A Company's 'Inability to Pay' a Cartel Fine Imposed by the European Commission

The concurrence of recession and extended length of proceedings has led to a massive increase since 2009 in the number of applications to the European Commission for a reduction of a cartel fine due to an enterprise's "inability to pay." This raises the fundamental question whether the "death penalty" for enterprises should be part of the sanctions foreseen by the competition law system. In order to be successful with an application for reduction of a fine, the enterprise will have to prove in practice (a) that the fine considered by the Commission would result in the enterprise's insolvency and (b) that the enterprise's activities would not be continued by someone else. In addition, without the fine, the exit from the market would be avoided. Further conditions, namely that the enterprise's assets would loose any value in the event of an insolvency and that there would be a particularly significant impact within the firm’s wider social and economic environment have in practice been watered down by the Commission in response to the economic crisis. Under the more permissive test, enterprises have indeed achieved reductions of fines of up to 95%; this said, the majority of applications has been rejected.