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Belgian competition law report: 2004/Q2

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• The Belgian Competition Act amended

A Royal Decree (the Decree) was adopted on 25 April 2004 amending several provisions of the Belgian Competition Act of 5 August 1991 to comply with EU Regulation 1/2003 on the modernisation of the application of articles 81 and 82 EC Treaty. Regulation 1/2003 aims to give national competition authorities and courts more powers to enforce EU competition law. Although Regulation 1/2003 applies directly, the enactment of a Decree amending the Belgian Competition Act appeared advisable to ensure uniformity and legal certainty in the application of EU and Belgian competition rules.

The main changes introduced by the Decree are the following.

• In line with the obligation imposed by Regulation 1/2003 to designate the competition authorities responsible for ensuring the effective enforcement of articles 81 and 82 EC Treaty, the Decree designates the Competition Council, the Competition Service and the Corps of Reporters as the responsible Belgian competition authorities.
• To enable the Belgian competition authorities to co-operate fully with the Commission, in line with Regulation 1/2003, the Decree also amends articles 18bis and 50 of the Belgian Competition Act to allow the Belgian competition authorities to share confidential information with the Commission, both regarding a decision of the Corps of Reporters to investigate a case and the type of decision the Competition Council intends to take.
• The Decree amends article 23 of the Belgian Competition Act to align the powers of investigation of the Reporters and the members of the Competition Service in searching business premises with those of Commission officials. The Reporters and members of the Competition Service can now seal business premises and seize documents there for as long as and to the extent necessary for the inspection. However, the powers of the Reporters and members of the Competition Service to seal private premises and to seize documents at private premises remain limited to a maximum of 48 hours.
• Finally, the Decree slightly amends article 31 of the Belgian Competition Act enabling the Competition Council to decide that articles 81 and 82 are ‘not applicable’ to an agreed restrictive practice only when trade between member states is not affected.

The Decree entered into force on 1 May 2004.

• Belgian competition authorities adopt a leniency programme and guidelines on setting fines

Following the examples of the European Commission and several other member states, the Belgian competition authorities have adopted a leniency notice and guidelines on the method of setting fines, which both entered into force on 7 May 2004.

The leniency regime is based on a joint communication from the Competition Council and the Corps of Reporters that sets out the conditions to be fulfilled by a leniency applicant to benefit from full immunity, or alternatively, from a reduction of fines. The Joint Communication also sets out detailed procedural rules on submitting leniency applications.

Full immunity vs reduction in fines

The Competition Council will grant full immunity if:

• an applicant is the first undertaking to provide evidence allowing the Competition Council to detect an infringement of article 81 EC Treaty and/or article 2 of the Belgian Competition Act relating to the Belgian territory;
• the Belgian competition authorities do not already have sufficient information and evidence to detect such an alleged infringement;
• the applicant fully co-operates with the authorities during the inquiry and provides any additional evidence (if applicable);
• the applicant terminates its participation in the infringement at the latest when making a leniency application to the Council; and
• the applicant has not coerced other undertakings to participate in the infringement.

When a leniency applicant fails to comply with the conditions for full immunity, it can be eligible for a reduction of fines when:

• it provides evidence that has significant added value compared to the evidence the authorities already have; and
• it complies with the third and fourth conditions above.

Procedural rules

To benefit from full immunity or a reduction of fines, the applicant must submit a written leniency application to both the Competition Council and the Corps of Reporters, accompanied by all the evidence it has on the alleged cartel. It is important to submit the leniency application simultaneously to the Competition Council and the Corps of Reporters, as the leniency application will be regarded as being submitted only as from the moment when both authorities have received a copy. Subsequently, a written acknowledgment of receipt will be sent to the applicant, indicating the date and hour of submission and reiterating the necessary conditions to benefit from full immunity or a reduction of fines.

The Corps of Reporters investigates whether the necessary conditions are fulfilled and informs the applicant as soon as possible if its application does not satisfy the conditions for full immunity. In such a case, the application for full immunity is automatically converted into an application for a reduction of fines, deemed to be submitted on the date of the original application. Once the Corps of Reporters has investigated the application and all the available evidence, it submits a reasoned non-binding report to the Competition Council, which issues a final decision on immunity or reduction fines. Based on the recommendations set out in the report of the Corps of Reporters, the Competition Council will determine in its final decision whether the evidence adduced by the applicant has significant added value and, if applicable, the level of reduction on fines. Fines may be reduced by 30-50 per cent for the first applicant providing evidence with significant added value, and by 20-30 per cent, and 5-20 per cent, respectively, for the second and third applicants providing such evidence.

