Cartels and Competition

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					Criminalization of Cartels

            UHOS Conference
11th November 2008 – Brno, Czech Republic
        Carolyn Galbreath
           Member and Director
              Cartels Division
         The Competition Authority
Cartels and Competition

 “Cartels remain the supreme evil of

Verizon Communications v. Law Offices of Curtis V.
Trinko, 540 U.S. 398, 408 (2004).
Cartels and Competition
"This type of crime is a crime against a consumer
and is not simply against one or more individuals.
To that extent it is different from other types of
crime; and while society has an interest in
preventing, detecting and prosecuting all crimes,
those which involve a breach of the Competition
Act are particularly pernicious. In effect every
individual who wished to purchase, for cash, a
vehicle from these dealers over the period which
I've mentioned were liable to be defrauded and
many surely were by the scheme and by the
practices which unashamedly this cartel operated.
These activities, in my view, have done a shocking
disservice to the public at large.”

Mr. Justice Liam McKechnie, Sentencing of Denis Manning, 3
February 2007.
       Cartel Enforcement
• Recognition that cartels are anticompetitive;
• Anti-cartel laws with substantial penalties;
• Impressive track record by anti-cartel
• Increased cooperation between enforcers
  within the EU and around the world to
  uncover and prosecute cartels;
• Use of a variety of tools to uncover cartels.
       Cartel Enforcement
• Secret nature of cartels require special tools
  to uncover illegal activities;
• Cartels are insidious and require active
  participation by executives at the highest
  levels within companies;
• Unique incentives in the form of leniency and
  immunity programmes have proved effective
  tools to crack cartels;
• Successful enforcement requires penalties
  that take into account the difficulties of
  detection, the need to encourage defection
  and are calibrated to deter future cartels.
       Cartel Enforcement

Successful anti-cartel enforcement depends
  upon creating a virtuous circle of:

 Defection

 Detection

 Deterrence
   Structuring Enforcement
         for Success

 Raising risks and creating incentives for

 Clear structure for acceptance of
  responsibility and providing incentives for

 Transparent outcomes that promote
    Tools for Enforcement

 Cartel Immunity and Leniency Programmes

 Sentencing Guidance

 Structured Means for Cooperation and
  Accepting Responsibility
  Cartel Enforcement in the
       European Union
• Many approaches to cartel enforcement

• Most apply the EU Community Model

• Variety of criminal enforcement models used by
  Member States:
   • Imprisonment and fines (Ireland and Cyprus);
   • Imprisonment and fines for specific offences (UK,
     Germany and Slovakia);
   • Criminal Fines (Denmark, Estonia, Slovenia)
         Benefits of Criminal
Criminal enforcement:

• Ensures that individuals are made to take
  responsibility for their illegal activities;

• Increases the risk profile for cartels and provides
  incentives for defection and detection;

• Limits the propensity for companies to factor cartel
  fines into the cost of doing business;

• Makes the cost of recidivism personal and adds a
  deterrent factor unattainable from fines alone.
 Ireland’s Criminal Enforcement
 Criminal convictions on indictment of 12 companies
  and 10 individuals.

 Custodial sentences imposed on five individuals since
  2005, all suspended.

 Two convictions and custodial sentences against the
  cartel enforcers who aided and abetted the Connaught
  Oil Producers Association and the Irish Ford Dealers

 Fines of just over €181,000;

 Cases pending against 6 companies and 7 individuals;

 Additional cases to be filed before year end.

           Competition Act, 2002
             Criminal Offence
•   Sections 4 and 5 of the Competition Act, 2002, mirror
    Articles 81 and 82 of the EU Treaty;

•   Section 6 makes hard-core cartels under Section 4 or Article
    81 criminal offenses;

•   Applies to individuals “completing undertakings” or “a
    decision made by an association of competing

•   Hard core offenses are enumerated as: (1) directly or
    indirectly fixing prices on goods or services by means of an
    agreement, decision or concerted practice; (2) limiting
    output or sales; or, (3) sharing markets or customers;

•   Section 6(6): “Any act done by an officer or an employee of
    an undertaking . . . in connection with the business shall be
    regarded as an act done by the undertaking.”

      Penalties for Cartels
• For conviction upon indictment, fines on both
  individuals and undertakings of € 4 million or 10
  percent of the turnover in the 12 months preceding
  the conviction;

• Prison term of up to 5 years;

• Individuals are subject to arrest for cartel offences;

• Imputed liability on the undertaking for acts by an
  officer, director, manager or person who purports to
  act in such capacity;

• Presumption that the undertaking has consented to
  acts by an officer, director or manager who engaged
  in cartel behaviour.

       Ireland’s Criminal
     Enforcement Structure
• Investigations by Competition Authority

• Prosecution by the Director of Public Prosecutions

• Charges against the accused on indictment

• Trial by jury

• Right against self-incrimination

• Plea bargaining is prohibited

• Judicial discretion in imposition of sentences
            Director of Public
• Cartel cases on indictment are investigated by the
  Competition Authority and prosecuted by the Director
  of Public Prosecutions (DPP);

• Competition Authority recommends prosecution;

• DPP has sole discretion to prosecute cases and to
  determine charges to be brought against individuals
  and undertakings;

• Ireland has a traditional solicitor/barrister split,
  cases tried by barristers engaged by the DPP;

• Plea bargaining in Ireland is prohibited; options for
  disposing of cases without a trial are circumscribed.

       Limited Options for
    Disposition in Lieu of Trial
•   Judicial plea bargaining between the prosecution and
    defense is not practiced and the DPP’s Guidelines
    specifically prohibit prosecutors from participating. (DPP
    Guidelines, Section 10.1);

•   Prosecutorial “charge-bargaining” is used, but sentencing
    recommendations to the court are not permitted (DPP
    Guidelines, Section 8.20);

•   Determination and imposition of sentence is within sole
    discretion of the Court. No sentencing guidelines, although
    DPP has endorsed Court developed Guidelines;

•   DPP has an obligation to present facts in mitigation or
    aggravation to the Court, which may include “full facts”
    (DPP Guidelines, Sections 8.14 to 8.19).

            Cartel Immunity
• Competition Authority and DPP operate joint

• First individual or company not ring leader may
  qualify; full immunity for employees present and past
  and all officers and directors;

• Ireland is a signatory to the EU Model Immunity
  Programme, with reservations, no leniency plus;

• No second in leniency option that is the hallmark of
  EU Leniency Notice and other programmes worldwide;

• While result may be more satisfactory in terms of
  public policy, ironically may be less satisfactory to co-

Success of criminal programme depends on:

 Widespread acceptance that cartels are crimes that
  warrant stiff penalties;

 Well integrated enforcement tools that support the
  virtuous circle;

 Skilled use of criminal law enforcement tools;

 Commitment by Courts, Prosecutors and Competition

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