The Egyptian Competition Authority recently published the first Egyptian guidelines on the process for obtaining amnesty or leniency from criminal prosecution for antitrust cartel violations, signaling the agency's intent to activate this tool in future enforcement activities. The guidelines explain the incentives offered to whistleblowers to report suspected violations, including full amnesty for the first witness to come forward. However, the guidelines leave the door open for some potential risk of criminal liability and follow-on private damages, which counsels prudence.
The Egyptian Law on Protection of Competition and Prohibition of Monopolistic Practices ("Competition Law"), enacted in 2005, was amended in 2014 to introduce a right to full amnesty for the first whistleblower who reports a prohibited conduct among competitors and partial amnesty to subsequent whistleblowers reporting the same conduct ("Leniency Policy"). Despite the statutory amendment, there were no published procedures to guide potential whistleblowers on how to use the Egyptian Leniency Policy in practice.
On June 28, 2020, the Egyptian Competition Authority ("ECA") issued its first guidelines to activate this Leniency Policy ("Guidelines"). The ECA established procedures for seeking amnesty and setting forth the criteria and prerequisites for granting full or partial amnesty. The publication of these Guidelines could encourage potential whistleblowers to cooperate with the ECA, leading to a potential increase of cartel enforcement proceedings in Egypt. We provide below an overview of the Leniency Policy and the Guidelines and identify some of the key risks to consider.
Overview on Leniency Policy
The Egyptian Competition Law prohibits any agreements or arrangements among competitors that result in: (a) price-fixing; (b) dividing markets based, inter alia, on territories, product type, market share or seasons; (c) bid rigging; or (d) imposing restrictions on the manufacture, production, distribution or marketing of products (each a "Cartel Violation").1Participating in a Cartel Violation is a criminal offense, subject to a criminal fine amounting to 12% of the revenue generated from the conduct at issue, or to a fine of up to EGP 500 million (approximately USD 31 million) if the generated revenue is unidentifiable.2
In light of the significant potential financial liability, the Leniency Policy aims to incentivize those involved in a Cartel Violation to report the violation to the ECA and offer evidence that can help incriminate all the other suspected perpetrators. The first whistleblower to report a Cartel Violation to the ECA is guaranteed full amnesty, not only from fines but also from criminal prosecution altogether.3 This provides an added incentive, which helps the whistleblower avoid the costs and reputational harm arising from being identified as a defendant in a criminal case.
Other participants in a Cartel Violation that volunteer to cooperate with the ECA, after the first whistleblower reports the violation, are still subject to prosecution but, if convicted, may be exempt from half of the applicable fine.4 However, this partial amnesty is granted only if the ruling court determines, in its sole discretion, that the testimonies of these defendants assisted the prosecution or the court in uncovering the details of the relevant Cartel Violation or proving the conduct at issue.5
Leniency Process and Conditions under the Guidelines
The Guidelines provide the procedural steps to apply for amnesty under the Leniency Policy, establish objective conditions for granting amnesty, and define the scope of who is granted this amnesty.
1. Pre-Application Process: The ECA allows entities that suspect they might be involved in a Cartel Violation to consult with the ECA anonymously (i.e., on no-name basis) and confidentially regarding whether their actions constitute a Cartel Violation and whether the evidence they have of the alleged Cartel Violation is sufficient to entitle them to a leniency application.6
2. Application Process: A company or an individual seeking amnesty must apply to the ECA pursuant to an application form to be provided by the ECA.7 The applicant must provide a range of information, including: (a) the date, names and full details of the parties to the Cartel Violation; (b) the products and territories affected by the Cartel Violation and; (c) the impact that the Cartel Violation has had on the market – accompanied with all of their documentary and testimonial evidence of the foregoing.8 The ECA keeps track of the date and time of applications provided in relation to each Cartel Violation to identify the first whistleblower that meets the Guidelines' criteria and is therefore entitled to amnesty. The Guidelines also introduce a "marker system," which allows applicants that do not have all the required evidence available to submit a short-form request documenting their intent to seek leniency (aiming to be first-in-line) on the condition they provide the remaining materials within 30 days.9
3. Application Criteria: The ECA will grant an application for full amnesty under the Leniency Policy if the following criteria are met:
(a)The applicant must be the first to submit a leniency application to the ECA with regard to the alleged Cartel Violation in question;
(b)The application must be submitted prior to an ECA decision (if any) to initiate criminal prosecution of the relevant Cartel Violation;
(c)The applicant includes all available documentary evidence and information to assist the ECA in uncovering the elements of the relevant Cartel Violation; and
(d)The ECA does not conclude, in its sole discretion, that it already had sufficient evidence to uncover the relevant Cartel Violation prior to the submission of the application.10
4. Protected Parties: A successful application for leniency grants the applicant full amnesty from criminal prosecution and proceedings relating to the Cartel Violation in question.11If the applicant is a corporate entity, the amnesty extends to their directors, managers, current and former employees, commercial agents and any other related parties. If the applicant is an individual who applied in their personal capacity, the amnesty does notextend to any corporate entities related to the applicant. The Competition Law allows the ECA to grant amnesty to foreign entities for Cartel Violations committed extraterritorially if the violation harmed competition in Egypt.
