Christine A Varney and John Terzaken1
Globalisation remains the overarching theme of modern antitrust cartel enforcement. Globalisation takes two principal forms: a growing worldwide consensus that cartels cause serious consumer harm and should be dealt with accordingly; and a marked increase in cooperation between jurisdictions in the identification, investigation and prosecution of transnational cartels. More eyes are watching than ever before at a time when, because of the destabilising effect of leniency programmes, conspirators have less and less reason to trust each other.
The role of cartel enforcement has undergone a long evolution. For over half a century, from the enactment of the Canadian Competition Act in 1889 and the Sherman Act in 1890 to the mid-1940s, Canada and the United States were the only nations prohibiting cartels. In Europe, cartels were then still widely regarded as at least partly beneficial to the national economy. Several European nations even enacted legislation in response to the Great Depression, enabling the government to establish compulsory cartels or to force outsiders to join already existing ones. Particularly during the Second World War, excessive concentration of economic power was used to create ‘national champions’ that were easy to control and that could outperform their foreign rivals.
In the aftermath of the war, the United States pressured Germany and Japan to break up the existing cartels and to put in place cartel enforcement regimes. At the same time, the United Kingdom adopted a new antitrust regime as part of its social policies to stimulate employment. Antitrust law was subsequently included in the 1957 Treaty of Rome as one of the key policy areas of the European Community, laying the foundation for the European Commission’s cartel enforcement practice.
In the past few decades, cartel enforcement has spread from North America and Europe to virtually every major jurisdiction in the world. There are now antitrust authorities in over 125 countries across all continents actively pursuing cartel activity, and that list is growing.
More countries are pursuing cartel activity and they are doing so more aggressively than ever before. Both mature and new antitrust regimes have come to regard aggressive prosecution of cartel offenders as a primary policy objective. This is reflected in the ever-increasing penalties imposed on cartel offenders year-on-year, with certain enforcers like the US Department of Justice and European Commission regularly imposing fines totalling more than a billion dollars each year.
This is also reflected in the expansion of the number of jurisdictions that have criminalised cartel offences. In addition to the United States, where cartel offences have long been prosecuted criminally, more than half of the Member States in the European Union have now criminalised certain cartel offences, as have countries like Australia, Brazil, Japan, Korea, Mexico and Russia. Although the shift has not come without challenges, criminalisation of cartel enforcement is undoubtedly gaining momentum globally.
Cartel detection has also become more effective. This is primarily the result of the growing use of leniency programmes. In the 1990s, only the United States and a handful of other countries had leniency programmes. Today, there are antitrust leniency programmes in more than 50 jurisdictions. This virtually global availability of leniency programmes radically destabilises cartels because of the tremendous incentives for co-conspirators to self-report to authorities once a cartel no longer serves its purpose.
Cartel enforcers are also benefiting from increased multi-jurisdiction cooperation and an expanded jurisdictional reach. Enforcement authorities understand that failing to cooperate creates a risk that evidence will be lost or destroyed. As a result, organisations such as the Organisation for Economic Co-operation and Development and International Competition Network were formed to drive global cooperation and convergence among enforcement authorities in the prevention, detection, investigation and punishment of cartel conduct. Today, there is close cooperation and coordination among enforcement authorities globally, as evidenced by the fact that in nearly every recent global antitrust investigation dawn raids were coordinated across continents.
Extraterritorial cartel enforcement has now become standard practice for the major enforcement jurisdictions. Whereas the United States was sharply criticised at first for the application of the Sherman Act to foreign conduct, other antitrust enforcement regimes now appear to have firmly embraced the principle of extraterritorial cartel enforcement. Out of the world’s major antitrust regimes, Colombia and arguably Canada are the only countries for which the location of the conspiracy is a decisive factor in establishing jurisdiction. For other countries, it is sufficient for the conduct to affect national trade or commerce. Up-and-coming cartel regimes are routinely adopting similarly expansive policies on extraterritorial cartel enforcement.
This increasingly crowded and complex global enforcement environment complicates the strategic decision-making facing corporations and individuals when possible wrongdoing is discovered or a government investigation commences. Counsel representing large corporate enterprises whose products are sold abroad are likely to face cartel investigations involving multiple jurisdictions, simultaneous processes, and seemingly endless demands for documents and witnesses. Individuals are likely to face similar demands, as well as the sobering reality that they may now be subject to criminal prosecution in multiple jurisdictions or be more readily exposed to extradition for prosecution in jurisdictions inclined to incarcerate them for extended periods, like the US. This added complexity places a premium on the need for counsel to assist clients in developing a global strategy from the outset of an international cartel investigation.
This book is intended as a primer and reference for the private practitioner or in-house lawyer on the cartel enforcement regimes of the world’s principal competition authorities. The book provides guidance on the investigatory and litigation procedures of those jurisdictions, including methods of evidence gathering, policies regarding information sharing with foreign enforcement authorities and private litigants, the scope of any leniency programme, and considerations relevant to sentencing. While the book focuses primarily on government investigations, each chapter briefly discusses the risk of follow-on private lawsuits, which in some jurisdictions may be substantial. Most importantly, this book will aid lawyers representing corporations to respond swiftly and with confidence when faced with the unwelcome news that their clients may have participated in cartel activity.
1 Christine A Varney is a partner at Cravath, Swaine & Moore LLP and John Terzaken is a partner at Allen & Overy LLP.