Competition rules tighten across Europe

Wednesday, 28 November 2012

Several European countries are in the process of tightening their competition rules. Legislation and guidance have changed (or are expected to change shortly) in the United Kingdom, Belgium, Estonia, as well as within the European Competition Network. More encouragingly, as one of the first national competition authorities, the United Kingdom now recognises the importance of compliance to the extent that ‘in principle’ competition sanctions are reduced when companies show good effort. 

Recently, the United Kingdom published new guidance on how it will set penalties for competition breaches. Crucially, this guidance increases the starting point for calculations from 10% to 30% of relevant turnover. In effect, this has made more starting points available to initiate the fining process. This move allows the Office of Fair Trading (“OFT”) to better appreciate the gravity of competition infringements. Practitioners fear the OFT may increase fines substantially as a result, especially in case of hardcore cartel infringements.

The reform brings the United Kingdom into line with the European Commission and several national competition authorities, where comparable developments took place.

Another key change in the new guidance would be the separating of several steps in the OFT’s reviewing process. The new guidance includes a separate proportionality step, to establish whether a competition sanction overall can be said to be proportionate. It also includes a separate step in which leniency and settlement discounts are applied.

Conversely, as one of the first amongst many jurisdictions, the British competition authority moves to formally favour compliance. In principle, it says, if a company can show it made efforts to comply with competition law both before and after an infringement, the OFT reduces sanctions for competition infringements (albeit modestly). This move, even if dependent on factual circumstances, would be welcome in other jurisdictions as well, as it clearly shows the importance of having proper compliance in place.

In general, the above changes appear to evidence tightening competition rules in the United Kingdom. As such, they reflect a cross-continent tendency to expand the grip of national competition authorities.

As discussed more elaborately elsewhere in this news letter, inBelgium, lawmakers currently propose a new Economy Act. The proposal, which is expected to take effect early 2013, aims to introduce sanctions for individuals. Although these sanctions for now will range between EUR 100,= and EUR 10.000,=, this move is a clear signal that the Belgian legislature want its competition authority to wield the full palette of sanctions available elsewhere.   

In Estonia, the national competition authority proposed to bring another sector of the economy under its scrutiny. It asked the Ministry of the Environment to remove restrictions on waste management markets, in effect broadening the scope of competition regulations and sanctions to an economic sector, which the competition authority views as government-controlled.

A development of quite a different order would be the overhaul of the 2006 Model Lenciency Programme by the European Competition Network (“ECN”). The body, composed of the European Commission and national competition authorities within the EU, replaced its 2006 rulebook with a simplified version.

Key changes for the ECN are the introduction of a standard EU template for summary applications; a list of EU Member States that are willing to accept summary applications in English; and a rule that all leniency applicants may submit summary applications, in cases that concern more than three EU Member States (previously, only the first leniency applicant was entitled to use summary application procedure). It is hoped these changes will serve to make the 2012 Model Leniency Programme more attractive and cost-efficient.

For more information please contact:

Adriaan Buyserd
T. +31 (0)73-6927 798
E. a.buyserd@banning.nl