Global Cartel Enforcement Report

Global cartel enforcement report

February 2020

allenovery.com 2 Global cartel enforcement report | February 2020

Foreword

Antitrust authorities around the world continued to focus on tackling national and international cartels in 2019, with many jurisdictions showing an appreciable upturn in the level of fines compared to those imposed in 2018. The European Commission (EC) once again topped the global leader board, with fines totalling USD1.6 billion (up by 74% from 2018). The U.S., Japan, Germany, Italy and France also saw significant increases in the level of fines imposed in 2018, while a number of authorities with a reputation for aggressive enforcement, including South Korea and Brazil, saw a marked drop in their fine totals.

But behind the numbers sit several major questions, the answers to which may impact international cartel enforcement in the future:

• Will the ever-increasing spread of private damages actions, including a wave of claimant actions in Europe following on from the EC’s Trucks and Forex decisions, ultimately make leniency an unattractive proposition? To date, leniency remains the key enforcement tool in many jurisdictions. 100% of decisions in the EU, UK and Japan included an immunity/leniency applicant, as did the majority of decisions in Brazil, Spain and Hungary. But notably, immunity/leniency applicants featured in only 13% of decisions in China and 8% of decisions in the U.S.

• Does the broad use of settlement agreements, and the lower fines they deliver, reduce the need for an ex ante leniency strategy? In the EU, Germany, the UK and the U.S., all decisions in 2019 involved settlement, with the EC’s approach on the Forex cartel signalling a willingness to continue to pursue ‘hybrid’ settlement decisions in the wake of the ICAP and Pometon judgments. A notable percentage of decisions in Brazil and South Africa also made use of settlement procedures (88% in Brazil, 80% in South Africa). This has contributed significantly to overall lower fine levels.

• Will there be a political will to focus in the future more on domestic cartels rather than international cartels? As the cycle of large, long-running international investigations in the financial services and automotive sectors continue to wind down, many new investigations are targeting bid-rigging in domestic industries. In 2019, decisions sanctioning bid-rigging accounted for two thirds or more of the overall number of decisions in South Korea, the CEE region and Italy and 46% of decisions in the U.S. With a number of authorities identifying enforcement against bid-rigging as a strategic priority and adding to their enforcement toolkit (including the launch of the inter-agency ‘Procurement Collusion Strike Force’ in the U.S.), domestic cartels are expected to remain an area of focus in 2020.

Irrespective of the answer to each of these questions, one thing is clear: the digital economy will continue to dominate the global antitrust debate. Regulatory scrutiny of the use of artificial intelligence and algorithms in business practices is expected to increase, while antitrust authorities continue to consider whether reform of existing laws is necessary to deal with the challenging issues raised by increasing digitalisation. There are also indications that authorities will be emboldened to investigate novel innovation-based theories of harm, taking their lead from the EC’s investigation into alleged collusion between German car manufacturers to restrict competition in emissions technology. Compliance efforts of companies will, of course, need to adapt and keep pace with these developments, as the focus of authorities increasingly extends beyond traditional ‘high risk’ areas of their business.

Report authors

Philip Mansfield Thomas Masterman Jack Ashfield Partner – London/Brussels Counsel – London Associate – London Tel +44 20 3088 4414 Tel +44 20 3088 3386 Tel +44 20 3088 1091 [email protected] [email protected] [email protected]

allenovery.com 4 Global cartel enforcement report | February 2020 4

2019 global cartel fine levels

Canada USD4.45m

U USD 1.65bn

U.S. USD USD apan 360.2m 637.31m Korea USD80.21m Mexico USD5.65m aian USD1.29m China USD2.37m Brazil USD 235.90m

India Chile USD12.01m USD13.34m South Arica Singapore USD8.32m USD1.14m Australia USD37.91m

1 UK – USD56.92m 7 Hungary – USD9.03m 4 1 2 2 Belgium – USD1.37m 8 Austria – USD0.07m 3 5 6 8 7 3 Germany – USD1.04bn 9 France – USD537.98m 9

10 4 Poland – USD0.07m 10 Italy – USD774.21m

11 5 Czech Republic – USD0.09m 11 Spain – USD316.09m

6 Slovakia – USD10.64m

2019 statistics are approximate and may not be exhaustive. They reflect fine levels calculated using an average exchange rate for 2019. The EU fine total relates to decisions taken by the EC.

U.S. figures relate to fines imposed at federal level by the DOJ and are for the U.S. fiscal year, which runs from 1 October-30 September. All other countries’ statistics relate to the calendar year. Cartel fines in this context mean fines imposed for a breach of Article 101 TFEU or national equivalent (excluding cases that are purely vertical in nature).

Hot topics 2020

DIGITAL, DIGITAL, RISE OF PROCEDURAL FINES ‘GOLD STANDARD’ DIGITAL…. INNOVATION-BASED ON THE INCREASE COMPLIANCE Digital markets and platforms are THEORIES OF HARM Perhaps as a reaction to Antitrust authorities are now expected to continue to dominate Although ‘classic’ cartel offences companies demonstrating less of frequently giving greater the antitrust debate in 2020 – such as bid-rigging, information an appetite to cooperate with guidance on what constitutes particularly in Europe where EU exchange, price-fixing, and cartel investigations – or as a sign effective compliance, with the Competition Commissioner market sharing, remained the of an increasingly aggressive overarching need for robust Margrethe Vestager’s portfolio primary enforcement focus in position taken by some regulators compliance to be firmly has been expanded to include 2019, there are indications in the face of fewer cases – 2019 embodied in corporate culture. both Competition and Digital that in 2020 authorities will saw a marked increase in Certain regimes, such as those in Markets – as authorities around be investigating less familiar, antitrust authorities taking Australia, the UK and the U.S., the world increase their focus and potentially novel, action against companies and give credit – in the form of a on the use of data, AI and theories of harm. The EC is individuals for breaching fixed or percentage reduction algorithms. Discussion as to already looking into alleged procedural requirements to in a penalty – to companies with whether existing antitrust ‘tool co-ordination between German produce documents or data or an effective antitrust compliance kits’ are sufficient to deal with car manufacturers accused of co-operate with investigations programme, while some issues raised by the digital delaying innovation around (eg Colombia, Latvia, the authorities impose a requirement economy, or whether radical emissions technologies Netherlands, Lithuania, the UK, to implement/maintain a reworking or new alternatives (sparking a parallel probe in France and Russia). Some of compliance programme are needed, is likely to intensify. China), which suggests the fines were significant as part of their sanction Consumer and data protection greater scrutiny of industry (eg EUR 1.84 million in the Dutch (eg Chile). We expect policies issues will be a vital part of the collaborations on R&D and case) and the Latvian fine was of this type will continue to be debate. Many authorities, technical matters in the future. imposed several years after used by enforcers in 2020 to including those in Australia, Companies may therefore need the breach. In Australia, in the encourage more widespread South Korea, Taiwan, France and to extend their compliance efforts on-going BlueScope case, compliance efforts. the UK, are introducing specialist beyond traditional ‘high risk’ criminal charges have also been digital units and are harnessing areas to include new strategic brought against an individual new technologies to improve risk areas. for his part in obstructing the their detection and investigation ACCC’s investigation. capabilities. Compliance initiatives by corporates are already adapting in response.

allenovery.com 6 Global cartel enforcement report | February 2020

FACILITATOR LIABILITY INDIVIDUAL LIABILITY INCENTIVISING CRACKDOWN ON ‘Facilitators’ of cartels remain in A number of authorities have WHISTLE-BLOWERS BID-RIGGING AND the headlines as the European declared an intent to increase As the rate of leniency PURCHASING Court of Justice (ECJ), in 2019, enforcement against individuals applications falls in some ALLIANCES upheld the General Court’s who have been involved in jurisdictions, authorities are decision to quash on procedural cartel activity. The CMA, looking for new ways to Enforcers have continued to grounds fines imposed by the EC for example, has drastically sufficiently incentivise the prosecute bid-rigging across a on ICAP in 2017 for its role as a increased the number of actions reporting of illegal cartel activity. broad range of sectors. The DOJ facilitator in the LIBOR and against directors of companies A whistle-blowing tool for launched an inter-agency TIBOR cases (discussed in last involved in cartel conduct, individuals is an increasingly ‘Procurement Collusion Strike year’s Report). This does not securing nine disqualifications popular option, and is already Force’; the Spanish authority held take away from the fact, in 2019. In Russia, the Federal established in many jurisdictions, for the first time that entities found however, that agencies will Anti-Monopoly Service (FAS) including Australia, the EU, to be involved in bid-rigging would prosecute facilitators, as well introduced a draft law which Hungary, New Zealand, Poland be automatically banned from as ‘participants’: in the UK, would see criminal liability and and the UK. China’s State participation in public tenders the energy regulator Ofgem, custodial sentences imposed for Administration for Market (Korea operates a similar using its competition enforcement directors and major shareholders Regulation (SAMR) is introducing ‘points-based’ system for repeat powers, fined a software and of companies found to have new whistle-blowing provisions, offenders); Brazil issued fines of consultancy provider for its role in engaged in cartel conduct. while the Lithuanian authority BRL535m (USD136m) in the developing and providing In 2019, the Canadian introduced a reward-based ‘subway cartel’ and banned software to two rivals allowing Competition Bureau (CCB) system, calculated as a participants from public tenders; them to monitor each other’s and the DOJ secured penalties percentage of the final fine. and the CMA and the Portuguese customer lists. Companies acting against individuals involved authority highlighted the issue as intermediaries need to monitor with companies participating in as a priority focus area. carefully whether the services bid-rigging schemes, while in Numerous publicly announced they provide could potentially fall Spain, a judgment of the investigations and dawn raids foul of antitrust laws, even when Supreme Court significantly indicate that cartel enforcement they are not active in the lowered the legal threshold of bid-rigging is likely to remain markets concerned. required to prove a director had in the global spotlight in 2020. been involved in anti-competitive Enforcement against purchasing conduct, opening the door to alliances also came sharply back further enforcement. China has into focus in 2019: the EC and also recently proposed draft the French and Belgian authorities legislation introducing the opened probes into purchasing possibility of personal liability cartels in the retail sector and and criminal sanctions. investigations are on-going in Germany (auto steel), the Netherlands (agriculture), and at the EC level (batteries).

