Fines play key a role in deterrence by making unlawful conduct less profitable. Adopting public rules or guidelines about the setting of pecuniary penalties may enhance general deterrence by allowing companies to understand how heavy the sanctions to which they may be subject are. The Tunisian competition law framework regarding fines is overall in line with international standards. However, there is no established fining methodology. This section presents an overview of fining methodology guidelines in selected jurisdictions, aiming to help Tunisian authorities to implement their own guidelines.
The Role of Guidelines in Fostering Competition Policy in Tunisia
Competition Law and Policy Reviews
5. Fining methodology
Abstract
5.1. Overview of competition law sanctions in Tunisia
According to Article 43 of Act 2015-36, fines imposed by the Competition Council on anti-competitive infringements must be up to 10% of the turnover taken in Tunisia by the operator concerned in the last financial year. Act 2015-36 has increased the maximum fining cap, which previously was fixed at 5%.
However, as pointed out be by Peer Review, in many infringement decisions no pecuniary sanctions are applied. While this used to be more common in the past, there are still some cases where no fines have been imposed (OECD, 2022, pp. 91-92[1]). This significantly reduces deterrence effects, also contributing for low incentives for competition law infringers to use leniency applications, as mentioned in chapter 6.
Evidence from OECD’s CompStats database shows that the total amount of pecuniary sanctions imposed by the Competition Council over the 2015-2022 period was largely below the regional average of fines imposed in the Middle East and Africa (MEA).
Figure 5.1. Amount of fines (EUR) imposed in Tunisia compared to MEA regional average
Source: OECD COMPSTATS database.
Competition law offenders are often subject to fines which impose a cost on those companies or individuals undertaking illegal anticompetitive conduct. Fines play a role in deterrence by making unlawful conduct less profitable. Breaking competition laws is profitable if it goes undetected. From the perspective of a pure profit-maximising company, it will not violate the law if the expected monetary sanctions (discounted by the probability of that fine actually being imposed) are greater than the expected illegal gain.
In Tunisia, there is no established clear fining methodology. For instance, the Peer Review has recommended that Tunisia should consider the duration of the infringement when setting fines. An established methodology on setting fines could help Tunisian competition authorities ensure a consistent fining policy. This would reduce discretion of administrative authorities when setting fines, which could be useful in judicial review, as courts could rely on an objective procedure previously established.
Decisions issued by the Competition Council can be appealed before the Administrative Court. Appeals have a suspensive effect on the decisions of the Competition Council, encouraging defendants to appeal. Moreover, cases before the Administrative Court last between five to ten years on average, although Article 28 of Act 2015-36 indicated that they should take no longer than one year. The same provision also states that the Competition Council can, where appropriate, order the provisional enforcement of its decisions, but this is not a common practice (OECD, 2022, pp. 132-133[1]). Even when fines are imposed by the Competition Council, they are still not deterrent, since it can take years before the firms finally pay them.
It is also worth mentioning that the Council does not have the mandate to oversee the implementation of its own decisions as it lacks representation powers before other public bodies, including the Administrative Court. In fact, the Minister of Trade is responsible for implementing the decisions of the Competition Council as well as for the recovery of fines. As such, the Council does not keep track of its decisions outcomes or the recovery of fines.
Although the improvement of the general fining framework depends on how the Tunisian authorities will deal with the above-mentioned shortcomings, adopting public rules or guidelines about the setting of pecuniary penalties – as is common in many jurisdictions – should help in many ways. It may enhance general deterrence by allowing companies to understand how heavy the sanctions to which they may be subject are. It helps ensure that there is a principled approach to ensure deterrence. It adds transparency to the competition authorities’ approach and the logic underpinning it. Ultimately, public guidance on the setting of pecuniary penalties would add to legal certainty.
5.2. Fining methodology guidelines
Guidelines on fining methodology typically outline the objectives and procedures for setting fines that are imposed on market players who violate competition law, in particular as regards anti-competitive behaviour.
These guidelines may bring several benefits. For example, guidelines can help deter market players from engaging in anti-competitive practices if they realise that their expected costs will exceed the potential gains. Fining guidelines also allow competition authorities to implement a consistent fining policy. In addition, they facilitate parties’ comprehension of why the fines were set at a specific level, potentially reducing the number of appeals and encouraging greater compliance with competition law (OECD, 2016, p. 37[26]).
This section considers the elements commonly covered in fining methodology guidelines by comparing guidelines published in the selected jurisdictions, which can be used by Tunisian competition authorities when developing their own fining guidelines.
