How To Avoid A €3billion Cartel Fine
Last week, European competition regulators issued record-breaking fines amounting to just under €3billion to five members of a truck manufacturing cartel. This level of fine is about double the previous record fine for cartel activity – sending a very strong signal from regulators that cartel activity will not be tolerated.
What’s the story here?
The cartel in this case is said to have started with a meeting between senior managers in a “cosy hotel” in Brussels – but that is about as dramatic as this story gets (contrary to what Netflix’s Narcos would have us believe, cartels can be rather mundane).
The five companies in question were found by the European regulators to have been part of a cartel, which involved the co-ordination of factory level prices, collusion on when to introduce new emission technologies (as required by legislation) and the adoption of a unified approach to pass the costs of new emission technologies on to customers.
The regulators found evidence to suggest that the cartel began in the late 1990s and continued until 2011 when one of the members of cartel came forward as a whistleblower (and benefited from a €0 fine as a result).
The high level of fine is said by the regulators to reflect the serious nature of the infringements, which were exacerbated by the fact the cartel had been running for 14 years. The fine also takes into account the size of the truck market impacted by the cartel, and the size of the collective market share of the members of the cartel.
What can we learn from this case?
The cartel in this case may have been set up by senior level management at the previously mentioned Brussels hotel, but over the years it was carried out by lower level managers and subsidiaries meeting at industry events, and exchanging information over emails. This demonstrates that there was organisation-wide acceptance of the cartel at each of the parties involved.
One potential solution to preventing widespread cartel activities would be to take a similarly organisation-wide approach to educating employees about competition law risks. In fact, the recipient of the largest individual fine in this case has already announced a programme of intensive and regular employee training on competition laws.
There are also specific competition law risks associated with trade associations and communications between competitors that can be mitigated with the adoption of clear and robust policies. Employees at all levels should also be encouraged to come forward with any issues under the protection of a whistleblowing policy.
What about Brexit?
This fine has been issued by a European regulator – so is this an area UK companies need to be less concerned about as a result of Brexit?
The short answer is no. EU laws (including competition laws) will continue to apply to the UK until the Brexit process is complete. The UK also has its own cartel laws, which give UK authorities powers to issue fines of up to 10% worldwide turnover for cartel behaviour. Individuals can also be prosecuted and imprisoned for cartel activity in the UK.
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