Select cartel fine comparison

USD1.6bn EU USD946m USD2.2bn USD4.1bn

USD360.2m USD186m U.S. USD108m USD387m

USD235.9m USD461m Brazil USD264.4m USD231m

USD80.2m USD151.6m South Korea USD172m USD765m

USD2.4m China USD12.6m USD81m USD5m

USD5.7m Mexico USD12.3m USD104.8m USD11m

USD637.3m Japan USD19.5m USD66.2m USD84m

USD12m India USD66.9m USD33.8m USD941m

USD37.9m USD45.6m Australia USD29.7m USD39m

USD8.3m South Africa USD19.7m USD16.4m USD111m

USD4.5m USD1m Canada USD11m USD10m

0 2019 20181075 2017 21502016 3225 4300

2019 statistics are approximate and may not be exhaustive. They reflect fine levels calculated using an average exchange rate for 2019. The EU fine total relates to decisions taken by the EC.

allenovery.com 8 Global cartel enforcement report | February 2020

Other key statistics in 2019

CARTEL DECISIONS INVOLVING AN IMMUNITY/LENIENCY APPLICATION

Selected jurisdictions with three cartel decisions or more

Japan 100%

EU 100%

UK 100%

Spain 60%

Brazil 50%

Germany 43%

Italy 38%

Australia 33%

India 29%

CEE 27%

Mexico 25%

Chile 20%

France 13% 12% % of cases involving China 13% leniency/immunity applicant South Africa 12%

U.S. 8%

0 20 40 60 80 100

SPOTLIGHT ON BID-RIGGING SECTOR FOCUS OF SELECTED ENFORCERS

Percentage of fining decisions sanctioning bid-rigging conduct

89 South Korea

Transport & Infrastructure: 24% 81 CEE Industrial & Manufacturing:17% TMT:13% Consumer & Retail: 8% Construction: 8% 67 Italy Life Sciences & Healthcare: 7% Financial Services: 6% 46 U.S. Energy & Natural Resources: 5% Other: 13% 43 India

40 Spain

33 EU/Japan/UK

The EU statistics relate to decisions taken by the EC. CEE includes decisions from the Czech Republic, Hungary, Poland and Slovakia. Statistics relate to the volume of decisions taken.

As at the time of publication, information about some decisions adopted by the authorities above was not available and these decisions have been excluded from statistics. Also excluded are decisions which were overturned by an appellate body in 2019. For the sectoral statistics, the surveyed jurisdictions are: Australia, Austria, Belgium, Brazil, Canada, Chile, China, Czech Republic, EU, France, Germany, Hungary, India, Italy, Japan, Mexico, Poland, Singapore, South Africa, South Korea, Spain, Taiwan, the UK and the U.S.

The digital economy: challenges and opportunities

In April 2019, the EC published a The potential for automated collusion, Increasingly, enforcers are also report commissioned from a panel of in particular, is firmly on authorities’ using AI to uncover infringements. external experts into ‘Competition radars: the head of the OECD’s As last year’s report noted, this may Policy in the Digital Age’. Intended as competition division, Frédéric Jenny, be part of their counter-attack to a contribution to the EC’s on-going has issued warnings on the issue, the continuing decline in leniency review of how competition policy can and Commissioner Vestager has applications. And they continue to best serve consumers, the report is made clear that companies cannot innovate: deputy head of Russia’s likely to be influential in shaping the use ‘the computer did it’ as a FAS Andrey Tsarikovsky has even EC’s future enforcement agenda. cartel defence. trailed the possibility of automated Recommendations of particular enforcement, handing out decisions relevance to cartel enforcement Whether existing laws enable in the same way as motoring offences. included changes to the standard and regulators to deal with the novel burden of proof because of the high issues raised by the digital economy, Compliance functions of companies costs of under-enforcement in the or whether reform is required, are already adapting in response to digital era, and further guidance, has been vigorously debated. authorities’ increased use of digital and potentially a new block exemption Some commentators call for the technologies to detect and monitor regulation, on the conditions under creation of new dedicated regimes. anti-competitive behaviour, and will which it is pro-competitive for For the time being, there is no need to continue to do so as companies to share or pool data consistent view on the most enforcement practice in this (especially in aggregated form). appropriate approach, and authorities area continues to evolve. Commissioner Vestager’s new dual are expected to continue to scrutinise mandate (responsible for shaping the carefully the use of AI and algorithms EC’s policy on digital markets and in business practice. overseeing the competition portfolio) is a clear sign the EC is serious about implementing reform.

allenovery.com 10 Global cartel enforcement report | February 2020

Europe

European Union

In 2019, the EC issued relatively cases suggests that it does not feel While all four decisions in 2019 few infringement decisions but constrained by the General Court involved ‘classic’ cartel activity nevertheless topped the leader board judgment in the ICAP case, and that (price-fixing, market sharing, of the jurisdictions surveyed by total it is able to respect the rights of information exchange and bid- value of fines imposed. Four decisions defence and presumption of rigging), the SO issued by the EC were issued (the same number as in innocence of parties that elect not in April to three German car 2018) with aggregate fine values to settle. The Forex decision has also manufacturers illustrates the EC’s of EUR1.47bn, compared with sparked a wave of damages claims willingness to pursue more novel EUR801m in 2018. Three decisions before the UK courts, including an theories of harm. The EC alleges related to the financial services and ‘opt-out’ class action claim, brought that the car manufacturers colluded automotive sectors, long-time targets by the former chair of the UK’s to limit technical development, and in of the EC’s enforcement activity, pension regulator, Michael O’Higgins. particular to restrict competition in while the fourth involved canned innovation for two emission cleaning vegetables, imposing a fine of The Forex decision brings total fines systems (which, according to the EC, EUR31.7m. All cases involved imposed by the EC in the financial denied consumers the opportunity to settlements, either by all or the sector to over EUR3bn. With two buy less polluting cars). The case is majority of participants, and the further pipeline cases involving part of a wider enforcement trend investigations were initiated secondary market trading in of antitrust authorities taking action by an immunity applicant. U.S. Dollar supra-sovereign, against industry collaborations sovereign and agency bonds that risks having a chilling effect The lion’s share of the 2019 fine total (Statement of Objections (SO) on competition in innovation and related to the EC’s decisions in the issued in December 2018) and research and development activities. Forex cartel, where five financial European government bonds institutions were fined just over (SO issued in January 2019), there is EUR1bn in two decisions issued on no indication that the spotlight will the same day for their role in yet move off the banks. exchanging commercially sensitive information in the Spot Foreign In a decision in the automotive sector, Exchange market for a number bringing the total value of fines of currencies. This was the EC’s imposed by the EC in the sector since fifth-highest fine to date. One bank 2013 to EUR2.15bn, the EC fined escaped a fine by blowing the whistle two companies EUR368m for in exchange for immunity. Nearly all participation in a car safety equipment of the other banks received reductions cartel involving the exchange of in fines for cooperating with the EC commercially sensitive information under the leniency procedure, on top and coordination of market behaviour of the 10% discounts for settling for the supply of seatbelts, airbags and the case. steering wheels. Again, each of the parties chose to settle and received a According to public sources, one bank 10% fine reduction in fine; one party refused to settle and continues to be received full immunity for revealing investigated. The EC’s willingness to the existence of the cartel. continue to pursue ‘hybrid’ settlement

