|
Leniency Programmes
Antitrust Committee Working Group submits comments to the Canadian Competition Bureau on the Draft Information Bulletin on Sentencing and Leniency in Cartel Cases
A Working Group of the IBA Antitrust Committee recently submitted comments to the Canadian Competition Bureau. While commenting positively on the Competition Bureau’s constructive consultation process, the submission suggests that some aspects of the Bureau’s Draft Information Bulletin on Sentencing and Leniency in Cartel Cases could benefit from further consideration.
In particular, the Working Group submission addressed the following issues:
- Roles of the Competition Bureau and the DPP:
The Draft Bulletin outlines the Competition Bureau’s approach to leniency and sentencing recommendations. Because the Director of Public Prosecutions has the exclusive authority to make decisions on plea agreements, the IBA has recommended that further guidance on the DPPs’ position on these issues should be provided, either in the Bulletin or in a separate document.
- Volume of Commerce Proxy
: The IBA has recommended that the Bureau reconsider its intention to rely on twenty percent of the volume of commerce as a proxy for economic harm in developing sentencing recommendations in cartel cases. No empirical basis for this proxy is included in the Draft Bulletin, and the IBA has suggested that strict reliance on such a proxy would be inconsistent with the Canadian sentencing principles of proportionality and deterrence.
- Consideration of the "value of the evidence"
: In determining sentencing recommendations for leniency applicants, the Draft Bulletin suggests that the Bureau will consider the "value of the evidence" provided by the applicant. The IBA has recommended that the Bureau should not adopt the value of the evidence as a sentencing criterion because it is subjective and unpredictable. The IBA recommends that sentencing recommendations should be based on objective criteria, which would allow an applicant to assess its exposure prior to approaching the Bureau.
- Leniency Procedure
: The Draft Bulletin contemplates a leniency process that is very similar to the Bureau’s existing immunity process. A leniency applicant will be required to provide full disclosure prior to the Bureau making its final sentencing recommendation. The IBA has raised concerns about this approach because, prior to a final settlement, an applicant lacks any assurance that it will be able to reach an acceptable outcome, and by providing full cooperation, it compromises its capacity to defend itself in a contested criminal case, if leniency discussions are unsuccessful. The IBA therefore recommends that the Bulletin should clarify the position of the Competition Bureau and the DPP as to the privileged nature of the leniency discussions
- Prohibition Orders
: The Draft Bulletin implies that the Competition Bureau will no longer recommend resolution of cartel cases through a prohibition order without a guilty plea. The IBA believes that such a position would be a significant departure from past practice, and would limit the options available to the Bureau in cases where a guilty plea, and heightened exposure to civil liability, would not be the most appropriate outcome. The IBA has suggested that, if this is the position of the Bureau, it should be stated explicitly in the Bulletin.
- Treatment of Individuals
: The IBA considers that individual criminal exposure plays a significant role both in the decision-making of potential leniency applicants and in the conduct of internal investigations. The Draft Bulletin states that the individuals associated with the first leniency applicant, absent exceptional circumstances, will not face criminal prosecution. The Draft Bulletin does not, however, provide guidance on the Bureau’s proposed approach to individuals associated with subsequent leniency applicants. The IBA has suggested that further guidance on the treatment of individuals will be important to the effectiveness of the leniency program.
Download the full IBA submission here.
For more information, please contact Leslie Alekel at leslie.alekel@int-bar.org
Antitrust Committee Working Group submits comments to the Office of Fair Trading on the OFT’s Draft Mergers: Jurisdictional and Procedural Guidance.
The Antitrust Committee Working Group submitted comments on the Draft Mergers: Jurisdictional and Procedural Guidance (“the guidance”) issued by the United Kingdom Office of Fair Trading (“OFT”) on 3 July 2008. The IBA’s comments on the guidance refer to formal and substantive aspects. The former focus on wording improvements and ways to increase consistency within the current draft. The latter cover a wide range of points and focus on increasing transparency of procedures and certainty for the parties in line with the overall approach adopted in the guidance (which the IBA welcomes).
