How-to guide: How to identify and address competition law infringements (EU)

Introduction

This guide outlines steps to identify and then address competition law infringements specific to your organisation. It provides you with guidance on what to do if you think your organisation is in breach of EU competition law. This guide incorporates practical tips, examples and guidance to aid your compliance with EU competition law. It is aimed at in-house lawyers and compliance professionals in organisations of all sizes and all sectors who may be subject to EU competition law.

The guide covers:

Ways of identifying competition law infringements
Conducting an internal investigation
Steps to take if there is an infringement of competition law in your organisation

This guide can be read in conjunction with How-to guide: Understanding the competition law prohibitions in Article 101 and 102 TFEU, How to identify and prioritise competition law risk in your organisation and Checklist: Competition law compliance.

Section 1 – Ways of identifying competition law infringements

The penalties for non-compliance with competition law can be severe, both for companies and individuals. If your organisation is found to have broken EU competition law, consequences may include:

financial penalties;
unenforceability of restrictions in agreements;
decisions requiring agreements or conduct to be modified or brought to an end;
private damages claims; and
other business implications.

For more information on liability for breach of competition law, see How-to guide: Understanding the competition law prohibitions in Article 101 and 102 TFEU.

Although the potential consequences of breach of competition law are serious, you can take steps to reduce the potential exposure if an infringement is found to have been committed (see section 4 below for more detail). An understanding of the potential consequences of breach and the existence of mechanisms to potentially reduce exposure to those consequences should underline the importance of having systems in place by which potential infringements might be identified.

There are a number of ways in which potential competition law infringements might be identified and organisations should pay careful attention to the following:

employees;
complaints;
internal reviews;
investigations; and
other indicators.

Each is dealt with in turn below.

1.1 Employees

Employees are often the best source of information about possible infringements, but staff can only spot or report wrongdoing if they have been educated on competition law and the specific competition law infringement risks faced by your organisation. This requires designing and implementing an appropriate compliance programme. See How-to guide: How to design a competition law compliance programme.

A trained workforce will provide your organisation with a valuable corporate tool for spotting and escalating the warning signs, red flags, characteristics or behaviours that point to a competition law infringement.

1.1.1 Legal advice

The goal of an adequately resourced and effective competition law compliance programme is to detect and prevent infringements before they happen. This involves educating staff on how to spot potential competition law red flags and identify when legal advice might be needed on a particular issue or course of action. Requests for legal advice might in particular come from those employees working in gatekeeping roles (eg, those with approval authority for pricing changes and participation in industry meetings, certification responsibilities for bidding activity, or human resources and hiring authority) as there are many intricacies to competition law and employees should be encouraged to maintain an open line of communication with in-house counsel.

1.1.2 Internal reporting mechanisms

Internal reporting mechanisms are most likely to be your first indicator that there is a risk of competition law infringement in your organisation.

Internal reporting mechanisms are a highly effective tool in identifying and combatting suspected competition law infringement. A credible internal report can:

prompt a timely internal investigation;
assist in rooting out competition law infringements within your organisation; and
allow your organisation to seek timely specialist legal advice on self-disclosing the infringement. For instance, by applying for leniency with the European Commission (Commission) or national competition authority of an EU member state (NCA).

If there are no internal reporting procedures in your organisation, or individuals are not comfortable reporting a matter internally, you may find that they decide to report breaches of the EU competition rules to the Commission or an NCA. As there are tangible financial benefits to organisations to self-reporting secret cartels (ie, secret agreements or concerted practices between two or more competitors aimed at coordinating their competitive behaviour on the market or influencing the relevant parameters of competition), it is in your organisation’s best interests to encourage internal whistleblowing so that any allegations can be investigated internally and possibly self-reported. At an EU level, where the Commission learns of competition law breaches directly from a whistleblower or another complainant, your organisation’s ability to secure full immunity from fines as a result of self-reporting will be lost. See further section 3 below.

An organisation that does not receive any internal reporting on competition law infringement risks might need to investigate why, in order to take proportionate action. It could be because staff do not feel safe raising concerns or cannot spot competition law infringement red flags. Alternatively, it may be because the competition law compliance programme is working perfectly well.

1.2 Complaints

Complaints may come from third parties such as customers, distributors or even suppliers. For example, a potential new distributor might, upon receiving a draft distribution agreement, complain that the terms of the agreement are restrictive and contrary to competition law.

Employees responsible for managing third-party relationships should be alive to the possibility of such complaints (in whatever form they are made, noting that they may not be formal in nature) and be aware of the procedure for escalation within your organisation.