Other notable developments include: Consultation on the horizontal The case involved an Austrian segments (leveraged buy-outs and block exemptions and guidelines: province which alleged that increased project/infrastructure finance), As part of its initiative to elevator prices paid by construction the report highlights the potential ‘keep the rulebook up-to-date’, companies as a result of a cartel in the antitrust risks in the industry. two important Regulations exempting sector led it to grant higher subsidies These include lenders’ use of ‘market from the rules on anti-competitive (in the form of promotional loans) sounding’; transparency resulting conduct qualifying research and than it would have done absent the from continued interaction between development agreements and cartel. The ECJ has ruled that there industry participants over time; specialisation agreements, is nothing under EU law to prevent restrictions requiring borrowers to and accompanying guidelines, the province’s claim being brought procure ancillary services (such as are being updated. The Regulations (citing its own, earlier Kone judgment: hedging) from syndicate members; are due to expire at the end of 2022. ‘for the purposes of guaranteeing conflicts of interest where lenders Also subject to review will be the EC’s the effectiveness of EU law... simultaneously act as debt advisors; guidance on defining product and national legislation must recognise and possible coordination among geographic markets. the right of any individual lenders in the event of refinancing to claim compensation for the loss sustained’), faced with borrower default. Widening the scope for claimants and the case has now in private damages: The EC has gone back to the Austrian courts Safeguards recommended for lenders recently sought to encourage parties to determine causality under include the improvement of staff suffering loss as a result of cartel domestic law. training and internal policies; activity to bring actions for damages putting in place internal protocols against cartel participants, in particular Syndicated lending report: for information-sharing between through the EU Damages Directive. In April 2019, the EC published different functions and limitations on Generally, claims brought to date its long-awaited report on EU loan the cross-selling of ancillary services. have been by customers of cartelists. syndication, commissioned to assess Whether any enforcement action However, the ECJ’s December 2019 whether the loan syndication market from the EC will follow from judgment in the Austrian Elevators was working effectively and to the report’s findings is as yet unclear. case has opened up the potential identify potential antitrust concerns. for cartel compensation pay-outs Based upon interviews with over to non-market participants. 100 industry participants across six Member States and focusing on two specific syndicated lending

Second term for Commissioner Vestager On 1 December 2019, Margrethe “I see no trade-offs between the two and the introduction of a dedicated Vestager took office for a second legs of my portfolio, but rather synergies: market surveillance unit. term as Competition Commissioner it will allow me to use the insights and Sector inquiries are expected to in President Ursula von der Leyen’s general market knowledge acquired be an early feature of Commissioner new Commission. A second term is under the competition portfolio when Vestager’s mandate; they were unprecedented for a Competition designing regulatory initiatives in specifically called for, for new and Commissioner and it means that, by the digital matters.” emerging markets, in her ‘mission letter’ end of her mandate in 2025, Vestager will Commissioner Vestager’s willingness from President von der Leyen. have had the chance to shape a decade to challenge tech giants and major The findings of such inquiries could well of EU antitrust policy. multinationals is likely to continue with lead to increased enforcement against Commissioner Vestager was formally vigour: she has stated that she will be anti-competitive conduct in the sworn in as one of three Executive bolder in the next five years than she was related sectors, as happened, Vice-Presidents with the mandate of in the first five. In relation to cartels for example, following the pharmaceutical overseeing ‘A Europe Fit for the Digital specifically, enforcement remains a and e-commerce sector inquiries. Age’. Her role now covers not only the priority and various initiatives have been Speeding up of investigations and antitrust brief but also co-ordination of EC floated to increase cartel detection, improved cooperation with and between policy across the whole digital economy. against the backdrop of a general national antitrust authorities at both Commenting on the challenge of being decline in leniency applications, European and global levels are also both the policy maker for shaping the including the creation of an information likely to be high on the Vestager agenda. new economy, and its enforcer, sharing network comprising enforcers, Commission Vestager is confident: police services and antitrust officials

allenovery.com 12 Global cartel enforcement report | February 2020

What is a ‘by object’ infringement? (AG opinion in Budapest Bank) In October 2019, Advocate General interpreted the concept narrowly, Or, in the AG’s words, “if it looks like (AG) Bobek issued his opinion in the but there has been uncertainty over a fish and it smells like a fish, one can Budapest Bank case. While not binding its precise scope. assume that it is a fish. Unless, at the on the ECJ, and arguably not breaking The AG proposes a two-step test: first sight, there is something rather odd new ground, his views on how to assess (1) can the infringement fall within a about this particular fish such as that it whether an antitrust infringement is category of infringements which, has no fins, it floats in the air, or it smells restrictive ‘by object’ within the meaning based on robust case law and practice, like a lily, no detailed dissection of that of the EC cartel rules usefully tie together is highly likely to be restrictive of fish is necessary in order to qualify it as loose strands from previous case law. competition; and (2) if so, has a such. If, however, there is something out A ‘by object’ infringement effectively ‘basic reality check’ been performed, of the ordinary about the fish in question, allows an authority to bypass the taking into account the infringement’s it may still be classified as a fish, but only need to prove that an agreement legal and economic context after a detailed examination of the between competitors actually (eg can the parties give a reasonable, creature in question”. had anti-competitive effects. not implausible, explanation of Historically, the European courts have their conduct).

EU Member States

At the beginning of 2019, the EU Austria The food industry and the energy adopted the ECN+ Directive, With thanks to Christine Dietz market are also attracting the targeted at harmonising the outcomes and Isabelle Innerhofer of attention of enforcers in Austria. of antitrust proceedings by ensuring Binder Grösswang. Two proceedings against the Austrian that Member States have appropriate In 2019, the Austrian Cartel Court sales subsidiary of international food enforcement tools (eg powers to (ACC) imposed fines totalling company Mondelez, in relation to conduct dawn raids and collect EUR1.76m (in 2018: EUR2.38m). alleged anti-competitive pricing information from companies) and However, the major share of the and territorial restrictions, to bring about a level playing field. 2019 fines related to vertical are currently pending before the ACC. Largely motivated by a desire to bolster infringements, such as resale price An investigation in the energy enforcement amongst regimes which maintenance (three decisions with sector may well be in the pipeline, have been historically less active in fines totalling EUR1.24m). following AFCA dawn raids at pursuing cartel behaviour, it is still too premises of several companies in soon to tell whether it will have the Over the past few years, the principal the Austrian market for energy intended effect, given that the period focus of the Austrian Federal metering and consumption recording. for transposition into national law runs Competition Authority (AFCA) has The AFCA is also looking at the online until 4 February 2021. been the construction industry, automatic pool cleaning equipment digital markets, and the healthcare sector (which has been the subject of Nonetheless, cartel enforcement sector. The largest cartel investigations previous Austrian investigations and continued apace across Europe. in the history of the AFCA to date proceedings), and in 2019 it requested Jurisdictions such as France, concern alleged bid-rigging in the the French Competition Authority Germany and Italy retained their Austrian construction sector. ( ) to carry out dawn raids in reputation as active enforcers, FCA The investigations were initiated in France concerning potential vertical and Spain had a particularly busy Spring 2017, and the AFCA is restraints. Other sectors likely to be in 2019. Despite not being one of the expected to apply for fines in 2020. In the spotlight in 2020 are rental cars jurisdictions surveyed for this report, the digital sphere, in 2019 the AFCA and taxis and the funeral market. Portugal twice broke its fining record began investigations against two major in 2019: first, with fines of over technology companies, which Belgium EUR54m on insurance companies ultimately led the companies to amend In 2019, the Belgian Competition and executives and a month later, their terms and conditions. In Authority (BCA) imposed two fines on in September, fining 14 banks November, the authority announced the Belgian pharmacists association of EUR225m for information exchange increased cooperation with the EUR1m and EUR0.23m respectively. in relation to the supply of retail credit Austrian Regulatory Authority for The first decision concerned restrictive products. In the CEE, bid-rigging Broadcasting and Telecommunications practices aimed at foreclosing the investigations topped the enforcement (RTR), in particular with regard to MediCare-Market group from the agenda. Several dawn raids and the RTR’s development of a market and/or hindering the on-going investigations throughout monitoring system for digital development of its innovative business the bloc indicate a strong pipeline of platforms. The system covers the most model. On the appeal of the BCA’s cases for 2020. important digital communications decision, the Market Court ruled that platforms used in Austria as well as the fine should not exceed 10% of the platforms that influence how the association’s annual turnover. As a internet is being used generally result, the BCA will need to adopt a (including voice and messaging apps, new decision revising the fine. voice assistants, operating stores, and app stores or browsers), and assesses their impact on competition.

