Planning For Antitrust Litigation (While Under Investigation)

A company could come under the spotlight of the EU/UK competition authorities at any time, either because a competition authority has launched an individual investigation in which the company is swept up or because the company is operating in a sector which has become subject to a sector inquiry or market study. In the case of a sector inquiry or market investigation, in which the authority will be examining broader questions of how effectively the market works overall and the extent of any quantifiable consumer harm there is, it will not know whether individual corporate investigations may spin out of the sector inquiry – as happened in both the European Commission's energy and the pharma sector inquiries. This could happen even to foreign companies whose business in the EU/UK is minimal, or who do not operate in the EU/UK at all, as the EU/UK competition authorities assess conduct based on its effects on their markets. The risks for foreign companies have become higher as the authorities have strengthened their enforcement in new areas such as DMA, sustainability, and AI regulations. It should also be aware that, after Brexit, a company's conduct may be subject to parallel investigations by both the EU and UK competition authorities.

In some jurisdictions corporate practices, such as producing a large volume of documentation and having key decisions led by the headquarters, require specific strategies for responding to investigations by the EU/UK competition authorities and the subsequent litigation. The purpose of the article is to highlight one consideration which companies often overlook and might otherwise be left until after the investigation is completed – namely the potential for subsequent litigation. Being aware of that aspect in advance may well assist in making productive and proactive decisions during the investigation.

The article draws on our experience, as English and European-qualified antitrust lawyers, of advising companies in regulatory investigations and subsequent English and international litigation, and it suggests some practical considerations to minimise risk.

When an investigation begins

An investigation can start in a number of ways:

• A company may itself uncover anticompetitive conduct internally
• Anticompetitive conduct may be unearthed by the buyer after a corporate acquisition;
• A whistleblower
• A complaint by a third party (customer, supplier or competitor) and
• The competition authority launching an investigation ex officio. The European Commission₁ and the UK's Competition and Markets Authority, as well as many other national competition authorities, have teams which keep an eye on public announcements and market trends and are on the alert for unusual/suspicious market activity.

The authority will undertake a review of the evidence before it, which will likely take some time before it decides whether to move to a formal investigation. It can commence its investigation by sending out Requests for Information (RFIs) or by conducting unannounced inspections (so-called 'dawn raids').² Once the company has an understanding of the broad nature of the investigation, it will need to decide whether to voluntarily approach the authority to apply for immunity or leniency under the relevant leniency programme.³ It is important to assess the relative benefits and downsides of applying for leniency.

There are a number of factors - legal and "political" - to be assessed in coming to a decision as to whether to approach the authority to request immunity or leniency. These include:

• How many jurisdictions may be affected? There are now a great many jurisdictions which have adopted cartel laws (extending beyond the obvious bid rigging anti-corruption laws, which are also often criminal in nature). If a company decides to go for leniency in one jurisdiction, it must also consider the impact of the conduct in any other jurisdiction which might have jurisdiction over the matter. This will multiply the resources needed to manage the investigations across them all. Also, the authorities will require consent be given to enable them to cooperate with each other (which they cannot do without such consent although in practice it is very difficult for the parties to withhold that consent)
• Is the company listed or regulated in some other way? This can be an important consideration because in some sectors a company is required under its regulatory regime to self-report infringements (e.g. financial services). There is no requirement in the EU/UK to self-report a competition law infringement to the competition authority such as the European Commission or the UK's Competition and Markets Authority. But the conduct may also involve regulatory infringements which do require to be self-reported to the company's regulating body.4 In such cases, the company will need to carefully balance how it engages with different enforcement agencies.
• What is the time period covered by the conduct under investigation? The company may gain some insight into this through the authorisation document provided by the investigating agency or through its own internal investigations. In any event, one of the reasons this is important is so that it can understand which executives may be in the firing line. If the conduct being investigated took place some years ago, it is possible that the individuals involved at that time are now in senior management and leadership roles in the company. This is a factor which would need to be recognised and addressed as quickly as possible. Where possible, it is desirable for the company to obtain agreement from any relevant past and former personnel that they will provide the company with any help that it may need to deal with investigations or litigation relating to the alleged anticompetitive conduct.
• Is bid-rigging involved? If the company participates in public tenders, then there are several factors which will be at play here:
  • Bid-rigging is, in many jurisdictions, subject to criminal sanctions for individuals involved due to the use of public monies
  • A company found guilty of bid-rigging may be barred from future public competitions for a number of years and may be subject to special supervisory measures
  • Existing public contracts (including sub-contracts) may be subject to cancellation risks.
• Are there key corporate structural events in the pipeline? Examples might include a corporate disposal or a capital raising exercise. Either of these might require disclosure of known antitrust infringements. If the company is already in the leniency programme of an enforcement authority, it should be noted that the company may not disclose participation in the leniency programme without the express prior consent of the authority. This can be obtained under certain circumstances but, for example, in the case of capital raising involving underwriting banks, their counsel will likely need to be brought into a confidentiality ring, which increases the burden of compliance.

