Commission issues New Guidelines on Fines

The European Commission has adopted new Guidelines on the method of setting fines for firms that infringe EC competition rules. The recent decisional move towards harsher penalties for violations of the EC treaty is clearly mirrored in the Commission's guidelines.  The two most noticeable changes are:

(i) the adoption of an "entry fee": 15% to 25% of the yearly relevant sales for the mere participation to a cartel agreement;

(ii)  Amendments to the principles governing repeated infringements. The changes there are threefold. First, the Commission  will take into account not only its own previous decisions, but also those of National Competition Authorities to determine whether a firm is a repeat offender. Second, the increase of the fine may now be up to 100% (in the past a 50% limited the increase). Third, each prior infringement will justify an increase of the fine.

See here for the new guidelines and here for the press release.

Comments

[Luca]

Another very notable change is in the way duration is taken into account. Before for infringements lasting more than 5 years, you had a mere +10% for each year of duration. Now the basic amount is multiplied by the number of years of duration of the infringement.

More than the entry fee (whose amount is quite limited) and recidivism (which will arguably affect a limited number of companies addicted to antitrust infringements), its this change which will bring about a massive increase in fines.

Consider an infringement lasting 10 years. Basic amount was €20 mio. Under the old guidelines: 10%*10= +100%. So basic amount including duration was €40 mio.

Now under the new guidelines it's €20*10= €200 mio. For companies which have a huge turnover and will not be saved by the 10% cap of Regulation 1/2003, this is a big change...
Congratulations for the interesting blog.

Luca

[David Mamane]

Indeed, some changes will have considerable influence on the way fines will be set in the future. One good thing is that the basic amount of the fine is now in relation to the turnover with the products/services concerned by the restriction of competition. This should better reflect the actual economic impact of the behaviour.

However, that companies, which are not very active within the European market, should be fined according to a hypothetical turnover, based on the worldwide market share and the turnover of the other undertakings involved, seems to me disturbing.