Today’s guest blog post is from Kelly-Ann Semper who recently attended the ASEAN ANTITRUST: THE FUTURE OF COMPETITION LAW & POLICY IN ASEAN COUNTRIES, sponsored by ESSEC+Sorbonne-Assas International Law School and Concurrences Journal. The conference was held in Singapore on Thursday, April 23, 2015. Ms. Semper’s helpful report is on the panel: “CARTELS AND LENIENCY APPLICATIONS IN THE ASEAN COUNTRIES.” The report also contains many useful links.
The panellists on the “Cartels and Leniency Applications in the ASEAN Countries were:
LEE Jwee Nguan – Director, Legal, Competition Commission of Singapore
Dhaniah AHMAD – Head of Legal, Malaysia Competition Commission, Kuala Lumpur
John DAVIES – Head, Competition Committee, OECD, Paris
Börries AHRENS – Partner, White & Case, Hamburg
Laurence IDOT – Professor, University Paris II Panthéon-Assas and Member of the Competition Authority, Paris
Chair: Dominique LOMBARDI – Lecturer, University Sorbonne-Assas, Singapore
By far the liveliest presentation of the day, due in no small part to the subject matter and the eloquence of the speakers (including the chair), this section of the conference did not (as the title indicates) limit its coverage to the ASEAN region. Anyone hoping for a detailed discussion of cartels and leniency programs in the ASEAN region may have been disappointed, with the main contributions coming only from the CCS in Singapore (more information about the CCS can be found here) and the MyCC in Malaysia (more information about the MyCC can be found here). Other contributions came from practitioners and experts on the US, the EU, France, Germany and Mauritius.
The main topics of discussion were: (1) What exactly is a cartel? (2) Leniency programs – what are they, what should they be, and are they effective? and (3) Co-operation between competition agencies – is there enough of it?
Although reference was made to the definitions set out in the 1998 recommendations by the OECD (further information on this can be found here) some participants noted that ‘modern-day’ cartels are less sophisticated in some ways than their 1990s’ counterparts, resulting in current enforcement against behaviour at the outer limits of what could be considered cartel behaviour, such as information sharing. Participants noted that cartel definitions in competition legislation tended to be inclusionary, i.e. not limited to the behaviours listed, leaving room for flexibility when competition agencies are faced with new or more subtle forms of cartel behaviour. The special case of Malaysia was noted: illustrations of cartel behaviour set out in the Malaysian Competition Act (the text of which can be found here) are limited to hard-core type cartels only. Participants agreed that a more open and flexible definition of cartels is the best approach, pointing to one particular downside of a rigid focus on hard-core cartels – a tendency on the part of leniency applicants to ‘exaggerate’ their evidence to ensure that they fall within the leniency program – which is not beneficial to anyone, not even the applicant.
A fairly recent tool in the arsenal of competition enforcement, leniency was by and large considered to be an essential and important instrument. The participants pointed to evidence suggesting that in the more mature jurisdictions (the US and the EU), leniency applications now account for the huge majority of cartels brought to the authorities’ attention (up to 90%), and have brought down the length of investigations by 1 ½ years. Despite this, there remains the chicken and egg conundrum of whether leniency itself was the cause of these cartels being brought to light, or whether such cartels were fundamentally unstable and would have been discovered in any event. One participant suggested that although there is very clear and strong evidence that the introduction of leniency has led to an increase in cartel deviation, cartels (and their life-spans) continue to be based mainly on economic considerations (i.e. whether or not it is profitable for the members to continue). The pertinent question is therefore whether leniency programs are only responsible for catching weaker cartels, or cartels that were on their way out anyway. If this is indeed the case, then there is the worrying spectre of the strongest and most profitable cartels continuing undetected, with business as usual, despite the massive injection of resources by agencies, which have placed cartel enforcement at the top of their agendas.
As a newcomer to the scene of competition enforcement, Malaysia is a somewhat different case. So far, due mainly to lack of awareness in the business community, cartel behaviour has not been outed by the establishment of a leniency program. Rather, cartels themselves have unwittingly committed flagrant breaches of the rules – one example given was the publication by one cartel of its own anti-competitive agreement.
