Criminalization of Cartels

1. Criminalization of Cartels UHOS Conference 11th November 2008 – Brno, Czech Republic Carolyn Galbreath Member and Director Cartels Division The Competition Authority

2. Cartels and Competition “Cartels remain the supreme evil of antitrust.” Verizon Communications v. Law Offices of Curtis V. Trinko, 540 U.S. 398, 408 (2004).

3. Cartels and Competition "This type of crime is a crime against a consumer and is not simply against one or more individuals. To that extent it is different from other types of crime; and while society has an interest in preventing, detecting and prosecuting all crimes, those which involve a breach of the Competition Act are particularly pernicious. In effect every individual who wished to purchase, for cash, a vehicle from these dealers over the period which I've mentioned were liable to be defrauded and many surely were by the scheme and by the practices which unashamedly this cartel operated. These activities, in my view, have done a shocking disservice to the public at large.” Mr. Justice Liam McKechnie, Sentencing of Denis Manning, 3 February 2007.

4. Cartel Enforcement Worldwide • Recognition that cartels are anticompetitive; • Anti-cartel laws with substantial penalties; • Impressive track record by anti-cartel enforcers; • Increased cooperation between enforcers within the EU and around the world to uncover and prosecute cartels; • Use of a variety of tools to uncover cartels.

5. Cartel Enforcement Worldwide • Secret nature of cartels require special tools to uncover illegal activities; • Cartels are insidious and require active participation by executives at the highest levels within companies; • Unique incentives in the form of leniency and immunity programmes have proved effective tools to crack cartels; • Successful enforcement requires penalties that take into account the difficulties of detection, the need to encourage defection and are calibrated to deter future cartels.

6. Cartel Enforcement Worldwide Successful anti-cartel enforcement depends upon creating a virtuous circle of: • Defection • Detection • Deterrence

7. Structuring Enforcement for Success • Raising risks and creating incentives for DEFECTION; • Clear structure for acceptance of responsibility and providing incentives for DETECTION; • Transparent outcomes that promote DETERRENCE.

8. Tools for Enforcement Success • Cartel Immunity and Leniency Programmes • Sentencing Guidance • Structured Means for Cooperation and Accepting Responsibility

9. Cartel Enforcement in the European Union • Many approaches to cartel enforcement • Most apply the EU Community Model • Variety of criminal enforcement models used by Member States: • Imprisonment and fines (Ireland and Cyprus); • Imprisonment and fines for specific offences (UK, Germany and Slovakia); • Criminal Fines (Denmark, Estonia, Slovenia)

10. Benefits of Criminal Enforcement Criminal enforcement: • Ensures that individuals are made to take responsibility for their illegal activities; • Increases the risk profile for cartels and provides incentives for defection and detection; • Limits the propensity for companies to factor cartel fines into the cost of doing business; • Makes the cost of recidivism personal and adds a deterrent factor unattainable from fines alone.

11. Ireland’s Criminal Enforcement • Criminal convictions on indictment of 12 companies and 10 individuals. • Custodial sentences imposed on five individuals since 2005, all suspended. • Two convictions and custodial sentences against the cartel enforcers who aided and abetted the Connaught Oil Producers Association and the Irish Ford Dealers Association; • Fines of just over €181,000; • Cases pending against 6 companies and 7 individuals; • Additional cases to be filed before year end.

12. Competition Act, 2002 Criminal Offence • Sections 4 and 5 of the Competition Act, 2002, mirror Articles 81 and 82 of the EU Treaty; • Section 6 makes hard-core cartels under Section 4 or Article 81 criminal offenses; • Applies to individuals “completing undertakings” or “a decision made by an association of competing undertakings”; • Hard core offenses are enumerated as: (1) directly or indirectly fixing prices on goods or services by means of an agreement, decision or concerted practice; (2) limiting output or sales; or, (3) sharing markets or customers; • Section 6(6): “Any act done by an officer or an employee of an undertaking . . . in connection with the business shall be regarded as an act done by the undertaking.”

13. Penalties for Cartels • For conviction upon indictment, fines on both individuals and undertakings of € 4 million or 10 percent of the turnover in the 12 months preceding the conviction; • Prison term of up to 5 years; • Individuals are subject to arrest for cartel offences; • Imputed liability on the undertaking for acts by an officer, director, manager or person who purports to act in such capacity; • Presumption that the undertaking has consented to acts by an officer, director or manager who engaged in cartel behaviour.

14. Ireland’s Criminal Enforcement Structure • Investigations by Competition Authority • Prosecution by the Director of Public Prosecutions • Charges against the accused on indictment • Trial by jury • Right against self-incrimination • Plea bargaining is prohibited • Judicial discretion in imposition of sentences

15. Director of Public Prosecutions • Cartel cases on indictment are investigated by the Competition Authority and prosecuted by the Director of Public Prosecutions (DPP); • Competition Authority recommends prosecution; • DPP has sole discretion to prosecute cases and to determine charges to be brought against individuals and undertakings; • Ireland has a traditional solicitor/barrister split, cases tried by barristers engaged by the DPP; • Plea bargaining in Ireland is prohibited; options for disposing of cases without a trial are circumscribed.

16. Limited Options for Disposition in Lieu of Trial • Judicial plea bargaining between the prosecution and defense is not practiced and the DPP’s Guidelines specifically prohibit prosecutors from participating. (DPP Guidelines, Section 10.1); • Prosecutorial “charge-bargaining” is used, but sentencing recommendations to the court are not permitted (DPP Guidelines, Section 8.20); • Determination and imposition of sentence is within sole discretion of the Court. No sentencing guidelines, although DPP has endorsed Court developed Guidelines; • DPP has an obligation to present facts in mitigation or aggravation to the Court, which may include “full facts” (DPP Guidelines, Sections 8.14 to 8.19).

17. Cartel Immunity Programme • Competition Authority and DPP operate joint Programme; • First individual or company not ring leader may qualify; full immunity for employees present and past and all officers and directors; • Ireland is a signatory to the EU Model Immunity Programme, with reservations, no leniency plus; • No second in leniency option that is the hallmark of EU Leniency Notice and other programmes worldwide; • While result may be more satisfactory in terms of public policy, ironically may be less satisfactory to co-conspirators.

18. Conclusions Success of criminal programme depends on: • Widespread acceptance that cartels are crimes that warrant stiff penalties; • Well integrated enforcement tools that support the virtuous circle; • Skilled use of criminal law enforcement tools; • Commitment by Courts, Prosecutors and Competition Authorities.