First settlement served by the Authority (1)

Introduction

in July 2013, the Competition Authority rendered its first decision under the settlement procedure available to antitrust infringements, which had been endorsed in mid-2012. Broadly considered, settlement procedures for antitrust breaches in Portugal follow closely the outline of the similar plea bargaining arrangements existing at EU level.

However, unlike the European Commission — that clearly sets at a specified percentage (in this case, 10%) the potential reduction of fine applicable to parties that are rewarded for settlement — the authority does not quantify beforehand the virtual benefit one should expect when engaging into settlement discussions.

A priori, this could work as a deterrent for both companies and individuals to even consider entering into such discussions with the authority. This recent case though suggests that there might be an interesting scope for settlement arrangements at national level, especially if the parties are willing to acknowledge their involvement in an infringement and are unlikely to benefit from full immunity from fines under the leniency programme.

The case at stake

This was the first situation in which the authority used the settlement proceedings in an antitrust investigation, which are available in Portugal since 2012.

The investigation of this case was initiated prior to the enactment of the current Portuguese competition act, which entered into force on July 2012. The proceedings concern an alleged cartel between the three main players in the national market for polyurethane foam, used as a raw material in several sectors of the so-called comfort industry, such as furniture, household textiles, automotive, footwear or childcare.

It follows from the information available that the three competitors (FLEX 2000, FLEXIPOL and EUROSPUMA), which account to approximately 90% of the relevant market concerned, implemented between 2000 and 2010 a price fixing agreement and a scheme for the continuing exchange of sensitive commercial information.

The proceedings were triggered by a leniency application, submitted by FLEX 2000, which received full immunity. The remaining two alleged cartelists were fined a total of € 993,000: FLEXIPOL received a fine of € 498,000, resulting from a 50% reduction for leniency and a 38% additional reduction for settlement; EUROSPUMA got a € 495,000 fine that includes a 39,5 reduction as a result of the settlement arrangement. Five members and former members of the board of the undertakings concerned were also fined, in a total of € 7,000 (these individuals were also entitled to immunity and reductions from fines, in the same terms as their respective companies).

Assessment

Neither the competition act nor the 2013 guidelines set out by the authority in respect to antitrust proceedings clarify the amount of reduction expected to be received in settled cases, and this aspect has been highly criticised by practitioners. Ultimately, this means that resort to settlement proceedings in Portugal requires a complex trade-off between opposing interests.

On the one hand, these types of arrangements allow for a swift decision and (an uncertain) reduction of the fine, which can be cumulated with further reductions under the leniency programme. Authors of settlement proposals are also protected to a certain extent against private enforcement follow-on actions given that, as a rule, third parties are not allowed to access settlement submissions contained in the file and other undertakings concerned in the case are only allowed to see those documents for the purposes of preparing their defence, but no copy of these can be made without authorisation by the settlement author.

On the other hand, the facts to which a party in a settlement procedure has confessed cannot be challenged in court.

At first glance and confronting the aforementioned positive and negative factors, it might be difficult to envisage clear advantages weighing in favour of settlement arrangements, since a party does not know at the outset what potential savings it may get from it. Surprisingly, the Authority did not publicly disclose the reductions of fine granted under the settlement procedure in the foams cartel case, even though those were generous figures (c. 40%) when compared to the Commission’s practice (set out at 10%).

Furthermore, even the assistance provided to the authority outside the scope of settlement is considered a general mitigating circumstance when setting the amount of the fine, without implying conversely a need for the party concerned to waive the privilege of judicial appeal.

Nevertheless, the recent decision issued by the authority in the foam cartel indicates that companies and individuals may still have a deal of interest in agreeing to a settlement — with the pros and cons mentioned before —, particularly in those situations where they are prepared to confess their wrongdoings and are unlikely to benefit from full immunity under the leniency programme (for instance, because they are not first-in whistle blowers).

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