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ECJ Rules on Third Party Access to Leniency Documents: Pfleiderer AG v Bundeskartellamt

Peter Crowther, Michael Holzhäuser, Dewey & LeBoeuf Client Alert, 20 June 2011

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On 14 June 2011, the European Court of Justice (ECJ) handed down a key judgment regarding the interplay between national leniency programmes and the right of individuals to claim damages for losses in EU cartel cases. The ECJ held that documents submitted under the auspices of a national leniency programme will not be protected from third party access as a matter of EU law. According to the judgment, it is for the courts and tribunals of the Member States to determine the conditions under which third party access to documents provided as part of a leniency application should be allowed or refused. The Member States must balance the interests protected by EU law on a case-by-case basis, taking all the relevant factors into account. Depending upon the standard of disclosure adopted by the individual Member States, third parties seeking to prepare a civil action for damages may be granted access to information voluntarily communicated by leniency applicants.

Background

This case involved a reference for a preliminary ruling from the German Amtsgericht Bonn (the Local Court of Bonn) dealing with an application by Pfleiderer AG (Pfleiderer) for full access to the file of evidence prepared by the Bundeskartellamt in the Decor Paper cartel (as yet unpublished). Pfleiderer stated it had purchased decor paper from the cartel participants with a value in excess of EUR 60 million. The Bundeskartellamt restricted access to the file to a version from which confidential business information, internal documents and documents covered by point 22 of the Bundeskartellamt’s notice on leniency (the Bundeskartellamt Notice) had been removed. Under point 22 of the Bundeskartellamt Notice, the Bundeskartellamt has the power to refuse applications by third parties for file inspection, or the supply of information, involved in a leniency application. Moreover, the Bundeskartellamt commits itself generally to refuse access to leniency applications and documents provided in that context.

Pfleiderer appealed the decision of the Bundeskartellamt to the Amtsgericht Bonn, which ordered the Bundeskartellamt to grant Pfleiderer access to the file in accordance with the combined provisions in the German Code of Criminal Procedure and the Law on administrative offences. The Amtsgericht Bonn held that Pfleiderer was an "aggrieved party" within the meaning of those provisions, as it must be assumed that it paid excessive prices as a result of the cartel, and had a "legitimate interest" in obtaining access to the documents, since those were to be used for the preparation of civil proceedings for damages. The Amtsgericht Bonn therefore ordered access both to the material in the case file, which the cartel participant (a leniency applicant) had voluntarily made available to the Bundeskartellamt, and to the incriminating material and evidence collated, though access was not granted to confidential business information and internal documents.

Preliminary reference to the ECJ

However, the Amtsgericht Bonn stayed its decision and referred the case to the ECJ, questioning whether the provisions of Community competition law – in particular, Articles 11 and 12 of Regulation No. 1/2003 and the second paragraph of Article 10 EC, in conjunction with Article 3(1)(g) EC which oblige the European Commission (Commission) and the national competition authorities (NCAs) to cooperate closely and provide for a mutual exchange of information – would conflict with its decision. The Amtsgericht Bonn considered that it might prove necessary to deny third parties access to leniency applications in order to ensure the effectiveness and proper functioning of the EU competition rules, namely Articles 101 and 102 of the Treaty on the Functioning of the European Union (TFEU).

Opinion of Advocate General Mazak

In his opinion, Advocate General (AG) Mazak focused on whether the grant of access to information voluntarily submitted by a leniency applicant by a NCA for the purposes of bringing a damages claim might undermine the effective enforcement of EU competition law and the system of cooperation and exchange of information between the Commission and the NCAs. In the view of AG Mazak, the preliminary reference required the ECJ to weigh and balance the possibly diverging interests of ensuring the efficacy of leniency programmes established for the purpose of detecting, punishing and ultimately deterring the formation of illegal cartels on the one hand, with the right of any individual to claim damages for harm suffered as a result of such cartels on the other.