allenovery.com 14 Global cartel enforcement report | February 2020

The second decision was a settlement expands, the scope of individual As in 2018, there was increasing use of decision and concerned restrictions liability for hard-core cartels. settlement proceedings, with four cases imposed by the association on certain Secondly, in October the BCA settled in 2019. On the other hand, types of offline and online published guidance on information only one investigation (relating to a advertisement by pharmacists in exchange in the context of trade cartel between fruit-compote Belgium. The two decisions are part associations, covering the collection manufacturers) involved a of a long line of BCA decisions and publication of market overviews, leniency application. targeting restrictive practices imposed price comparison websites, In the digital sector, the FCA’s cartel by professional associations. information on expected market enforcement activity is likely to be developments, and formula for cost A further fine imposed by the BCA in bolstered in the year ahead by the calculations and price composition. 2019 related to vertical price-fixing. creation, as of January 2020, of a HM Products Benelux NV was France digital economy unit, tasked with fined EUR0.1m for fixing the resale developing in-depth expertise in all In 2019, the FCA issued eight prices of infrared cabins. The decision digital areas and cooperating in the cartel decisions, with fines totalling (which was a settlement decision) investigation of anti-competitive EUR480.5m. This amount exceeds the confirms the BCA’s renewed focus practices in the digital economy. amount in each of the last three years on vertical restrictive practices. The FCA also announced in its (which ranged from EUR200m to priorities for 2020 the publication The BCA confirmed that it carried out EUR300m), but is still less than the of a study on the compliance of trade two dawn raids in 2019: in May, in the FCA’s high-water mark of EUR1bn associations and unions with antitrust retail distribution sector involving in 2015. rules, ahead of the entry into force members of a purchasing alliance, and Of the eight infringement decisions, of the ECN+ Directive which will in October, in the pharmaceutical two related to market sharing lead to associations, unions and sector, a sector which clearly continues agreements (EUR5.5m), two to professional bodies being subject to be on its radar. According to a BCA price-fixing agreements (EUR1.7m), to heavier penalties. press release, this second investigation two involved the imposition of relates to practices that allegedly discriminatory conditions for hinder the access to or expansion on membership of a collective body the Belgian market of biosimilar drugs. (EUR0.2m) and two concerned hybrid Further information regarding the agreements, i.e. agreements covering investigations, or whether additional various anti-competitive practices dawn raids were carried out in 2019, (the first involved price-fixing and is not yet available. market sharing as well as general Two regulatory developments in information exchange, resulting in a Belgium merit attention. Firstly, EUR58.3m fine; and the second the new Belgian Competition Act, involved discriminatory conditions which entered into force in June 2019, for membership of a professional increases the maximum amount of organisation, an agreement not to fines to 10% of worldwide turnover innovate, and general information (it previously was 10% of turnover exchange, resulting in a from both domestic and export sales) EUR414.7m fine). and amends, and to some extent

Germany Ultimately, Carlsberg prevailed on Netherlands procedural grounds, as the statute of Continuing where it left off in 2018, While the Dutch antitrust authority limitations had expired, but the case is the Federal Cartel Office (FCO) (ACM) issued no decisions in 2019, now at Federal Supreme Court level imposed fines totalling EUR925m in it did impose the highest stand-alone and it remains to be seen how that 2019. This includes the FCO’s highest fine in its history for non-co-operation court will rule. The underlying issue fine ever – a fine of EUR646m or obstruction during an investigation. nevertheless remains and the legislator imposed for a cartel in the steel sector The unidentified company was fined is considering amending the law to (the sector also being subject to the EUR1.84m because employees under ease concerns. highest fines in 2018). The FCO’s investigation left WhatsApp groups other decisions in 2019 related to plant Italy and deleted online chats while the protection products wholesaling, ACM raid was on-going. The fine was The Italian Competition Authority bicycles wholesaling and the embossing subject to a 20% reduction for the (ICA) imposed fines of EUR691m in of licence plates. company’s co-operation, but is eight separate decisions (the authority nonetheless intended to send a clear The three major authorities dealing elected to impose no fine in one message that the ACM will take with cartel cases were unusually divided decision). The total was bolstered by vigorous action against cartel in 2019. The Federal Supreme Court two separate cases, in the corrugated infringements and breaches of the overturned three decisions by cardboard and facility management procedural rules. the Düsseldorf Court of Appeal sectors, where the authority fined, (liquid gas, coffee and candy cases). respectively, 43 parties an aggregate Spain The Düsseldorf Court of Appeal, amount of EUR287m and 22 separate The five decisions taken by the for its part, refused to apply the legal parties an aggregate amount of Spanish Competition Authority standard established by the Federal EUR234m. Both cases are currently on (CNMC) in 2019 was in line with Supreme Court (in the railway cartel appeal. Bid-rigging was an element in previous years (six decisions in 2018). damages case). The Düsseldorf Court six of the eight cases, including the However, the total amount of Appeal also overturned the FCO’s facility management case, highlighting of fines imposed (EUR282m) has Facebook decision (which, while not a the ICA’s continued focus on more than doubled from 2018 cartel case, points to the differences in such conduct. (EUR118.4m). The increase is approach by the key cartel authorities). 2019 also saw an unusually high attributable to the size of the In another development, the German number of cases involving a leniency companies fined, particularly those in business and antitrust community has applicant (three), with several other the decisions involving the railway been voicing growing concerns over on-going cases having also been electrification and dairy sectors, the lack of effective judicial review of instigated by a leniency application. which represented around 70% of cartel fines. In recent years, the It is difficult to explain what may have the total amount of fines imposed Düsseldorf Court of Appeal has caused this, especially as follow-on by the CNMC. consistently increased cartel fines upon damages have been headline news in Following the trend of past years, appeal. As a result, fewer appeals are Italy this year: in the wake of the ICA’s cartel cases dealing with market-sharing lodged by cartelists and companies cartel decision in the International agreements (including bid-rigging) prefer to settle cases with the FCO. Football TV Rights case, three Italian have been priority areas for the The most noteworthy case in this clubs filed damages actions for CNMC. Four out of the five 2019 regard in 2019 concerned the beer approximately EUR500m, with the cases fell within this category. In a first, cartel where the FCO had imposed result that total liability for the the CNMC has found that findings of a fine of EUR62m on Carlsberg. defendants in the case could reach cartel infringement could automatically Upon Carlsberg’s appeal, the state EUR3bn (with the remaining amount result in the companies involved being prosecutor before the Düsseldorf likely to be claimed by Lega Serie A on debarred from participation in future Court of Appeal asked for an behalf of the remaining clubs). public procurement procedures, increase of the fine to EUR250m.

allenovery.com 16 Global cartel enforcement report | February 2020

referring three cases to the Spanish pharmaceutical sector, where the CMA #stopcartels campaign and has Public Procurement Board to decide continues to be highly active. It also reported a rise in tip-offs of over 30%. the scope and duration of the ban. has a number of on-going cases Whistle-blowers in the UK can related to alleged excessive pricing receive financial rewards of up to 2019 also confirmed the CNMC’s and other abusive conduct. GBP100,000 for providing readiness to fine directors for information on a cartel. In 2019, corporate cartel infringements. The sector regulators were also active CMA Chair Lord Tyrie called publicly A recent judgment by the Spanish in 2019. We saw the first fine imposed for an increase in the reward, citing the Supreme Court has significantly by the UK’s financial sector regulator, need for it to be “commensurate with the reduced the level of director the Financial Conduct Authority, using financial impact, the loss of career prospects, involvement required to establish its competition powers. Three asset and the distress” for whistle-blowers. individual liability. management firms were fined around GBP0.4m for exchanging strategic In the digital sphere, the CMA has Over half of the cases decided by the information. The energy regulator published a document setting out its CNMC in 2019 involved a leniency Ofgem also (unusually) exercised its digital markets strategy, following on application. It remains to be seen powers as a competition regulator, from a series of independent reports whether this is a one-off or whether it imposing fines of around GBP0.9m commissioned into the sector, heralds a revival of the use of leniency on two energy suppliers for agreeing including the Furman Report in March. applications in Spain. not to poach each other’s customers, Amongst other recommendations, the UK as well as on the consultancy firm report noted the importance of the The CMA issued three cartel which facilitated the conduct by CMA monitoring the development of infringement decisions in 2019 designing, implementing and AI and machine learning tools to guard (compared to one in 2018), relating to maintaining the software which against potential harm to consumers cover bidding in the office fit-out allowed them to do so. In targeting the (something which the newly sector, price-fixing and market sharing facilitator, Ofgem noted that it was established, Data Technology and in the precast concrete drainage aware of the suppliers’ conduct and Analytics (DaTA) unit has been industry and price-fixing in the estate anti-competitive intent. developing its competence in). agency sector. The total amount of A particular area of focus for the CMA After several delayed starts, Brexit took fines imposed (GBP44.6m) marks a has been the deterrence of bid-rigging place on 31 January 2020, with a significant increase on the 2018 of public contracts: its efforts have transition period currently scheduled amount (GBP3.4m). included a free screening tool to enable to last until the end of 2020. During The CMA also issued SOs in seven public sector procurers to review their that period it is broadly ‘business as cases involving suspected cartel tender data for signs of illegal activity. usual’: the EC’s role is unchanged activity. Five of these relate to the It has also taken steps to make and the CMA will continue to apply reporting cartels easier, through its UK law in accordance with the EU