1.3 Internal reviews

Internal reviews, whether formal audits or less formal reviews of processes or contracts, may turn up evidence of breaches. Even if the review is unrelated to competition law matters (eg, a review primarily aimed at bribery or anti-corruption matters), organisations should be mindful of any unexpected compliance matters arising from audits.

1.4 Investigations

The process of being investigated, whether by a competition or other regulator, will likely involve a review of a large amount of documentation and may also involve interviews with staff. As with internal reviews, the nature of the investigation process means that wrongdoing which is not the subject of the investigation may come to light.

To the extent that information is revealed as part of an investigation that relates to entirely separate infringing behaviour, there may be benefits to self-reporting this as wrongdoing unrelated to an extant investigation will be treated in the usual way with regard to the leniency programme (see below section 3.1). There may also be additional benefits to be gained in respect of any leniency discount in the first investigation, depending on the circumstances. Therefore, it is prudent in the course of an investigation to stay alert to the possibility of unrelated wrongdoing.

1.5 Other indicators

There may be other indicators which suggest that an investigation may be merited. For example, the sudden and unexplained absence of a participant from a longstanding series of meetings may merit consideration as the reason for this could be that they have applied for leniency (see below section 3.1), a condition of which is that participation in the potentially infringing conduct is ceased. Employees should be alive to such indicators and report these internally as early detection may have financial benefits for the organisation.

Section 2 – Conducting an internal investigation

Your organisation will have a head start if it can initiate an internal investigation promptly when a suspicion has been reported internally that there has been a potential breach of competition law. This will allow your organisation to identify the extent of the conduct and inform your organisation’s next steps.

A thorough internal investigation will allow your organisation to:

obtain legal advice;
remediate; and/or
self-report to the Commission or relevant NCA.

The primary purpose of an internal investigation is to gather facts about the allegations and relevant circumstances. This approach will provide top-level management and senior leadership with:

assurances that internal investigation procedures are being complied with;
timely execution of any necessary disciplinary and/or other legal actions;
assurances that your competition law compliance programme is being adhered to;
the opportunity to timely identify any remedial measures;
the opportunity to prepare internal and external communications to clarify rumours or media leaks; and
advice on any self-reporting obligations.

2.1 Conduct of an internal investigation

The nature and conduct of each internal investigation will vary depending on the nature and scale of the suspected misconduct. However, there are some general and procedural considerations that will likely apply to most internal investigations.

2.1.1 Considerations at the outset

Give careful consideration to the following issues in conducting the investigation.

What measures are needed to ensure that evidence is preserved.
How privilege might be maintained over investigation documents, which will impact who will carry out the investigation.
The internal and external resources that are required to conduct the investigation and the management of potential conflicts of interest.
Compliance with all relevant legal requirements, such as those relating to data privacy, employment law, etc.
The need to preserve confidentiality during the course of the investigation.
For investigations into suspected cartel activity, consider the following key points for potential leniency applicants:
- at the pre-leniency decision stage, limit enquiries to those necessary to reach a decision on whether to apply for leniency;
- avoid the risk of tipping off other parties who might eventually be subject to investigation;
- secure evidence to prevent tampering or corruption;
- take precautions when interviewing witnesses to avoid distorting evidence; and
- be able to explain actions taken in the course of the internal investigation.

2.1.2 Methodology

Internal investigations are likely to consist of two main avenues of exploration – document collection and review, and interviews. How to proceed, and in what order, will vary from case to case. Some allegations may require exploration with witnesses prior to being able to review for relevant documentation, whereas others may begin with documents which are then put to individuals in interviews. As the interview evolves, re-interviews or further document collection and review may be required as new information comes to light. The need to adapt and respond to new developments over the course of the investigation will be important.

Document collection and review

In order to obtain documents, determine who you need to collect documents from, where those documents exist and any parameters which will limit the scope of documents (such as relevant time periods).

Collect accurate records of evidence during the investigation. Evidence normally includes emails, documents, records of telephone calls, reports prepared by consultants and meeting notes, etc. You may need to engage specialists to collect documents that are within the scope of the investigation.

Issues relevant to document collection include those listed below.

