1 / 18

Detecting Cartels: What Can We Do?

Detecting Cartels: What Can We Do?. 7 April 2006, Seoul, Korea Regional Cartel Workshop, OECD-Korea Regional Centre for Competition. Joo-yong Lee Deputy Director, Cartel Policy Team, Cartel Bureau Korea Fair Trade Commission. Contents. Definition of Cartel Types of Cartel

moeshe
Download Presentation

Detecting Cartels: What Can We Do?

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Detecting Cartels: What Can We Do? 7 April 2006, Seoul, Korea Regional Cartel Workshop, OECD-Korea Regional Centre for Competition Joo-yong Lee Deputy Director, Cartel Policy Team, Cartel Bureau Korea Fair Trade Commission

  2. Contents • Definition of Cartel • Types of Cartel • Detecting Cartels: General Perception • What KFTC has done to improve detection • Fear of Heavier Sanction Also Helps

  3. 1. Definition of Cartel (1) • OECD Council Recommendation (1998) • - “A "hard core cartel" is an anti-competitive agreement, anti-competitive concerted practice, or anti-competitive arrangement by competitors to fix prices, make rigged bids, establish output restrictions or quotas, or share or divide markets by allocating customers, suppliers, territories, or lines of commerce.” • ICN (2004) • - “A "cartel" is an agreement between businesses not to compete with each other.”

  4. 1. Definition of Cartel (2) • MRFTA (Korean Competition Law) Article 19 • - “No business shall agree with other business by contract, agreement, resolution, or any other means to jointly engage in an act, or let others do this kind of activities, falling under any of the following sub-paragraphs, that unfairly restricts competition. ” 3 Elements of Cartel • Agreement • Between Competitors • To Restrict Competition

  5. 2. Types of Cartels (1) • OECD Council Recommendation (1998) • - “A "hard core cartel" is an anti-competitive agreement, anti-competitive concerted practice, or anti-competitive arrangement by competitors to fix prices, make rigged bids, establish output restrictions or quotas, or share or divide markets by allocating customers, suppliers, territories, or lines of commerce.” • ICN (2004) • - Price Fixing • - Output Restrictions • - Market Allocation • - Bid Rigging

  6. 2. Types of Cartels (2) • MRFTA (Korean Competition Law) Article 19 • Fixing, maintaining, changing price • Determining terms and conditions of transaction • Restricting production, delivery, transportation • Regional or Customer allocation • Restricting establishment of facility or equipment • Restricting types or specifications of goods or services • Joint management, joint establishment of company, etc. • Any other practice that substantially lessens competition

  7. 2. Types of Cartels (3) • Price Fixing (including bid rigging) • Output Restrictions • Market Allocation • Determining Terms of Trade Hard Core Cartel Usually per se illegal • Other types: • - such as jointly establishing company Cartel (Soft) Usually rule of reason approach

  8. 2. Elements of Good Cartel Regulation In regulating cartels, detection and sanction are keys to success Improved Detection: Increases chance of getting caught • Strong law and regulation giving sufficient investigative powers • Dedicated unit & Sufficient resources (eg. manpower) • Policy tools such as leniency programme Optimal Sanction: Sanction greater than cartel profit and chance of getting caught deters Cartels • Financial sanction • Incarceration

  9. Where can we find cartels? - Answer : EVERYWHERE! • However, more likely in following conditions • High market concentration: oligopolistic • High barriers to entry • Homogeneous product • Little residual production • Low market demand elasticity • Previous history of cartel activity 3. Detecting Cartels (1) • To Hunt Cartels We have to Find Their Hideout

  10. Ways to improve detection • Investigative powers given by law • - Power to enter premise, search, obtain evidence • Improve manpower because cartel investigation requires special skills different from other antitrust violations • - Sufficient investigators to conduct dawn raids • - Train them with search, interrogation, IT forensic skills 3. Detecting Cartels (2) • Detection tools • - Leniency programme • - Informant reward programme • - Others (eg. BRIAS, Bid Rigging Indicator Analysis System) • - Forensic Tools, Voice Recorders, Digital Cameras

  11. 4. KFTC’s Improvement of Cartel Detection (1) (1) Enhancing Detection - Improvement of Leniency Programme Leniency is granted to: A cartel member who is first or second to provide information necessary to prove cartel before KFTC obtains it • 100% amnesty to first comer (30% leniency to 2nd comer) • Amnesty Plus • Marker System • Improved protection of confidentiality of informer A hike in number of leniency applications Why? : Fear of Detection, Higher Sanction, Transparency

  12. 4. KFTC’s Improvement of Cartel Detection (2) (2) Enhancing Detection - Enhanced Informant Reward Programme • A strong complement to leniency programme which: - Gives reward up to 1 m USD to informant who provides evidence needed to prove cartel *Gravity of violation (amount of surcharge) and quality of evidence determines the amount of reward • First introduced in 2002 • - Improved protection of confidentiality of informer, increased the amount of reward by 10 fold More frequent use after improvement

  13. Suspicious Electronic Bids to Procurement Agencies Automatically Detected and Reported to the KFTC Bid Rigger Procurement Agency KFTC • Applied to Construction Projects Over 5 B Won, Goods and Services Over 2.5 B Won • Scores are Calculated by Analyzing 6 Factors and If Score Adds Up to be Over 80, the Bid is Reported to the KFTC On-Line 4. KFTC’s Improvement of Cartel Detection (3) (3) Enhancing Detection – Bid Rigging Indicator Analysis System

  14. 4. KFTC’s Improvement of Cartel Detection (4) (4) Enhancing Detection – Staff Training KFTC Investigators Improve Their Skills by : Exchange Enforcement Experience in Cartel Study Group Study Investigation & Interrogation Techniques of Other Enforcement Agencies (Police, Prosecutors, etc.) Participate in ICN and OECD Meetings on Cartels It is also important to “arm” investigators with strong will to detect cartels

  15. 4. KFTC’s Improvement of Cartel Detection (5) (5) Enhancing Detection – Reinforcement of Manpower Cartel Investigation Bureau (Director General Level) Cartel Policy Team (12 Persons) Cartel Division (11 Persons) Manufacturing Cartel Team (10 Persons) 19 December 2005 Service Cartel Team (10 Persons) Note : All Staffs in the Bureau are Strongly Motivated

  16. 5. Fear of Heavy Sanction • Heavier Sanction increases fear of detection 10% of Related Sales 5% of Related Sales * Higher sanction means that cartel members risk heavy sanction Deters Cartels and induces leniency application • OECD sees cartel damage to be 15%-20% of sales • - Korea needs to further raise the penalty in future Such fear increases incentive for coming forward with leniency application

  17. Conclusion • To improve detection, both hardware and • software upgrades are needed • 2. Both institutional and mental upgrades are needed • 3. Detection is facilitated even more by heavier sanction

  18. Thank You For more information, contact : Tel: 82-2-2110-4896 Fax: 82-2-507-2314 Email: joomer@ftc.go.kr

More Related