Applicants that complied with the conditions to benefit from a reduction of fines and submitted their application before 1 July 2004 were eligible to a 50 per cent reduction. The Joint Communication also stresses that immunity or a reduction of fines does not protect undertakings against possible damage claims resulting from their participation in a cartel.

Guidelines on setting fines

In parallel, the Competition Council has issued guidelines on setting fines. These are designed to ensure the transparency and impartiality of the Competition Council’s decisions, while upholding the discretion the Competition Council enjoys under the Competition Act to set fines within a specific range or limit. Under the Belgian Competition Act, the Council can impose fines of up to 10 per cent of overall turnover for restrictive practices under Belgian or EU competition rules. It can also impose a fine of between €500 and €25,000 for violations during the investigation of restrictive practices, for example if the Council finds that incomplete data were provided on purpose in response to a request for information. The guidelines are clearly inspired by the European Commission’s existing guidelines in this area.

In setting a fine, the Council will start from a basic amount that will be increased to take account of aggravating circumstances (eg a role as ‘leader’ in the infringement) or reduced to take account of attenuating circumstances (eg an exclusively passive or ‘follow-the-leader’ role). The basic amount will be determined according to the nature, gravity and duration of the infringement and the illegal profit resulting from it.

The guidelines apply to the calculation of fines for restrictive practices, but also to fines in merger cases imposed by the Competition Council. For example, the Council can impose a fine of between €500 and €25,000 if a concentration is implemented without prior notification. The guidelines will serve as a basis for calculating the fine.

It has been reported that, so far, the Belgian leniency rules have had unexpected success, with the Belgian competition authorities having already received three leniency applications. There have been leniency rules at the EU level since 1996, initially with limited success. For example, only 16 cartels were disclosed to the Commission between 1996 and 2001. In 2002, this number increased to 20 cases, and it is thought that the Commission’s increased focus on combating cartels has resulted in an increase in leniency applications. The Netherlands, which introduced a leniency regime in 2002, has already received approximately 400 leniency applications primarily dealing with the construction sector.

• Newspaper merger approved conditionally

The Belgian Competition Council cleared Rossel’s and De Persgroep’s acquisition of the joint control of Editeco, subject to conditions, on 26 January 2004.

Both are media companies: Rossel is primarily active in Belgium’s French newspapers, while De Persgroep focuses on Belgium’s Dutch-speaking print and audiovisual media. Editeco publishes the French newspaper L’Echo.

In previous decisions the Council distinguished between readers and advertising (and sub-advertising) newspaper markets. The Phase II investigation into the Rossel/De Persgroep/Editeco case focused on whether the readership of French language newspapers should be segmented into sub-markets.

Several intervening parties (including IPM, a publishing competitor) argued for a narrower market for French language quality newspapers. This is an area in which Rossel’s and Editeco’s activities would overlap significantly and where, together, they would have 71.4 per cent of the readership and 74.5 per cent of the sales.

The notifying parties, supported by several interveners, argued for a French financial newspaper market. In this market, Editeco’s L’Echo would have a monopoly position but there would be no overlap between the notifying parties’ activities since Rossel and De Persgroep do not publish financial newspapers.

The Council rejected these narrower market definitions as both specialised and general information newspapers satisfied consumer information needs. Also, general information newspapers increasingly offer more specialist information and vice versa. Therefore, the Council held that the overall French language newspaper market was the relevant market. It did not identify any competition issues, although together Rossel and De Persgroep would have 51.9 per cent (with a 2.7 per cent increment) of the readership and 49.4 per cent (with a 3.8 per cent increment) of the sales.

The Council found that the merger would increase the notifying parties’ already dominant position in the overall advertising market in French language newspapers –particularly in legal, financial and employment advertising.

The parties addressed the Council’s concerns by committing, for five years, not to: integrate L’Echo’s advertising management with Rossel’s or De Persgroep’s; or tie L’Echo’s financial and commercial advertising with Rossel’s or De Persgroep’s publications. They also undertook not to enter into any agreement granting them exclusivity in an advertising campaign in French language print media. On this basis, the Council approved the transaction.

IPM has announced that it will appeal the Council’s clearance decision to the Brussels Court of Appeals.