United States: Department of Justice
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Cartel enforcement across the Americas
These are exciting times in the world of cartel enforcement in the Americas. International efforts to expose and bring to justice the most hardcore anticompetitive offenders are critical to our shared interest in ensuring free competition and healthy markets. The US Department of Justice, Antitrust Division, is pleased to be among the leaders in these efforts and is heartened by the resurgence in global cartel enforcement – including criminal enforcement – in the Americas.
Many of our regional neighbours have made significant strides towards strengthening cartel enforcement in recent years. In February 2017, Mexico’s Federal Economic Competition Commission brought its first criminal charges for bid-rigging in Mexico’s health sector. In June 2018, Chile’s National Economic Prosecutor (FNE) updated its guidelines to set out which factors the agency considers before filing criminal claims, and this past April Chile’s Tribunal for the Defence of Free Competition imposed over US$9 million in fines on shipping companies for entering into agreements not to compete. The year 2018 also marked when a stronger enforcement agency emerged from Argentina, along with a leniency programme for cartel cases. And Brazil has continued to bring important cases like the Operation Car Wash investigation. The above describes just some of the many examples across the Americas of competition authorities’ work to preserve vigorous competition.
Robust, regional enforcement is particularly important because cartel activity is of a kind that the anticompetitive effects can easily cross borders. The United States’ ongoing freight forwarding investigation, affecting shipments from the United States to Honduras and other destinations, is a perfect example of that dynamic. The Antitrust Division hopes that in the years to come, cartel enforcement in the Americas will continue to strengthen. The Division has taken, and will continue to take, a variety of steps to improve case development and strengthen investigations, including: a criminal outreach programme to develop new case leads; international cooperation efforts with our Latin American neighbours; efforts to sustain and strengthen leniency on the global stage; and technical assistance training for international enforcers.
Case development – outreach efforts
The Antitrust Division aggressively investigates cartel activity and has prioritised a criminal outreach programme that has been critical in its efforts to uncover leads and open new investigations into suspected cartel conduct.
Division prosecutors regularly meet with law enforcement agents around the United States to raise awareness about cartel enforcement. Prosecutors teach agents how to detect early warning signs of cartel activity (eg, suspicious bid patterns, similar price increases) and an overview of the relevant law. Law enforcers are thereby empowered to develop investigations in their respective jurisdictions.
We hope that further outreach efforts – particularly along our southern border – will begin to generate referrals for cases that impact both us and our Latin American neighbours. In recent years, Division prosecutors have performed outreach many times along our southern border at US attorneys’ offices and the US Federal Bureau of Investigation (FBI) field offices. We view outreach efforts, by all global enforcement agencies, as an opportunity for realising cross-border synergies in taking down cartels that impact neighbouring countries. For example, in November 2018, two executives pleaded guilty to participating in a conspiracy to fix prices for freight forwarding services from the United States to Honduras and other destinations. In June 2019, the two executives were sentenced to prison terms for their roles in the conspiracy. This case provides but one example of how a cartel’s impact may reach across regional borders. With continued efforts to raise awareness about cartel behaviour and antitrust crimes, competition enforcement throughout the Americas will identify new opportunities for collaboration.
The Antitrust Division is always looking for opportunities to benefit from international cooperation. In fact, we have existing cooperation agreements with several competition enforcers in the Americas, including Mexico, Colombia, Chile, Peru and Brazil. These agreements, which all note as foundational the ‘close economic relations’ shared between our countries, promote and facilitate cooperation in our respective enforcement of anticompetitive practices through a variety of means.
In the Division’s investigation into the foreign currency exchange spot market – an investigation resulting in billions of dollars in corporate fines and several indictments of individual actors – the United States benefitted from the substantial assistance provided by international authorities, including the United Kingdom’s Financial Conduct Authority, the Swiss Financial Market Supervisory Authority and the United Kingdom’s Serious Fraud Office. This case is a prime example of the sweeping impact possible when international enforcers work in tandem. Amid this uptick in cartel enforcement in the Americas, it has become even more important for our countries’ law enforcers to work together and cooperate where possible.
In our practice, case cooperation – such as in the foreign currency investigation described above – is conducted through separate, parallel investigations. Cooperation typically involves occasional check-in calls and, in an effort to reduce the burdens of leniency as discussed more fully below, coordinating the timing of witness interviews. International cooperation also presents legal complexities, however, as procedural rules and protections vary from country to country. For example, under the US Constitution’s Fifth Amendment, compelled statements made to international authorities may be deemed inadmissible in a US court. These and similar considerations demand caution and thoughtfulness when deciding to cooperate with an international authority, though they should not dissuade those efforts. In the coming years, we and our regional partners should make efforts to learn about the various procedural considerations that may critically impact case development in other jurisdictions.
State of leniency
The Antitrust Division celebrated its leniency programme’s 25th anniversary in August 2018. In that time, the leniency programme has served as one of the Division’s most effective tools in rooting out cartels, and it has served as a model for similar programmes to develop around the world.