Any legal issues around the collection of certain types of data or from certain types of devices or locations, particularly if located in another jurisdiction.
Consider the availability of documents, in particular when information and communications technology systems are not linked, merged or available.
The methodology used to obtain documents in a manner which is forensically robust and maintains the integrity of the documents collected.
Record-keeping – it is best practice to record all the documents obtained and reviewed (including their storage location and security in line with retention schedules), including details of:
- the collection of original copies of hard-copy material (if applicable);
- dates of downloads of electronic material (including location of storage and a backup);
- the methodology for searching the documents.
Consider limiting access to the documents collected to specified individuals and maintain a record of those individuals.

Depending on the nature of the allegation and scope of the investigation, the number of documents yielded may be large (even if limited to certain time periods or custodians). If the universe of documents is large, then you may need to employ the services of a document review platform in order to manage the review. Review platforms allow for various operations to be performed on the data which help to identify relevant documents. These include the following:

deduplication;
email threading;
narrowing results by time period, custodian and/or search terms; and
predictive coding through artificial intelligence.

Review the documents for relevance and determine whether they attract privilege (and therefore are protected from disclosure to third parties, including regulators).

Interviews

The team coordinating the investigation should promptly seek to identify all relevant employees who should be interviewed either because they were involved in the suspected wrongdoing, had knowledge of it or were involved in the line management. There may also be individuals who need to be interviewed to ascertain the extent of the suspected wrongdoing and whether the incident is isolated or more widespread.

After identifying all individuals to be interviewed the investigators will need to consider how best to interview these individuals and have a clear (but flexible) plan in place for the interviews which considers:

who is to be interviewed and the reason for their inclusion;
the order of interviews;
the reason for removal of an interviewee from the list of interviewees; and
arrangements for re-interviews or additional interviews, should they be required.

There will be several matters to consider before conducting internal interviews. The relevant considerations will likely vary depending on the circumstances but may include those listed below.

Is there any need for mutual legal assistance from a foreign jurisdiction if the interviewee is in another jurisdiction?
The location of the interviews. For example, is there a discreet meeting room within your organisation or would an external location be better?
The suitability and consistency of the interviewer (ideally this should be an individual who is experienced in interviewing techniques). This will help identify inconsistencies in evidence or contradictions and ensure that similar avenues are explored with other interviewees.
The need for independent legal representation for the interviewee at the interview.
Whether an ‘Upjohn warning’ should be given at the start of the interview. Although derived from a US case, these warnings are now becoming common practice in UK investigations. An Upjohn warning informs the employee that where a lawyer is conducting the interview (i) they represent the company, not the employee; and (if privilege applies) that (ii) the communications with the lawyer conducting the interview are protected by legal privilege; and (iii) the company may choose to waive this protection without informing the employee.
What individuals should be told about the investigation.
Whether the interviewee is likely to have any queries. This may include the risk of disciplinary action if they refuse to participate in the internal investigation. Relevant information provided by the interviewer will be in accordance with your organisation’s policy. Investigators should therefore be familiar with your organisation’s internal guidance and procedures.
Which documents (if any) should be shown to the interviewee in the course of the interview.

Relevant considerations during the interview may include those listed below.

Consider what you should tell the interviewee. Inform interviewees that the internal investigation is a fact-finding exercise, and unnamed past and present staff have been asked to assist.
Consider the use of questions. Interviewers should be encouraged to ask open and non-leading questions. This will help to elicit more of a narrative answer that can be built upon by the interviewee and allows flexibility for the interviewer to follow up the answer with further questions.
The use of information obtained from others. The interviewer should not inform the interviewee about what other interviewees have said or not said.
Enough flexibility within the interview plan so that questions can be modified accordingly.
Ask questions that start with ‘who is best placed . . . ?’ or ‘who was responsible for managing . . . ?’ These types of question could identify potential interviewees that were not initially identified by the investigators. In this way you may be able to identify others to assist in the internal investigation.
Think about confidentiality. Remind the interviewee not to discuss the interview with anyone else (other than their legal representative). Remind interviewees of company policy and practices in the event they are approached by third parties in relation to the issues raised by the investigation.

In cases where the interviewee may have health issues (mental or physical), a medical expert assessment may be required before conducting an interview. Legal advice is best sought in situations such as these.

2.1.3 Findings

The output of an investigation will usually be recommendations as to the next steps. Recommendations may be contained in a formal report which sets out the facts which have been established through document review and interviews and an analysis of the facts within the framework of the competition rules. Where a report is to be produced, give careful consideration as to whether this can be protected from disclosure by legal privilege.

Recommendations might include:

taking no further action;
making improvements to your organisation’s compliance programme;
a decision by management to conduct disciplinary investigations; and/or
making an application for leniency to the Commission or other relevant NCA.

