Antitrust enforcement goes global
As one of the worldās top cops on the antitrust beat, the U.S. has long led the fight to curtail price-fixing, collusion, and other anticompetitive behavior in global commerce. And the Justice Departmentās antitrust division has wielded an especially big club of late.
In each of the past two years, criminal penalties in antitrust cases have exceeded more than $1 billion, thanks to groundbreaking settlements with DOJ following investigations into collusion in interbank lending rates among banks as well as price-fixing in the global auto parts industry. The $1.4 billion in fines collected in fiscal year 2012 was the largest recovery ever for the antitrust enforcement division in a 12-month span. Fiscal 2013 wasnāt far behind, hitting $1.02 billion.
Now that sequester-mandated budget cuts have taken hold, it may be tough for Justice to score another billion-dollar bounty in the year ahead. With fewer staff and tighter resources, trying existing cases and getting new investigations in the pipeline could be a challenge for U.S. antitrust enforcers.
That said, companies engaged in international commerce should by no means slacken up on competition compliance, given all the new watchdogs on the beat worldwide. In recent years the number of anti-cartel and fair competition authorities globally has soared as a host of new countries — including China, Mexico, India, and South Korea, to name a few — have joined the U.S., EU and other established players in going after violators of antitrust laws.
In all, more than 115 countries now have antitrust regimes in place. Roughly a third of those are aggressively targeting cartel activity, with nearly a dozen state actors pursuing price-fixing and other anti-competitive activity beyond their own borders.
Obviously that takes teamwork. In recent years antitrust authorities have stepped up inter-agency coordination on everything from search warrants to pre-dawn raids, while promoting far greater information-sharing of evidence of wrongdoing.
The list of countries engaged in extra-territorial anti-cartel prosecutions continues to grow. Take China’s National Development and Reform Commission. Though the NDRC has traditionally stuck to domestic targets, it has recently expanded its sights to include companies headquartered outside of mainland China. This past January, the NDRC announced criminal penalties of nearly $56 million against Korean and Taiwanese makers of liquid crystal display panels for televisions and computer screens, in what was not only the agencyās first ever prosecution of foreign-based price-fixing affecting China, but the largest sanctions that the NRDC has ever imposed.
The NRDC isnāt the only overseas antitrust authority breaking records. The European Commission has been on a tear, hitting new highs in total penalties collected (including ā¬2.9 billion in sanctions in 2010 alone) as well as the largest single antitrust sanction ever (ā¬1.47 billion) in a 2012 settlement with sellers of cathode ray tubes for televisions and computer screens.
Meanwhile, other foreign competition enforcement agencies in Brazil, Japan and South Africa are on track to have their own banner years. As of October, Brazil and Japan had each levied more than $200 million in fines against antitrust violators in 2013. And South Africa, a relative newcomer to competition enforcement, has leveled nearly $150 million in fines in 2013.
Not a bad payoff, especially at a time when anemic global economic growth has kept tax revenues down, and left governments with steep budget shortfalls. As more countries find that thereās significant revenue to be had, itās a good bet that enforcement actions will continue to climb, and already sky-high penalties could easily go up even more.
An obvious question is what other purpose those actions serve. Are the recent record-breaking sanctions a real deterrent to market manipulation? And for companies facing multiple fines from myriad antitrust authorities — and thus a form of multiple jurisdictional jeopardy — how much is too much?
While the United States and other countries have begun grappling with those questions, theyāre still a long way from coming up with real answers, much less concrete (and fair) reforms.
Companies caught in the crosshairs of serial enforcement agencies complain that whatever the alleged transgressions, the sanctions they and other defendants now face are badly out of whack. The problem isnāt just prosecutorial overkill, but outright piling on. One illustration is the recent Air Cargo cartel case. As part of what was alleged to be an overarching conspiracy to artificially inflate surcharges on global air freight services, antitrust prosecutors in at least ten different jurisdictions brought enforcement actions: the United States, European Union, Australia, Brazil, Canada, Mexico, New Zealand, South Africa, South Korea, and Switzerland. When the case finally settled, each government got its share of the spoils from the same set of defendants in the form of tens of millions of dollars in fines.
Itās not that the agencies donāt recognize the problem. There is consensus that in many instances the multiple sanctions meted out have been excessive, and that the rise in overlapping prosecutions needs to be addressed.
Yet instituting fixes that antitrust enforcers across the globe can abide by is another matter. While local antitrust bodies have done well coordinating their efforts in the launch and due diligence phase of prosecutions, theyāve been widely reluctant to give up home country control over sentencing, leading to what has been an ad hoc approach to apportioning punishments and fines.
The Justice Departmentās antitrust division has been trying to do its part to help curtail prosecutorial overkill. It recently established a new internal policy meant to encourage prosecutors to use wider discretion when defendants are facing parallel enforcement actions abroad.
Moreover, Justice is working on getting its counterparts around the world to adopt similar principles. If antitrust authorities are serious about trying to promote fairer, more proportional penalties in global antitrust matters, that could be a good start. Still, for now itās unclear how many other countries will sign on to those principles — or even how effective they would ultimately be.
The age of āmultipleā jeopardy for antitrust defendants isnāt about to end anytime soon, which is why companies that are potential targets need to fortify their defenses. One obvious step is to beef up compliance programs. If potential problems or risky practices are spotted, the smart move is to bring them to the attention of the relevant antitrust authorities as quickly as possible, since prosecutors typically go much easier on companies that self-report questionable behavior. Those that donāt self-report run a greater risk that their competitors, or even an internal whistle-blower, will report the potential violations anyway, and thus put them in a far more vulnerable position with prosecutors.
For companies that would rather avoid a global prosecutorial pile-on, not to mention many millions of dollars in fines, itās definitely something to consider before the antitrust enforcers come knocking.
PHOTO: Justice scales are seen in a lawyers cabinet in Nice, southeastern France, October 9, 2009.Ā Ā REUTERS/Eric Gaillard