U.S. Chamber of Commerce India/US Competition Laws Cartel Enforcement Competition Commission of India Cartel Training Washington, D.C. October 25-29, 2010

U.S. Chamber of Commerce

India/US Competition Laws Cartel Enforcement

Competition Commission of IndiaCartel Training

Washington, D.C. October 25-29, 2010

Cartels & AgreementsAgenda For Today

• A Comparative Primer • Relevant Statutes• Definition of Agreement• Treatment of Cartels v. Other Agreements• Treatment of Agreements Among Competitors &

Among Undertakings at Different Levels of an Industry

• Rule of Reason v. Exemptions• Investigation of Cartel Conduct

Key Statutes, Enforcement Authority, Hearing/Trade

The Competition Act, 2002 (12 of 2003)as amended by

The Competition (Amendment) Act,

2007 (39 of 2007)PREDECESSOR STATUTEMonopolies & Restrictive Trade Practices Act, 1973

The Sherman Act (1890)(15 USC

The Clayton Act (1914)(15 U.S.C.

Foreign Trade Antitrust Improvement Act (1981)

Competition Commission of India Dhanedra Kumar, Chairperson A. K. Chauhan, Director General

Antitrust Division, U.S. Department of Justice Christine Varney, Assistant Attorney General

Hearings before the CommissionCompetition Appellate TribunalSupreme Court of India

Trials in U.S. District CourtAppeals to Circuit CourtsU.S. Supreme Court

Statutory Prohibitions

Agreement in respect of production, supply, distribution…which causes or is likely to cause an appreciable adverse effect on competition in India

Competition Act §3 (1)

Contract, combination or conspiracy “in restraint of trade”

Sherman Act 15 U.S.C. § 1

Direct, substantial, reasonably foreseeable effect on US commerce

Foreign Trade Antitrust Improvements Act, 15 U.S.C.§6a

Any agreement directly/indirectly:(a) determing prices; (b) limiting or controlling production, supply,

markets…or services;(c) sharing market through allocation;(d) resulting in bid rigging or collusive bidding

presumed to have an appreciable adverse effect

Competition Act §3(3)

Illegal “per se”: price fixing, geographic, product market or

customer allocation agreement on terms/conditions of sale when among horizontal competitors

Case Law Interpretation

Does not apply to joint venture agreements if they increase efficiency in production, supply, distribution, storage, acquisition or control of goods or provisions of services


Joint Ventures analyzed under a “rule of reason” weighing impact of restraints against efficiencies and net competitive benefits

Case Law Interpretation

Penalties/Exposure10% of average turnover for 3 preceeding years

or for a cartel[1]:

3 times profit or 10% of turnover for each year of continuation, whichever is higherCompetition Act §27

Fines up to $100 million on each count

15 U.S.C. §1. (Under U.S. sentencing guidelines a base fine 20 of volume of commerce, adjusted by culpability score considering various factors)

or twice the gain realized or the loss suffered by victims 18 U.S.C.§3571(d)

Fines on individuals by the Commission: rupees one lakh/day for each day of non-compliance, up to maximum of rupees ten crorePenalties by New Delhi Magistrate: up to 3 years in prison, fines up to reupees 25 crore, or both, for failure to comply with orders, upon complaint by the CommissionCompetition Act §42

Individuals fined up to $1 millionUp to 10 years imprisonment on each count15 USC. § 1

[1] Section 2 (c) defines Cartel to include an association of producers, sellers, distributors, traders or service providers who, by agreement amongst themselves, limit, control or attempt to control the production, distribution, sale or price of, or , trade in goods or provisions of services.

