Antitrust & Competition Policy Blog

Editor: D. Daniel Sokol
University of Florida
Levin College of Law

A Member of the Law Professor Blogs Network

Tuesday, November 1, 2011

How to Give a Meaningful Interpretation to the Efficiency Defence in European Competition Law?

Posted by D. Daniel Sokol

Pal Szilagyi, Competition Law Research Centre, Peter Pazmany Catholic University asks How to Give a Meaningful Interpretation to the Efficiency Defence in European Competition Law?

ABSTRACT: The role of the efficiency defence in competition law, particularly in European Union competition law was always heavily debated since the adoption of the first merger regulation in the European Community, later the European Union. According to the current interpretation of the notion of dominance by the ECJ it is not possible to justify a merger creating or strengthening a dominant position based on efficiency justification. Moreover, the structural presumptions underlying the system of merger control prevail in such situations. If the merged undertaking does not have a dominant position, efficiency gains can outweigh the harm to competition on the condition that the benefits reach the consumers. This approach is not only consistent with past case law, but is also reflecting the traditions of the Harvard- and Freiburg Schools. Oligopoly theory suggests that concentration on the market is a very relevant factor and this is reflected in the SIEC test.

November 1, 2011 | Permalink | Comments (0) | TrackBack (0)

Monday, October 31, 2011

Introducing the FAST RAT Program

Posted by Joe Murphy

Introducing the FAST RAT Program

Brought to you by The Devil’s Advocate, LLC.

If you are a businessperson you know how inconvenient and even expensive a compliance and ethics program can be for your company. All the materials and training, all that intrusive auditing and reviews, the pain of disciplining managers, and on and on. It is a distraction from the more exciting and lucrative action involved in winning business and making sales.

Why do you need these compliance programs? It seems that these programs really matter to most of those in government. If you get in trouble with enforcers or regulators or get hauled into court, the fact that you diligently took steps to prevent and detect violations can really count. It might reduce your fine or penalty, it might mean no prosecution, it might even mean a defense at trial. And if you are dumb enough not to have a program before you are caught, most prosecutors will surely force you to come to terms with your conduct and institute a truly tough program. So there is really no point in complaining, because a good program is a necessary and important investment – in most areas of the law.

But we have exciting news for you. In one – and only one – area of the law you can escape these intrusive programs. In just one area government does not expect you to have a program, does not ask about your program, and even if you admit a violation you do not need to adopt a program despite committing the worst criminal violations. This one agency – the Antitrust Division of the Department of Justice - refers to any program that is not perfect as a “failed program.” Obviously they know that no program can be perfect, so by taking this position this agency manages to avoid the entire subject. They don’t believe in spending their time dealing with compliance programs, so why should you? If you are thinking about an antitrust compliance program, this is one area where the government offers no reason to do so.

Of course, if you are contemplating compliance programs in any other area – FCPA, government contract fraud, environmental compliance, discrimination, harassment, etc. – there are good reasons to do so. Those agencies look for them, they expect you to have them, and they actually consider them in how they will treat your company. But antitrust? You don’t have to spend your money to win points with government, because this part of government simply does not care.

But there is an alternative that can pay real dividends. The Antitrust Division does care about one thing, and it is the only reason they say compliance programs do count for anything – being the first cartel conspirator to report your fellow conspirators. If you are the first – but only the first – you are richly rewarded under their “Leniency Program.” You are not prosecuted. You are not fined. None of your people are prosecuted. None of your people are fined. And, to top it off, you are never required to have or start a compliance program, no matter how bad your offense.

The Antitrust Division makes it truly easy. No compliance program? It doesn’t matter. In a cartel for a decade? The length doesn’t matter. Made a bundle from the cartel? That doesn’t matter. All that matters is being first in, through their Leniency Program. So in every other area of the law it makes sense to have a strong compliance program, but in antitrust, all that matters is being first to report on your cartel colleagues.

Instead of wasting time and money on compliance, we at the Devils Advocate, LLC, are now offering the perfect program for dealing with competition law risks. Forget antitrust compliance, or trying to do the impossible – have a perfect compliance program. Forget trying to get your people not to engage in cartels. Instead, we have the solution to ensure you can use the Antitrust Division’s Leniency Program. We call it the: “First Antitrust Snitch Triumphs – Report and Tell” Program (“FAST RAT”).

