Guidelines for setting fines

SUMMARY OF:

Guidelines on the method of setting fines imposed further to Regulation No 1/2003

WHAT IS THE AIM OF THE GUIDELINES?

• They set out the methodology to be used by the European Commission when setting fines on undertakings* that infringe the EU’s competition rules which prohibit:
  • cartels* and other restrictive business practices (ex Article 81 Treaty establishing the European Community (TEC), now Article 101 of the Treaty on the Functioning of the European Union — TFEU) and
  • abuses of dominant position (ex Article 82 TEC, now Article 102 TFEU).

KEY POINTS

Regulation (EC) No 1/2003 (see summary), based on Article 103 TFEU (ex Article 83), gives the Commission powers to enforce the competition rules and to fine companies for infringements. The guidelines, which replace previous guidelines adopted in 1998, impose tougher fines on firms that violate EU rules prohibiting cartels and other restrictive business practices.

Article 23 of Regulation (EC) No 1/2003 indicates that fines shall be set with regard to both the gravity and the duration of the infringement. Fines can reach up to 10% of the worldwide turnover of the corporate group to which the infringing company belongs in the previous business year.

To achieve its objectives of imposing fines that are sufficiently high both to punish the firms involved and to deter others from practices that flout the competition rules, the Commission takes certain factors into account such as:

• the value of the sales of goods or services to which the infringement relates;
• the duration of the infringement — the fine needs to reflect the number of years during which a firm participated in the infringement in order to appropriately account for its impact on the market;
• the gravity of the infringement, in particular by reference to the fine type and nature of the infringing conduct and certain other factors;
• factors specific to individual companies that may justify increasing or decreasing a fine.

Two-step methodology

The Commission:

• 1.

  determines a basic amount of fine for each undertaking or association of undertakings; and

• 2.

  may adjust that basic amount upwards or downwards.

Basic amount of the fine

• The basic amount is calculated as a percentage of the value of the sales connected with the infringement, multiplied by the number of years the infringement has been taking place.
• The percentage of the value of sales is determined according to the gravity of the infringement (nature, combined market share of all the parties concerned, geographic scope, etc.) and may be as much as 30%. For cartels, which are among the most harmful restrictions of competition, the gravity percentage will be set in the upper half of the range (minimum 15%).
• The Commission may add to this initial calculation a further amount that is applied to all cartel cases and, at the Commission’s discretion, to other infringements. This will be between 15 and 25% of the value of annual sales, irrespective of the duration of the infringement. This is known as the ‘entry fee’ and is intended to deter firms from engaging in illegal practices even for a short period.

Adjustments to the basic amount of the fine

• The Commission may adjust the basic amount for individual undertakings; downwards if it finds that there are mitigating circumstances, or upwards in the event of aggravating circumstances.
• Repeat offenders are fined more heavily. Firms that re-offend can face a 100% increase in their fine for having committed past infringements.
• In order to ensure that fines have a sufficiently deterrent effect, the Commission may also increase a fine applied to an undertaking that has a particularly large group turnover that is unrelated to the value of sales affected by the infringement.
• The guidelines for setting fines do not affect the application of the EU’s leniency rules, which can reduce, or grant immunity from, fines for undertakings reporting their participation in a cartel and cooperating with the Commission’s investigation.
• Fines can be further reduced pursuant to the Commission’s policy on cartel settlements or, in infringements other than cartels, on the basis of effective cooperation and acknowledgement of the infringement by the undertaking(s).
• The maximum fine for each firm is set at 10% of its total turnover in the preceding business year (Regulation EC No 1/2003).

FROM WHEN DO THE GUIDELINES APPLY?

They have applied since 1 September 2006.

BACKGROUND

For more information, see:

• Procedures in anticompetitive agreements (Article 101 TFEU cases) (European Commission)
• Abuse of dominant position (Article 102 TFEU) (European Commission).

KEY TERMS

MAIN DOCUMENT

Guidelines on the method of setting fines imposed pursuant to Article 23(2)(a) of Regulation No 1/2003 (OJ C 210, 1.9.2006, pp. 2-5)

RELATED DOCUMENTS

Consolidated version of the Treaty on the Functioning of the European Union — Part Three — Union policies and internal actions — Title VII — Common rules on competition, taxation and approximation of laws — Chapter 1 — Rules on competition — Section 1 — Rules applying to undertakings — Article 101 (ex Article 81 TEC) (OJ C 202, 7.6.2016, pp. 88-89)

Consolidated version of the Treaty on the Functioning of the European Union — Part Three — Union policies and internal actions — Title VII — Common rules on competition, taxation and approximation of laws — Chapter 1 — Rules on competition — Section 1 — Rules applying to undertakings — Article 102 (ex Article 82 TEC) (OJ C 202, 7.6.2016, p. 89)

Consolidated version of the Treaty on the Functioning of the European Union — Part Three — Union policies and internal actions — Title VII — Common rules on competition, taxation and approximation of laws — Chapter 1 — Rules on competition — Section 1 — Rules applying to undertakings — Article 103 (ex Article 83 TEC) (OJ C 202, 7.6.2016, pp. 89-90)

Commission Notice on Immunity from fines and reduction of fines in cartel cases (OJ C 298, 8.12.2006, pp. 17-22)

Council Regulation (EC) No 1/2003 of 16 December 2002 on the implementation of the rules on competition laid down in Articles 81 and 82 of the Treaty (OJ L 1, 4.1.2003, pp. 1-25)

Successive amendments to Regulation (EC) No 1/2003 have been incorporated into the original text. This consolidated version is of documentary value only.

last update 29.05.2020