Unconventional cartel conduct needs harmonised enforcement, lawyers say

Tom Madge-Wyld

11 April 2018

Unconventional cartel conduct needs harmonised enforcement, lawyers say

Kristen Limarzi

Lawyers have called for competition agencies to agree a consistent approach to unconventional cartels, although a DOJ official has pushed back on what type of conduct would even count as unconventional. Tom Madge-Wyld at GCR Live in Washington, DC

Disparate enforcement approaches by agencies against unconventional cartel conduct are hindering global compliance efforts, Cleary Gottlieb Hamilton & Steen partner Mark Nelson said yesterday. He spoke on a panel at GCR Live’s annual cartels conference.

“It is critical, as much as possible, for antitrust enforcers globally to get on the same page, particularly in what we were referring to as unconventional cartel conduct,” Nelson said. “Especially where conduct is global in scope or has cross-border implications.”

It is far more challenging to create a culture of compliance at a global company, when dealing with conduct such as non-naked no-poach agreements or algorithms that react to rivals’ prices, where enforcers are taking different views on the legality of such conduct, he said.

But Kristen Limarzi, chief of the appellate section at the US Department of Justice’s antitrust division, disagreed that no-poach agreements constitute unconventional cartel conduct.

“I don’t consider naked no-poach agreements or wage fixing agreements to be all that unconventional,” she said.

“An agreement among employers not to compete for employees eliminates competition for those job seekers. It eliminates it in exactly the same way that an agreement among suppliers not to compete for customers eliminates competition for those customers.”

Although the DOJ is actively seeking to prosecute these types of naked no-poach agreements criminally, European enforcers are yet to tackle these types of issues, which characterises the disparate approach by enforcers in different jurisdictions.

Martin Raible at Gleiss Lutz at Düsseldorf said wage-fixing agreements, no-poach agreements and other related human resources topics are “completely absent from competition law enforcement” in Europe.

Whereas the debate in the US seems to be about what approach to take – whether to rely on rule of reason analysis or the per se rule and whether conduct should be pursued criminally or civilly – the question in Europe is whether to take any enforcement action at all, he said.

Cleary Gottlieb partner Nelson said it was important to draw a line globally as to what type of behaviour would be viewed as criminal in the US or as a major civil violation in other jurisdictions.

“If regulators can get on the same page as to where the line is drawn and what the limiting principles are, that makes our life as counsellors easier and it makes company leadership’s jobs easier in creating the right culture of compliance,” he said.

Without greater cooperation between enforcers, dealing with different rules in different jurisdictions will continue to be an enormous challenge, he said.

This has major implications for corporate compliance programmes, because companies are forced to adhere to the lowest common denominator of whatever regime implements the most restrictive policy, Nelson said. That puts “enormous pressure” on the most restrictive regime; if it gets the policy wrong, it over-deters on a global scale, he added.

Another challenge occurs when a particular enforcer’s approach to unconventional cartel conduct is exported elsewhere, Nelson said.

When an enforcer breaks new ground, it often sets limiting principles that govern when the agency will pursue those types of cases, he said. But when that new approach goes abroad, sometimes those limiting principles – which are often crucial to the development of the new regime – are not exported at the same time, he said.

Nelson – who noted that his firm advised Broadcom when it challenged Qualcomm’s allegedly abusive standard setting process – cited the FTC’s pursuit of standard essential patent violations as an example. Several important limiting principles were set out by the courts and in policy announcements by US government agencies, but these did not necessarily transfer abroad when other enforcers began tackling this behaviour, he said.

Raible also advocated a more consistent worldwide compliance culture, but said it would be very difficult to reach that goal and to agree a shared moral understanding about unconventional cartel conduct.

Covington & Burling partner Phillip Warren moderated the panel. GCR Live Cartels concluded on Tuesday.