Compare this lean and mean alternative to what you would need for a compliance program:

COMPLIANCE: You have to set policies against violations, and make sure they reach your people. You need controls designed to make violations even more difficult.

FAST RAT: Just have a policy, that anyone aware of a competitor likely to report a cartel must report to the FAST RAT coordinator (explained later) immediately.

COMPLIANCE: You need a high-level compliance officer watching whatever you are doing, monitoring the company-wide program, and reporting to the board. Senior officers have to endorse and support the program. You need a compliance committee to coordinate the program. You need subject matter experts in each high-risk area. You need compliance coordinators throughout your business. You need regular reports to your board of directors. What a nuisance!

FAST RAT: You only need a FAST RAT coordinator who knows the leniency program inside and out, and knows how to report on a moment’s notice. The FAST RAT coordinator also needs to know the signs of a weakening cartel, to beat all others to the punch. A savvy FAST RAT coordinator will even socialize with competitors, the better to learn when one of them might be weakening. The FAST RAT coordinator has outside counsel with papers already in hand, ready to sprint to the government’s door. No compliance officer, no board, no senior management distraction.

COMPLIANCE: You need to conduct background checks on new hires and be careful who you promote. This means the compliance officer plays a role in promotions.

FAST RAT: Forget all that stuff.

COMPLIANCE: You need to train any at-risk people about the law on cartels and what can happen to them. This can be expensive and time consuming. But training employees on cartels is enormously stupid. First, if you scare them they might not tell you when a cartel might be coming to an end. Worse still, you stand to gain a great deal from having a cartel last as long as possible. Then, if you beat your erstwhile co-conspirators to the government because of your FAST RAT program, they get whacked by the government and hurt badly in the marketplace. Meanwhile, you live well and comfortably until the cartel starts to deteriorate and it is time to call the government. At worst, all you do is give back as much as the government thinks you stole through the cartel. But they are so focused on nailing your competitors, they won’t spend that much time on you.

FAST RAT: Training is a breeze. Just make sure all your folks know the warning signs that another competitor might be wavering. They need to know how important it is that your company be first to report. They also need to know a few simple rules of the game, such as how to induce another dumb competitor to appear to take the initiative, and how to get other competitors to “coerce” others to join the cartel – two points you need to avoid to qualify for the leniency program. As a special bonus, making sure that each of your co-conspirators either qualifies as a “leader” or as someone who “coerced” another to participate makes it impossible for them to be eligible for leniency, and gives you the ability to wait for the maximum benefit before you turn them in. Your people do need to know to let the FAST RAT coordinator know as soon as possible if a cartel starts to weaken. Just hammer home to your people how important it is for your company to be first in the door – believe us, they will get the message Cartels make money for everyone, and the FAST RAT program can mean more rewards, even when the useful life of the cartel comes to an end.

COMPLIANCE: In a compliance program you need to keep checking to find out what is going on, who is doing what, and how the program is working. There is a long list of things companies spend energy and resources on – surveys, focus groups, interviews, computerized screening, tests, deep dives, etc. The costs and distraction are enormous, trying to find and stamp out any possible infractions. Plus, if a healthy cartel is prospering and helping you keep up margins, an intrusive program can spoil all that. It can even drive cartels underground, making it harder for you to know when to run to the government when the cartel starts to fall apart.

FAST RAT: You just need to know when there is the first sign of a cartel coming to an end. A good cartel can go strong for more than a decade. So you only need to look for certain conditions associated with cartel deterioration. Much, much simpler than all those diligence steps in a compliance program.

COMPLIANCE: You need advice and reporting systems that reach everyone. You need to protect those who report, so there is no retaliation. You need to reach everyone, everywhere in the business. And as soon as you start to investigate an issue, all your competitors are likely to find out through the grapevine and beat you to the punch in the leniency program. In fact, if one of your competitors has the FAST RAT program, they will win and all your diligence will cause you to lose.

FAST RAT: Forget all that stuff. Just make sure everyone in your company involved in competitive matters knows when to call the FAST RAT coordinator – at the first sign of cartel weakness.

