be remedied.
The creation of a European Competition Network should have been the first step for a centralized system. Exchange of information, duty of cooperation, uniform application of competition rules must be taken into account when a company applies for leniency before the Commission. In a European Internal Market, where the leniency programme is by the time a generalized system, to declare these programmes independent and autonomous is simply not realistic. The realization of a one-stop-shop could be the answer to the plague of multiple leniency applications: the leniency system must be improved and simplified in order to be perceived as fair and to encourage more undertakings to blow the whistle.