The Leniency Programme in Estonia - Illusion or Reality?

Author:Tarmo Sild, Rene Frolov

2. Essence and implementation principles of the Estonian leniency programme (CCrP § 205) - 2.1. Can an undertaking check its eligibility for leniency before, during, or at the end of the procedure? - 2.2. Immunity, reduction of fines, or both? - 2.3. Are competition and timing relevant to favourable treatment? - 2.4. The possibility of annulment of immunity, and the grounds for this - 3. Access... (see full summary)


Tarmo Sild, Rene Frolov

The Leniency Programme in Estonia - Illusion or Reality?

  1. Background on the fight against cartels
    in the EU and Estonia

The fight against cartels has been a long-term top priority for the European Commission (hereinafter 'Commission'). The reason for this is pragmatic: an arrangement between undertakings at the same level in the same market concerning division of the market, price fixing, etc. -- known as a cartel - is most damaging to competition and deals the heaviest blow to the consumer, one way or another. Since 1996, the Commission 'involved' cartel members themselves in the anti-cartel fight1 - it formalised the idea of giving undertakings that were 'coming out' a chance of immunity or favourable treatment if they betrayed other cartel members. The initiative was called a 'leniency programme', and the immunity and favourable treatment were granted on the 'first come, first served' principle. A renewed legal framework for the leniency programme was adopted with great expectations in 2002: the Commission notice on the non-imposition or reduction of fines in cartel cases2. It seems now that these expectations have been or are being fulfilled.

According to the Commission, after the adoption of the renewed leniency notice, applications for immunity or favourable treatment became the main trigger for instituting the Commission's procedures against the most severe violations of EU competition rules3. Reliable and unambiguous statistics that could confirm this argument are lacking, as the Commission itself is not prone to delivering exact statistics to the wider public4. However, one cannot deny the fact that a large number of applications for favourable treatment have been submitted under the 2002 leniency programme. For example, the 2003 Competition Policy
Report5 declares: 'Since the entry into force of the new leniency notice in February 2002, the Commission has received 34 applications for immunity, concerning at least 30 individual alleged breaches'. Secondly, from 2001 to 2003 the Commission issued an average of eight cartel decisions a year, which is enormous growth from the previous 30 years' average of 1.5 decisions a year6. The comparison suggests that most cartel cases that have reached a penalty decision were initiated under the leniency programme.

Presumably inspired by the Commission's success in uncovering cartels via the leniency procedure, leniency procedures are now in place in the domestic legislation of 18 EU member states7. Domestic leniency procedures have yielded good results in, among the EU member states8, the Netherlands and, among other countries, Australia9.

A leniency programme has also been formally implemented in the Republic of Estonia, as affirmed by the Competition Board. The Competition Board casts light on the target group of the Estonian leniency programme as regards its legal bases as follows: 'The leniency programme in Estonia arises from § 205 of the Code of Criminal Procedure (hereinafter 'CCrP'), which provides for the termination of criminal proceedings in connection with assistance received from a person upon ascertaining facts relating to the subject of proof.'10 By all presumptions, leniency applications should also be submitted in Estonia and a larger number of cartels identified than earlier.

But what is the real situation? It seems to meet expectations where the number of cases initiated and growth in the number of cases are concerned. In 2004, the Competition Board undertook proceedings in seven cases the object of which was an alleged horizontal agreement, decision, or co-ordinated activity between undertakings - i.e., a cartel11. One year earlier, in 2003, one proceeding was commenced on grounds of horizontal co?operation12. One year further back, in 2002, also, one proceeding was instituted on grounds of suspected cartel agreement13. Thus, in 2004 when § 205 of the new CCrP entered into force (01.07.2004), the number of proceedings in cartel cases indeed increased, but there is no indication that they were based on leniency applications.

To the contrary, the authors have information that in the last few years' operation of the Competition Board, proceedings addressing situations with the elements of a cartel agreement have been initiated in only one case that deserved public attention; subject to the proceedings were local tare purchasers. In other words, the current practice in the Republic of Estonia does not confirm that the leniency programme has yielded any notable results in the fight against cartels - i.e., led to the discovery of a greater number of cartels, as in many other countries utilising leniency procedures. It is also possible that there are no cartels in Estonia.

It is known that identifying cartels is a complicated task because of their highly secret nature, usually based on oral agreements, regardless of the quality of substantive or procedural law. By introducing leniency procedures, the European Union admitted its failure - as it sought help from the cartel members - while also launching a counterattack. The extensive reform of the leniency procedure to increase its legal certainty, reliability, and transparency just six years after the initial introduction of the leniency procedure shows that the Commission believes in the success of the counterattack, shadowed by an admission to failure, and work is constantly being done to improve the quality of the counterattack, even in a direction that reduces the Commission's discretion. If we believe that cartels do exist in Estonia, we should consider how to make better use of the nation's leniency programme.

The purpose of this article is to identify the main pluses and minuses of the Estonian leniency procedure (allegedly grounded on CCrP § 205) in comparison with the EU leniency procedure. An attempt is made also to indicate whether we are dealing with a correctable mistake in the existing framework or a conceptual problem that has its own prerequisites.

2. Essence and implementation principles of the Estonian leniency programme (CCrP § 205)

As mentioned above, the Competition Board - the domestic competition supervision authority and the conductor of potential leniency procedures but not the authority deciding on the application of the procedure - has taken the view that the Estonian leniency procedure arises from CCrP § 205.

According to this provision, the Public Prosecutor's Office may terminate criminal proceedings with regard to a natural or legal person suspected or accused:

(a)if the suspect or accused has significantly facilitated the ascertaining of facts relating to a subject of proof of a criminal offence that is important from the point of view of public interest in the proceedings and

(b)if without the assistance, detection of the criminal offence and collection of evidence would have been precluded or especially complicated,

whereas the Public Prosecutor's Office may resume proceedings:

(c)if the person has discontinued facilitating the ascertaining of facts relating to a subject of proof or

(d)if the person has intentionally committed a new criminal offence within three years after termination of the proceedings.

It is true that the regulation of § 205 itself does not give any reason that these grounds for the termination of proceedings should not be applied to cartel cases for preferential treatment similarly to the leniency procedure. Moreover, since the termination of criminal proceedings ends the possibility of punishing a person, § 205 provides for even more favourable treatment in certain cases than the 'original' leniency notice of the Commission does.

Nevertheless, lenient treatment under the regulation of § 205 requires that several prerequisites be met that are not necessary for attaining the goal of lenient treatment, and that the procedure and its consequences be derived by interpretation that renders the leniency programme unattractive for undertakings.

2.1. Can an undertaking check its eligibility for leniency before, during, or at the end of the procedure?

The EU leniency procedure is structured so that cartel members can check their eligibility for leniency before the procedure- i.e., in a legally regulated and formal preliminary procedure (for the purposes of the Estonian legal order, before the criminal proceedings) - by supplying the Commission with the hypothetical abstract circumstances of the violation and the related evidence (indicating the nature and content of the evidence). This is 'situation A'14, where the violation-related procedure has not yet commenced and the Commission's goal is to collect sufficient source information and evidence for the procedure and to carry out a 'dawn raid' - a procedure for collecting actual evidence at the place of operation of the cartel members. In situation A, the undertaking files a leniency application, usually anonymously via a solicitor. The Commission informs the undertaking in writing of its eligibility for leniency, after which the undertaking can decide whether or not to submit the actual evidence to the Commission and apply for (preliminary) conditional protection.

In Estonia, situation A...

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