The Leniency Program in the Egyptian Competition Law

To enhance investigative and enforcement potential and facilitate detection of violations of the Egyptian Competition Law, Law 3/2005 (Competition Law) the Egyptian Competition Authority (ECA) established a leniency program in art 26 Competition Law. The law provides that a criminal lawsuit will not be brought against the first party to an arrangement that violates the Competition Law to inform the ECA of the arrangement. To benefit from the leniency afforded under art. 26 Competition Law, the notifying party must provide the ECA with the evidence sufficient to expose the violation and establish its elements. In addition, the Egyptian Economic Court may exempt the remaining violators from up to half of the sanction imposed, if they contribute to disclosing and establishing the elements of the violation during the investigation or trial.

To further promote the leniency incentive the ECA in June 2020 issued its leniency policy guidelines . These guidelines aim to outline the ECA’s interpretation of and application of the leniency procedure of art. 26 Competition Law.. The guidelines  clarify which undertakings may benefiting from leniency, clarifies the conditions for accepting a request for leniency, and outlines cooperation obligations of the applicant as well as the obligations of the ECA and the applicant regarding the confidentiality of information and data.

According to the guidelines, if the request for leniency is submitted by a legal person through its legal representative or agent, the leniency also extends to current and former board members, managers, staff, commercial agents as well as any related parties within or outside of Egypt. If the request is submitted by an individual without authority to represent the legal person, leniency will be granted only to the individual making the notification.

To benefit from the leniency exemption, the application also has to meet certain criteria. These are defined in the Competition Law and guidelines issued by the ECA.. The applicant must be the first party to the arrangement to request leniency and the request must be made prior to the ECA issuing an order concerning the violation or  bringing a criminal claim. Moreover, the applicant must provide the ECA with information and documentation sufficient to expose the violation and prove the elements of the violation. Finally, the request must include details on the parties to the arrangement and their role in the arrangement, the scope of the arrangement, the way of communication between the parties to the arrangement, its impact on the market and any other relevant details.

The Competition Law does not stipulate a timeline for the ECA to decide on a leniency applications. Depending on the complexity of each case  it can take the ECA multiple months to render its decision. Still, the ECA tends to be fast in deciding on leniency applications compared to other regulators in the region and internationally.

Successful leniency applications will benefit from exemptions from fines and other penalties. In addition, they will not be named as violators in criminal proceedings. This may result in the applicants avoiding private damage claims. The ECA does not have authority to grant shielding from damage claims from damaged parties. Still, by excluding them from criminal proceedings an applicant’s role in the anti-competitive behavoir may remain hidden; thus, limiting the risk that they would be included in claims from damaged parties.

Still, the potential to escape private damage claims, may make leniency applications attractive to businesses. Due to the high value damages awarded by courts that often by far exceed fines imposed by regulators, exemption from fines imposed is becoming increasingly less of an incentive for violators to come forward under leniency programs. For example, in the European Commission’s cargo cartel case, Lufthansa was the whistleblower and received full immunity from fines. However, they were subsequently sued by Deutsche Bahn for damages amounting to EUR 1.76 billion. These damages far exceeded the total fines imposed on all cartel participants combined of EUR 776 million. The threat of such substantial damage claims diminishes leniency programs’ effectiveness as a tool in investigations.

Regulators have tried to address the negative impact high value damages have on their leniency programs. For instance, the US Federal Trade Commission (FTC) has started to require leniency applicants to make a restitution plan on how they would compensate injured parties for their applications to be accepted. However,  whether such restitution plans will be upheld by the courts and whether they will restrict damage claims accordingly remains to be seen. It may appear that Egyptian approach of providing anonymity to applicants is better suited to address these concerns. Still, other parties to the cartel may choose to disclose the identity of the applicant to third parties in an afford to drag them into court proceedings and limit their own exposure to damage claims by providing additional respondents.

Nonetheless, the leniency program played a significant role in several, recent investigations of the ECA. It was applied for the first time in a cartel case against four drug distribution companies, which was referred to the public prosecution by the ECA in December 2015. The case was built by the ECA based on its investigation supported by the information and documentation provided by the leniency applicant.