In deciding whether to make a leniency submission, the potential for future litigation is another important consideration. Indeed, the significant growth in follow-on damages claims (in number, jurisdictions and scale of claims) has been attributed as a key reason for the apparent decline in leniency applications.

• The conventional assumption has been that applying for leniency, and doing so as quickly as possible, was important from a financial perspective, because doing so can lead a material reduction, or even complete exemption, from regulatory fines depending on how many other companies have already applied for leniency. Whilst that remains true, a countervailing consideration is that a regulatory finding against a company may attract litigation against that company. The company's admissions can be often used against it to prove a civil damages claim, and claimants may be able to obtain disclosure of communications between the company and the authority in order to bolster their claims (as discussed in the next section below). Keeping a low profile may sometimes be a more successful strategy, where it leads to no regulatory decision being issued against the company and thereby avoids a wave of litigation
• Civil litigation is often brought in multiple jurisdictions. In such situations, it can be challenging to ensure that a company's strategy, positions taken and document management across jurisdictions are consistent, let alone to mount a vigorous defence in many different courts or tribunals
• Defending civil proceedings can be expensive, and that cost is exacerbated in some jurisdictions where the courts order the losing party to reimburse the winning party's costs
• In many jurisdictions (including the UK and the EEA), claims can be brought not only by direct customers of the infringing business but also by "indirect" customers, increasing the scope for high damages awards. In some jurisdictions there may even be a possibility of claims in relation to the same overcharge being brought by multiple claimants at different levels of the supply chain, with the potential consequence of the business having to pay multiple times (to claimants at different levels of the supply chain) for the same loss: whilst that outcome is obviously unfair, the reality is that many courts show no sympathy to cartelists.
• Some courts in the EU/UK may be willing to assume that infringing behaviour caused loss to claimants, even if there is no clear evidence that it did, on the basis that a company would not engage in unlawful behaviour unless it boosted profits
• The amount of damages awarded to claimants can be very high, and Claimants' lawyers specialize in developing creative arguments to maximise the size of the demands and, ultimately, judgments or settlements
• In some jurisdictions (including England), antitrust class actions are permissible and are gaining traction: these allow apparently small claims (when taken individually) to be aggregated into very large, aggregated claims
• In the EU, the implementation of the Damages Directive has significantly lowered the hurdles for claimants. A final infringement decision by a competition authority cannot, in principle, be re-litigated in civil proceedings; access to evidence has been eased through enhanced disclosure rules; limitation periods are suspended while an investigation is ongoing; and cartel participants are subject to joint and several liability.⁵
• In English law, the general rule is that litigation cannot be started more than six years after the end of the infringing conduct, but that period may not start to run where the unlawful conduct was hidden and the claimant could not reasonably have known that it had a potential claim.
• The development of a litigation funding industry, where investors fund speculative litigation, has led to a huge growth of claims in the UK and certain EEA countries and a far more litigation-focused environment

These factors make litigation a very serious threat, and one which we would suggest should be factored in when considering how to deal with competition authorities, specifically when considering the question of a leniency application.