Investigation Procedure

Commission can initiate inquiry on its own motion, upon receipt of a complaint,or upon a referral from central government

Competition Act §19

If Commission is of the view that there exists a prima facie case, it shall direct the Director General to investigate and issue a report


Director General for the purpose of inquiries is vested with the powers of civil court (including interviews, examinations) besides powers to conduct

‘search and seizure’Competition Act §§ 41, 36

Antitrust Division generally empowered to enforce both criminal and civil penalties

Antitrust Division can issue “civil investigative demands” to collect evidence (not used in criminal investigations) and/or can petition a US Court to convene a grand jury

FBI assistance, court-approved search warrants and wiretaps available

Grand jury issues document subpoenas executed by Justice Department, and can hear testimony; a variety of interview and immunity techniques are available

Leniency Programs

Commission may impose a “lesser penalty” on someone who makes disclosure before DG issues his report


Cooperation must be complete, information must be “vital,” with consideration to be given to “stage” at which person comes forward, quality of information, and facts and circumstances

First applicant reduction up to 100%; second and third applicants providing “significant added value” may get reductions of up to 50% and 30%

Reg. No. 4 of 2009

Full leniency for first to come forward, and its employees if an investigation has not yet begun (unless corporation coerced others or was the originator), or if Division does not at the time have evidence likely to result in sustainable conviction and not unfair to others

and report is a corporate act, is with candor and complete, unlawful acts were promptly terminated when discovered, cooperation is complete, restitution is made [remain exposed to single damages, no trebling]

No leniency (amnesty) for later applicants

Corporate Leniency Policy, August 1993

Relevant Statutes

• Sherman Act Section 1

• Competition Act (Amendment) Of 2007

Sherman Act

• Sec. 1. Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal. Every person who shall make any contract or engage in any combination or conspiracy hereby declared to be illegal shall be deemed guilty of a felony, …

Competition Act Prohibits Any - Agreement in respect of production, supply, distribution…

which causes or is likely to cause an appreciable adverse effect on competition in India

Competition Act §3 (1)

Any agreement directly/indirectly:(a) determing prices; (b) limiting or controlling production, supply, markets…or services;(c) sharing market through allocation;(d) resulting in bid rigging or collusive bidding

is presumed to have an appreciable adverse effectCompetition Act §3(3)

Does not apply to joint venture agreements if they increase efficiency in production, supply, distribution, storage, acquisition or control of goods or provisions of services


Agreements

• Distinguishing agreements from unilateral conduct

• Identifying agreements among competitors

• Identifying vertical agreements

Agreements v. Unilateral Conduct

• Sherman Act § 1 Applies Only To Concerted Action - Not To Unilateral Conduct

• Agreement Must Be Between Two or More Independent Entities– Intra-enterprise conspiracies

• Agreement May Be Reached Under Pressure

Agreements v. Unilateral Conduct

• No written agreement/verbal communication needed to find an agreement– “evidence that tends to exclude the possibility of independent

action…direct or circumstantial evidence that reasonably tends to prove…a conscious commitment to a common scheme designed to achieve an unlawful objective.” Monsanto Co. v. Spray-Rite Service Corp., 465 U.S. 752, 768 (1984).

– “conduct as consistent with permissible competition as with illegal conspiracy does not, standing alone, support an inference of antitrust conspiracy.” Matsushita Electric Industrial Co. v. Zenith Radio Corp., 475 U.S. 574, 588 (1986).

– Consider if (1) “any rational motive” to join a conspiracy and (2) conduct “consistent with…independent interest.” Matsushita, 475 U.S. at 587.

Horizontal Agreements• Among competitors as competitors

• More than conscious parallel action– In self-interest only if others act similarly; contrary to

self-interest if act alone

– Legitimate business reasons to act independently

– Motive to conspire

– Lawsuits alleging an antitrust conspiracy must state facts suggesting that the conspiracy is “plausible,” not merely “conceivable” Bell Atlantic v. Twombly, 550 U.S. 544 (2007)

• Actions by trade associations

Vertical Agreements

• Among undertakings at different levels of an industry

• More needed to prove agreement than termination of wholesaler/dealer by manufacturer in response to complaints by other wholesalers/dealers

• Hub & spokes, to benefit the hub and/or spokes– U.S. v. General Motors Corp., 384 U.S. 127 (1966)– Toys “R” Us, Inc. v. FTC, 221 F.3d 928 (7th Cir. 2000)

