By Hung Ou Yang and Chan-Chi Chang
Although concerted actions may become lawful under the approval of the competent authority, after all this kind of situation is quite exceptional for very few specific types of concerted actions. In principle, the Fair Trade Act (“the Act”) basically prohibits concerted actions of enterprises. For the purpose of deterring severe concerted actions, the Act even provides large sum of fines up to 10% of the total sales volume of the previous fiscal year of the business, upon culpable enterprises. For example, in the concerted actions of capacitor manufacturers, the Fair Trade Commission (“FTC”) fined them nearly two hundred million US dollars, while in the case of private power plants the total amount of fines was as high as two hundred seventeen million US dollars. Facing strict rules adopted by the Act, what shall an enterprise do, except avoiding legal risks carefully in advance, if it has participated in unlawful concerted actions? At this stage, to apply for a “Leniency Program” from the FTC may be an effective measure to be exempt from or mitigate the potential fines.
1. What is a Leniency Program?
The so-called leniency program refers to the system in which the enterprise engaged in concerted action proactively confesses the conduct and provides concrete evidence to law enforcement agencies in exchange for an exemption from or reduction of penalty. Since the consensus of concerted actions is usually reached in secret, law enforcement agencies are not able to find it directly. Thus leniency programs are commonly adopted by worldwide governments as incentives to encourage voluntary assistance in law enforcement agencies’ investigation from enterprises who have participated in unlawful concerted actions. In this way, law enforcement agencies may also more easily obtain evidence to punish other participants of unlawful concerted actions.
After introducing the leniency policy to Taiwan, Paragraph 1 of Article 35 of the Act provides: Any enterprise involved in violation of Article 15 of the Act may apply for exemption from or reduction of the fines which may be levied pursuant to Paragraph 1 and 2 of Article 40, under any one of the following conditions, in addition to prior approval of the competent authorities:
1) The enterprise involved in concerted actions shall voluntarily file written accusation or concrete illegal conduct, together with evidence of the said concerted actions, with the competent authorities, and assist in the investigation of the said concerted actions, before the competent authorities become aware of or initiate an investigation upon the said concerted actions, pursuant to this Act.
2) During the period in which the competent authority investigates the said concerted actions pursuant to this Act, the enterprise involved in concerted actions shall voluntarily state concrete illegal conduct, together with evidence of said concerted actions, with the competent authorities, and assist in the investigation of the said concerted actions.
The applicable targets, required evidence, and standards of exemption or reduction, relating to the details of the leniency policy, are provided by “Regulations on Immunity and Reduction of Fines in Illegal Concerted Action Cases”. We hereby introduce an overview of the leniency policy as follows.
2. Applicable Targets
Not all enterprises involved in the concerted actions may apply for a leniency program. Any enterprise engaged in forcing other enterprises to participate in or not to withdraw from a concerted action will not be qualified for a leniency program. In addition, when an enterprise has destroyed, forged, altered, or concealed any relevant evidence in connection with a concerted action during the period between it started to prepare for the application for a leniency program and the FTC initiated the investigation of the said concerted action, or when an enterprise has disclosed the fact that it has prepared for the application or any content of its application, to the public directly or indirectly, it will be disqualified from the leniency program. The ringleader, originator, leader, or recidivist who has been fined by the FTC for concerted actions previously, of a concerted action, however, may still be qualified for the application for a leniency program.
3. Evidence and Factual Statements Required for Filing the Application
Pursuant to Article 35 of the Act, the leniency program may be differentiated into two types according to whether the FTC has initiated the investigation. Thus, the evidence and factual statements required will be different:
3.1 Before the FTC becomes aware of or initiates investigation upon a concerted action, the applicant has to provide contributive evidence to the FTC’s start-up of investigation. In other words, the applicant must provide sufficient details of the concerted action it involved together with relevant evidence which the FTC has not known or obtained yet so as to enable the FTC to grasp an overview of the concerted action as well as the time, place, content, and other factors of the concerted action, which are contributive to the procedure of investigation.