Individual liability in the UK: Directors disqualification A notable trend in UK antitrust disqualification have ranged from disqualification orders, the CMA enforcement this year has been the 1.5 to 7.5 years – well short of the has the possibility to pursue criminal increase in enforcement action taken 15 year maximum, but by no means proceedings against individuals, against individuals. Directors of insignificant. The CMA’s director of although to date enforcement has been companies found to have infringed cartels and competition reportedly low and, as reported last year, the CMA competition law have in particular been expects the number of director has advocated the divestment of its targeted. In 2019, the CMA announced disqualifications to double in the powers to the Serious Fraud Office, an nine director disqualifications – up from next 12 months, with a focus on agency it feels is more suited to the task. only three in total since it obtained its ‘more prominent’ directors and larger powers in 2003. Lengths of companies. Alongside its power to seek

cartel rules. There remains, nevertheless, In terms of detecting potential cartel members PLN0.2m (around EUR0.04m the possibility that alleged cartel behaviour, CEE authorities relied – the largest fine imposed by the PCA infringement is reviewed by both heavily on dawn raids, conducting in 2019) for attempting to nullify a regimes, and that parties will have to numerous inspections across a range tender in order to remain the sole deal with two sets of investigations in of sectors including automotive, service providers is currently under tandem. For example, if the EC has cosmetics and informatics. appeal, and the CCA saw the largest opened formal proceedings before Like other regulators across the world, fine imposed by it in 2019 reduced on 31 December 2020, although it will in CEE authorities have been using a appeal from around EUR0.07m to principle retain the handling of those range of tools to strengthen their around EUR0.04m. proceedings, in some circumstances detection and enforcement capabilities. Russia (eg on-going conduct affecting trade In Hungary, all of the authority’s 2019 in the UK), the UK authorities could cartel decisions involved at least Cartel enforcement remains a priority have jurisdiction over the UK-related one successful leniency applicant. for the FAS as well as for the Russian elements. After the transition period, The Hungarian Authority (HCA) also government. The FAS has consistently the CMA expects an additional five to ramped up the use of penalty discounts pointed to the harm cartel agreements seven complex antitrust (ie not purely to encourage the implementation of pose for the Russian economy in cartel) cases a year. compliance programmes. In half of its terms of adversely affecting the quality cartel decisions, it granted a fine of goods produced and leading to CEE Region reduction after the parties agreed artificial price increases. In 2019, Bid-rigging remained a key focus area commitments to introduce or improve the government estimated the resulting for antitrust authorities in the CEE. compliance programmes. Poland is damage to the economy could be All of the 2019 cartel decisions by the actively promoting its Sygnalista in the region of 1.5% of GDP, Polish authority (PCA) (five), the programme, which allows whistle- and adopted, in June, a 2019-2023 Czech authority (CCA) (three) and the blowers to anonymously submit anti-cartel roadmap. Slovak authority (two) related to information about anti-competitive Against this backdrop, the FAS has put collusive practices in procurement practices, and the Czech authority is forward draft legislation which tenders. Bid-rigging was also a feature reportedly working on a software tool increases the sanctions available for of several decisions in Hungary, one of to detect bid-rigging. cartel agreements (the Draft Law). which resulted in the imposition of Withstanding judicial review has often The Draft Law, which the FAS has fines on several solar power firms been challenging for CEE authorities. been working on for around two years, for collusive tenders in relation After defeats for the HCA in cartel introduces criminal liability for to a government programme. cases in court in 2018, it achieved a bid-rigging for major shareholders and The technology sector (production of more balanced record in 2019. directors with the possibility of a electronic equipment, software supply Critically, it received support in an prison sentence of up to six years, and technical support) and the important Constitutional Court ruling and establishes a register of cartelists transport sector (transport of disabled for its use of protected witnesses in which are banned from participation in children, domestic market for road cartel cases. The Constitutional Court public tenders. It also provides for the freight transport) were among the confirmed that the parties’ right of automatic doubling of fines for principal sectors investigated for defence is not affected even if they do recidivists, and facilitates coordination bid-rigging in Poland, while in the not have direct access to, and cannot and information flow between the FAS Czech Republic the healthcare directly ask questions of, protected and criminal investigative authorities. and construction sectors also witnesses (eg through a distorted The Draft Law has been submitted to attracted attention. video link). In Poland, a decision the government and will also have to which fined two transport consortium pass through the Russian Parliament before it becomes law.

allenovery.com 18 Global cartel enforcement report | February 2020

According to public sources, the companies’ top executives were also in a price-fixing cartel, and bribing the number of cartel investigations found liable), and two private staff of medical facilities. handled by the FAS this year is companies, as well as the Ministry of On the global stage, the FAS continues significant, with no decrease in sight. Construction and a regional Housing to be an active member of the While at the date of publication the and Utilities department in relation to International Competition Network, FAS had not issued its full official a road construction project in the including the Cartel Working Group, enforcement statistics, 2019 cases Astrakhan region (the two private which is prioritising action against included bid-rigging investigations of companies were fined an aggregate digital cartels and conducting four medical product suppliers for amount of RUB86m (USD1.3m)). A research and studies on the impact participating in rigging tenders in 31 further case involved an aggregate fine digitalisation has on detecting and separate electronic auctions (aggregate of RUB283.5m (USD4.4m) against sanctioning cartels. fine of RUB115m or USD1.8m; the two private companies for participating

Americas

United States

The beginning of the DOJ’s fiscal year Strike Force (PCSF) on 5 November. “substantial and ongoing cooperation..., including in October 2019 signalled a year of The PCSF is an inter-agency its disclosure of information regarding criminal change in both the statistical trends and organisation charged with deterring, antitrust violations involving drugs other than the policies underlying the DOJ’s detecting, investigating, and prosecuting those identified in the criminal charge and the criminal enforcement. The DOJ saw a antitrust crimes such as bid-rigging agreement.” Other relevant factors turn in the tide in the amount of conspiracies and related schemes in included Heritage agreeing to resolve all corporate criminal fines imposed, which government procurement, grant, civil claims relating to its conduct in had been on the decline in the latter half and programme funding. In April, connection with federal health of this decade. In FY2019, the DOJ the Division also secured its first plea programmes, and the likely imposed corporate fines on 13 entities agreement in an investigation into consequences, including to U.S. amounting to USD360.2m (approximately bid-rigging at online auctions consumers, of Heritage being double FY2018’s figure of USD186m for surplus government equipment. mandatorily excluded from health and FY2017’s figure of USD171m). With the formation of the PCSF programmes in the event of a This year’s total is the highest since and the Division’s successes in 2019, conviction. Under the terms of the FY2016, when fines totalled USD387m, we expect the spotlight on government agreement, Heritage agreed to pay but still remains well below the fine levels procurement to continue in 2020. USD0.23m in criminal fines, and the earlier in the decade. U.S. agreed to defer prosecution for a 2019 also saw significant changes to period of three years to allow Heritage Notable fines in FY2019 included the leniency policy. Under the new policy, to comply with the agreement’s terms. USD100m fine (the statutory maximum) the DOJ will take into account the (Heritage agreed to pay USD7.1m in a imposed on StarKist Co., for its existence and adequacy of a company’s separate civil settlement.) participation in the conspiracy to fix compliance programme at the charging prices of canned tuna, and fines imposed stage in criminal antitrust investigations Similarly, on 3 December, the Division on five South Korean companies for and consider proceeding by way of a announced another DPA with Rising their participation in a bid-rigging and deferred prosecution agreement (DPA) Pharmaceuticals Inc., which was charged price-fixing conspiracy involving against companies which have robust with conspiracy to fix prices and allocate government contracts to supply fuel to antitrust compliance programmes but customers for a hypertension medication. U.S. military bases in Korea. In relation are not eligible for leniency. The DOJ Rising agreed to pay USD1.5m in to the latter, seven individuals were also has published public guidance on monetary fines (reduced from USD3.6m indicted, and one executive charged with the application of this new policy, because of the company’s bankruptcy obstruction of justice. In total, the and revised the Division Manual to proceedings), and the government companies agreed to pay USD156m in reflect the announced change. agreed to defer prosecution for three criminal fines and more than USD205m years or until Rising’s on-going The Division has also been quick to in separate civil settlements. The civil bankruptcy proceedings became final, implement this change in policy in recoveries are the largest the DOJ’s whichever came first. In this case too, its enforcement. On 31 May 2019, Antitrust Division ( ) has the agreement specifically identified Division the Division entered into a DPA with obtained under Section 4A of the Rising’s co-operation including its Heritage Pharmaceuticals Inc., Clayton Act, which permits the U.S. to disclosure of criminal antitrust violations which was charged with conspiracy to obtain treble damages when it is the involving other drugs. Other relevant fix prices, rig bids, and allocate victim of an antitrust violation. factors included Rising’s agreement to customers with its competitors for a pay restitution, and the fact that Partially in response to the South diabetes medication. The agreement conviction would cause significant delay Korean case, the DOJ announced the specifically identified the company’s to its bankruptcy and liquidation. formation of a Procurement Collusion

