As the New Year has just started, the Competition Council of Latvia, as usual, implements active work, carrying out research and supervision of competition on various markets. Among other things, the CC investigates possible infringements of the Competition Law, imposing fines on large and small companies.
Among infringements of the Competition law there are prohibited agreements of companies, where the most severe of them are cartel agreements – agreements of competitors on, for example, submission of mutually coordinated offers in procurements, division of customers and markets, or prices of goods and services, offered by these companies. Examples of prohibited agreements in a non-exhaustive way are listed in section 11(1) of the Competition Law.
If the CC detects a cartel infringement, the fines imposed on participants of cartel agreements are quite severe – they can reach even 10% of net turnover of the company in the last year at the moment of detecting the infringement. Moreover, if a company actively participates in public procurements, a decision of the CC also means exclusion of the company from participation in these procurements for one year. It should be kept in mind, that a fine may be imposed also on the company that has promoted this cartel, for example, the company that has acted as an intermediary or supporter, facilitating the cartel activities.
At the same time, it is important to remember, that even when the CC already investigates the alleged suspicion of infringement, companies should not passively watch and wait the inevitable, criticizing the system and stubbornly believing, that it is a conspiracy in order to ruin companies. The goal of the CC is to protect fair competition and eliminate its distortions, and one method to achieve it is to hold liable those companies that operate against fair competition. And in such moments, although a fine for an infringement may be inevitable, companies can always try to reduce it (or even become fully exempted from a fine) by actively and timely cooperating with the CC.
Types of cooperation with the CC during investigation of a case can be different, for example, provision of information for mitigating responsibility, or settlement offer; however, cooperation of a company within the framework of the leniency programme has to be emphasized as the most favourable of all legal solutions in the case of cartel agreement. Although it seems complicated, it is not so in reality. Still, a company has to be prepared to make its contribution in achieving a positive result and comply with certain conditions. Furthermore, if a company executes requirements of the leniency programme in good faith, exclusion for one year from participation in public procurements will not be applied on this company.
Clearly and formally – detailed regulation of the leniency programme is available in section 121 of the Competition Law and in the Regulations of the Cabinet of Ministers[1]. But in more simple words – it is a method, how a company can obtain reduction of a fine or even become fully exempted from it in exchange for significant information on the cartel agreement, when the CC detects an infringement. Representatives of the CC are always open also for confidential consultations and are ready to explain all aspects of the leniency programme via phone or by meeting in person.
Looking through all small details in relation to the leniency programme, the main accent is put on two issues – when to address the CC and what will happen with the fine – will it be reduction or full exemption?
Answering the first question – a company can address the CC before it has addressed the company with news, that a case is initiated against it, or still – within the framework of initiated case. All activities of a company shall be accompanied by awareness of the company, that its conduct has resulted in competition being limited on the market, and the desire to eliminate and correct the existing situation.
Answering the second question, it depends on when a company addresses the CC, and significance of the provided information.
If a company visits the CC before it has itself obtained information on alleged suspicion of cartel agreement and the information provided by the company reveals existence and operation of cartel agreement, the company may be fully exempted from a fine, if the CC detects an infringement. However, it is not the only case – exemption from a fine still can be obtained also within an already initiated case – if the CC has information, but it is insufficient to detect an infringement. It is quite obviously confirmed also in section 121 of the Competition Law. It has to be considered, that only the first reporting company is entitled for full exemption. In other instances, if the provided information is significant, a company can obtain reduction up to 50% of the final fine, if an infringement is detected. However, the potential risk has to be always remembered – any other company can become the first to report, because several companies are entitled to submit leniency programme applications within one case. And, the later an application is submitted, the smaller will be reduction of a fine.
In any case – cartel agreements will always be the priority of the CC as the most severe infringements of competition law. And it seems, that cartel agreements will not disappear so soon – this is confirmed by the fact, that none of the European Union Member States has managed to eradicate cartel agreements regardless of traditions of free commercial activity in each of them. Although it is impossible to detect all concealed agreements, cartel agreements are most frequent infringements of competition law, detected by the CC each year. Therefore, by planning cooperation with the CC in a forward-looking and strategic manner, a company can only benefit in the case of existence of cartel agreement. Moreover, it is better to understand own mistakes timely instead of waiting, when the CC will start investigation. Then there will be much less possibilities to avoid a fine.
[1] Cabinet of Ministers Regulations No. 179 “Procedures for the Determination of Fines for the Violations Provided for in Section 11, Paragraph 1 and Section 13 of the Competition Law and Sections 5, 6, 7 and 8 of the Unfair Retail Trade Practices Prohibition Law” of 29.03.2016