Last month, the American Bar Association hosted its 14th International Cartel Workshop in Lisbon, with roundtables and panels featuring cartel and antitrust practitioners and government enforcers from more than 20 countries. The speakers led participants through a hypothetical global cartel investigation exercise throughout the conference and provided their views of emerging developments and trends in global cartel enforcement.
The discussions at the event reiterated many of the themes we’ve seen developing in key enforcement regions, such as North America, South America and Europe. These include:
There’s a great deal of ambiguity about how the focus of cartel enforcement will adapt given changes in the leniency landscape. In some regions, including Europe and the U.K., leniency applications have dropped significantly, and enforcers expressed concerns about how they will effectively detect and regulate anti-competitive activity without a robust leniency program (however, they did also note that they leverage additional on-ramps for enforcement, including whistleblowers, cooperation with other authorities and market analysis). Notably, the U.S. Department of Justice recently changed its leniency guidelines, imposing a higher bar to obtain the benefits provided to self-report organisations. Participants at the conference discussed that self-reporting via leniency application has also become less valuable due to concerns about follow-on damages, significant liabilities in class actions and uncertainty of protection for corporate officers.
This uncertainty is causing some organisations to assess the rigour and value of their compliance programs as a first line of defense. It’s important for organisations, especially multinationals, to keep in mind that cartel enforcement is a global issue and leniency incentives vary across jurisdictions. For example, Michael Grenfell, the U.K.’s Competition and Markets Authority’s executive director of enforcement, said during the conference that while “private follow-on damages actions are certainly deterring cartelists from applying for leniency, the CMA is also working to increase incentives by raising fines, protecting companies from debarment, removing director disqualification and eliminating criminal prosecution for the companies that come forward first.” Ultimately, even if leniency benefits are limited in one jurisdiction, self-reporting incentives will still likely be worthwhile in another.
An additional consideration is that many cartels that come under investigation are identified by means other than leniency applications. In fact, Grenfell said during the conference that, “About half of the U.K. authority’s cartel investigations are initiated through means such as complainants, whistleblowers or market investigations.” If an organisation comes under investigation and does not have a robust compliance program, fallout in the form of reduced shareholder value and reputational damage is likely to be more severe, and fines will likely be higher.
Follow-on damages were a significant discussion throughout the event. While class actions have long been a part of the legal landscape in the U.S., they are just now beginning to emerge in the U.K. and Europe in a way they haven’t before. For example, a number of high-profile cases have demonstrated that the U.K. courts are willing to certify classes and are more open to collective actions, especially in matters involving competition violations.
In the U.S., while class actions are every day, there are uncertainties about the scope of discovery in cases following an antitrust investigation. Some have expressed concerns that as the environment around follow-on cases in the U.K. and Europe matures, these matters may begin to carry the same burden of e-discovery scope and scale that’s become standard in the U.S..
For more than two years, the DOJ and FTC have recognised and communicated the importance of data and analytics in antitrust compliance programs and competition investigations response. There was also discussion around analysis of public procurement and government tenders as an on-ramp to investigations and how regulators across various enforcement agencies and across jurisdictions are using documents to identify potentially problematic cartel conduct.
Discussions during the conference reaffirmed this focus, as well as the DOJ’s use of data analytics to process documents they receive during investigations. The CMA has also developed an extensive data science program that the agency relies upon for “vetting the evidence to check it has been submitted properly…[and] to extract useful information from the submissions.”
During the hypothetical that ran throughout the conference, the importance of data analysis, particularly for communications data, was a recurring theme. There was also conversation around analysis of public procurement and government tenders as another on-ramp to investigations and how regulators across various enforcement agencies may use document analysis to identify potentially problematic cartel conduct.
During the enforcement roundtable, there was a discussion around the growing focus of ESG as a catalyst for antitrust risk. As organisations look to set industry standards around ESG and improve their benchmarks, they will be engaging in discussions with other leading organisations within their industry. This may blur the lines between pro-competitive collaboration and improper collusion — impacting pricing and innovation — and is an area regulators expect to look at more closely in future enforcement activities. This will spur a need for organisations to expand their compliance monitoring programs to ensure they can flag ESG discussions and activities that may veer into anti-competitive territory.
The Canadian Competition Bureau commissioner provided several meaningful updates during the event. For one, the agency is moving in the direction of the DOJ in terms of criminal prosecution for violations including wage-fixing and no-poaching agreements. This is expected to drive an uptick in competition investigations in the country.
Canada has also removed its maximum for fines, which was previously set at $25 million for antitrust violations. When the maximum was in place, many companies would forego the effort of conducting a volume of commerce analysis to reduce fines. Now, the commissioner has indicated that volume of commerce calculations, which involve in-depth analysis of financial data, will become extremely important for organisations to limit their financial exposure in the wake of a violation.
Organisations should expect an increase in dawn raid activity, especially in highly active enforcement jurisdictions including Europe, the U.K. and Brazil. As dawn raids become more frequent, organisations will need to prepare for new trends such as hybrid dawn raids, dawn raids by agreement, raids at residences and data collection from personal devices.
Overall, cartel enforcement is evolving to adapt to the modern business landscape. Data is becoming more relevant and complex. ESG is top of mind across many areas. The scope and scale of antitrust risks are growing. Authorities are adapting to the realities of hybrid work. And the focus of what constitutes cartel activity is shifting alongside globalisation and technological advancement. Compliance programs and investigations preparedness will remain key for multi-national organisations to navigate an active global regulatory environment.
The views expressed herein are those of the author(s) and not necessarily the views of FTI Consulting, its management, its subsidiaries, its affiliates, or its other professionals.