How investigation documents are used in litigation

When a competition authority embarks on an investigation, it has broad powers at its disposal. It may conduct unannounced inspections (of corporate or domestic premises), secure copies of documents during an inspection, access electronic records accessible from the premises being inspected (wherever located) and send requests for information (RFIs) to the parties requesting information and documents. This article does not examine the details of those powers and the rights of defence during inspections, but there are consequences which need to be appreciated in anticipation of potential litigation later on.

Here are a number of points which need to be borne in mind:

• In civil competition law claims in the UK and the EU, cartel leniency statements are not admissible in evidence (leniency statements means information - other than pre-existing materials - which is provided orally or in writing by a person to a competition authority specifically for its leniency programme, and which consists of information about the person and their role in relation to the cartel). However, in other jurisdictions may take a different approach to admissibility: this will need to be carefully considered for other jurisdictions where the conduct may be investigated.

• The English courts have ordered disclosure of RFIs and other communications with regulators, even where producing them would involve a breach of foreign law
• Information which comprises confidential business secrets (and subject to redaction in any final Decision) may no longer be considered confidential due to the passage of time before any litigation
• Competition authorities increasingly have entered into mutual cooperation agreements (e.g., US/EU; UK/EU; Japan/UK, US and also EU). If a company seeks leniency in the EU (or the UK or the US), the agency will ask for the company's consent to cooperate with other named authorities and to exchange information with them. From that point onwards it will be important for the company to maintain relations with each of the affected competition authorities and ensure that no one agency may feel it is not being prioritised in favour of another agency
• The various systems of law within the common law tradition, such as the UK, US, Canada and Australia, have extensive and complicated rules regarding legal professional privilege (LPP), which can be used to prevent authorities and claimants having access to some categories of documents. In EEA administrative proceedings, including investigations by competition authorities, LPP applies only to advice between external lawyers qualified in an EEA Member State and their client company. Communications which may be thought to be protected by LPP (e.g. advice from in-house lawyers) may be subject to challenge.⁶
• In some jurisdictions, like Japan, LPP is recognised only to a very limited extent, if at all and perhaps only for communications with independent locally-qualified lawyers. Such limited protection may disadvantage companies, especially if they have extensive internal documentation practices, which are not protected by privilege. Headquarters-led decision-making — which may be manifested in emails and instructions issued to local EU/UK subsidiaries — can be interpreted as evidence of decisive influence and thus of the parent's participation in the infringement. Such structures also tend to broaden internal circulation and mix legal communications across jurisdictions, making privilege management significantly more challenging.
• As part of the company's risk-assessment practices, it would be prudent to consider how potentially privileged documents are generated, stored and managed, and how to maximise the prospects of privilege being found in any jurisdiction where investigations or litigation might arise. In this regard, it is advisable to establish:
• Document filing practices (including clear visibility into what documents exist and where they are);
• Document deletion practices (to minimize scope for arguments of improper destruction of materials); and
• Understanding and implementation of litigation holds.
• Be careful to preserve all documents and track down missing documents during the investigation. In particular, preserve all relevant contractual documentation. In subsequent litigation, the contractual background may be key to conducting effective economic analysis of any alleged losses. Gaps in contractual documentation may attract adverse inferences.

Impact of competition authority decisions on subsequent litigation

When dealing with competition authorities, it is also relevant to consider how the content of any regulatory decision could affect the likelihood of litigation and the extent of damages claimed in such litigation.

A regulatory authority's decision typically sets out the background to the case and the procedure it followed.  The operative part of the decision typically outlines the key facts constituting the infringement, the conclusion(s) reached and the penalties being imposed on the addressees. If the procedure of the decision is, as most cases now are, through a settlement, then the parties are likely engaged with the authority's case team throughout the process leading to the adoption of the decision (see below). If the procedure followed is the 'normal' procedure, the parties will not be involved at all in the shaping of the Decision. The following example relates to the European Commission.