The Working Group welcomed the opportunity provided by the OFT to comment. Some of the IBA’s key substantive comments can be summarised as follows:
- Timing aspects: the IBA has made various suggestions regarding time limits and deadlines. Amongst others, the IBA considers that the OFT: (i) should set out indicative deadlines for accepting undertakings in lieu (“UIL”), for informing the parties that material information is missing from the notification and for fast track reference cases; (ii) should restrict extensions to the informal submissions deadline to exceptional cases; and (iii) should not restrict the use of the merger notice (and therefore the benefit of a shorter and fixed time limit) to “no-issues” cases since this does not appear to have been the Government’s intention for this procedure.
- Material influence: whilst the IBA recognises that the outcome of BSkyB/ITV will have an impact on this section, it still considers that the guidance is too vague in some areas and gives importance to certain scenarios which in themselves do not necessarily amount to material influence and are based on speculative and uncertain tests. For example, the guidance states that minority shareholdings which would not block a special resolution may still be considered to confer material influence without providing any details as to how this would be assessed. Also, the guidance considers that board representation on its own may confer material influence without indicating that this would happen only in exceptional circumstances.
- Notification of mergers: amongst others, the IBA suggests that the OFT provides further clarification on the availability of informal advice for bidders in an auction process and allows such advice to cover jurisdictional questions, particularly in water mergers. It also notes that competitors’ complaints are not always unmerited and may prove useful and legitimate in certain cases (e.g. super-dominance).
- Initial undertakings: the IBA has raised concerns in relation to (i) the low threshold for seeking initial undertakings, (ii) the fact that the guidance does not seem to consider certain circumstances in which a level of integration may be necessary to safeguard the target business and (iii) the fact that waivers to initial undertakings are not publicly known. The IBA has also suggested a longer interval between the compliance statements required in the initial undertakings template (from 10 days to once-a-month).
- Undertakings in lieu: the IBA considers that there is some benefit in market testing remedies prior to the OFT deciding whether to refer or suspend the duty to refer. Moreover, clarification on the threshold for “near miss” UIL cases would also be welcome.
Download the full IBA submission here.
Download a full list of Working Group Members here.
For more information, please contact Leslie Alekel at leslie.alekel@int-bar.org
Antitrust Committee Working Group submits comments to the Australian Treasury on the proposed changes to the Trade Practices Act 1974 (Cwth) by the Trade Practices Amendment (Cartel Conduct and Other Measures) Bill 2008.
Following the release in Australia of the Exposure Draft of the Trade Practices Amendment (Cartel Conduct and Other Measures) Bill 2008 (“Bill”) the Antitrust Committee Working Group submitted comments on the proposed criminalisation of certain cartel conduct in Australia to the Competition and Consumer Policy Division of the Treasury.
The Working group welcomed the opportunity to address numerous aspects of the Bill and provided a high level, comparative assessment based on international best practice. The submission addressed the following areas:
• the dishonesty test as a means of distinguishing criminal offences from civil offences - the new Bill creates two criminal offences which are based on a test of ‘dishonesty’. Among anti-cartel enforcement regimes the only precedent for a dishonesty test is provided by the UK Enterprise Act 2002. Whilst dishonesty plays some role in distinguishing conduct deserving of a criminal penalty the Working Group considers on the basis of the limited UK experience to date it is not possible to determine whether the element of dishonesty is a workable distinction;a
• the definition of “cartel provision”- the proposed definition of cartel offence in Australia is unduly wide. It is unclear and inherently uncertain and as currently drafted may capture conduct that would ordinarily not be considered ‘hard core’ cartel conduct. Further consideration should be given to the potential consequences of the proposed ‘effects’ test as application of such a test is at risk of capturing provisions of agreements which could promote competition, increase efficiencies, or reduce costs. The Working Group considers that it would be beneficial to redefine the cartel offence more narrowly so as to only prohibit conduct that is considered to be ‘hard-core’ conduct;
• the criminal penalties proposed in the Bill - the penalties proposed by the Bill are adequate by international standards. The proposed penalty for individuals is 5 years imprisonment or a fine of $220,000;and for corporations a fine that is the greater of $10 million or 3 times the value of the benefit of the cartel or if the value cannot be determined then 10% of the annual turnover. The Working Group considers that these criminal penalties are consistent with overseas jurisdictions and generally satisfy the policy that criminal cartel enforcement regimes should have a deterrent effect;
• the interplay between criminal sanctions and immunity/leniency policies as a means of achieving greater efficacy of a cartel enforcement regime - it is proposed that there should be careful consideration of the interaction between the Australian Competition and Consumer Commission (“ACCC”) and the Director of Public Prosecutions to ensure the extension of the ACCC’s current immunity policy into the new criminal regime. The Working Group believes that the ACCC’s immunity policy for civil offences would be adversely affected if immunity from criminal prosecutions was not also available to leniency applicants;
• telephone intercept warrants - the draft Bill proposes to provide new investigative tools to extract
information fromtelecommunications systems after covert communications have taken place. Additionally, the Bill proposes a surveillance device warrant which allows the Australian Federal Police to use listening devices and tracking devices. The Working Group supports the provision of these investigative measures and also proposed that telecommunications interception powers should be available to the enforcement bodies provided they are subject to appropriate checks and safeguards.
