Live Coverage of Conference on Fines (First Panel)
Judge Ginsburg ( United States Court of Appeals for the District of Columbia Circuit) opens this session. In his view, the main flaw of current deterrence policy is to only seek to make cartels unprofitable for companies. But as long that it is not unprofitable for individuals to craft cartels, there will be cartels. What must be understood is that individuals profit from price fixing in ways different from corporations. The fact that individuals are compensated for divisional profits, regardless of firm’s performance when faced with cartel proceedings is for instance one of the things that keeps cartels creeping the economy. Moreover, there are many ways sanctions on individuals are mitigated by firms, thereby nullifying their potential deterrence (compensation schemes, etc.). Judge Ginsburg mentions for instance that some Korean firms re-hired businessmen involved in cartels, after jailtime in the US, and had taken care of family, etc.
His bottom line is that to do nothing against individuals involved in cartels makes no sense. Individual fines (monetary) are not a necessarily a good deterrent because they find a limitation in individual’s wealth. Jail sentences are probably the most deterrent penalty. Debarment is possibly a good thing, but it has no teeth against persons at the end of their career. It can also be wasteful to take away this human capital from society (but the same is true with jail). The focus of attention should thus be, in his view (i) on individuals (in particular on compensation scheme); and (ii) on what is the most efficient mix of sanctions. Finally, judge Ginsburg draws an analogy between firms and a whipping boy. Leave it to you to understand the parallel.
Andreas Stephan (East Anglia) opens with a note of disagreement with Judge Ginsburg, but promises to come back to this. He moves on explaining that the current “fines-only” approach of agencies is not the right one. Fines are not deterrent, plain and simple. And the debate on how to improve fines is dead in the water, given it is proven that optimal fining would lead most firms to bankrupcy.
Andreas’ second concern has to do with the protracted nature of antitrust investigation. All too often, this gives rise to the odd situation where the victims of corporate fines are the current shareholders, employees and consumers (through fines being passed on) of a company, whilst employees responsible of cartels are often no longer in business, and immune from any penalty. Andreas also makes an interesting point on economic studies that show that share valuation decreases when investigation are announced, but increase when investigation are closed with an infringement decision. According to him, this means that capital markets worry more about uncertainty than about sanction.
Andreas also points out that most supporters of criminal sanctions cite the US as an example of an efficient system. But what people ignore is that most such cases in the US are settled and not brought to an end. In fact, if the US have been so successful at running criminal antitrust cases, it is because they have a system of plea bargaining. We dont have any such thing in the EU, and if we had, it may not pass the bar before the ECHR.
Finally, Andreas mentions Director Disqualification Orders, which although in existence in UK law have never been enforced. And one of the problems with the UK regime, is that it only applies to Directors, and to Directors registered in the UK. Now, with the EU internal market, this can be easily circumvented, with UK firms appointing Directors in Belgium or elsewhere. Andreas concludes on the Commission’s reluctance to even initiate discussion on individual criminal sanctions. But this evolution is already taking place in the MS. In his view, the Commission should use the ECN to start this dialogue.
Tom Barnett‘s (Covington and Burling) speech’s is about differences between US and EU antitrust enforcement. He explains generally that what agencies try to do is to bring change in business culture. He talks about the growing awareness that cartel participation is risky. The main difference with the US, however, is that this evolution has taken place earlier there. In the EU, the evolution of business culture has been way slower. In the remaining of his speech, Tom focuses on more specific points. On compliance programmes, he recalls the audience that enforcers face the problem of separating wheat from chaff, i.e. what is a genuine compliance effort from a sham compliance policy. That said, Tom finds a genuine merit in compliance programmes (even sham ones it seems), which is to help educating business to antitrust risk. Rewarding them with some discounts on fines many thus not necessarily be a bad idea. His other important point is that the timing sanctions are imposed is important. Sanctions are adopted more quickly in the US than in the EU. In his view, it is important to speed up the fining process. First because, the closer to the facts the penalty, the more certain its deterrent effect. Second, because corporations need to move on and return to business quickly.
The final speaking slot goes to our good friend Luis Ortiz Blanco. Luis draws an analogy between antitrust fines and Rubens’ massacre of the innocent. This point, which ties in with Andreas’ Stephan presentation, is that the current fining policy harms many innocents, i.e. current employees and shareholders, whilst leaving managers unscathed. In turn, his presentation explores alternative ways to deter competition infringements. Luis makes a good point on The ECtHR in Menarini. The EU judicial review system may well pass the Menarini standard. But should we aim for a bare pass, or should we aim for the best possible, Nobel prize winning, system of judicial review. This point will be further elaborated in a forthcoming paper with Mark English. Luis then goes on to elaborate on a possible asymetrical administrative procedure in competition cases, with several types of proceedings available in distinct types of cases. His presentation, which was both hilarious and creative, is available below.