The world of antitrust/competition enforcement is changing more rapidly than ever. This evolving environment presents new challenges for companies with multinational operations, their executives and their advisers.
A company that discovers a potential antitrust violation must consider an array of issues and make decisions under varied and changing laws in multiple jurisdictions.
Items to consider include the following: where the conduct occurred; whether the conduct is prohibited in all the relevant jurisdictions; whether executives may be implicated in their personal capacity; whether applying for leniency is the appropriate course of action; alternatives to applying for leniency; the risk of not disclosing the conduct in some jurisdictions; and, if applying for leniency, where to apply and in what sequence.
Three recent conferences discussed developments in these areas.
The American Bar Association and the International Bar Association recently co-sponsored the 10th International Cartel Workshop in Rome from Feb. 19 to 21. Among this year’s attendees were enforcers from more than 25 countries, including Australia, Brazil, Brussels, Ireland, Japan, South Korea, Mongolia, Namibia and the United States.
A few days later, the competition committee of the Organization for Economic Cooperation and Development gathered at OECD headquarters in Paris for its 13th Global Forum on Competition. Representatives of more than 100 nations attended the event Feb. 27 and 28. Frédéric Jenny, economics professor at ESSEC Business School, chaired the forum.
The global forum focused on the link between promoting competition and fighting corruption. It also looked at competition issues in the distribution of pharmaceuticals.
Most recently, the ABA hosted the 62nd Annual Antitrust Law Spring Meeting in Washington from March 25 to 28. This meeting is one of the preeminent antitrust conferences in the world, and leading practitioners, enforcers and scholars from around the globe gathered to discuss recent developments and hot topics in the fields of antitrust, competition and consumer protection.
Although the conferences are designed to analyze competition issues from starkly different perspectives, common themes emerged: Competition enforcement is becoming a priority even in emerging economies, existing competition laws are being strengthened, new penalties and causes of action are being added, and enforcers are becoming more aggressive.
Many of these changes are happening seemingly overnight as companies are expanding into new markets around the world. This combination presents unique challenges for multinational firms.
International Cartel Workshop
The International Cartel Workshop uses a unique format to provide attendees with information on developments in the world of international cartel investigations. Rather than the standard Lecture or panel format, the workshop provides practical advice on how to handle a cartel investigation and related litigation by creating a hypothetical cartel and, using that scenario, putting on a number of demonstrations with in-house and outside lawyers, executives, enforcers and judges.
The watchword of the Department of Justice Antitrust Division representatives who attended the cartel workshop was leniency. The DOJ Leniency program has been an effective tool for the division and has been the primary source of information leading to DOJ investigations for many years.
Perhaps more significant are the developments relating to enforcement efforts by agencies outside the United States.
A number of enforcement agencies around the world have had leniency programs in place for several years, but to little or no effect. Many of those agencies are now implementing criminal penalties, strengthening civil penalties and providing for private rights of action in order to increase the efficacy of their competition laws. Anticipating the changes will lead to more applications for leniency. Enforcers from emerging economies that do not have leniency programs are now enacting their own, often modeled after the DOJ’s program.
In addition to leniency programs, other trends came to light during the program, including:
An increasing focus on international cartel investigations by enforcers
Continuing cooperation among multiple enforcement agencies, such as:
working together on investigative strategy
coordinating the execution of search warrants and dawn raids coordinating witness interviews in some cases
New legislation that includes a private right of action for antitrust violations — although few jurisdictions are considering class actions or treble damages
Some enforcers are expanding their focus to vertical agreements such as resale price maintenance
One of the most active and aggressive jurisdictions is Brazil. Brazil passed a new law intended to rationalize and improve its previous enforcement system in 2011.
The new law provides for both criminal and administrative penalties, and it makes structural changes to the country’s enforcers, merging its three former authorities into a single and independent enforcer that kept the name of the former tribunal, the Administrative Council for Economic Defense, or CADE.
After its restructuring, CADE implemented new regulations intended to bring more predictability to settlement negotiations.
While changes are afoot, leniency remains a part of Brazil’s enforcement framework and is available in both criminal and administrative investigations in exchange for full admission and cooperation.
If a company is unable or unwilling to seek leniency, protracted investigations and the ability of a court to overturn CADE settlements means parties frequently litigate rather than settle. As of January, only one settlement has occurred under the new CADE procedures. Emerging economies are not the only ones changing their tactics and strengthening their arsenals.
Later this year, the United Kingdom Competition and Markets Authority, which gained its full authority under UK Law April 1, will implement new laws that lower the burden for establishing criminal liability for individuals involved in anti-competitive agreements.
The changes are designed to amplify the law’s deterrent effect by facilitating an increase in the number of cartel prosecutions. Dishonesty will no longer be an element of the offense. instead, the burden will be on the defendant to establish one of a number of defenses.
Several criticisms have been leveled against the new law, primarily because of the view that the law is so broadly worded that enforcement will depend on the appropriate use of prosecutorial discretion.
As with the previous version of the statute, the new law criminalizes activity that does not infringe on civil competition law. Little has been done to allay concerns that the Competition and Markets Authority will not prosecute such activity.
The broad new law may also go too far in its effort to make cartel cases easier to prosecute and may have a significant chilling effect on legitimate contracts.
The actions by Brazil and the UK are examples of the types of legislative and enforcement changes being considered and implemented in markets around the world. Those changes, the increased activity of enforcers in emerging markets, the increased availability and use of leniency in a variety of jurisdictions, the distinctions between the standards for and the effect of leniency in the various jurisdictions, and the variations in standards for violation of the antitrust statutes all have the potential to create significant complications for a company with multinational operations.
