Scania & Others/European Comission: the ‘Hybrid procedure and the rights of defense guarantee
What are the consequences of a settlement procedure where all the companies reach agreement with the authority conducting the investigation phase except one? Could the latter be harmed by not reaching an agreement? How does the principle of presumption of innocence apply given that the other participants in the infringement have already admitted to the facts? In this article, we identify the risks and disadvantages created by the so-called hybrid process and we will see that these can hardly be fully mitigated.
On 2 February 2022, the General Court of the European Union, upheld the fine of €880.52 million imposed by the European Commission on the Swedish company Scania for participation in a cartel involving truck manufacturers. The cartel in question aimed to fix the prices to distributors and their gradual increase, the coordination of price change dates, the fixing of discounts to be applied by distributors to consumers and the date of introduction of low-emission technologies in each of the companies involved.
In the aftermath of this Decision, we highlight some issues raised by the so-called hybrid procedure that was adopted by the Commission to investigate this practice. In particular, we refer to the guarantee of impartiality of competition authorities and the principle of presumption of innocence, which face important challenges in this context.
The hybrid procedure consists of the adoption by the European Commission of two decisions in the same case, through two separate procedures: the settlement procedure and the ordinary investigation procedure for competition law infringements.
In the settlement procedure, undertakings involved in a competition law infringement procedure negotiate with the Commission their admission as to their participation in the infringement, as well as the facts and their legal classification. If the parties reach an agreement, the amount of the fine imposed by the Commission is reduced by 10%.
It should be noted that the settlement procedure only involves the parties who wish to participate, being the remaining parties subject to the ordinary procedure. This distinction is relevant because decisions under the settlement procedure are more expeditious and may occur prior to the adoption of a decision under the ordinary procedure, as it happened in this case.
In fact, Scania decided to withdraw from the settlement procedure that was underway to investigate the alleged cartel to which Scania was a party, while the procedure continued regarding the other participants targeted by the Commission's investigation. As a result, Scania claimed that the Commission infringed the principle of sound administration by first adopting a decision under the settlement procedure and leaving the decision under the ordinary procedure to a later point in time. In Scania's view, this action called into question the Commission's impartiality, since it had consolidated its belief as to the facts and their classification before they were assessed in the ordinary procedure.
In this context, Scania also argued that an infringement of the presumption of innocence occurred since the Commission, during the settlement procedure, considered that the facts and conduct in question constituted an infringement to competition law, , not providing Scania an opportunity to exercise its rights of defense.
In this regard, the Court held that the Commission's decision to adopt the settlement procedure does not in itself entail a breach of the presumption of innocence principle, nor of the rights of defense concerned or the Commission's duty of impartiality. Indeed, according to European case law, the Commission may both adopt a decision under the settlement procedure and under the ordinary procedure even if some parties do not opt for the settlement procedure. However, in such cases, certain requirements must be met so that the hybrid procedure can be adopted without jeopardizing the rights of the parties concerned.
In the Pometon case, the Court of Justice of the European Union confirmed for the first time the validity of adopting the settlement procedure in cases where all participants in the infringement are not included. According to this decision, and as to the facts concerning the parties not involved in the settlement procedure ("non-settling parties"), the Commission will have to take additional precautions to avoid a premature judgment regarding the participation of the remaining parties in the infringement. Therefore, it is important not to disclose information relating to non-settling parties beyond what is considered necessary for the qualification of the liability of the addressees of a settlement decision.
Some examples of these precautions are the drafting and statement of the reasons leading to a decision in the settlement procedure, ensuring that references to the company which withdrew from the settlement procedure are made only where strictly necessary, and without the Commission mentioning its name. It should be noted that in this decision the Court has taken into account these precautions.
With regard to the alleged violation of the principle of the presumption of innocence, the Court stated that this requires the existence of formal and concrete evidence, or at least a small degree of allusion to the liability of the non-negotiating parties. Thus, the Court concluded that the legal qualification of facts and assessment of the same evidence only by reference to the settling parties does not violate this principle, as the non-settling party will have the opportunity to contest and be heard in its own forum.
Also in this regard, the Court stated that the Commission is not bound by the facts and the legal qualifications adopted in the settlement procedure, even in relation to parties in such procedure. Thus, in accordance with the principle of the presumption of innocence and the duty of impartiality, the Commission must carry out its analysis of the facts and qualify the conduct of the parties concerned as if it was analysing new information (the tabula rasa principle).
The question of whether the impartiality of a competition authority is affected by the possibility of adopting decisions within the same proceedings but through different procedures is difficult to answer. The same question can be posed with regard to the integrity and guarantee of the rights of defense and the presumption of innocence of the companies targeted in such procedures, which, although not denied, are certainly put to the test.
Indeed, in this case, the Commission examined the same facts and evidence in both procedures. , Given that a decision on the legal qualification of the facts under the settlement procedure, framing the practice as a horizontal agreement, was already reached by the Commission, it seems difficult to imagine that it would reach a different conclusion under the ordinary procedure..
Scania did not deny having the guarantees and opportunities established by law, but it stated that they were useless since the Commission was not in an impartial position to simultaneously investigate, prosecute and decide, specially when two separate procedures were adopted to investigate the same conduct.
The conciliation of these two procedures is extremely complex and requires a high degree of care and discretion by any competition authority, since each procedure has different incentives. In fact, the settlement procedure privileges speed and discretion, which means that the conclusion of an agreement may be preferred over a detailed investigation that accurately appreciates all the relevant facts and the degree of participation of each party in the infringement.
Despite the existing guarantees, a company involved in cartel investigation proceedings there has already been a negotiation between the competition authority and other participants in the cartel will be in a weaker position than if the procedure used in the investigation was the same for all involved.
No matter how many resources and people the authorities have at their disposal to ensure an effective compartmentalisation of information in ongoing proceedings, it is difficult to deny that a company that has to present its defense to an authority that has already investigated, negotiated and agreed the terms and legal qualification of the facts with other participants in the infringement does not face a leveled playing field.