The main steps in the fine-setting process across jurisdictions may be described as following:
a. The base fine
The base level of the financial penalty is determined in relation to the value of the infringer’s turnover in the affected market as a rough proxy indication of the potential gains deriving from the cartel, the type (and gravity) of the infringement and eventually its duration.
Usually the determination of the fine takes as a starting point the level of the infringing company’s turnover, which relates directly to the infringement in question. The concept has been interpreted differently in each jurisdiction. Some jurisdictions take a narrow approach and refer to additional characteristics, such as the product-related turnover of the infringer or the total turnover of the infringing company in the specific jurisdiction or the world-wide consolidated turnover of the group of companies to which the infringing company belongs. Even these concepts are interpreted differently from jurisdiction to jurisdiction. For instance, the global turnover refers to the overall consolidated turnover realised by the infringer and its subsidiaries worldwide in the relevant business year, which might be the last year of the
Base fine
Adjustments (including aggravating and mitigating circumstances)
Limits (maxima and minima)
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infringement or the year before the finding of the infringement). In other jurisdictions, the global turnover taken into account is the “highest worldwide turnover, net of tax, achieved in one of the financial years ended after the financial year preceding that in which the practices were implemented” (France). The global turnover may also be relevant for the general purpose of deterrence and in order to increase the fine, in addition to the determination of the basic fine (e.g. EU Guidelines).
Other competition law regimes refer to broader criteria, such as the value of sales related to the infringement (e.g. EU) or to the volume of the affected commerce (e.g. US). The fine is determined starting a percentage of this specific measure. Other concepts frequently referred to are the relevant turnover, the value of affected sales and/or the value of affected commerce. The combination of the value of sales to which the infringement relates and of the duration of the infringement is thought to provide “an appropriate proxy to reflect the economic importance of the infringement as well as the relative weight of each undertaking in the infringement”116
. According to the US Guidelines, the volume of commerce indicated the volume of sales done by the company in goods or services that were affected by the violation. Sales of the cartelised products between cartel members are generally excluded from consideration. Captive sales, that is sales which are used by the undertaking in the production of a downstream product, may also be considered, as long as, depending on the facts of the case, they amount to sales indirectly related to the infringement and there is no double counting.
With regard to the duration of the infringement, there are some slight differences as well. In some jurisdictions (e.g. under the 2006 Guidelines in the EU, although actual practice varies) the base fine is based on one year of turnover (which is the last business year for which figures are available) and the duration of the infringement is accounted for but multiplying the base fine by the length of the period of the infringement. Other jurisdictions (e.g. Germany) consider the duration in the base fine, because the affected commerce, for instance, is taken as the turnover of the company over the period of the infringement.
The competition law regimes then factor in the probability of detection and/or deterrence considerations. For instance, in the EU, depending on the gravity of the infringement, the base fine can be up to 30% of relevant turnover. The base amount for hardcore cartels will be set at the upper end of the 30% limit. The basic amount will be multiplied for each undertaking by the number of years of its participation in the cartel. In addition, the 2006 EU Guidelines provide for an “entry fee”, that is an additional penalty of 15 to 25% of one year turnover for the most serious infringements (e.g. price fixing, market allocation and sharing,
116
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output limitation). Some jurisdictions choose a different starting point. For instance, the previous OFT Guidelines on setting financial penalties retained a percentage of 10% of the relevant turnover of the undertaking. The most recent 2012 Guidelines increased the relevant turnover band to 30% brining in line the OFT practice with that of the EU Guidelines. In the US, the base fine for bid-rigging, price-fixing or market allocation agreements among competitors is commonly set at 20% of the volume of the affected commerce, which corresponds, as we have previously explained, to the company’s turnover in the affected markets over the duration of the infringement117. To this figure, the DOJ establishes a “culpability score”, taking into account a number of qualitative factors, such as firm size, the nature of the offence, past history of violations, obstruction of justice, degree of involvement in the conspiracy and the level of cooperation with the DOJ, which indicates the minimum and the maximum “multipliers” to apply to the base fine in order to calculate the fine range. Consequently, the base fine may vary from 20 to 40% of the volume of the affected commerce.
b. Aggravating and mitigating circumstances
The base fine may be adjusted further by the consideration of aggravating and mitigating circumstances or of any estimates of any benefit made or likely to be made by the infringing undertaking118, including its size and financial position. For instance, in the EU repeat offenders face a 10% increase on the base fine for each previous offence. Recidivism may take into account previous infringements of EU competition law discovered by national competition authorities119. The Commission also increases the adjusted fine to reflect the large size of undertakings. Ring leadership may be an aggravating factor, which in the EU may result in up to 50% increase of the fine. In the US, aggravating circumstances consist in the prior history of the infringing undertaking (e,g. increasing the culpability score by two, if the offender committed an infringement for similar misconduct the last five years). Also, in the US, further three points are added to the culpability score if the infringer wilfully obstructed or impeded, aided abetted or encouraged an obstruction of justice. Non- compliance to procedural obligations (such as false or incomplete information, lack of disclosure, late provision of requested information) may also be subject to further sanctions. Intent and premeditation constitute aggravating factors in certain jurisdictions (e.g. Germany).
117
2R1.1(d)1 of the USSG. 118
E.g. Brazil which considers the extent of damages or potential damages to competition, to the Brazilian economy, to consumers or to third parties.
119
For a discussion of what constitutes a recidivist, see our discussion of the different national experiences Part VI.
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Cooperation with the authorities may, on the contrary, operate as a mitigating factor resulting in lower fines at the end of the process in both the EU and the US. In the US, an effective compliance and ethics programme may constitute a mitigating circumstance for which points may be subtracted from the culpability score if the compliance programme is effective (see our discussion previously). The immediate termination of the infringement, the limited participation or a minor role or a passive role in the infringement can also be considered as mitigating factors (e.g. EU, Germany). In some jurisdictions restitution (e.g. Canada) or compensation (e.g. Netherlands) to victims have also been considered as mitigating circumstances. Some of these factors, in particular the extensive cooperation with the authority, are taken into account in the context of leniency policies, rather than as a mitigating factor adjusting the base fine.
Inability to pay is indirectly considered with the provisions setting maximum fines at a certain percentage of the turnover. It is often considered by most competition authorities. This can either be done through the consideration of the proportionality principle, or by examining if the imposition of the fine will lead to drive the infringing undertaking from the market, thus reducing competition. According to the US Guidelines, the fine may also be reduced to the extent that its imposition would otherwise impair the infringing corporation’s ability to make restitution to victims. Other jurisdictions provide facilities for the payment of the fine, such as a debtor warrant or a deferred payment (e.g. Germany).
c. Limits (Maxima and Minima)
Several jurisdictions have instituted maximum statutory limits, providing for a maximum amount of fines against undertakings. The maximum amount of fines may take the form of a specific monetary amount (e.g. Chile) or be a percentage of turnover (e.g. European Union, Germany, France) or similar measure. Other jurisdictions use the profits gained from the infringement or losses caused to the victims (e.g. US where the maximum fine for a corporation is the greatest of 100 million USD or twice the pecuniary gains the conspirators derived from the crime or twice the gross pecuniary loss caused to the victims of the cartel. Combinations between the different measures is also possible. For an illustration of various maxima limits, see Table 2 above. Although none of the examined jurisdictions provides for a minimum limit, this is theoretically possible.
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The last step in the process involves the consideration of leniency and settlements, which might lead to a reduction of the financial penalty imposed.