Relaxing whilst doing Competition Law is not an Oxymoron

Live Coverage of Conference on Fines (Introduction Session)

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As a kid, I had a dream. That of becoming a professional journalist. And I must say that this blog has, at least to some extent, entitled me to achieve it.

Today, the TILEC-LCII conference on fines offers me an additional opportunity to beat M-Lex do this. I’ll try to offer live coverage of the discussion, as we go through the day. For each session, the speakers’ ppt. presentations will be available at the end of the post. A disclaimer: please bear with the rough, instant reporting style of my posts.

So here we go. We start with Damien Geradin‘s introductory speech. A take away point: the usual argument against new sanctioning tools, is that it is not feasible under current EU competition law standards. Now Damien is very right to mention that competition law underwent many significant reforms in the past decade, including vertical restraints, decentralisation and the effects based approach in Article 102 TFEU.

We then have the presentation of André Uhlman, from ThyssenKrupp AG. André points out the difficult conundrum between the non recognition of in-house legal priviledge, and the increased role of self assessments in EU competition law. This leads companies to avoid documenting internal advice, for fear of subsequent disclosure, and involve external counsels in all aspects of business life. A second area where companies walk on thin ice is sanctions against employees.  On the one hand, shareholders, the executive board and the public opinion may promote a zero tolerance policy, yet on the other hand, this will undermine employees incentives to cooperate in the context of investigations, or to report information useful in the context of leniency applications, for fear of being subsequently sanctioned. A third point is that compliance is expensive, in particular in times of crisis. So if NCA were to reward compliance efforts – like the OFT or the French NCA do – this could help convince to set up such programmes. Finally, André mentions a case that we should have covered on this blog, i.e. C-199/11, or the Commission’s private enforcement test case, where the Court held that the Charter did not prevent the Commission to act as a damages claimant and enforcer in one and a same case. Frankly, to me, the value of this case seems fairly limited, given the few instances in which the Commission (or a NCA) will be victim and  enforcer at the same time, unless NCAs or the Commission are ever empowered to act on behalf of claimants in follow on litigation.

Prof J. Harrington‘s talk (Wharton) walks us through the economics of anticartel enforcement. He starts with the dynamic incentive approach of deterrence. I like the idea that when cartels grow and endure, some documentary evidence is lost and this should be accounted in the deterrence equation. According to Prof Harrrington, the penalty inflicted should increase as time passes, to reflect for the lost evidence. Now, Prof. Harrington explains that in fact, fines that make cartels unprofitable (the current approach) may be higher than what is needed to make cartels unstable (the dynamic approach I just mentioned). And he seems to propose to muscle up the second approach. That said, to me, the first approach remain a necessary policy. Making cartels unstable is not enough because it does not eliminate the harm that existing cartels cause until they are destabilized.

Prof Harrington turns to the thought provoking question: “how can we be concerned with overdeterrence if all collusion is bad?“. Well, he goes on to explaining that competitive conduct can be wrongly accused of hardcore collusion because of flaws in the discovery and prosecution process. He takes, for instance, the example of the erroneous prosecution of R&D JVs, trade associations, etc. This concern may, however, be close to moot in the US, given the current sophistication of the law. Yet, in the EU – and this is my own view here –  the problem may be more acute, for instance with the cartel-like prohibition of certain types of information exchanges. The other over-deterrence concern mentioned by Prof Harrington is that firms may invest excessively into compliance efforts, which can be potentially wasteful from a social perspective.

Prof. Harrington’s next point is about the methodological problems of measuring over or under-deterrence. For instance, studies that seek to assess the cartel overcharge are based of samples of discovered cartels only. There is thus a bias in the data.

Harrington also talks of companies compliance efforts. He says there can be doubts that all those efforts are serious. And he points out to some puzzling examples. Recently, BA promoted to its board a business executive that had been previously charged with price fixing allegations. More generally, agencies should seek to better understand what a firm’s true commitment to compliance is. Compliance declarations may after all be just cheap talk.

Harrington also alludes to screening mechanisms for cartel cases. Unlike what certain enforcers seem to believe, those tools are his view are complementary and not substitutes to leniency programmes. Leniency applicants primarily come forward for fear of being detected. Because screening programmes increase the risk of ex officio detection, they also increase the efficiency of leniency programmes.

Finally, Harrington touches upon individual penalties.  If individual penalties are introduced, cartel trust busters will face a wealth of new incentives instruments – individual leniency being one of them – in their hunt against cartels. Harrington believes that races for individual leniency would be a powerful tool to detect cartels.

Here are the presentations.

Christoph Klahold – Importance and Challenges of AT Compliance for Large Corporations

Joe Harrington – Optimal Deterrence of Competition Law Infringements

Written by Nicolas Petit

3 December 2012 at 2:04 pm

Posted in Events

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