Download the full IBA submission here.
Download a full list of Working Group Members here.
Antitrust Committee Working Group submits comments on the European Commission’s Draft Notice on the conduct of direct settlement proceedings
On 19 December 2007, the Cartel Working Group on Leniency Programmes of the IBA Antitrust Committee submitted comments on the European Commission’s Draft Notice on the conduct of direct settlement proceedings.
The Working Group welcomes the Commission’s initiative to introduce direct settlement proceedings. It has the potential to provide for a more efficient and timely finalisation of individual cases by lowering the administrative burden for both enforcer and settling party and will ultimately result in more effective enforcement of cartel laws.
As to the Commission’s current proposal, the Working Group submits that the settlement discount should be sufficiently high to cause the parties to enter into settlement discussions and suggests it should be in the range of 20-25 percent. In addition, the Working Group is concerned about the lack of transparency and certainty for the parties willing to settle. This may discourage these parties from entering into settlement discussions and could thus undermine the goals of the Commission’s initiative. These concerns arise in particular in respect of the following areas of the Commission’s Draft Notice:
a) The need for increased transparency regarding the range of likely fines: the settling party should know early in the process what fine the Commission intends to impose as that would promote certainty and therefore early settlement;
b) The need for increased certainty regarding the Commission’s commitment to settle: its seemingly absolute discretion both as regards the decision to enter into settlement discussions as well as to endorse the written settlement submission puts the settling parties at serious risk of exposure. The Working Group submits that there should be a high degree of commitment by the Commission to also settle on the terms discussed in principle;
c) The need for improved safeguards regarding the admissions made by the settling parties: the current proposal does not provide sufficient safeguards in respect of the acknowledgements made by the settling parties. In this respect, the Working Group also questions whether it is necessary to make a submission in writing.
Download the full IBA submission.
A full list of Working Group Members.
Antitrust Committee Working Group submits comments to the Competition Commission of South Africa on Corporate Leniency Policy
In November 2007, a Working Group of the IBA Antitrust Committee submitted its comments to the Competition Commission of South Africa on the Commission’s Discussion Paper, Corporate Leniency Policy Review.
The Working Group’s submission responds to issues raised in the Discussion Paper and, in particular:
- provision in the Act – recommends that, in the interests of certainty, the South African Competition Act be amended to expressly empower the Competition Commission to adopt a binding corporate leniency policy (“CLP”);
- clear criteria rather than discretion – highlights that the CLP should prescribe clear criteria for eligibility, to ensure prospective applicants that if they meet the criteria, they will qualify for immunity;
- instigators – supports the removal of the requirement that an applicant not be an “instigator” of a cartel, because it is often unclear in practice who was the instigator, and the restriction may deter potential applicants;
- marker system – highlights that a “marker” system, where an applicant can approach the authority, establish whether leniency is available, and put down a marker, would be an effective addition to the CLP as currently proposed;
- applicants previously found guilty – recommends the removal of the exclusion from immunity for applicants who have been previously found guilty of engaging in cartel conduct, because that exclusion may deter potential applicants and may hinder the development of an “amnesty plus” element to the CLP; and
- partial leniency – suggests that the CLP could be enhanced by the provision of greater clarity around the offer of partial leniency for second and third applicants.
