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Grant Murray, Douglas Tween, Feb 26, 2014
Today, the allure of antitrust immunity is unmistakable. Almost all of the most prominent global cartel cases have originated from immunity applications and, in recognition, new leniency regimes are being adopted or fine-tuned in all key antitrust regimes around the world. But there is a risk that a combination of shrinking resources devoted to enforcement, and a lack of transparency and convergence in existing leniency regimes, could lead to a decline in the efficiency of leniency regimes. In this article we suggest 10 steps that will prevent any decline from occurring.
The effectiveness of leniency regimes in unearthing serious antitrust violations is apparent in the European Union, where contemporary anticartel enforcement by the European Commission has been characterized by a sharp drop in own-initiative cases. In fact, since Commissioner Almunia’s tenure began in 2010, only one of the 20 cartel decisions adopted by the Commission is thought to have been an own-initiative case. Almunia’s predecessor, Commissioner Kroes, seemed to attach a high value to own-initiative cases-regularly taking the opportunity to emphasize the frequency and success of cases that the Commission had started itself-reminding the business community that cartels are weaker than their weakest member.
Of course, Almunia’s apparent reliance on the EU immunity program may reflect nothing more than an inherited workload. But the Commissioner is known to be a pragmatic enforcer who places a high value on other enforcement tools, such as the cartel settlement and commitments procedures.
The allure of leniency is, of course, directly related to the likelihood that infringing conduct is detected and punished harshly in a particular jurisdiction. The startling financial penalties that were avoided by banks in the recent EU financial benchmark cases make it difficult to argue that leniency is anything but a very good option. In the Yen Interest Rate Derivatives cartel the EU immunity applicant escaped a fine of EUR 2.5 billion-which would have been the highest fine ever to have been imposed on a company by the Commission (and in fact almost twice the value of all fines imposed by the Commission in 2013). So leniency can have a very high value. (As trustbuster Teddy Roosevelt famously said, “Speak softly, and carry a big stick.”)
The picture is, of course similar in the United States, where antitrust amnesty first began. The Department of Justice Antitrust Division (“DOJ”) is rightly proud of its Amnesty Program, describing it as “…by far the most effective tool for detecting cartel activity.” In fact, in the years 2004 to 2010, around three quarters of all criminal cartel cases filed by the U.S. Antitrust Division are thought to have been initiated or advanced by information received from a leniency applicant. The ability to escape a likely custodial sentence (no matter the nationality of the defendant) has no doubt been a significant factor. Amnesty Plus (where a company under investigation self-reports another cartel and receives immunity in relation to the “new” cartel, as well as a reduction in relation to the existing one under investigation) has also become “…an increasingly important cartel-detection and case-generation tool.”
Against that backdrop, it is no surprise that the U.S. amnesty regime has inspired and been replicated by leniency programs in myriad countries. New countries come on line (Taiwan) and more established antitrust enforcers (Canada, United Kingdom) update and fine-tune their programs-just as the United States and the European Union have done in the past. Indeed, the United States is currently amending its ACPERA rules to give even greater protection to whistle-blowers. Amnesty Plus has also been copied elsewhere (United Kingdom, Singapore).
But high fines and/or individual sanctions do not guarantee leniency applications. Leniency regimes will only be effective if there is transparency in terms of agency procedures and trust between the agency and a potential applicant. If those elements are missing then high fines may disincentivize immunity applications completely. There are still some antitrust regimes out there that have high fines but no workable leniency program. As the ICN has said, the key elements of an effective leniency program are significant sanctions, a high risk of detection, and transparency and certainty.
Even in jurisdictions where leniency regularly leads to cartel investigations, observers may question the actual value of leniency-theorizing that leniency applications are typically made towards (if not after) the end of the cartel’s natural life. Recent high profile cartel cases (in financial services and the automotive sector) are somewhat of a paradox: the cascade of cartel cases shows the effectiveness of leniency (and Amnesty Plus) but also suggest that cartel conduct took place in countries that were known at the time for their strict approach to cartel enforcement.