Treatment of Cartels v. Other Agreements

• Neither Sherman Act nor Competition Act distinguishes between cartels and other agreements

• Sherman Act provides that all violations are criminal offenses

• Distinction in U.S. established by Supreme Court decisions since 1911– Section 1 prohibits only unreasonable restraints of trade– Unreasonable =

raises market prices

lowers total market output/quality/choice

creates/maintains/increases market power

– Only cartels subject to criminal sanctions

Treatment of Cartels v. Other Agreements cont’d

• Some types of agreements presumed to be unreasonable, based on judicial experience– Price fixing, bidrigging by competitors– Market allocations by competitors - territories, customers, market

shares, sales volumes

• Conduct per se illegal “only after considerable experience” with that type of conduct

• Other conduct considered case-by-case, under standard of reasonableness– Whether conduct’s anticompetitive effect substantially outweighs

pro-competitive effect that reasonably requires conduct to be achieved

– No consideration of social or other factors

Joint Ventures

• DOJ/FTC Antitrust Guidelines for Collaborations among Competitors

• Joint venture agreements among competitors are often pro-competitive– New products or services created– More efficient utilization of resources– Significant cost savings– Joint ventures are presumptively reviewed under the rule of reason– The “pricing decisions of a legitimate joint venture do not fall within the narrow

category of activity that is per se unlawful.” Texaco Inc. v. Dagher, 547 U.S. 1, 8 (2006)

• Competitive concerns may arise if the JV– Creates or enhances the market power of the participants– Imposes competitive restraints on the parties beyond the scope of the JV

Treatment of Horizontal v. Vertical Agreements

• Competitive Impact of Horizontal v. Vertical Agreements– Interbrand v. Intrabrand Competition

• Established by judicial precedents

Treatment of Vertical Agreements

• Unilateral v. coordinated action in vertical contexts– Refusals to deal– Discriminatory pricing

• Market power in vertical contexts

• Analysis of vertical price v. non-price agreements– Restrictions on sales/purchases

• Dual distribution arrangements– Wholesale-retail price squeezes

• Pacific Bell Telephone Co. v. linkLine Communications, Inc., 555 U.S. ___ (2009)

Rule of Reason in U.S. v. Exemptions

• U.S. rule of reason considers impact on competition

• Exemptions reflect concerns about non-competition factors and may ignore negative impact on competition

Impact on Competition• Proof of actual anticompetitive effect

– Reduction of output– Less price competition

• Market analysis– Relevant market– Market power = ability to raise/lower prices beyond that

possible with competition• Market share• Market entry barriers

– Impact of conduct on market power, competition, not on individual competitors

• Intent may indicate likely impact

Impact on Competition cont’d

• Proof of pro-competitive effects– Efficiencies– Avoidance of free-riding– Increasing output/quality/choices– Introducing new products/services– Conduct reasonably necessary to achieve procompetitive effects

or procompetitive effects outweigh anticompetitive effects

• Factors unrelated to competitive effect are irrelevant– “Under the Sherman Act the criterion to be used in judging the

validity of a restraint is its impact on competition.” NCAA v. Board of Regents, 468 U.S. 85, 104 (1984)

U. S. Exemptions

• U.S. Exemptions– Statutory– Judicial– Application

U.S. Exemptions• Statutory

– Regulated sectors• Agriculture, communications, transportation, energy, financial markets,

healthcare, insurance, sports, organized labor

– Types of conduct• R&D, production joint ventures, standards setting organizations, export

trading companies, medical training, higher education financial aid

• Judicial– Constitutional

• State action doctrine v. dormant commerce clause• Noerr-Pennington doctrine

– Implied from regulations of sectors• Filed rate/Keogh doctrine

U.S. Exemptions cont’d

• Narrowly construed

• Trend toward exemptions– Only from per se rule and treble damages

• Conduct may be found unreasonable and subject to single damages

– That are specific and narrow

Fundamental Goal of US Antitrust Law

• Protect the free market system– Protect competition– Multiple, independent buyers and sellers

• Major Concern In US - Cartel Agreements Between Competitors – Cartel Agreements are "the supreme evil of antitrust."

