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Inability to Pay

Inability to Pay. Dirk VAN ERPS Head of Unit Cartels II ITP Project Manager Madrid, 5 July 2013. Overview. Point 35 Fines GL: strict criteria Deepened and intensified review of ITP applications since 2009

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Inability to Pay

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  1. Inability to Pay Dirk VAN ERPS Head of Unit Cartels II ITP Project Manager Madrid, 5 July 2013

  2. Overview • Point 35 Fines GL: strict criteria • Deepened and intensified review of ITP applications since 2009 • Almunia/Lewandowski Information note of June 2010 clarifies practice – public document • 43 pre decision applications – 13 granted : reductions between 25% and 95%

  3. The procedure • Possibility mentioned in SO / Oral Hearing • but when to start? • Request by legal entity – grouped by undertaking • Standard questionnaire (Art. 18 RFI) • Several follow-up queries – resource intensive (team of 5) • Individual reasoning in decision only accessible to undertaking • Other addressees: general methodology part + individual name of company and outcome • General public: general methodology part + number of companies and outcome

  4. The methodology I • Key criterion: will the Commission’s fine cause the company’s bankruptcy (technically: ‘irretrievably jeopardise the economic viability of the undertaking’) • Burden of proof on company to show this with a sufficient degree of probability • Company unaware of precise fine

  5. The methodology II • Typical analysis: start from ‘infringing subsidiary’, go to ‘liable parent’, continue with ‘shareholders: majority or minority; legal entities or private individuals’ • Financial statements analysis and cash-flow review: liquidity, solvability, profitability • Review of relationships with shareholders and banks

  6. Methodology is evolving • cash availability vs cash requirements • ability to assist vs interest to assist for shareholders • ideal: “working capital review” – realistic? • company “going concern” • “assets losing significant value”

  7. Issues • Not an exact science BUT an expression of Commission discretion based on probabilities • Alliance of interests of all those concerned (undertaking, shareholders, banks) to have the Commission fine reduced • New source of litigation (appeal, interim measures, post-decision rejection letters)

  8. Post-decision ITP: methodology • Original decision “new methodology” • starting trigger: significant worsening? • Original decision “old methodology” • would we have granted sth under “new methodology” • passing of time

  9. Post-decision ITP: issues • No “free insurance” against problems • Expected to die out in view of refined policy in place • Successful applications expected to be quite exceptional: 1 granted Prym; 7 rejected • Go for “interim measures” instead of appeal

  10. Challenges • Commission discretion vs detailed reasoning • Creative destruction process of capitalism vs maintaining inefficient company (ITP recipients went bankrupt) • Strong legal backing to ignore bankruptcies vs political sensitivity /debate on fine levels

  11. Famous last words • Think before you start the process • Questions? • Dirk.Van-Erps@ec.europa.eu • * The views expressed are personal and do not commit the Commission

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