EU & Competition

Settlements with the Austrian Competition Authorities: Outlook

In its recently published guidelines, the Austrian Federal Competition Authority (FCA) outlines the regulatory framework for settlements in antitrust proceedings – a procedural instrument that is becoming more and more attractive in Austria. But do the guidelines provide sufficient incentives for companies to pursue settlements as an “early exit” route, and what are the benefits and pitfalls of such process?

How does the settlement procedure work in Austria?

The Aus­tri­an set­tle­ment pro­ce­dure seeks to sim­pli­fy and expe­dite antitrust pro­ce­dures. As a trade-off for not con­test­ing the results of an antitrust inves­ti­ga­tion by the FCA, the under­tak­ing con­cerned is offered a reduc­tion in fine as well as an accel­er­at­ed pro­ceed­ing before the Aus­tri­an Car­tel Court. In a nut­shell, the set­tle­ment pro­ce­dure com­pris­es the fol­low­ing steps:

  • First, the FCA and the under­tak­ing con­cerned must have a gen­er­al inter­est in explor­ing a set­tle­ment. If so, set­tle­ment dis­cus­sions may be opened infor­mal­ly by both sides. Such dis­cus­sions typ­i­cal­ly take place out­side the court room, well in advance of any Car­tel Court pro­ceed­ings.
  • Sec­ond, dur­ing the set­tle­ment dis­cus­sions, the FCA will lay out the key ele­ments of the infringe­ment. Most impor­tant­ly, the FCA will present the facts and evi­dence of the case, its legal qual­i­fi­ca­tion and the fine to be expect­ed. Even­tu­al­ly, the under­tak­ing must agree with the fac­tu­al find­ings of the FCA and refrain from object­ing the FCA’s legal qual­i­fi­ca­tion of the con­duct as a breach of com­pe­ti­tion law.
  • Third, the FCA will con­sult with the Aus­tri­an Fed­er­al Car­tel Pros­e­cu­tor (FCP) and bring the case before the Aus­tri­an Car­tel Court. Dur­ing the court pro­ceed­ings, the under­tak­ing con­cerned (as well as the FCP) will have the oppor­tu­ni­ty to com­ment. If the FCP does not object, the deci­sion of the Aus­tri­an Car­tel Court may not be high­er than the fine set­tled with the FCA.

Which cases are suitable for settlements?

A set­tle­ment can be an inter­est­ing option for a num­ber of cas­es. Unlike at the EU lev­el, the guide­lines of the FCA cov­er not only (hard­core) car­tels but also uni­lat­er­al con­duct, such as abuse of dom­i­nance or gun jump­ing in merg­er con­trol pro­ceed­ings.

Spe­cif­ic fac­tors that may sug­gest that a case is eli­gi­ble for a set­tle­ment are (i) the prob­a­bil­i­ty of reach­ing a com­mon under­stand­ing with the FCA in a rea­son­able time­frame and (ii) the prospect of achiev­ing pro­ce­dur­al effi­cien­cies. Hence, a set­tle­ment is suit­able first and fore­most for cas­es that do not require infi­nite (legal) dis­cus­sions.

How­ev­er, in excep­tion­al cir­cum­stances also cas­es that touch upon new legal the­o­ries may qual­i­fy for a set­tle­ment. This is because the FCA guide­lines do not fore­see a time restric­tion for the open­ing of set­tle­ment dis­cus­sions. Hence, a (legal­ly) com­plex case may be brought before the Aus­tri­an Car­tel Court to clar­i­fy cer­tain aspects of the alleged infringe­ment, but even­tu­al­ly be set­tled with the FCA before a full-fledged evi­den­tial pro­ce­dure has been con­duct­ed by the court.

What is the incentive for a company to settle?

From a company’s per­spec­tive, the most attrac­tive fea­ture to a set­tle­ment is finan­cial. In return for the acknowl­edge­ment of the facts of the infringe­ment, the under­tak­ing is grant­ed a reduc­tion of up to 20% of the envis­aged fine (twice what the Euro­pean Com­mis­sion would grant in its set­tle­ment prac­tice). The FCA guide­lines explic­it­ly note that a bonus for set­tle­ments does not exclude a fur­ther reduc­tion of the fine for the company’s coop­er­a­tion (be it as lenien­cy appli­cant or oth­er­wise). The accel­er­at­ed set­tle­ment pro­ce­dure also saves legal and con­sul­tan­cy fees and allows the company’s man­age­ment involved in the pro­ceed­ings to quick­ly return to its every­day busi­ness.