5.2.1. Overview of guidelines reviewed
The project team has assessed the fining methodology guidelines of selected jurisdictions, listed in Table A A.4 and summarised in Table 5.1.
Table 5.1. Overview of guidelines reviewed
Note: * Although Belgium has developed fining guidelines, they refer to the European Commission Guidelines, only presenting specific adaptations to the Belgian context. For this reason, they were not considered in the review carried out in this report.
** The Kenyan Guidelines also refer to sanctions for mergers implemented without prior authorisation by the competition authority and for the revocation of approval of proposed mergers. These sanctions will not be considered in this report.
5.2.2. Common features of guidelines reviewed
The following elements have been included in the guidelines of the selected jurisdictions, as summarised in Table 5.2.
Table 5.2. Summary of common features in fining methodology guidelines in selected jurisdictions
Objectives of the guidelines
All guidelines expressly indicate their objectives. While all guidelines refer to increase of transparency, the documents also mention other goals. For example, the European Commission Guidelines seeks to “ensure transparency and impartiality of its decisions” (European Commission, 2006[27]). Likewise, the South African Guidelines state that its primary objective is “to provide some measure of transparency and objectivity in how the Commission will determine administrative penalties” (Competition Commission of South Africa, 2015, p. 6[28]). In addition to increase transparency, the French Guidelines aims to allow interested parties to better understand how pecuniary sanctions are set, enable economic players to anticipate the financial risks associated with committing offences and help judicial authorities carry out their monitoring mission more easily (Autorité de la concurrence, 2021, p. 5[29]). The Kenyan Guidelines seek to “enhance transparency, consistency and predictability in computation of the financial penalties and achieve proportionality on the remedies imposed against the degree of the contravention” (Competition Authority of Kenya, 2020, p. 3[30]).
Objectives of fines
All guidelines also specify the objectives of the fining policy. All guidelines mention deterrence of anti-competitive conduct. In particular, the guidelines from the European Commission, France and South Africa specify that deterrence involves both deterring the undertakings concerned from engaging in the same anti-competitive behaviour in the future (specific deterrence) and dissuading other undertakings from engaging in or continuing anti-competitive conduct (general deterrence).
Furthermore, the French Guidelines indicate that sanctions also seek to punish the infringers. They also expressly mention that sanctions do not seek compensation (Autorité de la concurrence, 2021, p. 4[29]).
Determination of basic amount of the fine
According to all guidelines, the first step of the fines-setting process is the determination of the basic amount, which is set by taking a proportion of the turnover or volume of affected commerce of the undertaking concerned. The gravity of the competition infringement plays a significant role in determining the basic amount of the fine imposed on competition infringers. The gravity of the infringement refers to the severity or seriousness of the anti-competitive behaviour committed by the infringing party(ies). An assessment of such gravity considers different factors, including the nature and extent of the infringement, the harm caused to competition, the duration of the infringement, and the market impact.
On the one hand, the European Commission and French guidelines refer to the value of the sales of goods or services to which the infringement relates in the relevant geographic area within the EEA or in France, respectively. This is considered to be an appropriate proxy to reflect the economic relevance of the infringement and the relative weight of each market player in the infringement (European Commission, 2006[27]; Autorité de la concurrence, 2021, p. 7[29]).
On the other hand, the Kenyan Guidelines consider the affected turnover of an undertaking in the year before the competition authority reaches a decision, which gives indication of the amount of commerce affected (Competition Authority of Kenya, 2020, p. 4[30]). Likewise, the South African Guidelines also use the concept of affected turnover, referring to the “firm’s turnover derived from the sales of products and services that can be said to have been affected by the contravention” (Competition Commission of South Africa, 2015, p. 8[28]).
The guidelines also describe how the value of sales or the affected turnover is calculated, including the geographic and temporal dimensions. The guidelines also explain how this amount should be determined in cases involving associations of undertakings.
For instance, in both the European Union and France, where the infringement by an association of undertakings relates to the activities of its members, the value of sales will generally refer to the sum of the value of sales by its members (European Commission, 2006[27]; Autorité de la concurrence, 2021, p. 8[29]). In Kenya, the gross annual turnover of an association of undertakings is derived from the individual members’ turnover of the products or services that are the subject of a contravention (Competition Authority of Kenya, 2020, p. 4[30]). In South Africa, in case of infringement by an association of firms and the association is responsible for aiding, organising and/or executing the infringement, it shall be liable for payment of the fine, separately from the members of the association. Under these circumstances, the total revenue/members’ contributions to fees will be considered the affected turnover (Competition Commission of South Africa, 2015, p. 9[28]).
