Chicago Global: Valuable Secrets in Antitrust Enforcement

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Alexandre Zanotta
Alexandre Zanotta, L.L.M. '06, bachelor of law (JD equivalent - 2000) and masters of law (2005) from the Pontifica Universidade Catolica de Sao Paulo (Brazil). Researches such subjects as Corporate, Securities, Banking and International Law.
Dan Larkin
Dan Larkin, a corporate partner in the London office of Squire Sanders & Dempsey, focuses on developments, acquisitions and financings of real estate and infrastructure facilities.
David Evans
David Evans, JD '61, QC, MA, LLM Cambridge, retired as a Senior Circuit Judge in '03. Practiced as a barrister '65-'87, interested in most fields of law including International Law.
Eduardo Baeza
Eduardo Baeza, LLM' 05, is an associate at Simpson Thacher & Bartlett LLP in New York, and researches such subjects as Public International Law, Human Rights Law and Corporations.
Eva Garcia Bouzas
Eva Garcia Bouzas, lawyer, researches such subjects as International Public Law, Human Rights and the Laws of war.
Fabio Polverino
Fabio Polverino, LL.M.'06, researches on antitrust law issues, especially merger control and cartels. He is also interested in telecommunication regulation, corporate law and governance.
Konrad von Hoff
Konrad von Hoff, LL.M.' 06, has special interest in employment law, international law, and law and economics and Germany.
Saul Levmore
Saul Levmore is Dean of the University of Chicago Law School.

March 13, 2006

Valuable Secrets in Antitrust Enforcement

With its 2002 Leniency Notice, the EU Commission has established the Leniency Program, one of the most effective tools for prosecuting illegal cartels pursuant Art. 81 of the EC Treaty.

Under the Leniency program, a company involved in a cartel can ‘blow the whistle’ and cooperate with the Commission by providing detailed evidence on its own involvement, as well as that of other undertakings, in the cartel.

The program rewards the first whistleblower with a 100% rebate on the fine applicable to him (participating in the program does not avoid ‘conviction’ for the infringement) - if the information provided allows the Commission to open an investigation - and grants lower rebates to other companies that cooperate after the opening of the investigation.

Great part of the evidence the applicant company submits to the Commission is documentary evidence – notes of meetings, flights schedules and tickets, e-mails – but the most valuable documents are corporate statements, with which corporate officials and attorneys explain to the Commission’s case handlers the functioning of the cartel.

Corporate statement, however, have a highly undesirable downside, when the applicant company is involved in a trans-national cartel and is being tried (or faces a trial) in a third-country jurisdiction (often the US) as a defendant in an antitrust private lawsuit.

The rules of pre-trial discovery, in fact, require the parties to disclose any documents relevant to the claim at trial, including, therefore, any written corporate statements rendered to the EU Commission. The risk of having to disclose self-incriminating information often restraints companies involved in cartels from cooperating with the EU Commission and puts the leniency program – so far a successful enforcement tool – at jeopardy.

The EU Commission has taken action to tackle this risk. In fact, it has launched on its website a proposal for amendments of the 2002 Leniency Notice. Pursuant to the proposed amendment, companies cooperating within the leniency program will no longer be required to submit a written statement, which later might be subject to discovery in a trial.

Under the new procedure, the Commission, in fact, will also accept submissions by corporations in oral form. The Commission will record these statements and prepare its own transcript of the statement. Applicants will be required to confirm that the transcript is a correct rendering of the oral statement. This confirmation may be given orally and will then be recorded. The transcript will serve as evidence, if necessary supplemented before the EU Courts with the original recordings.

Access to the records will be allowed by the Commission only for purposes related to administrative and judicial proceedings related to the enforcement of art. 81 of the EC Treaty. Access for any other purpose will be denied. If any company granted access exceeds the permitted scope for accessing the statements, the Commission will sanction such behavior by filing a complaint to the national bar of the lawyer who has exercised the access or increasing the fine on the infringing company.

The sanctions threatened by the Commission appear prima facie sufficient to grant protection to the companies submitting corporate statements. What remains to be seen is whether exists, under procedural rules of non-EU jurisdictions (especially the US) any device allowing plaintiffs or courts to pierce the veil of protection set by the Commission and obtain disclosure of such information.

This outcome appears unlikely, since the Commission is ready to intervene as amicus curiae in any private antitrust proceedings to stress the relevance of corporate statements and the need to ensure their secrecy.

Posted by Fabio Polverino on March 13, 2006 at 04:42 PM in Europe | Permalink

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March 13, 2006

Valuable Secrets in Antitrust Enforcement

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