The 14th ABA International Cartel Workshop – key developments in relation to leniency and ex officio investigations

On 27-29 June the 14th International Cartel Workshop organised by the ABA in collaboration with the IBA took place in Lisbon.

This edition marked the 25th anniversary of the workshop, which aims at bringing together practitioners and enforcers to discuss current key trends and issues in cartel enforcement by way of staging a role play on a hypothetical global cartel investigation. The workshop furthermore counted several roundtable discussions with top cartel enforcers from antitrust authorities around the globe as well as practitioners who gave an insight in most recent developments in the area of cartel enforcement.

In this blog post we will look at the current state and future outlook of leniency programmes and the use of ex officio investigation tools, and in our second blog on this workshop we will zoom in on current focus areas of cartel enforcers and the key take-aways from the discussions.

The current state and future outlook of leniency programmes

The general sense is that the number of leniency applications has sharply declined over recent years. The workshop has however revealed some nuances to this trend. The European Commission (EC) and certain other jurisdictions such as Canada reported a clear and steady decline (of approximately 65 per cent) in leniency applications. However, the US Department of Justice (DOJ) and other enforcers such as the Austrian, Spanish, and Brazilian Competition Authorities indicated not to have seen such a trend and still receive a steady stream of leniency applications. The Australian Competition and Consumer Commission (ACCC) reported that it still receives a large number of leniency applications for national cartels but no longer for international cartels. The differences between the several jurisdictions may be explained by the fact that there appear to still be a large number of cartels at local level (including bid rigging for public tenders), but that multinationals (that used to be the perpetrators of global cartels in the past) have increased their compliance activities to such an extent that cartel conduct of their employees only occurs in exceptional cases.

Enforcers seem to believe that despite the increased compliance efforts of companies there are still a large number of unreported cartels and that the decline in leniency applications for international cartels is rather due to the leniency programme having become less attractive. Based on this premise, an important topic of discussion throughout the workshop was therefore what can be done to make leniency applications (more) attractive.

• First, the key to making a leniency programme attractive lies in the design and application of the programme itself. Enforcers agreed that as a “golden rule” leniency applicants must be better off than those who do not self-report. This can be achieved by (i) making the conditions to qualify for immunity/leniency clear and predictable; (ii) good faith application of the leniency policy by the enforcers and giving leniency applicants the benefit of the doubt in borderline cases; (iii) providing leniency applicants sufficiently attractive benefits as a reward for self-reporting. During the workshop discontent was voiced by practitioners over the DOJ’s changes to its long-standing leniency programme. The bar in particular takes issue with the introduction of a “promptness” requirement saying that this creates significant insecurity for companies seeking to self-report. The DOJ defends this new policy by stating that it only codifies its current practice and that there is limited uncertainty as it very rarely withholds leniency where a company is able to demonstrate an infringement (for example where a company fails to promptly and effectively terminate the conduct or warned its co-conspirators before applying for leniency). Another significant change in the DOJ’s enforcement practice, which is expected to discourage leniency applications, is that the current employees of Type B leniency applicants (i.e., in cases where the government already had some incriminating evidence) are no longer automatically excluded from criminal prosecution. The more vigorous criminal prosecution of individuals involved in cartel behaviour is said to be motivated by an attempt to align antitrust enforcement practice with the DOJ’s individual accountability focus in other areas of criminal law enforcement.
• Second, given that the decline in leniency applications is considered to be in large part attributable to an increasing exposure to damages claims, it was debated whether in terms of benefits for the leniency applicant not only fine reductions/exemptions should be granted but also protections from damages actions. In the US, following the adoption of the Antitrust Criminal Penalty Enhancement and Reform Act (ACPERA) in 2004, immunity applicants are only liable for single damages (as opposed to treble damages) and are not jointly and severally liable as long as they can demonstrate that they have provided “satisfactory cooperation” to the claimant. In the EU, a similar exemption from joint and several liability was introduced in the Damages Directive. However, in jurisdictions such as the EU that do not allow to claim treble damages, the civil liability of leniency applicants cannot be further reduced without encroaching on claimants’ rights to obtain full compensation. Therefore, enforcers’ position is that a further protection from private claims is not a viable option.
• Third, enforcers agreed that vigorous cartel enforcement is an important destabilising factor for cartels that encourages companies to self-report. This implies the need for authorities to, on the one hand, develop tools to pursue ex officio investigations and, on the other hand, impose tough sanctions once cartel conduct is established (on the respective companies and in jurisdictions where this is possible on individuals). The UK in particular is increasingly using director disqualification as a means to discourage cartel participation and encourage leniency (and whistleblower) applications, and Australia has introduced criminal liability in 2009 (with a number of successful guilty pleas and first ever contested jury trials which have however not led to convictions).

The use of ex officio investigation tools

The workshop has clearly shown that authorities are (and have been for a while) investing heavily in tools that enable them to open ex officio investigations. This is largely motivated by the decline in leniency applications but, as noted by the EC, it also allows authorities to set their cartel enforcement policies more autonomously rather than having to depend on “random” leniency applications. As a result, there is a clear trend towards more investigations being launched ex officio. The UK Consumers and Markets Authority (CMA) reported that approximately half of its investigations are now ex officio, and the EC acknowledged that several of its recent dawn raids were not triggered by leniency applications. Tools used by enforcers to crack down on cartels by their own motion include the following:

• Whistleblower programmes. Several authorities (including the CMA, the EC and the Korean Fair Trade Commission (KFTC)) have reported great successes of their whistleblower programmes. These programmes give individuals the opportunity to report illegal or suspicious behaviour (including on an anonymous basis). In certain jurisdictions such as in Korea, these individuals receive monetary rewards if they can provide useful/incriminating information. In the US, whistleblowers who expose criminal antitrust violations are protected from retaliation (and a bill was proposed to introduce rewards).
• Data analysis. Many authorities developed very advanced data analytics tools to detect cartels. Such tools are often used following an initial tip from a whistleblower but also on a standalone basis (in particular for the screening of bidding information). For example, the Portuguese, Spanish and Brazilian Competition Authorities reported that they have access to very extensive public procurement databases that allow them to analyse patterns in tender behaviour and bid prices in order to detect bid rigging infringements. The ACCC on the other hand uses data analytics also to review documents and data sets collected during merger reviews in order to identify potential cartel infringements.
• Cooperation with other public authorities. Several enforcers, such as for example the Austrian and Portuguese Competition Authorities, stressed the importance of cooperating closely with other public authorities such as the court of auditors or public finance departments. In Austria, a cartel was for example recently detected in the framework of a tax inspection.

Conclusions

The workshop has provided an interesting insight in the current state of cartel enforcement in several jurisdictions around the world and has highlighted a few areas that companies should be particularly vigilant of when determining their strategy towards global cartel investigations such as: (i) differences in leniency programmes across jurisdictions (including the criteria to qualify for leniency); (ii) differences in benefits that the immunity/leniency provides (immunity or reduction in fines compared to protections with respect to private damages claims).

It is certainly clear that enforcers are not holding back. To the extent there has been any slowdown of cartel enforcement during the pandemic, enforcers are again very active in pursuing cartels, including based on ex officio investigations.

You can read our second blog on the ABA International Cartel Workshop here, which looks at current focus areas of cartel enforcers and the key take-aways from the discussions. To read more about these and other antitrust developments, you can read the Detecting cartels and compensating consumers chapter of our Global antitrust in 2022: 10 key themes report. Our Antitrust, Competition and Trade team is also available to discuss any of these points in further detail.