Section 3 – Steps to take if there is an infringement of competition law in your organisation

If it is determined, following investigation and assessment, that competition law may have been breached, then your organisation will need to decide what to do next.

3.1 Self-reporting suspected infringements – the Commission’s leniency programme

The Commission’s leniency programme operates such that businesses and individuals that come forward to report their own involvement in a cartel may have their financial penalty reduced or avoid a penalty altogether. The Commission’s Leniency Notice sets out the characteristics of the Commission’s leniency programme, and it covers secret agreements and concerted practices which are considered hardcore restrictions between competitors. It does not cover vertical restraints.

Both the Commission and NCAs have the ability to enforce Article 101 of the Treaty on the Functioning of the European Union (TFEU), but an application for leniency to one authority is not considered as an application for leniency to another authority. In addition, the leniency programmes of NCAs differ in their scope. In light of this and in an attempt to ease some of the burden of applications, there is in place between the Commission and NCAs, a system whereby the applicants that have applied for leniency to the Commission are able to submit summary applications (containing more limited information) to NCAs in relation to the same cartel, provided that the application to the Commission covers more than three member states as affected territories. The detail of this system is outside the scope of this guide, but further information can be found in Directive 2019/1.

Under the Commission’s leniency programme, provided that the conditions for doing so are met, the Commission will either grant immunity from fines or may grant a reduction in fines (leniency). The requirements for immunity from fines and a reduction in fines are considered in turn below.

3.1.1 Immunity from fines

Where an undertaking discloses its participation in an alleged cartel, it will be granted immunity if it is the first to submit information and evidence which in the Commission’s view enables the Commission to either:

carry out a targeted inspection in connection with the alleged cartel; or
find an infringement of Article 101 TFEU in connection with the alleged cartel.

The requirements to benefit from each of these are explored in more detail below.

In order to qualify for immunity by providing information and evidence that enables the Commission to carry out a targeted inspection:

the Commission must not have already carried out such an inspection or have sufficient evidence to adopt a decision to carry out an inspection;
the undertaking must provide the Commission with:
- a corporate statement which includes, in so far as it is known to the applicant at the time of the submission:
  - a detailed description of the alleged cartel arrangement, including for instance its aims, activities and functioning; the product or service concerned, the geographic scope, the duration of and the estimated market volumes affected by the alleged cartel; the specific dates, locations, content of and participants in alleged cartel contacts; and all relevant explanations in connection with the pieces of evidence provided in support of the application;
  - the name and address of the legal entity submitting the immunity application as well as the names and addresses of all the other undertakings that participate or participated in the alleged cartel;
  - the names, positions, office locations and, where necessary, home addresses of all individuals who, to the applicant’s knowledge, are or have been involved in the alleged cartel, including those individuals which have been involved on the applicant’s behalf; and
  - information on which other competition authorities, inside or outside the EU, have been approached or are intended to be approached in relation to the alleged cartel; and
- other evidence relating to the alleged cartel that is in the possession of the applicant or available to it at the time of the submission, including in particular any evidence contemporaneous to the infringement; and
the requirements set out in section 3.1.3 (below) must be met.

In order to qualify for immunity by providing information and evidence that enables the Commission to find an infringement of Article 101 TFEU in connection with the alleged cartel:

the Commission must not have sufficient evidence to find an infringement of Article 101 TFEU in connection with the alleged cartel;
no undertaking can have been granted conditional immunity from fines providing information and evidence that enables the Commission to carry out a targeted inspection;
an undertaking must be the first to provide contemporaneous, incriminating evidence of the alleged cartel as well as a corporate statement containing the kind of information detailed above which would enable the Commission to find an infringement of Article 101 TFEU; and
the requirements set out in section 3.1.3 (below) must be met.

Immunity is not available where applicants have taken steps to coerce other undertakings to join the cartel or to remain in it. A reduction in the fine may still be available in these circumstances (provided the other requirements are met).

Ascertaining whether immunity might be available

The Commission’s Frequently Asked Questions on Leniency address various questions about contacting the Commission regarding immunity applications. There are a number of options for undertakings.

Firstly, the Commission is available for informal exchanges with legal representatives of undertakings about potential immunity applications on a no-names basis and without any requirement to disclose the sector, the participants or other details identifying the cartel. As a result, undertakings can make an informed choice as to whether to apply for leniency.