Of course, a major risk of leniency programs is the potential for complacency on the part of the agency – why bother to spend limited resources on investigations etc. when leniency applicants present all the required evidence to you on a silver platter? Limited resources also present another risk in that increasing numbers of leniency applications make it that much harder for agencies to focus energy and time on ex officio investigations. Again, this leads to the danger of the strongest, most stable, cartels continuing to escape detection. The novel approach of the CCS in Singapore was highlighted: (i) the establishment of a reward scheme, whereby complainants may receive a monetary reward (up to SG$120,000) and their identities remain confidential (more information on this can be found here; and (ii) the engagement of a consultant to identify specific sectors of the economy which may be more prone than others to cartel behaviour, potentially followed by a wholesale market review or simple monitoring of behaviour by the CCS in such sectors.
Despite the acknowledged importance of leniency as a tool in cartel detection and enforcement, participants agreed that there are other useful tools, including ex officio investigations, monitoring of particular economic sectors, and hotlines for complaints. Indeed, it was pointed out that the majority of leniency applications in the US and the EU were only made after investigations by the relevant antitrust agency had already commenced, although this could be partially explained by such systems allowing multiple leniency applicants.
The perspective of businesses, often neglected, was addressed – leniency provides more commercial certainty for them as it complements their compliance programs (assuming of course that such programs actually work in practice!), and the resulting decrease in fines are welcomed. However, the downside to this, as experienced in Germany, is the tendency of leniency applicants to exaggerate their evidence (and the anti-competitive nature of their conduct) in order to ensure a successful application. One member of the audience challenged the magnitude of this risk in practice in the context of follow-on litigation, but conceded that short-term, more tangible objectives (obtaining immunity or a reduction in fines) often outweigh long-term objectives (avoiding costs from potential follow-on damages actions).
Participants also touched on the mechanics of dawn raids and the protection of confidential information (most agreed that there were a variety of options for keeping leniency application information confidential, but these usually do not extend to protecting identity).
The participants discussed the current mechanisms in place for inter-agency co-operation, such as the sharing of information once waivers are obtained from leniency applicants (in cases where applications have simultaneously been made in multiple jurisdictions). Participants foresee the eventual convergence of leniency systems globally over time (given that such systems are still relatively young).
In the ASEAN context, there is already a degree of co-operation taking place, in the form of regional conferences, annual meetings of an informal network of enforcement heads, and information sharing on an ongoing basis. Participants also mentioned that the ASEAN experts group on competition (further information about this group can be found here) is used as a platform to exchange information and share ideas.
Joint investigations and enforcement action are still on the agenda, but with so many member states only at a nascent stage of enacting or implementing competition legislation, it is unlikely that this will come to fruition very soon.
The participants briefly discussed the OECD recommendations to reduce inconsistencies in leniency systems (for the text of this, please see here), and proposals for introducing a global marker system. Suggestions falling shy of a global marker system and complete alignment in leniency systems included international and/or regional co-operation, alignment of the period between submitting and perfecting a marker, and alignment of the methods used to protect confidential information.
Impressions from the panel discussion
Despite the sometimes debative nature of the panel discussion, it seems the panelists were mostly agreed on the current state of cartel enforcement and leniency programs around the world: leniency is undoubtedly an essential tool in cartel enforcement, but it should not be the be-all-and-end-all of enforcement tools or lead to complacency on the part of agencies. Two major concerns highlighted by the group are (i) the likelihood that stronger and more stable cartels are evading detection, and (ii) the urgent need for more inter-agency co-operation and alignment of processes, in order to reduce inconsistencies around the globe.
Unfortunately, perhaps due to the relatively embryonic stage at which many ASEAN nations find themselves in the antitrust sphere, there was little discussion surrounding ASEAN-specific issues. However, do watch this space as member states gear up to fulfil their commitment to introduce competition policy and law by the year-end.