The introduction of the European Union (EU) Settlement Procedure in 2008 aimed at promoting the speed and efficiency of cartel investigations by the European Commission (EC). We use a data set that consists of 575 firm groups that were convicted by the EC for cartelization from 2000 to 2015 to investigate the impact of the settlement procedure on the probability to file an appeal. Based on the estimation of a model of a firm’s decision to appeal in the pre-settlement era, we subsequently run out-of-sample predictions to estimate the number of hypothetical appeals cases in the settlement era absent the settlement procedure. Comparing these estimates with the actual number of appeals, we find a settlement-induced reduction in the number of appeals of about 53%.
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Firms within one group are linked through ownership and are jointly liable for cartel fines.
In a more recent study, Eisenberg and Heise (2015) investigate a similar research question for a large sample of U.S. state court cases that were filed from 2005 to 2009 and find that appellate reversal rates for jury trials and defendant appeals exceed reversal rates for bench trials and plaintiff appeals.
In a related article, Carree et al. (2010) empirically investigate the determinants of appeals of EC decisions on the case and firm levels with the use of a similar data set. They identify the level of fine, the decision length and the number of parties to which the decision is addressed as significant drivers of the decision to file an appeal. Furthermore, Harding and Gibbs (2005) provide a qualitative assessment of EU cartel appeals from 1995 to 2004.
In the European Union, cartel fines generally aim at punishment and deterrence thereby reflecting both the gravity and the duration of the infringement. The maximum fine level—which is a function of the percentage of a firm’s annual sales of the product that is involved in the infringement, the duration of the infringement, as well as aggravating or mitigating circumstances—is capped at 10% of the overall annual turnover of a firm (see EC 2013).
Substantively, four main categories of argument can broadly be distinguished in an appeal against an EC cartel decision: fine levels; procedural aspects; facts/standard of proof aspects; and substantive assessment issues.
See the consolidated version of the Rules of Procedure of the Court of Justice, Official Journal of the EU, C 177/01, 2010, 1–36.
EC Regulation (EC) No 622/2008 of 30 June 2008 amending Regulation (EC) No 773/2004, as regards the conduct of settlement procedures in cartel cases, OJ L 171/3, 1.7.2008. EC Regulation (EC) No 773/2004 of 7 April 2004 relating to the conduct of proceedings by the EC pursuant to Articles 81 and 82 of the EC Treaty (OJ L 123/18, 27.4.2004) lays down the rules that concern the participation of the parties that are involved in such proceedings.
EC Notice on the conduct of settlement procedures in view of the adoption of decisions pursuant to Article 7 and Article 23 of Council Regulation (EC) No 1/2003 in cartel cases (2008/C 167/01), OJ C 167/1, 2.7.2008.
See EC Regulation (EC) No 773/2004, OJ L 123/18.
EC Regulation (EC) No 622/2008, OJ L 171/3, p. 1.
Granting full access to the file usually demands resource-intensive preparation efforts in the form of screening ‘tens of thousands of pages of documents’ for confidentiality (see Kroes 2008).
Interestingly, Hüschelrath and Laitenberger (2017) find a statistically significant reduction in the overall duration of EC cartel investigations for settled cases.
Furthermore, it appears likely that the presence of recidivists or aggressive ringleaders in a case is likely to reduce the probability of a settlement offer by the EC.
Interestingly, Schinkel (2011) argues that by fixing the settlement discount at 10%, the EC gave away its only hard bargaining point. As the derivation of the final fine is also subject to comparatively soft facts that are derived from information from/about the cartelists, the setting of individual percentage fine reductions could have maintained a much stronger bargaining position for the EC.
In re-adopted cases, the EC reappraises previous decisions. Re-adoptions are mostly reactions to General Court (GC) rulings: e.g., questioning the liability of a particular cartel member. As such re-adopted cases do not add any additional information of value for our research question, including them would lead to an inappropriate duplication of the respective case information and would therefore bias our results. In our observation period, the following re-adopted cases are thus excluded: Gas Insulated Switchgear (Case COMP/39.966); Steel Beams (Case COMP/38.907); and Manufacture of other Organic Basic Chemicals (Case COMP/39.003).
The cases are Animal Feed Phosphates (Case COMP/38.866), Yen Interest Rate Derivatives (Case COMP/39.861), Euro Interest Rate Derivatives (Case COMP/39.914), Steel Abrasives (Case COMP/39.792) and Mushrooms (Case COMP/39.965).