The existence of these and other variables forces a company considering an application for Leniency to make very difficult decisions early in the process that may have far-reaching ramifications.
Global Forum on Competition
A number of the trends discussed at the International cartel workshop were also evident at the Global Forum on Competition, although from a somewhat different perspective.
The forum focused on the interrelationship between competition and corruption. In that regard, the question was not whether competition should be promoted and protected, but how regulation of competition affects corruption.
For example, fostering compliance and encouraging voluntary self-disclosure are two key incentives that, when coupled with an effective competition framework, should both increase competition and reduce corruption.
Although many countries have enacted or strengthened competition laws over the past several years, some competition regulation is more effective than others. Efficacy depends on a country’s level of democracy as well as its independence, efficiency and predictability and the fairness of the country’s judicial system.
In evaluating whether competition laws in place are effective, several factors should be considered, including the following:
To what extent is the competition authority independent?
To what extent are the decisions of the competition authority transparent?
To what extent is the competition Law decision maker accountable and to whom?
Are any guidelines or bulletins available to explain to the public how the competition law system works in that country?
To what extent has competition policy been applied to improve the environment in terms of corruption?
To what extent has an ineffective competition policy or corrupt agency exacerbated the corruption problems?
Some competition authorities are generally regarded as effective, but they become impotent when political power enters the picture. All these factors must be taken into account in deciding how to proceed in the face of illegal conduct or in defending a multinational investigation.
Once again, there was significant discussion of voluntary self-disclosure and the belief that leniency for companies that self-report is a powerful instrument for enforcement of antitrust laws in many jurisdictions.
However, in connection with the discussion of the relationship between competition enforcement and anti-corruption efforts, it was noted that leniency has not been adopted by authorities to assist with anti-corruption enforcement and that companies should be rewarded for detecting and reporting violations of the law, whether or not the violations concern antitrust laws.
In this environment, counsel advising or defending a company with multinational operations needs to know not only the law in the relevant jurisdictions, but also the agencies, the enforcers and how the agencies and enforcers operate. Such knowledge requires that persons in those jurisdictions work with the enforcers on a regular basis.
ABA Spring Meeting
Like the other conferences, the ABA Antitrust Law Spring Meeting featured considerable discussion regarding competition developments in emerging jurisdictions. In particular, enforcers from emerging markets noted that they expect the trend of increasing global enforcement of competition Laws to continue.
A hot topic at the meeting was recent changes to competition regulation in Brazil. Brazilian enforcers discussed the substantial revisions to the country’s competition law and enforcement structure and stated that 2014 would probably bring many more settlement agreements under the new cade procedures — though the details of those pending agreements are still confidential.
The Competition Commission for the Common Market for Eastern and Southern Africa, which was established in 2008 and finally became operational in 2013, was also discussed as yet another emerging regulator focusing on antitrust enforcement.
Leniency programs were also a topic of major discussion. Consistent with the discussions in the aforementioned conferences, panelists concluded that leniency programs are increasingly widespread, but they vary greatly in their terms and effectiveness. It was noted, however, that Leniency programs have been effective and continue to become more so; this is contributing to the global increase in private antitrust actions.
The proliferation of private rights of action, particularly in Europe, was another prevailing topic. there was considerable discussion regarding the European Commission’s draft directive reflecting a proposal for legislation to facilitate damages claims by antitrust victims.
The draft directive, which was released June 11, 2013, says, “Member states shall ensure that any natural or legal person who has suffered harm caused by a formation of competition law is able to claim and to obtain full compensation for that harm.”
The directive reflected the EC’s view that victims of collusive agreements or abuses of dominant market position are entitled to compensation for the harm they suffered as a result of such conduct.
In addition, because of shortcomings of the widely varying legal frameworks in member states, there arose a need for “private enforcement of EU competition rules [that] consists in legal actions brought before a national court to enforce the rights derived from those rules.”
It is significant that the European Parliament adopted the directive April 17 shortly after the Spring Meeting concluded. The directive has been sent to the EU Council of Ministers for final approval.
Furthermore, a consumer rights bill that is pending before the UK Parliament expands the types of cases that the UK Competition Appeal Tribunal could hear and would allow for collective actions for competition claims; this would permit potential claimants to “opt out” of a collective action.
In a related vein, there was considerable discussion regarding the exponential growth in the amounts that claimants have recovered worldwide in competition actions, and it was noted that global recoveries have been in the billions of dollars annually for several years and are projected to exceed US$10 billion globally in the near future.
Together, the Cartel Workshop, Global Forum and Spring Meeting demonstrate that the world of antitrust and competition enforcement is changing at a rate not seen before. More jurisdictions are passing antitrust and competition laws, and the potential consequences for companies or individuals violating those laws are becoming more severe.
Antitrust and competition compliance is growing in importance just as it is becoming increasingly complex. Enforcers are working together more than ever before while also gaining new and stronger enforcement tools.
In this multi-faceted and rapidly changing environment, counseling and representing clients with multinational operations requires not only current knowledge of the laws in multiple jurisdictions but also, and perhaps more importantly, knowledge of and on the ground experience with the agencies and enforcers in every jurisdiction touched or affected by the client’s operations.
An earlier version of this article appeared in Westlaw Journal Antitrust, June 2014, Vol. 22, Issue 2