Belgian Competition Law: More Sanctions against Companies and Individuals?
On 10 October 2011, the Belgian Competition Authority initiated a consultation on new fining guidelines which aim to clarify the authority's methodology in setting the fine for antitrust violations and to bring it on par with leading competition agencies. In parallel, far-going reflections are currently taking place on the introduction of administrative, if not criminal, sanctions upon individuals. These developments indicate that the Belgian Competition Authority is determined to step up its enforcement record and to change the perception that Belgium is a safe haven for cartelists.
In the past, the Belgian Competition Authority (the “BCA”) did not have the reputation of being a particularly tough agency. Despite a 2006 legislative reform which, among others, increased the merger notification turnovers in order to free up capacity for antitrust enforcement, the BCA's enforcement record remained disappointing. The reasons were varied, but were mostly attributable to a lack of resources compared to competition authorities in smaller economies as well as a general lack of political support and awareness. For example, although it received the power to do so back in 2006, the BCA is yet to initiate its first sector inquiry, despite regular calls to investigate network industries or the retail sector. This lack of action has been picked up by international organisations such as the OECD which, in its 2009 economic survey for Belgium, recommended increasing the BCA's resources and giving it more firepower by introducing criminal sanctions, including prison sentences.
In May 2009, the BCA stunned observers by imposing a EUR 66.3 million fine on the incumbent telecom operator's mobile arm in an abuse of dominance case featuring a margin squeeze. Given the size of the Belgian market, the amount of the fine came as a shock and indicated the dawn of a new era of though sanctions for antitrust violations.
With the consultation on fining guidelines and their probable adoption before the end of the year, the BCA clearly indicates its willingness to continue pursuing a tougher enforcement against antitrust violations and to instil a stronger compliance culture on Belgian undertakings, on par with neighbouring countries.
The draft fining guidelines provide for a more transparent (although, on purpose, not fully predictable) framework for setting antitrust penalties on undertakings and trade associations. The upper limit of the fine, as set by law, is 10% of the undertaking’s turnover. The draft guidelines now propose a framework to calculate the basic amount of the fine, as a function of the gravity of the infraction and of its duration. A formula is proposed in which the value of sales of the product at stake is multiplied by a factor of 15% to 30% in function of the gravity (the “gravity factor”). A “duration factor” is then added to that amount, which is calculated on the basis of a percentage (10% to 30%) of the gravity factor, multiplied by the number of years.
For example, if the sales value of the cartelised product was EUR 1 million during the last year of an infringement which lasted six years and that a percentage of 20% is applied for gravity and 30% for duration, the calculation would be as follows:
Gravity factor: EUR 1 million x 20% = EUR 0.2 million
Duration factor: (EUR 0.2 million x 30%) x 6 years = EUR 0.36 million
Basic amount: gravity factor (EUR 0.2 million) + duration factor (EUR 0.36 million) = EUR 0.56 million
That basic amount can then be adapted in function of a number of mitigating and aggravating factors, equity reasons and the undertakings ability to pay the fine.
Interestingly, the BCA indicates that it could take account of initiatives taken by the cartelists to compensate the victims of anticompetitive behaviour on a voluntary basis. The BCA clearly recognises that it remains difficult for victims of antitrust violations, especially consumers, to obtain compensation via traditional actions for damages. Even though proposals to improve collective redress mechanisms in Belgium are pending, the BCA’s statement provides for a welcome incentive for companies to provide effective compensation to the victims of their wrongdoings.
What about individuals?
While most companies are now well aware of the risk of engaging in anticompetitive behaviour, individuals in Belgium so far had little to fear from the antitrust watchdog. They should be aware that this may change in a not too distant future.
It has often been argued that fines on legal entities are often ineffective as prevention tools and to a certain extent unfair, as (innocent) employees and shareholders often have to bear the consequences of large antitrust fines, while the actual participants in the cartel are not sanctioned.
While the draft fining guidelines are only targeted at undertakings and trade associations, it is no secret that the BCA has been exploring ways to introduce criminal and/or administrative sanctions on individuals participating in anticompetitive behaviour. In 2010, it proposed introducing prison sentences between two months and five years and fines between EUR 100 and EUR 10,000. The competent minister ordered a study from the Competition Commission, a consultative body which independent of the BCA.
The report highlighted two main challenges linked to criminal sanctions for competition law violations. Firstly, the Competition Commission considers that criminal investigations could jeopardise the BCA’s leniency programme, which permits companies to report anticompetitive behaviour and obtain immunity against fines. Leniency is widely recognised as the most efficient source of information for competition authorities and an essential tool in the fight against cartels. If employees who report their own anticompetitive behaviour and assist their employer in preparing a leniency application are not effectively shielded against criminal investigations, there is a real risk that the leniency programme fails. Secondly, the Competition Commission observes that cartel investigations are already very long today and that parallel criminal investigations could risk delaying the procedure even more. In addition, both types of investigation (criminal and administrative) could conflict and create procedural issues, notably in terms of exchange of evidence, the protection of leniency applicants and conflicts between protection of business secrets and rights of defence
The president of the Belgian Competition Council (the administrative court within the BCA which adopts the decisions) held in an interview that he would rather first establish a robust and strict competition policy against undertakings before venturing into the muddy waters of criminal sanctions against individuals, especially prison sentences.
The focus therefore seems to have shifted in favour of a more realistic objective: the introduction of administrative sanctions on individuals, such as director disqualifications or administrative fines. Such sanctions, which have effectively been introduced in many neighbouring countries and which are already in use in other fields of law, could prove to be an acceptable compromise between effective deterrence and procedural efficiency.
It however remains to be seen whether the political will to introduce sanctions against individuals can be found. At the time of writing, Belgium is still under a caretaker government, waiting for a new government to be formed since June 2009, so that legislative initiatives are few. Even if and when a new government takes office, it will likely put more focus on measures to deal with the economic crisis and a reform of the current competition enforcement system could be far down its to-do list.
Geoffroy van de Walle de Ghelcke is an associate in the EU & Competition Department of Bird & Bird LLP in Brussels. Geoffroy regularly advises on various issues of Belgian and European competition law.
Geoffroy can be contacted at firstname.lastname@example.org.