Verizon Communications Inc. v. Law Offices of Curtis V. Trinko, LLP, 540 U.S. 398, 408 (2004).

Sherman Act Section 1

• “Every contract, combination… or conspiracy in restraint of trade or commerce… is declared to be illegal”

– Formal agreement not required

– Written agreement not required

– Implied Agreements

– Common Purpose or Understanding

Per Se Illegal Agreements Prosecuted As Criminal Violations In The US

• Price-Fixing Agreements Among Competitors• Bid-Rigging Among Competitors• Customer or Territorial Allocation Agreements

Among Competitors• Market Allocation/Output Restriction/Sales

Volume Agreements Among Competitors

Why Is This Important?

• Criminal Exposure

• Follow on Civil Action Exposure

Antitrust Criminal Penalties Enhancement And Reform Act Of 2004

• Enhanced Carrots And Sticks

• Statutory Maximum Individual Penalties—$1 Million Fine And 10 Years In Jail

• Statutory Maximum Corporate Fine—$100 Million

• Alternative Fine Statute – Can Increase Fine To Twice The Gain To Conspirators Or Twice The Loss To Victims

• De-trebling Of Civil Damages For Amnesty Applicants

U. S. Strategies For Investigation Of Cartel Conduct

• Dedicated Resources - Top Enforcement Priority – Dedicated Cartel Units - Eight Offices Dedicated To Anti-

Cartel Enforcement

– Trained Investigators - Assigned FBI Agents

– Proactive Outreach To Assist In Detection (Public and Private Sectors)

• Treat Cartels As Crimes & Members As Criminals– Holding Individuals Responsible - Greatest Deterrent

– Some Avoid Extending Conduct To US

– Cartels Thrive When They Are Under Punished

U. S. Strategies For Investigation Of Cartel Conduct (Continued)

• Reward Cooperation - Penalize Failure To Take Responsibility– Secret Nature Of Cartels = Need For Cooperation From Participants

Trained Investigators - Assigned FBI Agents– Inducing Cooperation By Effective Leniency Policy– Significant Rewards For Second In– Significant Punishment For Those Who Do Not Accept Responsibility

• Maximize Transparency & Predictability– Cooperation Results From Predictability & Certainty– Undertakings Need To Know Standards For:

• Opening Hard Core Cartel Investigations• Bringing Charges• Calculating And Imposing Penalties

• Protect Integrity Of Investigations – Vigorous Prosecution of Obstruction


• Reward Cooperation - Penalize Failure To Take Responsibility– Secret Nature Of Cartels = Need For Cooperation From Participants

Trained Investigators - Assigned FBI Agents– Inducing Cooperation By Effective Leniency Policy– Significant Rewards For Second In– Significant Punishment For Those Who Do Not Accept Responsibility

• Maximize Transparency & Predictability– Cooperation Results From Predictability & Certainty– Undertakings Need To Know Standards For:

• Opening Hard Core Cartel Investigations• Bringing Charges• Calculating And Imposing Penalties

• Protect Integrity Of Investigation Through Prosecution of Obstruction


• Cooperative Relationships With Other Law Enforcement Agencies– Public Prosecutor - Even If Cartel Violation Is Civil/Administrative– Domestic Investigative Agencies - Police– Government Procurement Officials– Foreign Competition Authorities

• Investigate Related Offenses As Well As Cartel Offense– Source of Leads & Inducements To Cooperate– Examples - Kickbacks/Bribery To Public Or Private Procurement

Officials; Tax Offenses For Failure To Report Bribery Income• Engage In Public Advocacy