All guidelines recognise that for some infringements the value of sales or the affected turnover may not reflect the weight of each participant in the infringement, and alternative criteria is introduced to determine the basic amount of the fine.
For instance, the European Commission and French guidelines indicate that when the scope of the infringement extends beyond the EEA or France, respectively (for example, international cartels with market-sharing arrangements), the competition authority may assess the total value of the sales of goods or services to which the infringement relates in the relevant geographic area (wider than the EEA), determine the share of the sales of each participant on the market and apply this share to the aggregate sales within the EEA of the undertakings concerned (European Commission, 2006[27]; Autorité de la concurrence, 2021, p. 8[29]).
Likewise, the South African Guidelines state that where the affected turnover of a firm is zero for a particular market (e.g. in the case of market allocation precluding entry into a certain product of geographical areas), the Competition Commission may take into account the company’s annual turnover in the market that was protected as a result of the practice, i.e. the market that was allocated to the firm as a result of the anti-competitive behaviour (Competition Commission of South Africa, 2015, p. 9[28]).
The French Guidelines also include other circumstances where alternative criteria can be used for determining the basic amount of the fine. For example, if the infringement consists of an agreement on commissions by which firms are remunerated for the sale of certain goods or services, the Autorité de la concurrence may consider these commissions as a reference. Moreover, in case of two-sided or multi-sided markets, the value of sales made by the undertaking concerned on the upstream, downstream or related markets can be considered by the competition authority, where they are directly or indirectly related to the infringement (Autorité de la concurrence, 2021, p. 8[29]).
Some guidelines also present specific rules for bid rigging cases. For example, the French Guidelines recognise that the general methodology must be adapted in cases of bid rigging, as the value of sales does not properly reflect the economic relevance of the practices and the relative weight of each participant, especially when their involvement consists of cover bidding or bid suppression. Accordingly, the basic amount should result from the application of a coefficient determined based on the gravity of the facts, the total turnover achieved in France by the undertakings or the association of undertakings, typically during the complete business year in which the offence occurred or the last complete business year if there are more than one. This coefficient will also consider that such practices are among the most serious competition violations (Autorité de la concurrence, 2021, p. 15[29]).
The Kenyan Guidelines state that in bid rigging cases the competition authority should take into account the value of the tender contract to be the affected turnover used to set the fines (Competition Authority of Kenya, 2020, p. 10[30]).
The South African Guidelines provide that, for bid rigging violations, the affected turnover of both the winning bidder and the other participants of the infringement will be considered the greater of (i) the value of the bid submitted by the winning bidder, (ii) the value of the contract concluded or to be concluded or (iii) the amount ultimately paid to the successful bidder pursuant to the tender. Additionally, for bid rigging cases the competition authority will consider the number of years for which the contract lasts as the duration of the infringement multiplier (Competition Commission of South Africa, 2015[28]).
As for the percentage to be applied to the value of sales or the affected turnover, it varies according to the jurisdiction but takes into account the gravity of the infringement. For example, the guidelines from the European Commission, France and South Africa indicate that the proportion of the value of sales should be up to 30%. The guidelines provide some elements to be considered when determining which percentage should be applied at a specific case. While these factors vary across the guidelines, some common elements include the nature, gravity and extent of the infringement. Other elements indicated in some guidelines are the combined market share of all the undertakings concerned, barriers to entry in the market and the nature of the activities, sectors or markets at stake. These guidelines also mention that the percentage for hard-core cartels should generally be set at the higher end of the scale.
In Kenya, however, the percentages are pre-established at 10%. The duration of the infringement is then considered when adjusting the basic fine considering aggravating circumstances (Competition Authority of Kenya, 2020, pp. 4-7[30]).
The European Commission and French guidelines also provide that a sum of between 15% and 25% of the value of sales should be added to the basic amount in the case of hard-core cartels, to further deter companies from entering into such practices. The specific percentage should be determined taking into account the elements referred above. This additional amount can also be applied in the case of other infringements.
Duration of the infringement
The guidelines of the European Commission, France and South Africa establish that the duration of the infringement will be taken into account by multiplying the basic amount by the number of years of the participation in the anti-competitive practice. These guidelines also explain how the duration of the infringement is considered when it involves period of less than one year. On the one hand, the European Commission Guidelines state that periods up to six months are counted as half a year and periods between six months and one year will be counted as a full year. On the other hand, the French and South African guidelines provide that for infringements lasting less than one year the basic amount should be multiplied by the proportion of the year over which the practice lasted.
According to the Kenyan Guidelines, the duration of the conduct is considered only as an aggravating circumstance.