COMPLIANCE: You need to discipline people for even getting near a violation, and even for simple things like not getting the training. You even need to discipline managers for not policing their own people.

FAST RAT: Forget all that stuff. You just make it clear that if another conspirator beats your company to the government’s door, heads will roll. Otherwise, just let your people do what they do best, and forget all about discipline. Quiet, happy, profitable cartels don’t call for any discipline.

COMPLIANCE: You need to be sure your whole incentive system supports the compliance program. This is a giant task that easily can get in the way of having a healthy and profitable cartel. Rewards for compliance leadership, rewards for raising difficult compliance questions, rewards for being a model under the company’s code of conduct. Giving away money and recognition for compliance activity, instead of just for fattening margins.

FAST RAT: Big rewards if your company hits its profit goals, especially if it turns out a cartel was helping meet the numbers. Plus, a giant reward for any manager who figures out another cartel member was getting weak knees and helps your company to be first to report on other cartel members.

COMPLIANCE: Risk assessment is a big, painful deal. Trying to figure out which locations, markets and people are most susceptible to cartel behavior, then targeting them with all the compliance tools.

FAST RAT: Forget all that stuff. You just focus on the signs of a weakening cartel, and when is the best time to report. You don’t want to be premature, because healthy cartels mean big margins and comfortable lives for everyone. But your objective is never to be too late to make your report. Sophisticated computer analysis can maximize your chances of being first in. And remember, aside from possible lost profits from reporting too early, there is no real downside.

So compare:

COMPLIANCE: Costs, diligence, management commitment, training, audits, discipline – on and on the list goes. And if your big, expensive program finds signs of a violation, you will probably just end up being punished by government. Plenty of risk, very little reward.

FAST RAT: Forget all that stuff. Just let people know when to call your FAST RAT coordinator. Then sit back and enjoy those fat profits that come from healthy cartels. And as soon as a cartel starts no longer to be profitable, use the FAST RAT. Your competitors get hammered with costs of defending themselves, then big fines for them, and fines and jail for their key people. What a great scenario for your company!

So what should you do? How do you start your own FAST RAT program? You need to call, and you need to call first. There can be only one FAST RAT in any industry. For more information, and to ride the FAST RAT program to success, call us at The Devils Advocate, LLC. You too can be a FAST RAT beneficiary under the Antitrust Division’s leniency program. Let us show you how. Just remember, you can be a FAST RAT – just “go to the Devil” – The Devil’s Advocate, LLC.

NOTE: If you have European operations, the FAST RAT program works even better there.

DISCLAIMER: Not available in Canada, the UK, Australia, Singapore and other countries that do recognize competition law compliance programs.

October 31, 2011 | Permalink | Comments (0) | TrackBack (0)

Introducing Guest Blogger Joe Murphy

Posted by D. Daniel Sokol

I want to introduce guest blogger Joe Murphy. Joe Murphy, is Director of Public Policy (pro bono) for the Society of Corporate Compliance and Ethics (SCCE) and of counsel to Compliance Systems Legal Group. He was co-founder of Integrity Interactive Corporation (now part of SAI Global), and has worked in the organizational compliance and ethics area for over thirty years. Before entering private practice, Joe was Senior Attorney, Corporate Compliance, at Bell Atlantic Corporation, where he was the lawyer and architect for Bell Atlantic's worldwide corporate compliance program. Joe recently was designated as editor of SCCE magazine, The Compliance and Ethics Professional. He has lectured and written extensively on corporate compliance and ethics issues, is an outspoken member of the ABA Antitrust Section, is on the board of SCCE, and has represented SCCE as a consultative partner to the OECD Working Group on Bribery. His most recent book is “501 Ideas for Your Compliance and Ethics Program,” published by SCCE. He is also an avid ballroom dancer and is chief cha-cha officer of Dance Haddonfield in his home town of Haddonfield, NJ.

October 31, 2011 | Permalink | Comments (0) | TrackBack (0)

"I'd like to propose a toast:" Marking the 20th Anniversary of U.S./EU Antitrust Cooperation

Posted by D. Daniel Sokol

Sean Heather (U.S. Chamber of Commerce) & Guido Lobrano (BUSINESS EUROPE) adress "I'd like to propose a toast:" Marking the 20th Anniversary of U.S./EU Antitrust Cooperation.

