Competition: Cartel. Russia - Vitaly Dianov for Chambers & Partners Legal Practice Guide 2015
Chambers & Partners has issued, for the first time, a Legal Practice Guide devoted to recent developments in the cartel regimes of the most significant jurisdictions throughout the world. The Competition: Cartels guide in general provides an expert legal commentary on the key issues for businesses operating in the Competition: Cartels sector. Vitaly Dianov contributed a review of a cartel framework, including but not limited to the regimes for gathering evidence, watchdog decision-making and the subsequent judicial review process applicable to the Russian Federation.
Introduction to Competition: Cartels
Partner Luc Gyselen'scompetition practice encompasses advice and representation before EU and national agencies on merger control, abusive conduct, cartels, other restrictive practices, and state aids. Prior to joining Arnold & Porter LLP he had a long career in government, primarily at the European Commission.
James W. Cooper is a partner in Arnold & Porter LLP's white collar criminal defense and litigation practice groups. His experience includes internal investigation and crisis management in response to federal grand jury investigations, administrative subpoenas and inquiries, congressional interest and whistleblower allegations. He advises clients in matters involving antitrust cartel prohibitions, the Foreign Corrupt Practices Act, Bank Secrecy Act/ Anti-Money Laundering laws, health care fraud allegations, export control, and the federal False Claims Act.
International firm Arnold & Porter LLP has a strong tradition in antitrust/competition policy. Lawyers work with clients from various industries on matters under federal, state and European laws governing competition, pricing, distribution, advertising, intellectual property.
The reader will find a wealth of information in this Guide about recent developments in the cartel regimes of an impressive sample of jurisdictions throughout the world. Every contribution will describe the legislative framework (e.g. type of cartel conduct, territorial reach, limitation periods) and review the various instruments enabling the antitrust agencies to collect evidence (e.g. surprise visits, witness interviews, leniency programs). Furthermore, every contribution will summarize the decision making process as well as the judicial review process in each jurisdiction and explain to what extent victims of cartel behaviour can claim damages for the alleged harm caused by the cartel participants.
This introduction makes no attempt to reiterate points made by the contributors to this Guide. Instead it takes a helicopter view by reviewing potential developments in the area of international co-operation between the antitrust agencies in the various jurisdictions reviewed in this Guide.
On 16 September 2014, the OECD’s Council issued an updated Recommendation concerning ‘international co-operation on competition investigations and proceedings’. This Recommendation re-affirms key principles (e.g. negative and positive comity) featured in previous recommendations, In addition, the 2014 Recommendation contains two sections that, according to the Council, are meant to ‘offer governments new and particularly innovative solutions.’
Let us take a closer look at each of these two sections.
One section introduces the concept of ‘information gateways.’ Such gateways would enable antitrust agencies to exchange confidential information without the need to seek prior consent from the companies that have transmitted the information to one of these agencies. Indeed, the Recommendation is that the transmitting agency would have full discretion to open the gateway for another agency. For instance, the transmitting agency could decide to provide the information ‘subject to restrictions on use or disclosure’, and if it did, the receiving agency would ‘maintain the confidentiality of the exchanged information to the extent agreed’ in order to comply with these restrictions.
The OECD’s proposal obviously goes a considerable step beyond the exchange of information traditionally based on voluntary confidentiality waivers offered by companies holding the relevant information. However, such gateways do not come out of the blue. They already exist in several jurisdictions. In its 2013 Report on the OECD/ICN survey on international enforcement co-operation, the OECD’s Secretariat refers to the marine hose case where the Australian agency successfully used information gateways to collect and use information from the US Department of Justice and from the UK Office of Fair Trading. Within the European Competition Network (ECN) which unites the 28 EU Member State agencies and the European Commission, there is even a formal legal basis for such information gateways. Art. 12-1 of Regulation n°1/2003 indeed provides that these agencies and the Commission ‘have the power to provide one another with and use in evidence any matter of fact or of law, including confidential information’. Art. 12-3 of the same Regulation only qualifies this by adding that ‘the information exchanged cannot be used by the receiving authority to impose custodial sanctions’. More recently, in December 2014, the EU and the Swiss Confederation entered into a ‘second generation’ agreement that provides inter alia for the exchange of information without the companies’ consent.
Another section of the OECD’s 2014 Recommendation seeks to enhance the assistance that agencies can provide to each other in the course of their investigations by conducting on behalf of another agency surprise visits at companies’ premises, sending requests for information or collecting witness testimonies. Here too, there are precedents. For instance, in accordance with Art. 22 of Regulation n°1/2003, the EU Member State agencies already regularly assist each other or the Commission in ongoing investigations.
For a number of reasons, it will no doubt take time for these two recommended novelties - information gateways and active assistance - to become a common feature of the antitrust agencies’ enforcement practice. For instance, many antitrust agencies are still relatively young and their top priority will understandably be to detect, investigate and decide their own cartel cases rather than spending their scarce resources on helping out other agencies. Moreover, U.S. grand jury secrecy rules may be an impediment to the free flow of information contemplated by the Recommendation.
However, the OECD’s 2014 Recommendation does not (yet) provide for a co-ordination mechanism that helps antitrust agencies figuring out who is/are best placed to investigate a given cartel case. The current co-ordination mechanism set forth in this Recommendation only aims to ‘avoid possible conflicting approaches and outcomes’ or ‘reduce duplication of enforcement costs’ in parallel proceedings pending before several agencies. In other words, if one agency decides today that one or more agencies are better placed to handle the case, it will have reached that decision on the basis of its own independent judgment. Thus, in marine hose, the Canadian agency decided there was no point in pursuing the matter, given the ongoing investigations in several other jurisdictions, including the USA.
Any recommendation to put in place a co-ordination mechanism that would allow agencies to discuss who is best placed to handle a case, would - as always - take inspiration from existing best practices. One such best practice exists in Europe. In April 2004, the Commission adopted a Notice to set out clear ‘principles of allocation’ based on a combination of parameters meant to determine where the case’s centre of gravity lies and thus enable members of the ECN to decide who is best placed to pursue the matter. This allocation mechanism has been very effective in most instances, and the current string of parallel hotel e-booking cases in a dozen or so EU Member States seems to be an outlier.
In the short to medium term, an allocation mechanism as described above might not get a lot of traction. Established agencies would not naturally be inclined to give up their jurisdiction - indeed, at this point, some agencies are aggressive in asserting expansive jurisdictional reach. Moreover, younger agencies around the globe will probably be eager to handle more cases, not less, in order to build up an enforcement track record. That said, the concept of reduction in duplication of effort and more targeted enforcement may be a more effective means of combating cartel conduct.
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