allenovery.com 20 Global cartel enforcement report | February 2020

Brazil

With thanks to Marcelo Calliari followed by settlement agreements, received significant media attention and Raquel Souza Jorge of where lack of evidence nevertheless led and was launched following an TozziniFreire Advogados. to dismissal of the case against the immunity application by Siemens. In 2019, the total amount of fines remaining defendants. Analysis of the Immunity applications in 2019 imposed by the Administrative Council cases dismissed, together with the continued to decline: according to for Economic Defense ( ), public statements from some of CADE CADE’s annual report, around decreased by around 50%, with a CADE’s new commissioners, 11 agreements were signed (compared total of BRL930m (USD235.9m), indicate that there may be moves to to five in 2018 and 37 in 2017). compared to USD461m in 2018. significantly increase the standard Settlement agreements also reduced in The lower total was expected, given of proof required in cartel cases in number in comparison to the previous that the 2018 total was heavily inflated the coming years. year. In contrast to the 49 settlements by the series of settlements reached Bid-rigging has been a key focus in 2018, 19 settlements were in the context of the ‘Operation Car of cartel enforcement in Brazil for reached in 2019, culminating in Wash’ Petrobras investigations. some time, with the authority one of BRL145m (USD36.7m) in fines. CADE’s enforcement activity was the most active in the world in its Particularly noteworthy settlements affected to some extent by the crackdown against the practice and were reached in connection with two unprecedented departure of four recently publishing a study by its own cartel probes into the sales of medical commissioners in the middle of the economists into deterrence and equipment, mainly to Brazilian public year. The resulting lack of a quorum detection methods. In one of the most entities, between 2004 and 2017. paralysed the agency for nearly three high-profile cases in 2019, in July Issues to look out for in 2020 include months. While this had a greater CADE fined 42 individuals and the role likely to be played by the four impact on merger review than on cartel 11 companies including Alstom, new commissioners in the CADE cases, the number of cartel rulings has Bombardier and Mitsui & Co., Tribunal, who will increasingly nevertheless slightly decreased since for rigging at least 26 public tenders to influence decision-making and could last year, with a total of 15 proceedings manufacture subways and trains for potentially advocate an increased concluded in 2019 (six cases fewer CPTM and METRO between 1999 standard of proof in cartel cases. than in 2018). and 2013 in four Brazilian states. The Brazilian Data Protection Law The total fines imposed amounting In seven out of these 15 cases the (very much modelled on the EU to BRL535m (USD136m). CADE also CADE Tribunal subsequently General Data Protection Regulation) banned Alstom from participating in dismissed the case against the will enter into force in 2020, and is public tenders in the rail sector for five individuals and companies involved for likely to impact on how companies years and barred Alstom, Bombardier lack of evidence. The cases included negotiating immunity applications and CAF from receiving public two international investigations, have to deal with private data. subsidies or tax exemptions for the originating from a leniency agreement, same period. The investigation

Canada

With thanks to Cassandra Brown and led to an estimated 33% increase The CCB remains engaged in several and Gillian Singer of Blake, in cost. Over the course of the year, high-profile cartel investigations. Cassels & Graydon LLP. all four individuals charged in This includes an investigation into As in 2018, Canadian cartel connection with the scheme pleaded price-fixing in the commercial bread enforcement in 2019 focused largely guilty and received conditional industry, as well as an investigation into on bid-rigging activities in the province sentences ranging from 12-22 months conduct by newspaper companies of Quebec. Engineering firms Genivar (sentences included house arrest, Postmedia and Torstar, which each Inc. (now WSP Canada) and Dessau curfews, and community service, closed several newspapers immediately were ordered to pay a total of but no jail time). after acquiring them in an asset CAD5.9m (USD4.4m) for rigging bids swap deal. In April, the CCB also concluded an for municipal infrastructure contracts investigation into gasoline pricing In June, Matthew Boswell was in Quebec. This represents an increase practices in the province of Ontario. announced as the new Canadian in penalties from 2018, which involved The CCB did not uncover any Commissioner of Competition. a single CAD1.3m (USD1.0m) fine. evidence of anti-competitive Previously acting as Interim The bid-rigging scheme involved 21 agreements among competitors in the Commissioner of Competition, he will municipal infrastructure contracts wholesale or retail gasoline markets. lead the CCB’s cartel enforcement across various Quebec municipalities, efforts for a five-year term.

allenovery.com 22 Global cartel enforcement report | February 2020

Chile

With thanks to Luis Eduardo Toro economic threats and that CMPC approximately USD4.8m for Bossay and Francisco Bórquez Tissue’s threat was credible, given its participation in a market sharing Electorat of Barros & Errázuriz. market position. It then imposed a fine cartel and were also required to The Chilean Tribunal for the Defense of around USD15.5m on CMPC. implement a five-year compliance of Competition ( ) adopted four programme. The whistle-blowing TDLC 2019 also saw one of the first follow- cartel decisions in 2019. According to company was granted immunity from on damages cases being filed in Chile, the TDLC’s annual public statement, the fine, but not from the compliance involving a consumer association suing although the number of decisions programme obligation. This case is the main poultry companies in Chile to remained steady compared to last year, also being appealed before the obtain compensation for customers the number of antitrust investigations Supreme Court, with the FNE hopeful who had been affected by a price-fixing brought by the National Economic of increasing the fine. cartel, following sanctions previously Prosecutor’s Office ( ) have FNE imposed by the TDLC and upheld by In January 2020, the TDLC launched increased by 37% year-on-year the Supreme Court. modernising reforms of its judicial (the statement also noted that the system, including a new digital system average length of investigations The highest fine imposed by the for the processing of judicial cases. has decreased by 42% since 2012). TDLC in 2019 was approximately Several important legislative changes USD6.5m in FNE vs. Supermarkets In an interesting development for are also in the pipeline. Following the where a group of supermarkets was leniency applicants in Chile, the social uprising in Chile in the latter found liable for having fixed the price Supreme Court recently issued its part of 2019, the Government of poultry products as part of a judgment in the FNE vs. Tissue introduced a new ‘Anti-Abuse’ agenda hub-and-spoke style infringement. Companies case. The court revoked the in December. The President has In addition to the fine, the infringers immunity which had been granted by indicated that measures introduced as were also required to implement a the TDLC to pulp and paper company part of this, intended to stamp down minimum five-year compliance CMPC Tissue as the first leniency on ‘white collar crimes’ such as cartels, programme. The case is now with the applicant to report a tissue cartel, will include an increase of the Supreme Court after the FNE finding that CMPC Tissue had coerced criminal penalties for collusion; requested an increase in the fine to its competitor SCA into joining the the strengthening of the FNE’s powers around USD14m for each participant. cartel through threats of an with the introduction of more exclusionary price war. It found that In a similar set of circumstances, investigative tools; and provision for the scope of coercion covered not only in FNE vs. Shipping Companies, anonymous whistle-blowing. threats of physical violence but also the infringing parties were fined

Mexico

With thanks to Eduardo Pérez Sixteen individuals and three Bid-rigging and public procurement Motta of SAI Law & Economics. associations were fined a total of cartels will continue to be a focus of Compared with the activity of the USD127m. In the third case, COFECE’s activity in 2020, with a case previous year, there was an increase in three individuals and two air transport related to tenders to hire integrated the number of fines imposed by the companies were found guilty of health services of laboratory and Mexican Federal Economic coordinating the minimum reference blood bank studies currently under Competition Commission (COFECE) price for air transportation services on investigation. As of January 2020, in 2019, which concluded four cases intra-Mexican routes (USD4.6m in COFECE had two additional open with total fines rising to USD5.6m. fines). The fourth case concerned investigations into potential cartel public tenders for toothbrushes: activity: the first concerns Mexican The first two cases involved price- five individuals and three companies government securities intermediation; fixing, offer restriction, market sharing were found guilty of coordinating bids and the second relates to the and other anti-competitive practices in or abstaining from tenders and were pharmaceuticals market. the corn ‘tortilla’ market. fined USD0.9m.

allenovery.com 24 Global cartel enforcement report | February 2020

Asia Pacific and South Africa

Australia

The trend for increased enforcement AUD15m (around USD10.4m) experience during key criminal action, particularly with respect to against Air New Zealand, with the investigations, the new policy requires criminal cartels, continued in 2019. former penalty subject to appeal. a higher level of cooperation from The Commonwealth Director of In imposing criminal fines in relation immunity applicants, narrows the Public Prosecutions (CDPP) laid to the shipping cartel prosecutions, scope of application and clarifies a criminal charges in two cases – the Federal Court ordered fines number of issues related to eligibility one against global shipping company of AUD25m (around USD17.4m) for immunity. The ACCC also Wallenius Wilhelmsen Ocean AS in for NYK and AUD34.5m launched an encrypted online portal, relation to international shipping of (around USD24.0m) for K-Line, which allows whistle-blowers to vehicles to Australia, and the other noting that were it not for NYK’s anonymously contact the ACCC to against a money transfer business and early plea and cooperation, the fine report cartel conduct. five individuals for allegedly fixing the would have been AUD50m The criminal cartel prosecution against Australian dollar and Vietnamese dong (around USD34.8m). The Federal three banks, and several senior exchange rate and fees charged to Court highlighted the importance executives for alleged cartel customers. In relation to an ACCC of deterrence and had regard to the arrangements relating to trading in investigation now subject of civil cartel fines and penalties imposed in ANZ shares, is still in its very early proceedings, the CDPP (for the first overseas jurisdictions. stages, many months after charges time) charged an individual with In another first, the Federal Court were laid in June 2018. A fourth bank inciting the obstruction of a ordered Cryosite Limited to pay was granted conditional immunity in Commonwealth official. The charges penalties of AUD1.05m for cartel exchange for on-going cooperation allege that former Bluescope executive conduct following an ACCC with the ACCC and CDPP. At the time Jason Ellis took actions to obstruct an investigation into gun jumping. of writing, committal proceedings were ACCC investigation into alleged cartel While the penalties were on the lower underway, with the case expected to go conduct by Bluescope. end of the available maximum penalty, to trial later in the year. The ACCC’s campaign for higher the Federal Court considered it to Looking ahead to 2020, we can expect penalties, including in relation to cartel be of sufficient deterrence in light the high level of ACCC cartel conduct, appeared to gain momentum of Cryosite’s size and precarious enforcement, the focus on individual in 2019. In relation to the Air Cargo financial position. accountability, and the trend of courts cartel proceedings, the Federal Court In October, the ACCC’s new cartel imposing more substantial penalties, ordered penalties of AUD19m (around immunity and cooperation policy came to continue. USD13.2m) against Garuda and into effect. Informed by the ACCC’s

