Businesses that admit guilt in European Commission (EC) price-fixing investigations will receive a 10 per cent reduction in fines, the EC said today.

The new settlement procedure, which will take effect immediately, is part of a wider EC drive to clamp down on cartel activity that has seen an increase in prosecutions leading to higher fines.

Neelie Kroes, EU competition commissioner, said: “This new procedure will reinforce deterrence by helping the Commission deal more quickly with cartel cases, freeing up resources to open new investigations.”

Lawyers said it would also remove the burden of companies under investigation by allowing them to settle cases earlier.

Under the settlement procedure, the EC will reveal some of its evidence to companies under suspicion, which can then opt to settle the investigation immediately in return for a 10 per cent penalty discount - or continue to contest the case.

Ros Kellaway, head of competition law at Eversheds, said: “A 10 per cent reduction is a pretty mean incentive compared with the 25 to 35 per cent on offer in the UK.”

“This is a disappointing outcome of what looked initially like a sensible reflection of the UK settlement procedure which has been used successfully in the supermarkets dairy cartel and the construction cartel cases.”

Matthew Levitt, a competition partner at Lovells, said: “I suspect 10 per cent will not be enough to persuade many companies to admit guilt and give up their rights of defence.

“But this is probably just the Commission moving cautiously - if there isn't much of a response, I imagine it may raise the level in a few years' time.”

The EC already operates a separate leniency procedure that offers companies a full amnesty if they are the first to report a cartel and can provide useful information about other members.

The EC stressed that its settlement procedure was different from a US style plea-bargaining system because its guilty discount is non-negotiable.

Another common criticism of US plea-bargains is that since eventual penalties are so steep, the system may encourage innocent parties to plead guilty. But Paul Lasok, QC, a competition expert at Monckton Chambers, said this would not apply with the EU system where genuinely innocent businesses were unlikely to admit guilt in a cartel case.

Marc Hansen, a competition partner at Latham & Watkins in London and Brussels, said that although the 10 per cent penalty was fixed, the settlement procedure still offered businesses a valuable chance to influence the EC’s investigation.

“Entering into settlement talks opens up a dialogue between the company and the EC that was previously unavailable allowing the company to see the allegations against it earlier on and the chance to comment on them before they are set in stone.

"Also, even if the EC says the settlement procedure does not offer the chance for negotiation, being able to discuss the fine with the Commission before it is settled may essentially be a negotiation by another name.”

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