Aggravating and mitigating circumstances
According to all guidelines, the basic fine (including, when applicable, after the duration of the infringement is considered) is then adjusted by increasing or decreasing it in light of aggravating and mitigating circumstances. All guidelines present a non-exhaustive list of such circumstances.
The most common mitigating circumstances include: (i) immediate termination of the infringement following the knowledge of the competition authority’s investigation (although this factor usually does not apply to secret practices, such as cartels); (ii) minor role in the anti-competitive behaviour (i.e. whether the firm was a passive participant); (iii) co-operation with the competition authority (e.g. by providing evidence concerning infringements); (iv) the infringement was authorised or motivated by public authorities or by legislation; (v) pressure exercised by other companies (e.g. whether the firm was coerced by other firms who were party to the infringement); and (vi) compensation for injured parties.1
As for aggravating circumstances, the following factors are referred to in most guidelines: (i) recidivism (although debate exists regarding whether it relates to the same or similar infringements and the same legal entity, as well as the limitation period of the range of prior infringements); (ii) refusal to co-operate with the competition authority (e.g. obstruction of investigations and non-compliance with procedural obligations, such as failure to reply, late replies and incomplete or misleading provision of information); (iii) role of leader in, or instigator of, the infringement; and (iv) coercion or retaliatory measures to ensure continuation of the infringement.2
The guidelines from the European Commission, France and South Africa do not indicate detailed elements on how much the basic amount should be reduced or increased in light of aggravating and mitigating circumstances. On the other hand, the Kenyan Guidelines provide a score system with a different percentage to increase or reduce the basic amount.
The European Commission and French guidelines also provide that in case of recidivism the basic amount should be increased up to 100% and between 15% and 50%, respectively. While the European Commission only mention “the same or a similar infringement” (European Commission, 2006[27]), France explains in more details the elements that should be considered when assessing recidivism. This includes (i) the existence of a decision from the European Commission or a competition authority from any EU Member State sanctioning practices of the same nature; (ii) the second practice is identical or similar, in its object of effects, to the second infringement; (iii) the previous sanctioning decision should be final on the date on which the competition authority sanctions the second practice; and (iv) the second infringement has started within 15 years from the date on which the first decision was issued (Autorité de la concurrence, 2021, p. 12[29]).
Statutory limits on fines
All guidelines mention and explain a maximum fining cap, established by legislation. When the fine is set beyond this amount, the competition authority must fix it at the maximum cap. All guidelines refer to a similar fining cap of 10% of the firm’s annual turnover, albeit with different features.
For instance, the European Commission Guidelines indicate that the legal maximum is set at 10% of the total turnover in the preceding business year of the undertaking or association of undertakings participating in the infringement. Where infringements of an association relate to the activities of its members, the maximum fine is set at 10% of the sum of the total turnover of each member active on the market affected by that infringement (European Commission, 2006[27]). The French Guidelines set the maximum cap at 10% of the highest global turnover, before taxes, achieved during one of the closed financial years since the financial year preceding the one in which the practices were carried out. Fines for associations of undertakings should not exceed 10% of its highest global turnover, before taxes, achieved during one of the closed financial years since the financial year preceding the one in which the practices were carried out. Nevertheless, where infringements relate to the activities of its members, the fine should not exceed 10% of the sum of the total global turnover of each member active on the market affected by that infringement (Autorité de la concurrence, 2021, p. 13[29]).
According to the Kenyan Guidelines, the statutory limit is fixed at 10% of the firm’s annual gross turnover during the firm’s preceding financial year (Competition Authority of Kenya, 2020, p. 10[30]), while in the South African Guidelines it is set at 10% of the firm’s annual turnover in South African and its exports from the country in the financial year preceding that in which the fine is imposed (Competition Commission of South Africa, 2015, p. 15[28]).
Inability to pay
All guidelines also affirm that the competition authority may consider, in exceptional circumstances, the firm’s inability to pay when setting the fine.
Most guidelines require the firm to provide the competition authority with objective evidence that imposing a fine following the established methodology would irrevocably jeopardise the financial sustainability of the firm and result in a complete loss of value for its assets.
The Kenyan Guidelines mention that the firm’s ability to pay can be considered only to allow undertakings to pay fines in reasonable instalments (Competition Authority of Kenya, 2020, p. 10[30]).
Leniency and settlement
All guidelines include guidance on leniency and/or settlement, albeit through different approaches.
For example, the European Commission Guidelines provide that the competition authorities should consider as mitigating circumstance whether the undertaking concerned has effectively co-operated outside the scope of the Leniency Notice and beyond its legal obligation to do so (European Commission, 2006[27]). The French guidelines indicate that, when setting the fines, the Autorité de la concurrence must consider the total or partial immunity arising from leniency (Autorité de la concurrence, 2021, pp. 13-14[29]).