Anniversaries are marked by celebration, reflection, and renewals of commitment. On this occasion, the 20th anniversary of the agreement between the United States and the European Union regarding the application of their competition laws, ("Agreement") the U.S. Chamber of Commerce and BUSINESSEUROPE would like to propose a toast. A toast to the visionaries that set the world's two leading jurisdictions on a path to cooperation and coordination, to what has been accomplished in the last two decades, and to a rededication both to the work that remains bilaterally and the transatlantic leadership needed multilaterally.

The Agreement and the continuing agency dialogue that has developed within its framework have undoubtedly made positive contributions to the difficult process of navigating through the labyrinth of compliance issues arising from the scores of distinct state, national, and supranational antitrust enforcement systems originating in the United States and European Union. No one would suggest that such cooperation efforts have been anything less than productive; indeed, it is hard to envision a world in which the United States and European Union did not engage in a significant degree of consultation and information exchange on antitrust matters of mutual interest. The Agreement has made a measurable and lasting contribution to bilateral convergence and reducing costs and burdens.

While mindful of the valuable contributions cooperation has made, there remains a great deal of work to be done if antitrust enforcement is to be transparent, fair, predictable, reasonably stable over time, and grounded firmly in sound economic analysis. Business wants competition enforcers to be an integral and credible part of developing and sustaining market economies around the world. After all, business needs markets that function efficiently, and in a manner that is largely self-regulated and governed by competitive forces. Business favors enhancing innovation that results in the economic progress typical of highly innovative economies, while also advancing consumer, not producer, welfare.

The remaining points of convergence needed between U.S. and EU antitrust enforcement requires focused attention of senior policymakers and must be met with the same visionary leadership that launched us on the journey we now commemorate. Improvements in the coherence of transatlantic antitrust enforcement have become critical to convergence in global antitrust enforcement. Historical preoccupation over divergence between the United States and European Union is quickly giving way to recognition that there is a compelling and urgent need to develop new and more effective ways to address the rapidly increasing complexities arising from scores of additional antitrust enforcement systems that continue to emerge across Africa, Asia, and Latin America.

October 31, 2011 | Permalink | Comments (0) | TrackBack (0)

2nd World Competition Day

Posted by D. Daniel Sokol

From the press release:

It is important for the agencies to engage in education and outreach programmes to raise awareness about the harmful effects of cartels, and to generate leads about cartel activities which may be a source for the initiation of investigation. It would also be beneficial to generate awareness about tools such as leniency programmes, whistle-blower protection, etc so as to encourage stakeholders to act as informers and provide information about Cartels. Thus, one of the aims of the present Call is to educate and create awareness among the stakeholders about the harmful effects of cartels and the need to support Competition Agencies to crack them down.

For more details, see here.

October 31, 2011 | Permalink | Comments (0) | TrackBack (0)

Cartel Detection and Duration Worldwide

Posted by D. Daniel Sokol John Connor (Purdue University) discusses Cartel Detection and Duration Worldwide. ABSTRACT: In the old days-before price-fixing became illegal nearly everywhere-cartels operated in the public sphere. In some cases, the formation of a new cartel would be trumpeted to the business press because after a disastrous decline in prices, the market needed to be "stabilized." Sometimes these saviors of industries would even publish the new scheme's contract, which might be enforceable in a national court. Legal and scholarly opinion supported the many benefits of cartels in tough times. If successful, their members knew, profitability would return and possibly reach new heights. Most cartels died natural deaths-war, squabbles over market shares, and the like-not legal deaths after raids by antitrust authorities.

Today, detecting modern cartels is hard, and detecting international cartels is even harder. They tend to be populated with multinational corporations that have histories of engagement in cartels, and executives from these recidivists pass on their knowledge of both organizing and hiding the new virtual joint venture. Wily cartelists use all manner of subterfuge to keep their activities secret: by meeting in unexpected places (far from the eyes of their customers), at times that coincide with legitimate industry conferences, and in Switzerland or other cartel havens; by destroying written evidence of agreements; keeping the incriminating spreadsheets hidden in their homes; using code words and code names when telephoning; and fabricating in advance plausible stories to mislead business journalists. Price increases tended to be orchestrated, slowly and steadily, so as not to alarm customers. Big customers would be thrown off the scent by benefitting from collusively agreed-upon discounts. Evading the authorities became fun and games for some.