In the Commission's Settlement Procedure⁷, the parties voluntarily participate in the process at the invitation of the Commission. During the process the parties must admit liability in a written submission to the Commission. The trade-off is an additional 10% discount off the fine (in addition to whatever leniency discount the company has earned through its participation in the leniency programme). So far as the terms of the Decision is concerned, the Commission always stresses that it does not engage in a negotiation with the parties. 

There are some downside consequences of going through the settlement procedure, not least the limited opportunity there will be to appeal against the Decision (not least because liability has to be admitted). On the other hand, there are some obvious advantages to participating in a settlement procedure. Firstly, there is an opportunity to engage in bi-lateral discussions directly with the Commission case team over the scope of the cartel (temporal, product and geographic) and potentially help narrow the scope of the inquiries. Secondly, there is the chance to explore the extent to which the company's leniency contributions have been helpful and material to assisting the Commission in its investigation. Thirdly, it is possible to engage in discussions about the interpretation of the documents submitted, whether the evidence supports infringing conduct, whether there are expiating circumstances and also outline any additional defenses.

With the possible prospect of litigation in the future, there are several points to be borne in mind during both the discussions with the authority's case team, drafting replies to RFIs and in crafting the settlement submission (which precedes the Decision itself):

• The Settlement Submission itself (like oral leniency statements) will not be subject to later disclosure in litigation.
• Written submissions/arguments made to the Commission will not constitute legally privileged material and are likely to be disclosable.
• The Commission's Case file index may be subject to production in litigation and this can point potential claimants to possible document production requests.
• Focus efforts on maintaining as narrow a scope as possible in the description of the infringing conduct. Avoid references to a 'global' nature of the conduct. Use terms such as 'certain' customers, or 'certain' contracts but not 'all' contracts or 'all' customers. Keep the product, geographic and temporal scope as narrowly focused as is consistent with the direct and clear interpretation of the documents on the Commission's file.
• Make sure the company's leadership is fully aware of the settlement process and the consequences of participation in it (both for the company and any affected individuals).
• Keep in mind the potential knock-on effect of and for the text of the settlement submission
  • on procedures in other jurisdictions
  • on any non-competition regulatory investigations and
  • on how foreign decisions might impact on the pending procedure.

*Charles Whiddington is an English-qualified solicitor and Belgian Maître, admitted also in New York and Ireland. He has nearly 40 years' experience as a competition law specialist and has represented many companies in many sectors in cartel and sectoral investigations and follow-on damages claims. Angus Rodger is an English-qualified solicitor advocate. He has specialised in international commercial dispute resolution for around 30 years and has litigated and arbitrated antitrust disputes for around 15 years. Both are Steptoe partners.

¹ Council Regulation (EC) No 1/2003 of 16 December 2002 on the implementation of the rules on competition laid down in Articles 81 and 82 of the Treaty, OJ L 1, 4.1.2003

² Commission Regulation (EC) No 773/2004 of 7 April 2004 relating to the conduct of proceedings by the Commission pursuant to Articles 81 and 82 of the EC Treaty, OJ L 123, 27.4.2004, as amended by OJ L 208, 5.8.2015

³ Commission Notice on Immunity from fines and reduction of fines in cartel cases, OJ C 298, 8.12.2006, Communication from the Commission, mended by Commission Notice OJ C 256, 5.8.2015

⁴ For example, companies supervised by the UK's Financial Conduct Authority (FCA) are subject to specific obligations under FCA rules (SUP 15.3.3, 2015R) to notify the FCA if they have, or may have, committed a significant infringement of applicable competition law.

⁵ Directive 2014/104/EU of the European Parliament and of the Council of 26 November 2014 on certain rules governing actions for damages under national law for infringements of the competition law provisions of the Member States and of the European Union (Text with EEA relevance)

⁶ Ruling of December 8 2022 of the European Court of Justice (ECJ) in Case C-694/20, Orde van Vlaamse Balies, EU:C:2022:963

⁷ Commission Notice on the conduct of settlement procedures in view of the adoption of Decisions pursuant to Article 7 and Article 23 of Council Regulation (EC) No 1/2003 in cartel cases, OJ C 167, 2.7.2008, amended by Commission Notice OJ C 256, 5.8.2015