Secondly, there is the possibility of making a hypothetical application. Under this procedure, an applicant can present information and evidence in hypothetical terms by providing a detailed descriptive list of the evidence it proposes to disclose at a later agreed date. The applicant is not required to disclose its identity nor that of its co-cartelists in the hypothetical application, but is required to identify the sector, geographic scope and estimated duration of the cartel. Once the Commission informs the applicant that the nature and content of the evidence in the list satisfies the requirements for immunity, it must disclose the evidence in full. Provided that the evidence disclosed corresponds to that described in the list the Commission will grant the applicant immunity.

Thirdly, legal representatives of potential immunity applicants can contact the Leniency Officer to establish whether immunity is available for the cartel that the potential applicants are involved in. The legal representative needs to disclose the product concerned but does not need to disclose the identity of its client. However, the legal representative has to commit, on behalf of its client, that if the Leniency Officer confirms that immunity is available its client will immediately submit an application for immunity or an application for a marker.

Procedure for applying for immunity

The procedure for applying for immunity is set out in section II.B of the Commission’s Leniency Notice and you can find further clarity in the Commission’s Frequently Asked Questions on Leniency.

3.1.2 Reduction in fines

Undertakings that do not meet the conditions for immunity from fines may still be eligible for a reduction in fines.

In order to qualify for a reduction in fines, an undertaking must provide the Commission with evidence of the alleged infringement which represents significant added value with respect to the evidence already in the Commission’s possession.

As to what constitutes ‘added value’, this concept refers to the extent to which evidence strengthens the ability of the Commission to prove the alleged cartel (either by its very nature and/or level of detail). In considering added value, the Commission will assess:

the contemporaneous nature of evidence – generally written evidence originating from the period of time at which the behaviour occurred to have greater value than subsequent evidence;
the relevance of evidence – evidence that is incriminating and is directly relevant to the facts in question will generally be of greater value than that of indirect relevance; and
the degree of corroboration required – the degree of corroboration required from other sources in order for the evidence to be relied upon against alleged cartelists will impact on its value.

In addition to providing evidence of significant added value, the requirements set out in section 3.1.3 (below) must be met.

At the end of the Commission’s administrative procedure, the Commission will determine the level of any reduction in fine. The Commission awards reductions of fines within bands, as follows:

to the first undertaking to provide significant added value: a reduction of 30-50%;
to the second undertaking to provide significant added value: a reduction of 20-30%; and
to subsequent undertakings that provide significant added value: a reduction of up to 20%.

Within each of these bands, the Commission takes into account the time at which the evidence was provided and the extent to which it represents added value.

Procedure for applying for a reduction in fines

The procedure for applying for a reduction in fines is set out in section III.B of the Commission’s Leniency Notice and further clarity may be found in the Commission’s Frequently Asked Questions on Leniency.

3.1.3 Cooperation requirements

In addition to the conditions set out above for a grant of immunity from fines or a reduction in fines, all of the following conditions must be met by applicants for immunity or a reduction in fines.

The undertaking applying for immunity must cooperate genuinely, fully, on a continuous basis and expeditiously from the time it submits its application throughout the Commission’s administrative procedure. This includes:
- providing the Commission promptly with all relevant information and evidence relating to the alleged cartel that comes into its possession or is available to it;
- remaining at the Commission’s disposal to answer promptly to any request that may contribute to the establishment of the facts;
- making current (and, if possible, former) employees and directors available for interviews with the Commission;
- not destroying, falsifying or concealing relevant information or evidence relating to the alleged cartel; and
- not disclosing the fact, or any of the content, of its application before the Commission has issued a statement of objections in the case, unless otherwise agreed.
The undertaking must end its involvement in the alleged cartel immediately following its application, except for what would, in the Commission’s view, be reasonably necessary to preserve the integrity of the inspections.
When contemplating making its application to the Commission, the undertaking must not have destroyed, falsified or concealed evidence of the alleged cartel nor disclosed the fact, or any of the content, of its contemplated application, except to other competition authorities.

3.2 Other steps

Depending on the nature and circumstances of the breach, it may be that a decision is made to not make an application under the leniency programme or the leniency programme may not be available for the conduct in question. Whilst it is not possible to ‘self-clean’, you can take steps to try and mitigate against the risk that practices continue or recur. These include:

ceasing the conduct in question. What this means in reality will vary depending on the conduct but may include changing contract terms or business practices;
implementing new policies and procedures; and
refreshing compliance training for staff.

See How-to guides: How to design a competition law compliance programme and How to implement a culture of compliance with competition law in your organisation.