AG Mazak considered that, while no de jure hierarchy has been established between public enforcement of competition law and private actions for damages, the role of the Commission and the NCAs was of far greater importance than private actions in ensuring compliance with Articles 101 and 102 TFEU. AG Mazak made a distinction between voluntary oral statements and pre-existing documents (a distinction that can be found in the 2006 EU Leniency Notice, although exclusively with regard to access to the file by the addressees of a Statement of Objections). AG Mazak proposed that, while third parties ought not to be given access to self-incriminating voluntary oral statements provided by leniency applicants, it would run counter to the fundamental right to an effective remedy if access to other pre-existing documents were denied.

ECJ Judgment

The ECJ did not adopt the opinion of AG Mazak, but instead concluded that the provisions of EU law in relation to cartels must not be interpreted as precluding a person, who has been adversely affected by an infringement of EU competition law and is seeking to obtain damages, from being granted access to documents related to a leniency procedure involving the participant in that infringement.

The ECJ recalled that neither the competition law provisions of the TFEU nor Regulation No 1/2003 set out common rules on leniency or the right of access to documents submitted voluntarily to a NCA pursuant to a national leniency programme and that the relevant Commission Notices and the ECN Model Leniency Programme are not binding. Accordingly, it was for Member States to establish and apply national rules on the right of access by persons adversely affected by a cartel to documents related to leniency procedures.

However, Member States must nonetheless exercise that competence in accordance with EU law; in particular, in the area of competition law, they must ensure that the rules which they establish do not jeopardise the effective application of Articles 101 and 102 TFEU. The ECJ recognised that the effectiveness of leniency programmes may be compromised if documents were disclosed to a party wishing to bring an action for damages, but restated the right of an individual to claim for damages for loss caused by an infringement of the EU competition rules.

In doing so, Member States must ensure that the applicable rules are not less favourable than those governing similar domestic claims, and that they do not operate in such a way as to make it "practically impossible or excessively difficult" to obtain compensation for breach of EU law.

Comment

It is notable that the ECJ did not take the opportunity to strengthen the role of public enforcement of competition law against private actions for damages in ensuring compliance with Articles 101 and 102 TFEU. Even though both instruments have a deterrent effect on potential cartel participants, only through the authorities’ investigation and enforcement actions, to which leniency applications are key, will unknown cartels be detected. Following the ECJ’s judgment, entities, that voluntarily cooperate with the authorities in revealing cartels, might now be put in a worse position in respect of civil claims than other cartel members which refuse cooperation. This may create disincentives for companies to apply for leniency.

Following the decision of the Amtsgericht Bonn, the Bundeskartellamt’s official position not to grant access to that part of its files, concerning information submitted under the leniency program, is now capable of being challenged in the future. The national courts will have to determine in each individual case whether "overriding interests worthy of protection" constitute an obstacle to full access. According to the presently applicable provisions of German criminal procedure and administrative offence law, access to documents may be refused if the purpose of an investigation may be jeopardised. However, following the judgment, an amendment of the German Act against Restraints of Competition explicitly establishing the effective public enforcement of Article 101 TFEU as an "overriding interest worthy of protection" may reasonably be expected.

Following the ECJ’s judgment, similar claims in other Member States can be expected which may lead to different standards of third party disclosure in different Member States. The ECJ judgment may well negatively impact upon the cooperation and mutual exchange of information between the Commission and the NCAs, as other authorities may become reluctant to provide information to certain NCAs.

That the ECJ did not make a distinction between corporate statements and pre-existing documents as proposed by AG Mazak is notable and may suggest that corporate statements are now more vulnerable to disclosure. However, following the judgment, the Commission has been quick to confirm publicly that it will continue to protect leniency documents as it has in the past. Where the Commission has competence over a case, its basic position is that public disclosure of documents, and written or recorded statements received in the context of the 2006 Leniency Notice, would undermine the leniency process subject to the requirement that the Commission carry out a documentby- document assessment.

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