The cases are DRAMs (Case COMP/38.511) and Animal Feed Phosphates (Case COMP/38.866). In our empirical analysis below, we therefore exclude these two cases.
Please note that the respective appeal values correspond to the year in which the original EC decision with respect to the cartel was made; i.e., a case that was decided by the EC in 2001 and finally decided by a European appellate court in 2004 is counted as appeal in the year 2001.
Firms within one group are linked through ownership and are jointly liable for cartel fines.
However, it has to be added that the companies on average waited about 49 months from the beginning of the appeals process to the final decision (either by the GC or the ECJ). See Hüschelrath and Smuda (2016) for further information. As this waiting period generates a substantial amount of additional costs, the benefit of an appeals process is reduced.
In the Euro Interest Rate Derivatives case (Case COMP/39.914), Société Générale became the first settling party to appeal an EU Settlement decision: The bank alleged an error in the assessment of the fine (Case T-98/14, Société Générale versus EC, case brought on 14 February 2014). Subsequently, in the Envelopes case (Case COMP/39.780), Printeos became the second settling firm group that decided to file an appeal: Printeos alleged that the EC neglected the duty to state reasons (related to an adjustment of the basic amount of the fine) and the principles of equal treatment as well as proportionality and non-discrimination (both related to the determination of the amount of the fine, see Case T-95/15, brought on 20 February 2015).
See http://ec.europa.eu/competition/antitrust/cases/index.html (last accessed on 15 January 2017).
See http://curia.europa.eu (last accessed on 15 January 2017).
Using firm-level data would therefore result in an unjustified multiplication of the sample size, without providing additional information.
Due to the fact that the first two settled cases in 2010 (DRAMs, Case COMP/38.511; and Animal Feed Phosphates, Case COMP/38.866) were specific ‘test’ cases (see Sect. 3.2 above for further information), our ‘settlement era’ applies to all cases that were decided after 2010. Besides disregarding these two ‘test’ cases we also had to exclude the most recent case (Optical Disc Drives, Case COMP/39.639) from the settlement era as—at the time of writing—only an EC press release that provided incomplete information was available.
In our sample, this is only the case for Printeos, a member of the Envelopes cartel (Case COMP/39.780). The second case mentioned in Footnote 22 above (Euro Interest Rate Derivatives, Case COMP/39.914) had to be excluded from the sample due to insufficient data.
Aggravating circumstances considered by the EC are, e.g.: repeat offenses; refusal to cooperate with the EC; or the role of leader in an infringement. Mitigating circumstances, however, include, e.g.: the provision of evidence that the infringement was terminated as soon as the EC intervened; or proof that the anti-competitive conduct has been authorized or encouraged by public authorities or by legislation.
We are fully aware of the fact that the final fine is affected by the settlement procedure. In this respect, it would be desirable to, e.g., use the basic fine as a measure for the expected fine. However, as this information was often unavailable in the respective EC case documents, we use the final fine in our empirical analysis (and thus assume that it is highly correlated with the expected fine at the stage of the investigation).
These adjustments are driven by quality criteria such as the quality of in- and out-of-sample predictions or information criteria such as the Akaike information criterion (AIC).
As is discussed in greater detail in Hüschelrath and Smuda (2016), possible tactical motives to file an appeal include the delay of fine payments (motivated by, e.g., current liquidity problems) or the postponement of follow-on private damage claims into the distant future.
In fact, such a (negative) time trend is found in Hüschelrath and Smuda (2016) for a shorter sample of EC cartel decisions from 2000 to 2012.
Directive of the European Parliament and the Council on Certain Rules Governing Actions for Damages under National Law for Infringements of the Competition Law Provisions of the Member States and of the EU (PE-CONS 80/14). The Directive was signed into law on 26 November 2014 and allowed the Member States two years to implement it into their national legal systems.
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We are indebted to an anonymous reviewer, Robert Jackson, Daniel Rubinfeld, Maarten Pieter Schinkel, Mengjie Wang and especially the editor Lawrence J. White for very valuable comments and suggestions. Cung Truong Hoang provided excellent research assistance. The usual disclaimer applies.
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Hellwig, M., Hüschelrath, K. & Laitenberger, U. Settlements and Appeals in the European Commission’s Cartel Cases: An Empirical Assessment. Rev Ind Organ 52, 55–84 (2018). https://doi.org/10.1007/s11151-017-9572-1
- Antitrust policy
- Ex-post evaluation
- European Union