Leniency has faced criticism and challenges in recent years, however. In the United States, practitioners have speculated about a decrease in leniency applications. Those criticisms ring hollow when measured against the facts. As Assistant Attorney General Makan Delrahim made clear in recent public comments, ‘the number of leniency applications the Division received in 2018 was on par with our historical averages’, and it finished ‘FY 2018 with 91 pending grand jury investigations, the highest total since 2010’. 1
Even still, global cartel enforcement must constantly nurture our respective leniency programmes to ensure they remain viable tools for cartel enforcers and an attractive option for defence lawyers to mitigate their client’s liability. The United States is not the only jurisdiction facing recent criticisms of its leniency programme. We must all take care as stewards of a global, borderless leniency programme, which sustains itself through the confidence that practitioners have in its predictable enforcement.
To promote predictability and consistency among global enforcers, the Antitrust Division is working with the International Competition Network to develop leniency best practices: the product of the Division’s 25 years of experience, developed from both successes and lessons learned. Perhaps most importantly, the guidelines will provide advice about how international authorities can and should work effectively together to bring down global cartels while avoiding interference with each other’s investigations.
One consideration might be a proposed global effort to reduce the perception of duplicative penalties across jurisdictions. Enforcers around the world can do more to share information about fine methodologies, which would both prevent overlapping fines and ensure the full scope of competitive harm is being covered by the multitudes of agency actions. Through increased cooperation and coordination among enforcement agencies, we can all do better to address concerns about overlapping penalties.
Likewise, it is time for global cartel enforcers to think more seriously, and creatively, about how to lessen the burden of cooperation for leniency applicants. In the United States, legislation detrebles damages for lenience applicants who also cooperate in civil litigation. We have found that this law removed what was previously a significant disincentive to seeking leniency. If global enforcers could adopt a similar framework, this might increase incentives for a company to seek leniency in multiple jurisdictions. Ultimately, by adopting such a framework, we would all benefit from stronger and more efficient investigations and prosecutions.
Global cartel enforcers may also wish to examine additional means to incentivise early detection and prompt self-reporting of antitrust violations, even when leniency is no longer available. Consistent with the Division’s efforts to deter antitrust violations and promote good corporate citizenship, Assistant Attorney General Delrahim recently announced that, moving forward, the Division will consider effective corporate compliance programmes for credit at the charging stage. 2 The Division does not have a checklist for evaluating the effectiveness of compliance programmes and prosecutors are, instead, to conduct a fact-specific inquiry as explained in the Division’s new public guidance document. 3 This new approach to compliance does not change the Division’s commitment to its leniency programme, which remains the ultimate reward available only to the first company to self-report and qualify. Rather, this change underscores the Division’s commitment to deterrence, early detection of cartels and predictable enforcement decisions. With consideration at the charging stage as an additional incentive for companies to invest in antitrust compliance, the Division anticipates that more cartels will be quickly disrupted and reported to law enforcement.
The Antitrust Division – in collaboration with various components and agencies, including the FBI – can be a resource for our regional neighbours in the Americas.
Colleagues in the Division and the FBI are eager to meet other international cartel enforcers and provide technical assistance. Since late 2016, they have sent attorneys and law enforcement agents to Honduras, Brazil, Mexico and Argentina. These trainings are made possible by funding from the US Agency for International Development, the World Bank, the Antitrust Division and the individual competition agencies hosting these trainings. The Department of Justice and the FBI also provided training to a group of Latin American agencies at a cartel investigations workshop in August 2019 hosted by the FNE. In these programmes, the Division works with international peers to provide training on investigative techniques as well as the use and implementation of leniency programmes. For new competition enforcers, we have been able to help provide training on investigative techniques, and have helped leadership think through policy and strategy considerations.
These technical assistance programmes are motivated by our conviction that free markets and open competition cannot exist in a vacuum, but rather depend on the policies and enforcement of our neighbouring countries.
Cartel enforcement remains as critical as ever. And although the rapid globalisation of our economies has made things more complicated, it has also provided greater opportunities for cartel enforcers across the Americas to cooperate with and learn from each other. The anticompetitive effects of cartels are often not bound by jurisdictional borders, as illustrated in the freight forwarding case described above. As regional neighbours, we are well positioned to notify one another when we uncover cartel conduct that affects another’s jurisdiction.
We share a common mission, to shine a spotlight on, and put a stop to, illegal business practices that get in the way of innovation and open markets. As the cartelists get more sophisticated, we are at our strongest when we are working with each other. The Division looks forward to the years ahead as cartel enforcement continues to surge across the Americas and cartelists are brought to justice.
1 Remarks by Assistant Attorney General Makan Delrahim, Public Roundtable Discussion: Antitrust Criminal Penalty Enhancement and Reform Act (April 11, 2019), www.justice.gov/atr/page/file/1161371/download.
2 Remarks by Assistant Attorney General Makan Delrahim, ‘Wind of Change: A New Model for Incentivizing Antitrust Compliance Programs’ (July 11, 2019), www.justice.gov/opa/speech/file/1182006/download.