ZEW Lunch Debate in Brussels - Principal Witnesses Key to Combating Cartels in Europe
ZEW Lunch Debate in Brussels
Over the past years, competition policy has increasingly become a core domain of the European Commission. Combating cartels has top priority in this context. The Commission's most powerful weapon in this fight is its leniency programme. It enables cartel members to partly or even entirely dodge heavy fines - that is, to go unpunished. The most recent ZEW Lunch Debate, staged at the Representation of the State of Baden-Württemberg to the European Union in Brussels on July 1, 2015, focused on the actual effectiveness of EU policies to reveal cartels.
In his lecture at the beginning of the panel discussion, Professor Kai Hüschelrath, head of the Research Group "Competition and Regulation" at the Centre for European Economic Research (ZEW), stressed that even though the number of cartels has fallen over the past years, the average fine for cartel members has grown. According to him, the possibilities to file an appeal against EC decisions before European courts allow repeat offenders and cartel leaders to get away with significantly lower fines.
Kai Hüschelrath further explained that by revealing and severely punishing cartels, the Commission, on the one hand, increases European competitiveness and deters companies from participating in cartels. Forming cartels thus becomes much less attractive. On the other hand, Hüschelrath said, the blessing of effective cartel law enforcement is also a curse. The fact that companies can benefit from the leniency programme and file appeals to reduce their fines for cartel membership, he said, weakens the deterrent effect. "That is the other side of the coin," concluded the head of ZEW Research Group.
The Leniency Programme of the European Commission - a Success Story?
At the panel discussion, Kai Hüschelrath was joined by Dr. Stephanie Birmanns, lawyer for European and German cartel law and merger control at the EU Commission in the internationally active law firm Schilling, Zutt & Anschütz, and Dr. Gerald Miersch, head of unit of the European Commission's Directorate-General for Competition. ZEW President Professor Clemens Fuest chaired the debate in front of a selected group of experts, among them representatives of the European Commission and companies, as well as journalists.
Stephanie Birmanns drew on her practical experience with clients, stating that the geographical range of cartels is a factor that should not be underestimated – particularly with regard to the Commission's instruments against illegal price-fixing, customer allocation and market sharing. She explained that national legislation in some countries makes it almost impossible to implement a leniency programme. In addition, she said, companies always face the possibility of cross-border claims for damages. Nevertheless, as Birmanns pointed out, it is becoming apparent that 20 years ago, companies were much less willing to act as principle witnesses for the European Commission against their cartel partners. According to her, that has fundamentally changed.
Gerald Miersch also referred to the leniency programme initiated by his institution as a success story. He stressed that up to 75 per cent of all antitrust cases in which the EU Commission succeeds are brought to justice because companies decided to self-report and testify against their former accomplices. Insider knowledge, he noted, is the main factor for success when combating cartels. Former employees of a cartel member, in particular, play a key role in revealing illegal market conduct.
Do Cartels Cause Regional Consequences?
The audience added more aspects after the panel discussion, asking: Are the citizens of certain regions particularly affected if that is where the cartel operates or has its headquarters? Are there any incentives similar to the Commission's company-related leniency programme that aim for individual informants? The debate on and with the panel showed that European competition policy is growing increasingly effective - but still has room for further reform.
Since its launch in 2014, the ZEW Lunch Debate series has provided a lunchtime platform for experts to discuss current economic challenges facing Europe. Events within this series, which take place in Brussels on a regular basis, provide an opportunity for controversial, open and committed debate.
Further information on the ZEW Lunch Debate series as well as on upcoming events