Download the IBA Submission 
For more information, please contact Leslie Alekel
IBA Antitrust Committee Working Group
Co-Chairs:
Paul Coetser, Brink Cohen Le Roux Inc, Johannesburg
Martin Low, McMillan Binch Mendelsohn LLP, Toronto
Members:
Lynda Martin Alegi, Baker and McKenzie, London
Dave Poddar, Mallesons Stephen Jaques, Sydney
Franz Hoffet, Homburger, Zurich
Eriko Watanabe, Nagashima Ohno and Tsuematsu, Tokyo
Gary Spratling, Gibson Dunn and Crutcher, San Francisco
Gervin Van Gerven, Linklaters, Brussels
Hideto Ishida, Anderson Mori, Tokyo
Jacques Buhart, Herbert Smith, Paris
Martin Bechlold, Allen & Overy, Brussels
Philip Mansfield, Allen & Overy, London
Terry Calvani, Freshfields, Washington
Yves Bériault, McCarthy Tetralt, Canada
Pieter Steyn, Werksmans, Johannesburg
Sharon Henrick, Mallesons Stephen Jaques, Sydney
Anthony Norton, Webber Wentzel Bowens, Johannesburg
The Working Group Members acknowledge the assistance provided by Lucy Budding and Nicholas Lingard of Mallesons Stephen Jaques on this submission.
IBA Submission to the European Commission on the Commission Leniency Notice
The IBA Antitrust Committee Working Group on Leniency Programmes submitted comments to the European Commission, following its a proposal to amend the Notice on Immunity from fines and reduction of fines in cartel cases.
The Working Group supports the Commission’s objective to clarify its leniency programme by setting out precise evidentiary threshold requirements for immunity and facilitating coordinated immunity applications to the Commission and competition enforcement agencies in other jurisdictions. The Working Group considers that further consideration should be given to the proposed Notice to help achieve those aims.
The Working Group highlighted four overriding concerns regarding the amendment to the Leniency programme:
- Predictability: The Commission’s proposals reserve unnecessary and undesirable discretion to decide whether an application will be successful or not, creating unpredictability;
- The introduction of the new marker system: the Working Group strongly supports a marker system, but both the concept and criteria for obtaining a marker appear unworkable and require further consideration;
- ”The One Stop Shop”: The proposed “summary “ application procedure fails to achieve a one stop shop approach for leniency applications;
- The proposed Notice sets excessively stringent and impractical evidentiary requirements for an immunity applicant, and lacks coherence with the programmes of other competition agencies regarding the thresholds for immunity, when an applicant must apply for immunity and the length of time it takes to obtain an immunity decision.
The Working Group suggests the following structural reforms:
- That the Commission refine its proposed process, so that once a lead application has been made, a summary application that states the name of the applicant and the product market concerned and identifies the lead application would suffice for other European agencies;
- That an application for a marker should require no more than a description of the product market in which the cartel operated and that the Commission align its proposals for a marker system with those of other enforcement authorities in Europe and other jurisdictions;
- That further consideration be given to the stringent evidentiary requirements for an application for immunity.
- That the Commission provide greater assurances that the first party to apply for immunity will not be displaced by a later applicant, in the absence of non-cooperation. Greater simplicity and predictability in the application process would promote applications, further international convergence and thereby ensure that society benefits from the termination and penalisation of cartel activity.
Click here to download the IBA Submission to the European Commission on the Commission Leniency Notice.
This Working Group also submitted comments to the Japan Fair Trade Commission (JFTC) on the Proposed Rules on Reporting and Submission of Materials Regarding Immunity From or Reduction of Surcharges. The Amended Act Concerning Prohibition of Private Monopolization and Maintenance of Fair Trade (Antimonopoly Act) which includes increasing the surcharge rate, introducing a leniency program (immunity from or reduction of surcharges), compulsory measures for criminal investigations, and others was promulgated on 27 April 2005 and is came into force in January 2006.
Click here to download. Click here to download a Japanese version.
|
ABOUT THE IBA