– Proactive Steps To Change Public & Corporate Perception of Hardcore Cartels

– Advocate Strong Anti-cartel Deterrent Message Media, Business Groups, Consumer Groups, Government Agencies, & Defense Bar

– Outreach To Help Others Identity & Report Hardcore Cartel Conduct

Investigation Of Antitrust Crimes By U.S. Authorities

• How Do Investigations Get Started?– Informants—Undercover Agents– Customer Complaints - Procurement Officials– Foreign Investigations - International Cooperation

Agreements– 1993 Corporate Leniency Policy—More About It

Later

Investigation Of Antitrust Crimes By U.S. Authorities (Continued)

• Investigative Tools:– Search Warrants– Consensual Recording Of Conversations/Meetings – Wire Taps – Pen Register & Trap & Trace Devices– Police (FBI) Field Questioning—Drop-in Interviews– Border Watches & Interpol Red Notices– Subpoenas For Documents & Testimony Under Oath– Compulsion Orders—18 U.S.C. §6002– Grand Jury—Secret Proceeding—No Lawyers Present– Severe Penalties For Obstructing Investigation

Investigation Of Antitrust “Crimes”By Foreign AuthoritiesEuropean Commission

• Civil Investigative Powers– Dawn raids—essentially a search of corporate premises– Can seal premises– Can now search private homes– Can now question witnesses—at least during dawn raid– Dedicated Cartel Units

Japan• Civil/Administrative Investigative Powers

– JFTC Has Dawn Raid Authority– Can search private homes– Can question witnesses—can arrest for purpose of questioning– Criminal Referral To Public Prosecutor

Investigation Of International Cartels

By U.S. Authorities • MLAT

• Australia/US Antitrust Assistant Agreement (IAEAA)

• Exercise Of Domestic Powers At Request Of Foreign Government

• Letter Rogatory—Documents—Witness Questioning

• Border Watches

• Informal Cooperation—Coordination—Feb. 2003 coordinated simultaneous raids executed by US, EU, Japan and Canada

• Interpol Notices

• Extradition – UK National (Norris) Extradited On Obstruction Charges To US 2010

Investigation Of Antitrust Crimes

• Basic Information To Obtain From Companies

– Methodology used to determine prices of company products - price list, bids, discounts, sale-by-sale negotiation, etc.

– Methodology for communicating price changes to customers

– Identity of corporate employees who have any responsibilities for establishing company prices/bids

– Identity of secretaries or administrative assistants to individuals responsible for determining prices/bids

– Travel/Expense/Personnel Records/Calendars/Correspondence (including electronic correspondence) of individuals responsible for determining prices/bids

– Files relating to pricing, bidding, etc.

– Identity of major customers

– Identity of competitors and any competitors with which company also has a customer/supplier relationship

Investigation Of Antitrust Crimes

• Basic Information To Obtain From Companies (cont.)

– Documents and Information relating to all price changes - contemplated and/or adopted

– Documents and Information relating to all bid proposals - contemplated and/or submitted

– Documents and Information relating to customer complaints regarding pricing/bids/terms of sale

– Documents and Information relating to contacts with competitors

– Documents and Information relating to Trade Association membership and identity of individual employees who attended meetings of Trade Association

– Documents and Information relating to the company’s strategic and/or annual plans

– Company financial documents

USA Enforcement Since 2000

• 75-100 Investigations initiated each year

• 30-40 Grand Juries empanelled each year

• 30-50 cases filed each year

• 434 individuals have been charged

• 215 corporations have been chargedDATA IS THROUGH END OF 2009

Fines In Criminal Antitrust CasesCan Be Enormous

Fines In The United States• Fines FY00 - FY 09 - Over $4 Billion• 75 Corporate Fines of $10 Million or more• 18 Corporate Fines of $100 Million or more• 18 U.S.C. § 3571(d) – Alternative Fine Statute

