On 21 October 2008, in a co-ordinated effort with national competition authorities, the European Commission conducted dawn raids at the premises of a number of smart card chips producers across various EU Member States. The Commission was investigating possible violations of EC Treaty rules which prohibit cartels and anti-competitive conduct such as price fixing, customer allocation and the exchange of commercially sensitive information.

Some six years later, on 3 September 2014, the European Commission rendered its decision, finding four companies (namely, Infineon, Philips, Samsung and Renesas) guilty of anti-competitive conduct in the European Economic Area. The Commission found that between 2003 and 2005 they shared sensitive commercial information such as pricing, customers, contract negotiations, production capacity and utility, and future market conduct, and established a network of contracts fixing their responses to customer requests to lower prices. The Commission accordingly imposed fines totalling more than €138 million (US$181 million).

The bulk of that sum, nearly €83 million, was imposed against Infineon (a German company). Renesas (a Japanese joint venture of Hitachi and Mitsubishi) would have received the second largest fine of some €51 million, however, it was granted full immunity for having exposed the illegal activities to the Commission. Samsung (a South Korean company) also benefitted from leniency, receiving a 30% reduction in its fine for co-operating with the Commission’s investigation, ultimately being fined just over €35 million. Philips (a Dutch company) received the lowest fine of some €20 million. Despite having divested of its smart card chip production business after the infringing conduct, Philips was held liable for the period of infringement. Infineon and Philips have indicated that they intend to appeal the decision.

When announcing its decision, the Commission issued a stark warning that if companies collude, they should expect EU sanctions – although clearly justice may be slow.

In addition to substantial EU fines, companies guilty of cartel or anti-competitive conduct could also face private enforcement litigation by victims of the anti-competitive conduct (so-called “follow on” damages actions). Any person or company that has suffered loss and damage due to anti-competitive behaviour has a right to bring a claim for damages before EU national courts. In this instance, the volume of victims (and therefore potential claimants) is likely to be substantial given that smart card chips are used so widely. In particular, they are found in PayTV cards, mobile phones SIM cards, bank cards, even identity cards and passports.

In such follow-on actions, a Commission finding of liability will be conclusive that illegal conduct has occurred, which means victims are only required to prove causation and that they suffered quantifiable loss. Follow-on actions are therefore substantially faster and cheaper than standalone proceedings. Not surprisingly, recent years have seen a significant increase in these private actions, with claimants obtaining fast and effective redress. Injunctions can be obtained in a matter of days and damages can be very substantial – running into millions of Euros. As is clear from the EU Commission’s recent announcement of its decision against the smart card chip cartellists, such private enforcement actions are actively encouraged by the EU. This is also reflected at the legislative level, with proposed EU and national legislative changes likely to make it even easier and more cost effective for victims to obtain such damages.