The consensus among experienced antitrust lawyers and from abstruse economic studies is that the great majority of cartels operate clandestinely their entire lives. Table 1 collects all the publications that have quantitative opinions about cartel detection rates, and documents the dismal conclusion that most believe that only between 10 percent and 33 percent of all cartels are being uncovered in the post-World War II era. Another rule of thumb that has not changed much for a century or more is that cartels seem to have an average life of about five to eight years. However, it should be noted that many of these beliefs rest upon data sets that are pretty old in some cases. Have things changed since the early 1990s when scores of new antitrust authorities began operating and had access to tough new detection methods?

In this note I address trends in modern international cartel detection and duration over the past 21 years. Greater rates of detection and increasingly shorter duration may well be signs that anti-cartel policy measures are winning the battle against price-fixing. If the total number of cartels in existence has not changed much, greater numbers of investigations and prosecutions per year would be a measure of antitrust success. Similarly, if cartel duration is declining, then that suggests that leniency programs and other policies have had their intended effects of destabilizing collusion.

October 31, 2011 | Permalink | Comments (0) | TrackBack (0)

Changes Brought to Greek Competition Law: The Contribution of Competition Law to the Foundation of a More Open Economy

Posted by D. Daniel Sokol

Aida Economou (Panagopoulos, Vainanidis, Schina, Economou) addresses Changes Brought to Greek Competition Law: The Contribution of Competition Law to the Foundation of a More Open Economy.

ABSTRACT: In the mind of Europeans, Greece has become associated with financial and budgetary difficulties. Although it is correct, that association does not reflect initiatives taken in the last months to improve the economy. Among these changes, the modifications brought to the rules of competition should contribute to laying down foundations for a more open, modern and efficient economy.

October 31, 2011 | Permalink | Comments (0) | TrackBack (0)

Dial-in Program: Antitrust and Judaism November 28, 2011 12pm-1:30pm EST

Posted by D. Daniel Sokol

The American Bar Association
ABA Section of Antitrust Exemptions & Immunities Committee
Antitrust and Judaism
November 28, 2011
12pm-1:30pm EST

In light of the Supreme Court's pending decision of the scope of religious organizations’ immunity from civil liability, as well as prominent recent scholarship on the antitrust treatment of rabbinical orders and concerns expressed by some over their conduct in employment, kosher certification, and other matters, the top-flight panelists will ask whether antitrust could and should be used to police markets also regulated by rabbinical authorities. This seminar will put the oy back in oy vey!

Link to the program details here.

Speakers:

  • Makan Delrahim, Brownstein Hyatt Farber Schreck, LLP
  • David Dunn, Hogan Lovells
  • Robert Litan, Kauffman Foundation and Brookings Institution
  • Barak Richman, Duke University Law School

 

Moderator:

  • D. Daniel Sokol, University of Florida Levin College of Law

The ABA is not seeking CLE credit for this program. You will not receive CLE credit for attending/viewing/listening.

To register for the conference. You will receive the dial in numbers in your confirmation.

Recordings of this program will be posted on the Section website and downloadable in an MPEG-3 format, provided all releases have been obtained. Please visit our Committee Program Audio page after the program to listen to/download the audio.

 

October 31, 2011 | Permalink | Comments (0) | TrackBack (0)

Important Developments in the Field of EU Competition Procedure

Posted by D. Daniel Sokol

Luis Ortiz Blanco (Garrigues) and Konstantin Jorgens (garrigues) describe Important Developments in the Field of EU Competition Procedure.

ABSTRACT: In its judgment of 17 May 2011 the General Court has (re)defined the standards which the Commission has to comply with when establishing the presence of state aid with the “private creditor test”.

October 31, 2011 | Permalink | Comments (0) | TrackBack (0)

Regional Agreements of Developing Jurisdictions: Unleashing the Potential

Posted by D. Daniel Sokol

Michal S. Gal, University of Haifa - Faculty of Law and Inbal Faibish, University of Haifa - Faculty of Law address Regional Agreements of Developing Jurisdictions: Unleashing the Potential.