– Twice the gain – Twice the loss

Even Larger Fines In Europe• EC Imposed Fines 2004-2009 — Over €10 Billion

US: Over $4 Billion in Fines Collected Since 2000

U.S. Jail Sentences In Antitrust Criminal Cases Are Also On The Rise

• FY97 - Average Jail Sentence - 4 Months

• FY09 - Average Jail Sentence - 25 Months– January, 2009 - Four Years - Longest Sentence For

A Single Antitrust Offense

• Executives From Europe And Asia Have Served Time In US Prisons

• Maximum - 10 Years; Guidelines Amendments Effective November 2005

Prison Days Sentenced Since 2000

Other Consequences

• Civil Actions– Direct Purchasers– Indirect Purchasers– Foreign Purchasers (Empagran)

• State Civil Investigations And Parens Patriae Actions• Class Actions and Opt-out Claims• Shareholder Actions• Derivative Actions• Conviction in criminal proceeding is prima facie evidence

of liability in civil cases—what’s really at issue is damages

• Debarment

Corporate Leniency Policy — A Real Incentive For Early Cooperation

• What Is It And What’s Required?– Cooperation agreement with the Government– Admission (To Government) Of Criminal Violation– Exposition of all relevant facts– Documents wherever located (U.S. or abroad)– Best efforts to provide employee cooperation

• What does company get out of it?– No criminal charges against the company—No fine– No collateral consequences from a felony conviction– No charges against cooperating executives—No jail time – Potential to de-treble civil damages

Corporate Leniency Policy — A Real Incentive For Early Cooperation (cont.)

• Part A: Automatic if no preexisting investigation– No exercise of prosecutorial discretion– Cooperating executives receive automatic amnesty if

corporation qualifies under Part A

• Part B: Alternative amnesty—available after investigation underway– Evidence not yet sufficient to sustain a conviction– Cooperating executives receive serious consideration

for lenient treatment in form of immunity or individual amnesty

Corporate Leniency Policy — A Real Incentive For Early Cooperation (cont.)

• Requirements– Not The leader or organizer and did not coerce others to

join– Upon discovery corporation took prompt and effective

action to terminate its participation in illegal activity– Where possible, corporation makes restitution to victims– Full cooperation with Antitrust Division throughout

investigation and prosecutions

• Misrepresentations of Prerequisites or Failure to Cooperate Fully– Removal from program—Subject to prosecution– Evidence provided may be used against company

Criteria For An Effective Leniency Program Inducing Companies To Self Report

The Threat of Sever Sanctions• Perceived Risks Must Outweigh Potential Rewards• Criminal Sanctions Provide The Greatest Inducement

Realistic Fear Of Detection• Strong Enforcement Record • Must Have Adequate Tools of Detection - Law Enforcement

Powers• Incentives For Individual Cooperation/Reporting• Meaningful Penalties For Obstructing Investigation

Amnesty Plus - Cartel Profiling - Proactive Strategies• Strategies That Increase The Risk Of Detection • Omnibus Question• Penalty Plus - Increase Incentives To Self Detect And Report

Criteria For An Effective Leniency Program Inducing Companies To Self Report (Cont.)

Transparency In Enforcement Policies• Standards For Opening Investigation & Conduct Subject To

Cartel Investigation/Prosecution • Standards For Bringing Charges• Prosecutorial Priorities• Sentencing & Fine Calculations• Application Of Leniency Policy - Confidence & Predictability

Best Practices In Application Of Leniency Programs

Available Prior To And After Institution Of Investigation Use Of Markers To Enhance Race To Enforcement Authority -

Reasonable Standards For Extending Time Requirement Of Full Cooperation - Employees Too Confidentiality Transparency & Certainty In Policy And Procedures For

Applying For Amnesty Parallel Systems - Cover Civil And Criminal Consequences Education - Enforcement Community - Legal Community -

Business Community Lenient Treatment For Second/Third In

Effective Antitrust Compliance Programs

• First goal—prevent the problem in the first place– Requires commitment at highest levels of company– Education and certification of compliance by executives– Appropriate employees should understand government’s view of

