Coronavirus will likely lead to more cartels, ex-DOJ official warns

Emily Craig

21 April 2020

Coronavirus will likely lead to more cartels, ex-DOJ official warns

Credit: Shutterstock/creativeneko

The coronavirus pandemic is likely to lead to an increase in cartels and global cartel enforcement, a former enforcer at the US Department of Justice has said.

Morrison & Foerster partner Lisa Phelan said today that the global crisis could put pressure on companies to engage in cartels and lead to an “uptick” in global cartel enforcement. She spoke on a podcast about global cartel enforcement, which forms part of the American Bar Association’s virtual spring meeting.

From 2002 to 2018, Phelan was chief of the national criminal enforcement and Washington criminal I sections of the DOJ’s antitrust division. She said that when the economy is not robust, or there is a crisis or declining market, companies and executives can feel “a real pressure” to “put a floor on prices or deal with their competitors” to divide the market.

There is “too much of a temptation” for competitors to coordinate and “there will be an uptick again in global cartel investigation and prosecution”, she warned.

Fellow panelist Heather Nyong’o, a partner at Wilmer Cutler Pickering Hale and Dorr in San Francisco, added that despite the DOJ and Federal Trade Commission issuing guidance on collaboration in essential industries, companies are going to “cross that line pretty quickly, given the really desperate times that we are in”.

“Different competition authorities across the world are going to start seeing leniency applicants in the coming months after we have entered into the recovery stage,” Nyong’o said.

The European Commission's deputy head of cartels, Marisa Tierno Centella, also spoke on the podcast. She said that global cartel enforcement can benefit from the “complementaries of the two main enforcement models” of an enforcer’s decision being final and the prosecution model, where an agency’s decision is certified in court.

The commission’s cartel concept “is driven by the purpose of [a company’s] conduct” and enables the enforcer to “address a wider range” of anticompetitive activities that other jurisdictions do not classify as cartels, she said.

“This flexibility has enabled us to capture buying cartels, restricted innovation, manipulation of benchmark rate, cartel facilitators and in the future we may be confronted with other things,” Centella added.

Centella, Nyong’o and Phelan spoke alongside Anderson Mori & Tomotsune partner Atsushi Yamada. J Brent Justus, a partner at McGuireWoods in Washington, DC, chaired the podcast.

The ABA’s spring meeting concludes on 1 May.

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