The European Commission has recently given a demonstration of its commitment to anti-cartel enforcement in the financial sector by fining eight international financial institutions a total of €1,712,468,000.
The Alleged Cartels
The fines were imposed after the banks were found to have participated in illegal cartels in markets for financial derivatives covering the European Economic Area (EEA). Such cartels are prohibited under Article 101 of the Treaty on the Functioning of the European Union (TFEU) and Article 53 of the EEA Agreement.
One cartel, which four banks were found to be party to, related to interest rate derivatives denominated in the euro currency. A second case involved bilateral cartels relating to interest rate derivatives denominated in Japanese yen, and involved six of the recently fined banks.
Anti-Competitive Behaviour
The interesting thing about the two cases is the fact that the Commission has stepped into an area where other regulators, such as the Financial Conduct Authority, are carrying out their own investigations.
However, the Commission has taken a different tack in its investigations, focusing solely on breaches of competition rules – in this case collusion between competitors in derivatives markets – and looking at groups of banks, rather than the conduct of single banks.
Cartel Leniency Programme
The cases are also good examples of the way in which the Commission uses both its leniency programme and settlement procedure when dealing with cartels.
Leniency programmes allow authorities to grant full immunity or a reduction in the penalties that would otherwise have been imposed on a participant in a cartel, in exchange for freely volunteered disclosure of information on the cartel and continuous cooperation in the authority's investigation.
The reasoning is that by creating incentives to provide information to competition authorities, such programmes not only destabilise existing cartels, but prevent the creation of new ones.
The Commission certainly believes that it is working. It says that since the programme began in 1996, it has sanctioned more than 500 undertakings and imposed more than 16 billion euros in cartel fines.
In the most recent cases there were a number of beneficiaries under the leniency programme:
- Barclays was not fined for its involvement in the euro-related derivatives cartel, after revealing its existence to the Commission, while Deutsche Bank, RBS and Société Générale received a reduction of their fines under the programme for their cooperation in the investigation. These companies received a further fine reduction of 10% for agreeing to settle the case with the Commission.
- With regard to the yen-related derivatives cartels, UBS received full immunity for revealing the existence of the infringements. Citigroup also benefited from full immunity for its participation in one bilateral infringement. For their cooperation with the investigation, the Commission granted fine reductions under the programme to Citigroup, Deutsche Bank, RBS and RP Martin, while the companies were also granted a fine reduction of 10% for agreeing to settle the case with the Commission.
Settlement Procedure for Cartels
These 10% fine reductions were all granted under the Commission’s cartel settlement procedure.
This came into operation in 2008, and allows parties, having seen the Commission’s evidence against them, to acknowledge their involvement in the cartel and their liability for it. In return for this acknowledgement, the Commission can reduce the fine imposed on the parties by 10%.
The point of the procedure is to simplify the administrative proceedings and to potentially reduce litigation before the European Courts in cartel cases.
“Today's decision sends a clear message that the Commission is determined to fight and sanction these cartels in the financial sector,” said Joaquín Almunia, Commission Vice-President in charge of competition policy. “Healthy competition and transparency are crucial for financial markets to work properly, at the service of the real economy rather than the interests of a few.”
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