“red flags”– Ensure all employees know how, and are encouraged, to report

suspicious conduct without fear of retaliation

– Encouragement of reporting—hot line—no retaliation– Severe consequences for violations

• Second goal—early detection– Early end to conduct—reduces criminal exposure—fines and jail

based on volume of commerce affected– Early end to conduct—reduces civil damages– Leniency Programs

Effective Antitrust Compliance Programs (Continued)

• General Provisions And Structure– Educate Personnel About Basic Provisions of Antitrust Law And

Establish Clear Standards Of Conduct – Educate Personnel About Enforcement Agency’s Priorities,

Policies For Destabilizing Cartels, And Severe Penalties – Creation Of Clear Procedures For Obtaining Guidance In

Questionable Situations– Effectiveness Of Program Entrusted To High Level Personal– Day-To-Day Operation Entrusted To Specific Individuals Who

Report Directly To High Level Personnel Or To The Board– Ensure That Those Previously Involved In Questionable Conduct

Are Not Responsible For Conduct Of Program– Periodic Education Programs For All Personnel Including Senior

Management


• General Provisions And Structure– Incentives To Perform In Compliance And To Report Violations – Prompt And Effective Responses To All Reports of Violations– Appropriate Disciplinary Measures For Violation (Publicize)– Monitoring & Periodic Auditing To Ensure Compliance And

Detect Violations– Evaluate Effectiveness Periodically - Particularly After Serious

Violations– Periodic Risk Assessment To Identify Potentially Problematic

Areas Or Practices And Take Corrective Action


• Specific Provisions – Education Based On Specific Common Characteristics Of Cartels– Often Brazen Direct – Nothing Subtle – Agreements– Elaborate Steps To Avoid Detection– Senior Executives Often Involved– Often Highly Concentrated Industries – But Some Exceptions – Often Large, Publicly Traded Companies Involved – Cartel Participants Often Are Recidivists – Often Develop In Industries With Excess Capacity


• Specific Provisions – Education Based On Specific Common Characteristics Of Cartels (Continued)

– Control & Allocate Sales Volumes To Ensure Adherence To Fixed

– Often Meet Under Guise Or Cover Of Trade Association Meetings

– Threats And Retaliation To Police Agreement– Compensation Schemes - End Of Year Sales – Adjustments –

To Even Out Allocated Sales And To Ensure Adherence To Agreed Sales Volume Allocation During Year

• Role Of Enforcement Agency – Educate Business/Legal Communities About Enforcement

Programs, Policies, Procedures– Advocacy – Prevent & Detect (Benefits Of Leniency Policy)

“Red Flags” Of Collusion In Government

Procurement • US Officials View The Following As Indications Of Collusion:

Small number of bidders or proposals Similarities in bids or proposals - i.e., similar handwriting, typos,

mathematical errors; Proposals sent from same location - address, email, fax, courier

account number; Last minute changes (white out, etc.) made to alter prices; Metadata that shows bids/proposals created or edited by one vendor Patterns In Project Awards

Rotation of awards among bidders Vendors winning similar volume of work Winning vendor subcontracts to unsuccessful bidders or those that could

have, but did not bid

• Other “red flags” - Bids from unqualified vendors; delivery of multiple proposals by vendor at in-person procurement; vendor statements re: competitors’ pricing or advance knowledge of outcome.

Case Selection Criteria - Particularly For A New Enforcement Agency

• Keep It Simple– Clear Evidence of Collusion And Knowledge of Culpability– Conduct That Public/Business Community Will View As “Wrong”– Avoid Cases Where It’s Unclear Whether Conduct Is A Cartel Or

Joint Venture– Bring Cases You Can Win - Early Losses Create Confusion

• Goal Of Case Selection Is Deterrence– Focus On Domestic Markets Where Deterrence Is Maximized

• Bid rigging on government procurement contracts

• Price fixing/market allocation in domestic heavy industries and construction trades

– Focus On Domestic Cases That Will Result In Dramatic Fines

• Create A Dedicated Cartel Team