Both the Kenyan and South African guidelines refer to settlements, through which the competition authority may offer a discount to the fine to be imposed on a market player for violating competition law. The Kenyan Guidelines only mention that the competition authority may, at any time during or after an investigation, enter into an agreement of settlement with the parties concerned, which may include an amount as a pecuniary penalty (Competition Authority of Kenya, 2020, p. 11[30]).
In its turn, the South African Guidelines state that the competition authority “at its sole discretion, may offer a discount of between 10% - 50% off the administrative penalty” arising from the general methodology. The following elements should be considered: (i) the timing of the settlement (i.e. firms settling in the early stages of the investigation should enjoy a greater discount than those settling in latter stages) and (ii) the extent of co-operation in the prosecution of other firms involved in the infringement (i.e. whether the firm provide timely, complete and accurate information that will corroborate other evidence at the disposal of the competition authority) (Competition Commission of South Africa, 2015, pp. 15-16[28]).
5.2.3. Less common but helpful features of guidelines reviewed
The review revealed less common but helpful features in the guidelines in the selected jurisdictions which are worth mentioning. A summary of these features is set out in Table 5.3.
Table 5.3. Less common but helpful features of fining methodology guidelines
Legally non-binding nature of guidelines
Like merger and leniency programme guidelines, some fining methodology guidelines refer to their legally non-binding nature on courts, although in some of them this is only implicitly stated.
For instance, the South African Guidelines affirm that they “are not binding on the Commission, the Tribunal or the CAC in the exercise of their respective discretion, or their interpretation of the Act” (Competition Commission of South Africa, 2015, pp. 6-7[28]).
In Kenya, the non-binding nature of the guidelines is implied when they indicate that “the guidelines is not a substitute of the Act and they shall be read together with the Act and subsidiary rules made pursuant thereto” (Competition Authority of Kenya, 2020, p. 2[30]).
The French Guidelines indicate that they commit the Autorité de la concurrence, which seeks to refer to a consistent method to set fines. Nevertheless, it is established that the Autorité de la concurrence can deviate from the guidelines in light of the specific circumstances of the case (notably considering the characteristics of the practices at stake, the activities of the parties involved and the economic and legal context of the case) or for reasons of public interest (Autorité de la concurrence, 2021, p. 13[29]). The European Commission Guidelines have a similar provision (European Commission, 2006[27]).
Terminology
Also like the other categories of guidelines assessed in this report, setting methodology guidelines can present the definitions of key concepts, in order to increase understanding of the public. For instance, this is the case of the South African Guidelines, which have a section with a glossary of relevant terms (Competition Commission of South Africa, 2015, pp. 4-5[28]).
Rights of defence
The French Guidelines include procedural rules, highlighting that the competition authority should provide the investigated parties with the facts and legal basis that may impact on the setting of fines, enabling them to exercise their rights of defence (Autorité de la concurrence, 2021, p. 6[29]).
Parental liability
The South African Guidelines include rules on parental liability, specifying that parent companies not directly involved in the infringement may be held liable for an infringement where its subsidiary has violated competition law. When establishing whether the parent company is held liable, the Competition Commission should take into account whether it: (i) wholly owned the subsidiary; (ii) directly controls the subsidiary or has a decisive or material influence over the commercial policy of the subsidiary; (iii) had knowledge of the subsidiary’s participation in the infringement; or (iv) derived substantial benefit from the activities of the subsidiary (Competition Commission of South Africa, 2015, pp. 17-19[28]).
Key takeaways – Fining methodology
Fines play key a role in deterrence by making unlawful conduct less profitable. Adopting public rules or guidelines about the setting of pecuniary penalties may enhance general deterrence by allowing companies to understand how heavy the sanctions to which they may be subject are.
The Tunisian competition law framework regarding fines is overall in line with international standards. However, there is no established fining methodology.
Adopting guidelines about the setting of pecuniary penalties can help the Tunisian competition authorities to ensure a consistent fining policy.
Developing fining guidelines should take several elements into account, including the objectives, the methodology, the gravity and duration of the infringement as well as the potential firm’s inability to pay.
Notes
← 1. As described in section 7.2, in Canada the existence of a compliance programme is treated as a mitigating factor, while in Belgium, the European Union and France a compliance programme is not considered as a mitigating circumstance for the purpose of setting fines.
← 2. See (OECD, 2016[26]) for a more detailed assessment of mitigating and aggravating circumstances.