Antitrust Alert: Leniency Documents Not Exempt from Disclosure Demands in EU

On 14 June 2011, the European Court of Justice ("ECJ") ruled that EU law does not exempt leniency documents lodged with national competition agencies ("NCAs") from requests for disclosure in private actions. In a reference for preliminary ruling from a German court, Pfleiderer v Bundeskartellamt, the ECJ ruled that national courts must decide under their national procedure rules under what conditions firms seeking damages from cartelists will be allowed access to any leniency applications the cartelists have filed with the NCAs. National courts must assess case-by-case the relative merits of disclosing or protecting leniency information.

Background

Council Regulation (EC) No 1/2003 ("Regulation") provides that NCAs and the European Commission ("Commission") may exchange information within the European Competition Network ("ECN"), which is the informal organization of EU NCAs.  The information exchanged may include confidential information, for the purpose of applying EU competition law or national competition law to a case also under investigation by the Commission.

In Pfleiderer, the German court found that, if claimants in private actions for damages could require NCAs to disclose to them the documents the NCAs had received pursuant to the NCAs' leniency programmes, disclosure would chill the exchange of information among the NCAs and between the Commission and the NCAs, undermining ECN cooperation mechanisms. It also stated this could deter leniency applicants from cooperating within the framework of the leniency programmes. Leniency applicants would fear their information might be used against them in civil claims for damages. In this way, the applicants for leniency would be placed in a worse position than those cartel members who do not cooperate with the competition agencies, leading to fewer cartels being reported.

Against this background, the German court asked the ECJ to rule on whether victims of cartels have a right to access information and documents voluntarily provided pursuant to a national leniency programme. 

ECJ ruling

In adopting its ruling, the ECJ observed: 

• There is no binding regulation under EU law requiring that third parties be granted access to information voluntarily submitted by a leniency applicant.
• It is for Member States to establish and apply national rules on disclosure to leniency applications. In doing so, Member States must ensure that national rules do not render the application of EU cartel law impossible or excessively difficult.
• Leniency programmes are useful tools to uncover and punish cartels and therefore essential for the effective application of EU cartel law. The risk of disclosure of leniency applications to potential claimants would have a "chilling" effect on the use of leniency programmes and thus make the application of EU cartel law more difficult.
• Nevertheless, it is settled law that any individual has the right to claim damages for loss caused to him by conduct that distorts competition. The risk of damages action is a deterrent in itself against cartel behavior.

Applying these principles, the ECJ ruled that it is for national courts to decide under their national rules on procedure whether, and under what conditions, firms seeking damages from cartelists will be allowed access to any leniency applications the cartelists have filed with the NCAs.  In doing so, national courts must assess, on a case-by-case basis, the relative merits of disclosing or protecting leniency information, taking into account all the relevant facts of the case.

Practical implications

The ECJ ruling clarifies that the Regulation does not provide a "one size fits all" solution to the issue of disclosure in cartel damages actions across the EU. A tailored approach is required, depending on the procedural rules in each Member State. However, a number of issues remain open in practice.

First, national rules on disclosure vary significantly across the EU. While some Member States have detailed rules on disclosure (e.g., Germany and the UK), others do not (e.g., France, Italy and Spain). The ECJ ruling does not consider how to deal with situations where national rules on disclosure do not exist.

Second, the ruling concerns national leniency programmes. It is therefore unclear what impact it may have on the EU leniency programme. Commenting on the judgment, a spokeswoman for the Commission said "the Commission will continue to strive to strike the right balance between the interests of public enforcement and private damages and will continue protection of leniency documents as it has always done in the past". However, two days after the ECJ’s judgment in Pfleiderer, a plaintiff in the EU switchgear cartel asked the English High Court to order disclosure of leniency documents given to the Commission by a cartelist. The presiding judge questioned "if it is for me to conduct the balancing exercise, I would want to give the Commission the chance to submit observations". He therefore stayed the proceedings and asked the Commission for its views. A hearing is scheduled later this year.

Third, Pfleiderer concerns a purely domestic situation. It is therefore unclear what impact it may have in situations concerning multiple, parallel leniency procedures before NCAs. At present, in the absence of an EU "one-stop-shop" leniency procedure or an EU-wide system of fully harmonized leniency programmes, leniency applicants may find it necessary to apply to all the competition agencies that are involved to apply EU cartel law. The Commission and NCAs can exchange information relating to these multiple leniency applications. The ECJ ruling does not deal specifically with disclosure requests concerning leniency documents exchanged by the competition authorities. 

Fourth, for several years now, the Commission has been trying to adopt EU legislation on private antitrust enforcement, with the aim of harmonizing and encouraging actions for damages across the EU. Thus far the Commission has failed to reach a workable compromise. The Commission may see the Pfleiderer ruling as just another step away from its plan for an EU harmonized private enforcement system.

Fifth, the ECJ ruling fails to draw a distinction between (a) voluntary presentations by leniency applicants on their knowledge of a cartel and their role therein, prepared especially to be submitted under a national leniency programme ("corporate statements"), and (b) pre-existing documents submitted by the leniency applicants together with their corporate statements. On one hand, it may be that the risk of disclosure of corporate statements is more perceived than real, since most of the leniency programmes that are operated in the EU provide for an oral procedure, which is designed to protect corporate statements from discovery in civil damage procedures. On the other, access to pre-existing documents may pose confidentiality issues.

Conclusion

In an ideal world, private enforcement requirements and procedures would be harmonized throughout the EU, to avoid the risk of inconsistent approaches at the national level. The ECJ’s judgment in Pfleiderer confirms that, absent EU harmonized legislation on this, disclosure in action for damages remains a matter of national law in each Member State.

Lawyer Contacts
For more information, please contact your principal Jones Day representative or either of the lawyers listed below.

Frances Murphy
London
+44.20.7039.5959
fmurphy@jonesday.com

Francesco Liberatore
+44.20.7039.5221
London
fliberatore@jonesday.com

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