Law Business Research: The Public Competition Enforcement Review 2011 - Ireland Chapter

Author:Mr Patrick O'Brien and Fiona McKeever
Profession:Arthur Cox
 
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I. OVERVIEW

i. Prioritisation and resource allocation of enforcement authorities

The Irish Competition Authority ('the Authority') is responsible for enforcing Irish and EC competition law within Ireland. To carry out its enforcement function, the Authority is organised along six divisional lines, which correspond to the Authority's areas of activity. Each division is headed by one of the members of the Authority.

During the course of 2010, the Authority was lead by four members, three of whom were on temporary six-month contracts. In early 2011, the fourth member announced his decision to leave the Authority.1 This upheaval in the leadership of the Authority as well as other departures at a lower level affected its allocation of resources and workload throughout 2010. Notwithstanding this, its strategy remains focused on cartel detection.

The Cartels Division continues to be the most resourced division within the Authority, reflecting the priority given to detecting, investigating and prosecuting cartels.2 During 2010, the Division comprised nine staff,3 including one detective sergeant on secondment from the Garda Bureau of Fraud Investigation ('GBFI'). The Division's staff is generally made up of former members of other law enforcement agencies experienced in investigating white-collar crimes. This division is responsible for the initial investigation of an alleged cartel and the preparation of a file to be sent to the Director of Public Prosecutions ('DPP') if the Authority recommends a trial prosecution. The DPP is ultimately responsible for bringing criminal proceedings on indictment against individuals and companies. During 2010, the Cartels Division was headed by Mr Gerald FitzGerald.

The second largest division within the Authority continues to be the Monopolies Division, which investigates non-hard-core infringements of the competition rules such as non-cartel agreements (e.g., resale price maintenance and other vertical agreements) and abuse of dominance cases. During 2010, this Division comprised a team of seven members of staff. If an investigation results in obtaining evidence of an infringement, the Division may initiate civil proceedings before the court seeking declaratory or interlocutory relief but not civil fines or damages. The Authority has also in the past entered into settlement agreements with companies to close investigations without having recourse to civil litigation. During 2010, the Division was headed by Mr Stanley Wong, who left the Authority in early 2011.

The remaining staff are positioned in four other divisions, responsible for mergers, corporate services, advocacy and policy.

ii. Enforcement agenda

The Authority's enforcement regime is primarily focused on deterring hard-core price-fixing, bid-rigging and market-sharing cartels, which the Authority considers to be serious crimes against the public. During 2010, the Authority received 31 new complaints of alleged criminal cartel behaviour, in addition to continuing a number of ongoing investigations. One file has been sent to the DPP with a recommendation to prosecute on indictment. The Authority has indicated that the file was extremely complex.

In light of the Authority's strategic goals it is anticipated that enforcement of competition law through the criminal courts will remain a priority during 2011, although it remains to be seen the extent to which the continuing personnel changes will affect delivery of this objective. Civil enforcement of non-cartel activity is also likely to remain a priority for the Authority, particularly abuse of dominance cases.

II. CARTELS

i. Significant cases

Irish competition law is contained in the Competition Act 2002 ('Competition Act'). Although it is modelled on the competition provisions of the EC Treaty, now Treaty on the Functioning of the European Union ('TFEU'), there are some differences between the two regimes in terms of substance, burden of proof and penalties. These are briefly described below.

Section 4(1) of the Competition Act ('Section 4'), is based on Article 101(1) TFEU. Arrangements that infringe Section 4(1) of the Competition Act will not be unlawful where they satisfy the efficiency conditions listed in Section 4(5), which are the same criteria as those listed in Article 101(3) TFEU. Section 5(1) of the Competition Act ('Section 5') prohibits the abuse of a dominant position in Ireland, or any part of Ireland and is modelled on Article 102 TFEU ('Article 102').

All infringements of Sections 4 and 5 are criminal offences and can be tried either summarily, that is in the lower criminal courts, or on indictment. All convictions on indictment carry a penalty of a fine not exceeding the greater of €4 million or 10 per cent of the turnover of undertaking in the previous completed financial year. Any person convicted of an indictable offence is deemed disqualified from being a director for five years from the date of conviction.4 An important feature of the Irish legislative framework is enforcement through the courts system. Unlike the European Commission ('the Commission'), the Authority may not issue an infringement decision, or fine individuals or companies.

Irish legislation distinguishes cartel offences as described in Section 6(2) of the Competition Act5 and other anti-competitive behaviour in two manners: first, the evidential burden on the prosecutor is lessened in relation to the first category, and second, cartel activity is punished more harshly than non-cartel activity.

In particular, when prosecuting cartel offences, the court must presume that those activities have as their 'object' the prevention, restriction or distortion of competition, unless the defendant can prove otherwise. The prosecution thus has to prove less of the constituent elements of the crime when prosecuting cartel offences. Second, on conviction of a cartel offence, in addition to being fined, an individual can be sentenced to five years' imprisonment. No other competition offence carries a custodial sentence. The reversal of the burden of proof, and the tougher sentencing regime reflect the fact that cartels are generally considered to have no consumer welfare enhancing attributes, therefore the prosecution of such offences should be made easier and the penalty should be sufficiently harsh so as to promote deterrence.

Criminal conviction successes

Criminal sentences were first imposed by the courts in 2002 against companies and individuals involved in cartel activities, affecting many industrial sectors including petrol retailing, home heating and motor vehicles. Since 2002, two convictions secured by the DPP were European firsts.

October 2005 saw the first person being sentenced to six months' imprisonment, suspended for one year, which was the first custodial sentence to be imposed on an individual for a cartel offence in Europe.6

Another first followed in March 2007 when the DPP secured a conviction following a jury trial. The case of DPP v. Denis Manning7 remains one of the most important competition law criminal case brought before the Irish courts. Central to that judgment was Judge McKechnie's position that custodial sentences for individuals should become commonplace, rather than exceptional, on conviction of cartel activities.

Developments in 2010

The major cartel enforcement event of 2009 was the judgment of Judge McKechnie in DPP v. Patrick Duffy where Judge McKechnie identified the factors that courts...

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