3.2 Should the application was filed during the period in which the FTC has already started the investigation, the enterprise shall provide contributive evidence relating to the illegality of the concerted action. In short, one of the following requirements shall be met:
3.2.1 The applicant must provide sufficient details of the concerted action it involved together with relevant evidence which the applicant has when it filed for the application and is sufficient to prove the illegality of the concerted action, or,
3.2.2 The applicant’s statements and evidence are contributive to the FTC’s investigation upon the concerted action.
Is there a way to understand whether the FTC has started the procedure of investigation? Basically it is the time when the FTC issues notice of investigation or sends investigators to any of the enterprises involved. If the FTC sends investigators after the notice is issued, the date of issuance of notice counts.
4. Method of Review Adopted by the FTC: Two Phases
4.1 Preliminary Review
The FTC will conduct preliminary review with respect to the qualification of the applicant and whether its statements and evidence have complied with the law, after receiving the application. If all requirements were met, the FTC will issue a conditional approval so that the enterprise could know its order in the sequence of exemption or reduction. However, the conditional approval is an interlocutory decision during the procedure, not a final decision. The FTC may revoke the conditional approval after finding out that the enterprise is not qualified as applicable targets or has not fulfilled the conditions. Under this situation, there may be a change in the sequence of other enterprises that have filed the applications and the FTC will notify them the same in writing.
4.2 Final Review
The conditions prescribed in the conditional approval issued to the applicant usually consist of demanding the applicant to stop its participation in the concerted action (immediately or at certain specific time) and to take the obligation to assist in the investigation, for the purpose of obtaining internal materials and evidence of said concerted action, so that the FTC may collect relevant evidence easily. The obligations to assist in the investigation includes the following:
4.2.1 Providing materials and evidence, including all materials and evidence available now and in the future, in time;
4.2.2 Providing elaborations and assisting in the investigation according to the FTC's instructions;
4.2.3 Sending involved employee or authorized representative to accept questioning;
4.2.4 Providing true statements which shall not be false, forged, altered, or served to destroy or conceal the truth; and
4.2.5 Prohibiting the disclosure of the fact that it has prepared for the application or any content of its application to the public without permission of the FTC, before the case is closed.
The applicant must observe the FTC’s conditions till all the investigation is closed so that it may be granted the exemption from or reduction of fines.
5. The Standards for the Exemption from or Reduction of Fines: Based on the Sequence
The purpose of the leniency program is to encourage earlier application from the enterprises involved in the unlawful concerted actions, based on potential distrust among the participants who may betray others for the exemption from or reduction of fines. Therefore, the system works in a way where earlier application enjoys higher order and then higher order enjoys higher priority in the sequence to the exemption from or reduction of fines. The details are as follows:
5.1 The “exemption” from fines: Only one sole candidate
An enterprise may be exempted from fines under two kinds of situation. First, before the FTC initiates the procedure of investigation, the enterprise that files the application the first and then obtains a conditional approval from the FTC and performs all the conditions could be exempted from the fines entirely. Second, in the absence of any enterprise of the first situation, the enterprise that files the application the first, during the period of investigation, and then obtains a conditional approval from the FTC and performs all the conditions could also be exempted from the fines entirely.
5.2 The “reduction” of fines: Four candidates at most
If an enterprise could not meet all the requirements of exemption from fines, it may still apply for the reduction of fines. The reduction of fines is applicable to four entities to the maximum, and the sequence of reduction is as follows:
The first: Reduction by 30%~50%
The second: Reduction by 20%~30%
The third: Reduction by 10%~20%
The fourth: Reduction by not more than 10%
5.3 How to judge the time of filing the application?
The standards as mentioned above make the judgment on the time of filing an enterprise’s application very essential. If the enterprise files written application, the time of filing would be the time when the FTC receives the application; Since the application could also be filed orally, namely the enterprise sends a representative to the FTC for making statements as well as signing on the records kept by the FTC, on behalf of the enterprise, then the time of filing the application would be the time when the representative signs on the FTC’s records. When an enterprise files the application, it would be better actively request a receipt, which has the date and time of filing the application, issued by the FTC, as a proof.