China

As predicted in last year’s Report, there Enforcement has generally been SAMR is also focusing on the message were only a limited number of cartel targeted at industries affecting daily of prevention being better than cure, decisions in China in 2019. In part, life (pharmaceuticals, automotive, with businesses facing strong this could be due to the fact that the and energy being three of the areas encouragement to implement effective recently established SAMR has been typically earmarked as ‘relevant’ compliance programmes. finding its feet as well as focusing upon in China), such as the investigation A significant development has been the legislative developments. The total opened into three German car shft in the methodology for calculating amount of fines issued was relatively manufacturers over possible collusion fines: in the future, fines will be modest (RMB16.4m (USD2.4m), on emission technology in parallel with calculated on the basis of total sales in although this may increase to around the EC’s probe. Enforcement efforts China rather than of sales of the RMB24m (USD3.5m) if a proposed were also directed at the key economic products/services concerned. fine in the Maoming Concrete case sector of construction and infrastructure, Proposed revisions of the Anti- is adopted). with a high proportion of cartel cases Monopoly Law further signal that fines concerning building materials. Antitrust enforcement has been could increase in the coming years. conducted at local level through The relative lack of use of the leniency Proposals include significant increases government’s local branches rather regime continued in 2019, with in the caps for trade associations and than by SAMR at the central level investigations typically being opened for agreements that were not (SAMR does, however, play an on an own-initiative basis. With a implemented and the introduction of important coordinating role and was whistle-blower incentive policy having penalties for aiding and abetting very active on legislative initiatives last been trailed in the latter half of the antitrust infringement. Additionally, year). No decisions were issued against year, it appears that SAMR is the proposals open the door to the international companies for cartel considering ways to change this, introduction of criminal liability. activity in 2019. although it remains unclear whether this will be adopted as formal policy.

Hong Kong

Hong Kong’s Competition Ordinance future investigations to predict how beyond the scope of his employment. legislation came into effect in the antitrust rules will be enforced. This is a welcome potential avenue December 2015. The Competition Second, the judge decided that a for companies to escape liability. Tribunal has now handed down its criminal standard of proof – proof A further court hearing will determine first two judgments, finding four IT beyond reasonable doubt – applied. what sanctions should be imposed in companies and 10 interior decorating Assuming that this is not appealed, each case. The infringement decisions firms guilty of cartel conduct. this will impact how the Competition and any fines serve as a warning to The rulings provide greater legal Commission chooses its future cases businesses – especially in the IT and certainty. First, the judge closely and how it conducts its investigations; construction sectors – that the Hong followed EU and UK precedent, cases involving complex behaviour will Kong antitrust regime is up and for example the EU’s interpretation be harder to prove. Third, the judge running. The Competition of anti-competitive agreements and found one IT firm not guilty on the Commission has welcomed the by-object infringements. This means basis of a ‘rogue employee’ defence judgments, noting that it is open to that companies can safely rely on the – the person that participated in the complaints from members of the rich source of EU and UK case law in cartel was a junior employee who acted public as well as leniency applications.

allenovery.com 26 Global cartel enforcement report | February 2020

India

With thanks to Manas Kumar leniency applicants. In both, the CCI of the Competition Law Review Chaudhuri, Arshad (Paku) Khan and granted full immunity, as it continues Committee’s report on streamlining Anisha Chand of Khaitan & Co. to develop its leniency programme to the system, which was submitted to In 2019, India witnessed a significant encourage cartel disclosures by giving the government in August 2019. decline in the number of competition more certainty for fine reductions Drawing upon consultation with law cases prosecuted (seven) and for successful leniency applicants. stakeholders, ‘including industry number and value of fines imposed. bodies, professional associations, Overall, cartel enforcement activity was Overall, the total amount of fines government departments/ministries, relatively subdued in 2019. The CCI imposed by the Competition NGOs and experts’ the report makes a has not issued an order finding cartel Commission of India ( ) was INR range of recommendations, including CCI conduct since August 2019, and the 0.8465bn (USD12.0m): a decrease introducing provisions for hub-and- National Company Law Appellate of around 82% compared to 2018. spoke cartels and purchasing cartels, Tribunal, the relevant appellate body, The highest individual fine imposed additional mechanisms for settlements gave no substantive rulings on cartels was in the energy and natural resources and commitments, penalty guidelines, in 2019. However, the CCI did carry sector (INR0.3984bn, USD5.7m). and amendments to the cartel leniency out three dawn raids, which may result programme, including a ‘leniency plus’ After a record year for decisions in a busier agenda in 2020. option and procedures for the involving immunity in 2018, 2020 may also bring changes to the withdrawal of leniency applications. only two cases in 2019 involved Indian competition regime, in the wake

Japan

With thanks to Kenji Ito and in place monitoring systems to prevent Looking ahead, Japan’s amended Yusuke Takamiya of Mori Hamada future collusion, conduct regular audits, Anti-Monopoly Law will come into & Matsumoto. and ensure that the employees involved effect in 2020. It is expected that the There was a dramatic increase in in the collusion are assigned to other amount of fine that the JFTC can the total cartel fines imposed by the positions for a five-year period. impose per cartel case will be Japan Fair Trade Commission ( ) increased, and the leniency programme JFTC While 2019 marks greater cartel in 2019: JPY69.3bn (USD637m), expanded. Businesses will want to enforcement activity by the JFTC as against the 2018 total of JPY2.2bn monitor whether the amendments than in the past few years, it is still a (USD19.5m). The fines are largely will prompt a change in JFTC’s long way from that of the first half of attributable to two big price-fixing enforcement policy. the past decade. In another change, cases: the first involving nine asphalt all 2019 cases related to domestic mixture manufacturers and the second cartels and no international cartels involving four steel and aluminium have been publicised. In this respect, can manufacturers. The fine imposed the current cartel enforcement in the asphalt case was the largest ever landscape differs significantly from imposed by the JFTC for an antitrust that of the early 2010s. infringement. The JFTC also issued cease-and-desist orders against most of the companies, requiring them to put

Singapore

With thanks to Daren Shiau of prices offered to corporate customers. study, CCCS emphasised that price and Allen & Gledhill LLP. Unlike the poultry cartel case, non-price parity clauses in the online After the imposition of its largest fine investigations into this case were begun travel booking sector could potentially to date in relation to a poultry cartel in following own-initiative enquiries by harm competition and concluded that September 2018, the Competition and CCCS and not pursuant to tip-offs. it would continue to actively monitor market developments in the sector and Consumer Commission of Singapore This decision brings the total number take enforcement action where there (CCCS) continued to take action of cartel cases concluded by CCCS to is sufficient evidence to indicate against cartels in 2019 by issuing an 15 since the relevant provisions of the competition infringements. infringement decision against the Singapore Competition Act came into owners and operators of four hotels in force in 2006. After having conducted Looking ahead to 2020, we can expect Singapore. This decision, CCCS’s first unannounced inspections on its own more cartel enforcement activity from concluded case in the hospitality initiative, CCCS again relied upon CCCS in sectors such as digital industry, resulted in CCCS imposing leniency applicants who provided platforms, transport and hospitality. penalties totalling SGD1.5m further information regarding the Given the increasing relevance of the (USD1.1m). CCCS found that the cartel, confirming that its leniency digital and data economy, CCCS also hotels’ owners and operators had programme is a crucial and plans initiatives to study the impact of exchanged commercially sensitive well-established tool in its cartel digital platforms on competition and information about issues such as room detection and enforcement toolbox. to review its assessment toolkits to rates, price-related strategies and other ensure their relevance in today’s 2019 also saw CCCS’s publication of information capable of materially digital sector. affecting the future determination of a market study on the online travel booking sector in Singapore. In the South Korea

