The new Cartels 2021 guide covers 20 jurisdictions. The guide provides the latest legal information on the impact of COVID-19 on cartels policy; dawn raids; attorney-client privilege; protection of confidential/proprietary information; leniency, immunity and/or amnesty regimes; burden of proof; sanctions and remedies; and private civil litigation.
Last Updated: June 16, 2021
Cartels 2021 – An Overview
Cartels? The basic principles have not changed. What has changed is the number of regulatory agencies increasing their involvement in enforcement activity and the number of businesses and individuals who erroneously believe that these principles do not apply to them or that they can avoid problems by just “staying around the edges”. Many still believe that the term "cartel" is limited to secret meetings in which sizeable companies with global footprints fix the prices for the products they sell, leading to government action and, in some jurisdictions, multimillion-dollar private class actions or actions for collective redress – and little beyond that.
These are, of course, classic examples of cartel behaviour. And they can lead many companies to say “Not an issue for us; we are too small.” The reaction is understandable, but absolutely wrong. A more durable definition is one that encompasses a wide variety of arrangements between actual or potential competitors involving agreements that may set or affect price (or price factors), output (including volume and geography), product (including features, characteristics and other classifications), practices (such as operating rules, restrictions on innovation and the like) and often inputs (such as raw materials used, sources, employment practices and restrictions, and related costs). A memorable, if not also useful, acronym is POPPI. Some argue that “costs” deserves its own initial, particularly because of the current focus on agreements and practices that restrict employee movement (aka “no-poaching” agreements), so they prefer “POPPCI”!
The definition announced some years ago by the Australian Competition and Consumer Commission is even more direct and simple (if somewhat overstated): "A cartel exists when businesses agree to act together instead of competing with each other."
Tracking cartel activity
The common method used by regulatory agencies around the world for tracking cartel activity is to count the number of cases and total the monetary value of sanctions imposed. Those numbers go up and down from year to year; for example, they dipped in 2018 and rose back in 2019. In 2020, some metrics went down because of the COVID-19 pandemic’s effects on personnel, while at the same time the number of jurisdictions reporting new cases and higher-than-ever fines went up. While these are interesting points of reference, they can be misleading. Many competition cases have long gestation periods so that one year’s metrics do not reflect current levels of activity. Given the length of time needed to conclude investigations and prosecutions, annual data may simply reflect stages of case development. Changes from year to year rarely, if ever, reflect a continuing trend, and emphasis on significant fines, or on actions against leading firms, does not provide instructive guidance to the full business community.
Also, metrics fail to capture information regarding significant procedural changes, such as rulings that extend liability to parent or controlling corporations, dawn raids, revisions in steps involving leniency regimes, or initiatives in regulatory agencies addressing specific problematic areas, including new inquiries into digital marketing, the role that the use of algorithms plays in competitive behaviour and enhanced recognition that business activity among entities that are not viewed as direct competitors in their principal businesses may nonetheless include involvement in restraints that affect market function in more limited sectors, such as employment and wages.
The number and variety of proceedings involving cartel behaviour, applying sanctions to all manner of POPPCI agreements between competitors, is the meat on which regulatory authorities, worldwide, feed. And the impact on business entities and individuals caught in these proceedings – both criminal and civil – can be extraordinary. Over 150 countries, as well as the EU, have some form of competition laws, and co-operation between regulatory authorities is robust. Over 40 countries have laws imposing criminal penalties on cartels and their participants. The jurisdictions in which anti-cartel activity is beginning to gain regular attention – consider, eg, Brazil, Chile, Egypt, India, Mexico, South Korea and Turkey – leave little doubt that concern for potential cartel issues, everywhere, is mandatory. Put simply, agreements that restrict the decisions of competitive market participants in any of the POPPCI categories, in any jurisdiction and among entities of any size, are likely to be problematic and should only be pursued after obtaining legal guidance from qualified and experienced counsel.
Targets and actions
The targets of competition agencies are varied. Small and medium-sized enterprises, and activities in economic sectors that might be thought of as less significant, do not escape scrutiny. Consider the activities in the past few years of the US Department of Justice Antitrust Division and the US Federal Trade Commission. They have ranged from opposition to a proposed regulation that would bar Kansas real estate brokers from offering gift cards to homebuyers, to action against companies using electronic media to set the prices of customised online promotional products, to foreign exchange manipulations, to restrictive agreements between hospitals in south-east Michigan limiting where they would market, to employers' "no-poaching" and wage-fixing agreements affecting workers (between major multinationals, but also between local Texas therapist staffing companies) and classic alleged price-fixing and/or market allocation schemes in international shipping, electrolytic capacitors and packaged seafood. In addition, cartels face the administrative authority of the Federal Trade Commission, which has been applied to a trade association code of conduct restricting competition among organists and chorus conductors, and fee-setting methods used by appraisal management companies. Both agencies predict that their efforts in 2021-22 will be increasing. And state attorneys general maintain antitrust enforcement teams under their state antitrust laws as well.
Competition authorities' actions against cartels in major sectors of the economy – e-commerce platforms, energy, transport, banking and finance, public project bid rigging, etc – are well known. But in recent years, regulatory scrutiny has also extended to matters as diverse as musical instruments, rolled lead roofing products, cleaning services, laundry detergents, maintenance of gas furnaces, optical disk drives, pipework connectors, pharmaceutical ingredients, metal packaging manufacturers, spark plug manufacturers, online sellers of posters and frames, courier services, real estate commissions among agents in a local area, adult incontinence undergarments, in-home personal care services, Tasmanian growers of Atlantic salmon, warehouse surcharges, arrangements setting the recovery of the costs of emission compliance in product pricing, down to arrangements among four publicists, two cardboard box companies (with one given immunity for co-operation), and even a truck/tractor mechanic who quoted a repair cost for a front-end loader and then sought cover from the only other mechanic in a remote region of Australia. The message is clear: no one can assume that an area of business activity is too small to be the object of attention.
There are two additional areas for caution. First, as economic dislocations occur in economies worldwide, and recovery proceeds unevenly, there is typically increased emphasis on a firm’s ability to gain insight regarding the upcoming strategies of competitors: when will production levels be increased, can volume be managed to avoid downward pressure on prices, and ultimately whether it is possible to co-ordinate market developments so as to have smooth changes. These are topics that can easily evolve into illegal cartel behaviour. They must be monitored carefully. (As they will also be monitored by regulatory agencies!) And second, private rights of action to recover damages, including class actions or equivalent procedures, continue to play an important role in many countries worldwide and must be considered alongside government regulatory activity.
Remember, this guide is intended as a broad, first-level, survey of principles and practices in a substantial number of jurisdictions. It will, we hope, be useful in helping to identify issues and shape further enquiry. Its scope will also help to underscore the fact that effective competition law compliance programmes are an essential element of risk management and client education (as well as having potential salutary effects in affecting the sanctions imposed when companies and individuals find themselves under scrutiny). But the guide is not a compendium of answers to actual problems that arise in the course of business activity. "Answers" require detailed review and evaluation. Competition laws are not only complex as written and interpreted; they most often call for fact-intensive enquiry and analysis by experienced counsel. Those caveats notwithstanding, it is a body of information of immense value to anyone concerned with the application of "cartel" (or "POPPCI") questions that arise on a regular basis.