5. Confidentiality Protections: The Competition Law and the Guidelines require both the applicant and the ECA to maintain the confidentiality of all information relating to applications under the Leniency Policy, including the identity of the applicant.13 In addition, the Guidelines introduced an added protection to the first whistleblower by committing the ECA not to identify the whistleblower among the named defendants referred for prosecution – an innovative approach to incentivize cooperation with the Leniency Policy.14
Potential Risks
ECA's Discretionary Authority: Although the Guidelines clearly state that, so long as an application for amnesty meets the criteria set out above, the ECA is obligated to accept their application, the Guidelines also leave some room for the ECA to exercise discretion. For example, the ECA determines whether the information provided by the applicant is sufficient to prove the Cartel Violation and incriminate other perpetrators before it decides to grant amnesty. The ECA may also conclude that the applicant did not offer any new evidence that the ECA did not already have in its possession regarding the alleged Cartel Violation. This discretionary authority creates significant risk for applicants who may volunteer evidence to the ECA only to find such evidence potentially used against them in future criminal proceedings.
Civil Liability of Successful Applicants: The Competition Law empowers the ECA to grant amnesty only from the criminal liability arising out of a Cartel Violation but does not extend to any potential civil liability under Egyptian law. This may deter potential applicants from providing evidence of wrongdoing for fear of exposure to civil claims from third parties alleging damages from the harm to competition imposed by the Cartel Violation in question.
Third-Party Confidentiality Risks: The Competition Law and the Guidelines provide considerable measures to protect the confidentiality of the whistleblower under the Leniency Policy.15 Although the Competition Law permits the ECA to disclose information to a prosecutor or a competent court for the successful prosecution of an alleged violation, the Guidelines require the ECA not to disclose the identity of the whistleblower.16 However, nothing prevents third parties and other named defendants from disclosing the whistleblower’s involvement in the underlying Cartel Violation to the prosecutor or the court. Therefore, an applicant that succeeds in obtaining amnesty, while protected from prosecution, may still find their name mentioned in future proceedings causing some potential risk of reputational exposure.
Conclusion
The issuance of the Guidelines suggests that the ECA is aiming to activate the use of the Leniency Policy as a tool to boost enforcement efforts against suspected Cartel Violations. Parties that suspect they may be involved in a Cartel Violation should consider consulting with their legal counsel on utilizing the Leniency Policy, subject to a full assessment of the potential legal and commercial risks that arise from volunteering self-incriminating evidence. Given the heightened uncertainty and the significant risks, it may be advisable to engage with the ECA anonymously first through the Pre-Application Process to try to confirm whether they are in fact party to a Cartel Violation and whether they have sufficient information that entitles them to amnesty.
1 Egyptian Competition Law, Article 6.
2 Egyptian Competition Law, Article 22.
3 Egyptian Competition Law, Article 26.
4 Id.
5 Id.
6 Leniency Policy Guidelines, Section 18.
7 The Guidelines indicate the application form is enclosed in an annex but the form has not been published yet.
8 Leniency Policy Guidelines, Section 8.
9 Leniency Policy Guidelines, Section 14.
10 Leniency Policy Guidelines, Section 8.
11 Leniency Policy Guidelines, Section 6-7.
12 Egyptian Competition Law, Article 16.
13 Egyptian Competition Law, Article 16.
14 Leniency Policy Guidelines, Section 5.
15 Egyptian Competition Law, Article 16; Leniency Policy Guidelines, Section 5.
16 Id.
Mariam Mohamed Mohsen (White & Case, Trainee Associate, Cairo) contributed to the development of this publication.
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