With thanks to Yong Woo Lee imposed in relation to such cases. future cartel fine levels in South Korea and Sangdon Lee of Shin & Kim. The transport and infrastructure sector are likely to be significantly lower than In 2019, the Korea Fair Trade was high on the list of priorities for the in the past. KFTC, accounting for KRW33.1bn Commission (KFTC) continued active Bid-rigging will remain firmly in the (USD29.9m) of the 2019 fines. enforcement against cartels, with the authority’s sights in 2020. New KFTC issue of no fewer than 46 decisions Compared with 2018 where only Chair Sung-wook Joh has announced (with potentially additional decisions two cases involving an international the agency’s plan to strengthen which have not yet been published). element resulted in the issue of a fine, surveillance of and strictly sanction Overall fine levels fell significantly. the KFTC in 2019 issued fining bid-rigging. Amended review The KFTC imposed total fines of decisions for seven international guidelines loosen bidding eligibility around KRW89.1bn (USD80.2m), cartels, including in the financial restrictions with effect from 2020, about 50% less than the previous year’s services and manufacturing sectors. and sanctions on bid-rigging are expected to increase further in the total (USD151.6m). The case with the Explaining the drop in overall fines, years to come. highest fine was imposed in a domestic the KFTC has stated that its bid-rigging case involving ready-mixed investigations are not carried out with concrete and totalled KRW14.7bn the goal of levying large fines and that (USD12.6m). As in 2018, the KFTC’s some larger cases have been delayed sanctions were mostly for bid-rigging for procedural reasons. As a result, conduct, with about 82% (KRW71.8bn, it is difficult to draw a conclusion that USD66m) of the total value of fines

allenovery.com 28 Global cartel enforcement report | February 2020

Taiwan

With thanks to Stephen Wu, April, and it is possible that these In the TFTC’s view, current legislation, Yvonne Hsieh and Wei-Han Wu figures may alter. including the cartel rules, is sufficient of Lee and Li. to tackle the potential antitrust issues As with many global authorities, The fines imposed by the Taiwan Fair arising in the digital economy. the focus of the TFTC in the coming Trade Commission ( ) in 2019 However, it has highlighted the need to TFTC years is expected to be on digital for cartel infringement amounted enhance its enforcement tools so as to markets, and dealing with the to NTD60.4m (USD2m). This is a more precisely hone its competition enforcement challenges presented ten-fold increase from NTD0.6m analysis. In line with the Government’s by rapid developments in technology. (USD0.2m) in 2018. However, in terms aim of encouraging innovation as the In response to the challenges, the of the number of closed investigations driver for economic growth, the TFTC TFTC has set up an internal special in 2019, the TFTC only issued has emphasised that it will not take a task force to study new business decisions in two local cartel cases, predetermined view in its handling of models and its appropriate responses with no cross-border cartel new issues. Rather, it intends to as a gatekeeper for fair competition. investigation or leniency case reported. carefully apply the law to avoid a It has also expressed an intention to Official enforcement statistics are chilling effect on innovation. pay particular attention to the four available only in the TFTC’s annual major digital technology giants and to report, which is usually released in examine potential competition issues

related to their business models. South Africa

With thanks to Pieter Steyn of African Broadcasting Corporation, remains relatively limited, with the Werksmans Attorneys. which agreed to pay a fine of Chief Executive of the Common 2019 saw another active year for around ZAR31.9m (USD2.2m), Market for Eastern and Southern cartel enforcement in South also committed in its settlement to Africa (COMESA) Competition Africa. The South African provide additional advertising space to Commission quoted as saying that Competition Commission certain, smaller advertising agencies existing laws in the region were (CompCom) imposed fines in 25 over the next three years as a fixed ‘gathering dust’. 2019 nonetheless separate cases. However, the total proportion of every rand spent by saw signs of future change, with the value of fines was low at around those agencies. Namibian authority agreeing settlements with two insurance ZAR120.2m (USD8.3m) – the lowest There was also an important ruling companies for price-fixing and the aggregate amount in four years. from the Competition Tribunal in early Mauritian agency recommending The largest fines imposed were against 2019 which should provide comfort fines against two chemical fertiliser a manufacturer of wood-based panels for companies considering entering companies. It has also been reported, for price-fixing and collusive conduct into leniency or immunity agreements although not fully confirmed, that the (ZAR46.9m, USD3.2m), which agreed in South Africa in the future. The Moroccan authority, which started to settle proceedings in June 2019. Tribunal ruled against CompCom who operations in earnest in 2019, CompCom also reached settlement had been hoping to introduce into has begun probes (as have the agreements in a long-running probe evidence, in an on-going case, an Egyptian authority and COMESA into price-fixing arrangements in the earlier leniency application filed by itself). In early 2020, the President of media sector whereby through a Unilever relating to the same conduct Kenya called upon the Competition separate organisation, Media Credit (CompCom had earlier rejected the Authority of Kenya to increase its Co-Ordinators, various companies leniency application). enforcement activity. Going forward, co-ordinated prices charged to Looking at the African continent more enforcement is only likely to increase. advertising agencies. The South broadly, cartel enforcement still

allenovery.com 30 Global cartel enforcement report | February 2020

A&O global cartel practice

Our global cartel practice is cross-border and consistent approach damages actions. Alongside our ranked first in the world by Global and response strategy in place to competition team, we also have data Competition Review 2020. meet the potential risks of public protection, privacy and employment We represent clients in the most and private enforcement actions. law experts around the world that can high-profile international and national provide the specialist advice that is We have one of the most extensive cartel investigations as well as in the crucial to ensuring that the internal competition networks in the world, equally important subsequent investigation (which is often time and our integrated teams understand litigation. Cartel and other behavioural critical) runs smoothly and quickly. both the technical legal requirements investigations are often now carried of multiple jurisdictions and the Major cases we have advised on out simultaneously across different investigative methods used by different include those involving trucks, auto jurisdictions and regulators are regulators. We handle all stages of parts, multiple financial instruments increasingly coordinating approaches, the investigation process, from launch (including credit default swaps and while sanctions for cartelists at both to advising on immunity/leniency foreign exchange), DRAM, speciality corporate and individual level remain applications, to appeals of chemicals, pre-packaged seafood, a serious threat. More than ever, infringement decisions and follow-on and air cargo. any multinational needs to have a

Report authors

With special thanks for their contributions

Austria Brazil Canada Chile Binder Grösswang TozziniFreire Advogados Blake, Cassels & Graydon LLP Barros & Errázuriz

Christine Dietz Marcelo Calliari Cassandra Brown Luis Eduardo Toro Bossay Partner – Vienna Partner – São Paulo Partner – Toronto Partner – Santiago Tel +43 1 534 80 720 Tel +55 11 5086 5313 Tel +416 863 2295 Tel +56 2 23788925 [email protected] [email protected] [email protected] [email protected]

India Japan Mexico Singapore Khaitan & Co Mori Hamada & Matsumoto SAI Law & Economics Allen & Gledhill LLP

Arshad (Paku) Khan Kenji Ito Eduardo Pérez Motta Daren Shiau Executive Director – New Delhi Partner – Tokyo Partner – Mexico City Partner – Singapore Tel +91 11 4151 5454 Tel +81 3 6266 8515 Tel +52 55 59856618, ext. 254 Tel +65 6890 7612 [email protected] [email protected] [email protected] [email protected]

South Africa South Korea Taiwan Werksmans Attorneys Shin & Kim Lee and Li

Pieter Steyn Sangdon Lee Stephen Wu Director – Johannesburg Partner – Seoul Partner – Taipei Tel +27 11 535 8296 Tel +82 2 316 4638 Tel +886 2 2763 8000 ext. 2388 [email protected] [email protected] [email protected]

allenovery.com GLOBAL PRESENCE

Allen & Overy is an international legal practice with approximately 5,400 people, including some 550 partners, working in over 40 offi ces worldwide. Allen & Overy LLP or an affi liated undertaking has an offi ce in each of:

Abu Dhabi Bucharest (associated oﬃ ce) Hong Kong Munich Singapore Amsterdam Budapest Istanbul New York Sydney Antwerp Casablanca Jakarta (associated oﬃ ce) Paris Tokyo Bangkok Dubai Johannesburg Perth Warsaw Barcelona Düsseldorf London Prague Washington, D.C. Beijing Frankfurt Luxembourg Rome Yangon Belfast Hamburg Madrid São Paulo Bratislava Hanoi Milan Seoul Brussels Ho Chi Minh City Moscow Shanghai

Allen & Overy means Allen & Overy LLP and/or its affiliated undertakings. Allen & Overy LLP is a limited liability partnership registered in England and Wales with registered number OC306763. Allen & Overy (Holdings) Limited is a limited company registered in England and Wales with registered number 07462870. Allen & Overy LLP and Allen & Overy (Holdings) Limited are authorised and regulated by the Solicitors Regulation Authority of England and Wales.

The term partner is used to refer to a member of Allen & Overy LLP or a director of Allen & Overy (Holdings) Limited or, in either case, an employee or consultant with equivalent standing and qualifications or an individual with equivalent status in one of Allen & Overy LLP’s affiliated undertakings. A list of the members of Allen & Overy LLP and of the non-members who are designated as partners, and a list of the directors of Allen & Overy (Holdings) Limited, is open to inspection at our registered office at One Bishops Square, London E1 6AD. UK © Allen & Overy LLP 2020. This document is for general guidance only and does not constitute definitive advice. CS2001_CDD-58297_ADD-88527 UK allenovery.com