ABSTRACT: Regional competition agreements (RCAs) hold great potential for overcoming the major enforcement problems of developing jurisdictions. Indeed, it is no coincidence that the past two decades have seen an unprecedented upsurge in the number and scope of such agreements, especially in the developing world. Yet, as the experiences analyzed throughout this book clearly demonstrate, the accumulated experience of almost all of these newly sprung RCAs is that thus far they have not significantly enhanced competition law enforcement in their regions, or have encountered serious difficulties in doing so. This empirical finding applies regardless of the region and the special characteristics of the jurisdictions within it. This creates a paradox: why do so many countries invest in adopting such agreements in the first place, if the obstacles to their successful operation are high.

This chapter attempts to offer some answers to this paradox by analyzing the obstacles that stand in the way of realizing the potential benefits of RCAs. Our purpose is to identify and analyze at least some of the variables that affect their adoption and operation in the real world. Such an analysis can hopefully provide better tools to understand and predict when an RCA is likely to succeed or to fail, and what can be done to increase its chances of success. To do so, we combine the empirical observations on how RCAs operate in practice with a theoretical analysis. The analysis builds, inter alia, on studies of the collective action problem, including studies of successful collaborations in environments which face relatively similar obstacles to a successful joint collaboration. Such an analysis can also assist us in determining whether the current failure is mainly rooted in the regional aspect of the RCAs or rather in the fact that they involve competition law, the application of which would have encountered serious difficulties in the relevant jurisdictions regardless of its regional aspect.

Accordingly, the chapter is divided into three parts. The first explores the potential benefits that can accrue from a successful RCA. The second, which is the heart of this chapter, analyzes some of the obstacles to realizing such benefits that emerge from the case studies of the different RCAs and places them in a wider theoretical context. The third part offers some potential solutions for overcoming such problems.

October 31, 2011 | Permalink | Comments (0) | TrackBack (0)

Regional Agreements of Developing Jurisdictions: Unleashing the Potential

Posted by D. Daniel Sokol

Michal S. Gal, University of Haifa - Faculty of Law and Inbal Faibish, University of Haifa - Faculty of Law address Regional Agreements of Developing Jurisdictions: Unleashing the Potential.

ABSTRACT: Regional competition agreements (RCAs) hold great potential for overcoming the major enforcement problems of developing jurisdictions. Indeed, it is no coincidence that the past two decades have seen an unprecedented upsurge in the number and scope of such agreements, especially in the developing world. Yet, as the experiences analyzed throughout this book clearly demonstrate, the accumulated experience of almost all of these newly sprung RCAs is that thus far they have not significantly enhanced competition law enforcement in their regions, or have encountered serious difficulties in doing so. This empirical finding applies regardless of the region and the special characteristics of the jurisdictions within it. This creates a paradox: why do so many countries invest in adopting such agreements in the first place, if the obstacles to their successful operation are high.

This chapter attempts to offer some answers to this paradox by analyzing the obstacles that stand in the way of realizing the potential benefits of RCAs. Our purpose is to identify and analyze at least some of the variables that affect their adoption and operation in the real world. Such an analysis can hopefully provide better tools to understand and predict when an RCA is likely to succeed or to fail, and what can be done to increase its chances of success. To do so, we combine the empirical observations on how RCAs operate in practice with a theoretical analysis. The analysis builds, inter alia, on studies of the collective action problem, including studies of successful collaborations in environments which face relatively similar obstacles to a successful joint collaboration. Such an analysis can also assist us in determining whether the current failure is mainly rooted in the regional aspect of the RCAs or rather in the fact that they involve competition law, the application of which would have encountered serious difficulties in the relevant jurisdictions regardless of its regional aspect.

Accordingly, the chapter is divided into three parts. The first explores the potential benefits that can accrue from a successful RCA. The second, which is the heart of this chapter, analyzes some of the obstacles to realizing such benefits that emerge from the case studies of the different RCAs and places them in a wider theoretical context. The third part offers some potential solutions for overcoming such problems.

October 31, 2011 | Permalink | Comments (0) | TrackBack (0)