5.4 How to ensure the entitlement of the order of the application filed?
After ensuring the time of filing the application, it would be much more important to ensure the entitlement of the order. For any enterprise that aims at applying for exemption from fines, evidence may not be complete in a short time or not be sufficient for the time being but will be available in the future, although at this stage such enterprise is not able to meet the requirements of exemption, but it may apply for a retention of qualification, in order to maintain its order to obtain the potential exemption in the sequence and prevent other enterprises from taking it. When applying for the retention of qualification, the applicant shall provide its identification, an overview of the facts of the concerted action, reasons for the retention of qualification and temporary delay of the formal application, and anticipated evidence that would be produced in the future. After the retention is granted, such enterprise shall also supply the FTC with necessary evidence within the deadline specified by the FTC, or it may lose the retention of qualification in the sequence.
Generally speaking, any enterprise, when it files the application for exemption from fines, would not be able to know whether other enterprises have filed similar applications; if another enterprise does, later applicant’s application will be rejected by the FTC. Then, how to deal with it? At this stage, the enterprise may apply for a change from the procedure of exemption into one of reduction and for the retention of the time of filing the original application as the time of filing the application for reduction, in writing, so that it could maintain its entitlement in the sequence.
Furthermore, it is difficult for any enterprise, suddenly under investigation, to file a formal application with sufficient evidence which meets all the requirements in a very short time. Facing such a situation, an enterprise may provide the FTC with materials and evidence together with a request for reduction of fines according to the leniency policy. Though it does not count as a formal application in accordance with legal requirements, it may still be deemed as an application filed, and at the time when those materials and evidence are produced shall be the time of filing the application, so as to protect the enterprise’s interests in the sequence, provided that the materials and evidence are contributive to the FTC’s investigation upon the concerted action. However, any enterprise shall note that it is only an expedient measurement and a formal application that meets all the requirements shall be prepared and filed with the FTC eventually. If the enterprise fails to file a formal application with the FTC within the deadline prescribed by the FTC, the FTC will render a decision of Case-Not-Entertained in the end.
Last but not least, since an enterprise’s order in the sequence is so important, could plural enterprises coordinate with each other and file the applications at the same time, so that all of them may enjoy the first place in the sequence? The Fair Trade Act anticipated that if this is allowed, the legislative purpose to encourage first application from all enterprises involved so as to break down the concerted actions will be void; therefore, “independent application” is expressly required, whereas joint application will not be entertained by the FTC. However, there is an exception to this rule. When all the enterprises filed the applications jointly at the same time are affiliated to one group of enterprises as defined by the Company Act, those enterprises may be deemed as one enterprise with regard to the leniency program therefore share the same order in the sequence. However, if affiliated enterprises did not file the applications jointly at the same time, they may not share the same order in the sequence.
6. For multinational enterprises, beware of international mutual legal assistance
In conclusion, one of the requirements to file for a leniency program is that an enterprise must actively provide law enforcement agencies with the facts and evidence of the unlawful concerted actions it has participated. In the wake of actively global deployment by multinational enterprises, many countries have established international cooperation models for the enforcement of competition law. In other words, the law enforcement agency in one country may deliver the evidence it has obtained to the law enforcement agency in another country. So, a multinational enterprise which tends to apply for a leniency program shall take the probability that evidence of its unlawful conduct may fall into the hands of the law enforcement agency in another country into consideration and consult legal professionals for a comprehensive deliberation on the laws of different countries potentially involved. For example, some countries punish the concerted actions in addition to fines; not all countries maintain certain type of leniency policy; whether such leniency program will prejudice claims for civil damages; etc. After making the decision to apply for a leniency program in one country, such an enterprise shall note that it would be better to file similar applications in other countries in which certain type of leniency policy has been enacted, in case other countries may undertake to punish or fine the same enterprise based on the evidence of unlawful concerted actions obtained.
AUTHOR: Hung Ou Yang
Managing Attorney
Taipei
+886-2-2707-9976
[email protected]
AUTHOR: Chan-Chi Chang
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Taipei
+886-2-2707-9976
[email protected]
Copyright Brain Trust International Law Firm
Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer. For specific technical or legal advice on the information provided and related topics, please contact the author.
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