Resolving the Leniency Equation: The Need for a Harmonized Leniency Regime in Europe Illustrated in the DHL Case

In an unsurprising judgement handed down in the awaited DHL case (C-428/14) on January 20, 2016, the European Court of Justice (CoJ) confirmed that the EU and Member States leniency programs coexisted autonomously without any form of mutual recognition.  The outcome of this case, revolving around this well-known and long standing issue in Europe, was highly predictable and is very much in line with the existing case-law (see Pfeiderer, case C-360/09).  It nevertheless provides a clear illustration of the difficulties that businesses regularly face when applying for leniency in relation to cross-border or potentially cross-border cartels and exposes the acute need for a one stop shop for leniency applications within the EU.

Run-up to the Judgment: Race for Leniency

The judgment follows a series of leniency applications that were made in the context of the freight forwarding cartel, before both the European Commission and several national competition authorities, including the Italian competition authority (AGCM):

The Commission’s adjudication on the scope of their case after a year of investigations changed the leniency equation for the cartel participants and led to parallel proceedings and to the issue addressed in the judgement:

• The EU proceedings focused on the international air freight sector.  On March 28, 2012, the European Commission imposed a €169 million fine on freight forwarders.  DHL received full immunity as first applicant.

• In Italy, the proceedings focused on the international road freight sector.  On June 15, 2011, the AGCM imposed fines on several undertakings.  Schenker received full immunity, as the AGCM found that it was the first company to have provided information on the Italian road freight forwarding cartel, on December 12, 2007.  DHL was granted a 49% fine reduction, as the AGCM considered that it had provided information on the road cartel after Schenker, on June, 23, 2008.

DHL brought an action for annulment before the Regional Administrative Court for Lazio.  The company argued that it should have been granted the first place in the queue under the national leniency program, on the grounds that summary leniency applications received by a NCA should be assessed in view of the main application for immunity filed with the EC.  As a result, according to DHL, the AGCM should have examined DHL’s summary application (which initially did not make any reference to road) in light of DHL’s application to the EC (which covered the entire freight forwarding sector, including road).

Following the rejection of the action by this court, DHL brought the case before the Italian Council of State, which referred a number of preliminary questions to the CoJ.

The CoJ Forced to State the Obvious: Still No One Stop Shop for Leniency Applicants in the EU

In response to the questions raised by the Italian Council of State, the CoJ reaffirmed that the leniency programs of the EU and of the Member states coexist autonomously.  In this regard, the CoJ noted the following:

• The ECN Model Leniency Program, which is a model for a uniform summary application system for cases for which the Commission is particularly well placed, is a soft law instrument created by the ECN to alleviate the burden associated with multiple filings.  As such, it is not binding on NCAs.

• Therefore, there is no legal link between the main application before the EC and the summary applications submitted to a NCA, such that the NCA would be required to assess the summary application in light of the main application.  Instead, the two applications are fully autonomous.  According to the CoJ, this autonomy “follows directly from the fact that there is, at the EU level, no single system of self-reporting for undertakings that participate in cartels in breach of Article 101 TFEU”.

In sum, the AGCM was not required to assess DHL’s summary application in light of DHL’s main application to the EC.  Therefore, in order to secure full immunity in the Italian proceedings, DHL should have been the first to apply specifically for the Italian road cartel before the AGCM.

The Case Illustrates the Clear Shortcomings of the Current Leniency System in Europe and the Need for a Reform

Applying for leniency in the context of most cartels is a tricky exercise for businesses willing to come clean and their advisors.  Not only do businesses need to ascertain, in a short period of time, the exact scope of the practices at stake (both from a material and a geographical point of view); they must also anticipate all possible jurisdictional scenarios, i.e. which of the 29 EU competition authorities will choose to deal – or not – with the case.  There is indeed no guarantee that a case filed with the Commission will remain entirely at the Commission; equally, a case with clear national features may actually turn out to present a cross-border element causing the Commission to take over national cases. This is certainly a situation where there is plenty of room for honest mistakes – as illustrated by DHL’s misfortune.

And the issue is unfortunately not novel.  In a speech delivered in 2005, former Commissioner for competition Neelie Kroes suggested to address this issue through the creation of a one stop shop for leniency: “the current European leniency program implies that, in an ideal world, the Commission would deal with every application addressed to us.  Otherwise we might leave applicants in a situation of uncertainty, trying to second guess whether, and when, to rush to file separate applications with those national competition authorities which offer national immunity programmes.”

Despite the achievements of the ECN since 2005 (in particular the ECN Model Leniency Program introducing a uniform summary application system), the above remains true: leniency applicants are still left in a situation of uncertainty and cannot resolve on their own the leniency equation.  The current situation is unworthy of a modern competition law regime and needs to be resolved legislatively.  The European Commission is currently consulting on the efficiency of national leniency programmes in the context of its initiative “Empowering the national competition authorities to be more effective enforcers.”  However, its current focus is solely on the divergence in the features of Member States' leniency programmes, which is only part of an equation that remains to be addressed in its entirety.