Fur­ther­more, and in terms of num­bers not the least import, a coop­er­a­tive dia­logue with the FCA may well influ­ence the scope and dura­tion of the alleged infringe­ment as the FCA – unlike in liti­gious cas­es – is more pre­pared to focus on key con­duct and the key peri­ods in order to achieve a set­tle­ment. This will not only reduce the amount of fine to be expect­ed but also lim­it the infor­ma­tion that becomes avail­able to the pub­lic (Car­tel Court deci­sions must be pub­lished since the most recent antitrust reform that entered into force in 2013). Addi­tion­al­ly, cov­er­age in the media and the neg­a­tive per­cep­tion of the pub­lic may also be sig­nif­i­cant­ly low­er in a “silent set­tle­ment pro­ce­dure” than in con­test­ed cas­es, which may last for years.

What are the downsides and pitfalls of the settlement procedure?

As a draw­back to the “ear­ly exit” route, the par­tic­i­pat­ing under­tak­ing must accept cer­tain restric­tions of pro­ce­dur­al rights:

  • The FCA guide­lines do not fore­see spe­cif­ic mea­sures to safe­guard the undertaking’s right to be heard in the set­tle­ment process before the FCA. In this respect, the par­tic­i­pat­ing under­tak­ing depends on the good­will of the author­i­ty.
  • As regards the cal­cu­la­tion of the set­tled fine, the over­all coher­ence and con­sis­ten­cy of the lev­el of fine will be scru­ti­nised by the Aus­tri­an Car­tel Court. Dur­ing the set­tle­ment dis­cus­sions with the FCA, it is there­fore advis­able to specif­i­cal­ly label the mit­i­gat­ing mea­sures that will lead to a reduced fine.
  • It is also impor­tant to include the FCP at an ear­ly stage of the set­tle­ment process. Oth­er­wise, there remains a cer­tain risk that the FCP will request a high­er fine or sub­se­quent­ly con­test the set­tle­ment deci­sion of the Car­tel Court, if he dis­agrees with the com­pro­mise sought (only in lenien­cy appli­ca­tions is the right of the FCP to request a fine statu­to­ri­ly exclud­ed).
  • There is lit­tle chance for an under­tak­ing con­cerned to cred­i­bly appeal a set­tle­ment deci­sion of the Aus­tri­an Car­tel Court, if it cor­rect­ly reflects the facts to which the under­tak­ing has con­sent­ed to vis-a-vis the FCA (even though a waiv­er of the right to appeal may not be request­ed in advance of the Car­tel Court pro­ceed­ings). There­fore, a legal­ly bind­ing set­tle­ment state­ment should be made only once the case had been brought before the Aus­tri­an Car­tel Court.
  • Final­ly, a set­tle­ment may back­fire in poten­tial fol­low-on dam­age claims due to the acknowl­edge­ment of facts and the non-objec­tion of its legal qual­i­fi­ca­tion, which will be reflect­ed in the set­tle­ment deci­sion (a non-con­fi­den­tial ver­sion of which will be pub­lished by the Aus­tri­an Car­tel Court). Con­sid­er­ing the recent­ly adopt­ed EU direc­tive on antitrust dam­age actions, the risk of civ­il cas­es is like­ly to increase sig­nif­i­cant­ly as the direc­tive – once imple­ment­ed into nation­al law – may low­er the bur­den of proof and facil­i­tate the quan­tifi­ca­tion of harm for which a third par­ty may seek dam­ages. On the plus side, how­ev­er, set­tle­ment deci­sions are like­ly to be less detailed than a ful­ly rea­soned deci­sion and there­fore – at least poten­tial­ly – of less use as a basis for dam­age claims.

In determining whether a settlement is an attractive option in antitrust proceedings, an undertaking must balance the risk of increased exposure in follow-on damage claims against the prospect of a reduced fine and less media attention.