Presentation of the study “Cross-border cartels: challenges and threats for competition authorities” at the ASCOLA Conference

Cross-Border Cartels
Presentation of the study “Cross-border cartels: challenges and threats for competition authorities” at the ASCOLA Conference
03.07.2021 109

On the 2nd of July, Centre’s Director Alexey Ivanov and Research Fellow Anna Pozdnyakova participated in the 16th ASCOLA (Virtual) Conference as speakers and presented the BRICS Competition Centre's findings on the topic "Cross border cartels: challenges and threats for competition agencies". The presentation took place at the session "Enforcement Challenges".

Alexey started their presentation by outlining and explaining the problems that competition agencies, especially in the developing countries face, when dealing with the cross-border cartels, such as for example difference in investigative procedures and time limits set for investigation; underdeveloped leniency programs, especially in young competition regimes; absence of extraterritorial reach of competition legislation, in developing jurisdictions and lack of convergence of competition laws regarding sanctions for participation in cross border cartels. It is difficult to give precise quantitative assessment of such negative impact, however, for the period 2012-2016, import by developing countries from the industries, where cartels had been detected, represented 6.7%.

Alexey also spoke about the BRICS Competition Сentre's findings according to the Empirical Study conducted for the support of the discussion during the Roundtable ‘Combating Cross-Border Cartels’ in course of the Eighth United Nations Conference to Review All Aspects of the Set on Mutually Agreed Equitable Principles and Rules for the Control of Restrictive Business Practices which took place on 22 October 2020. It showed that most of the competition agencies, which participated in the study believe that combating cartels is a high priority. However, only 1/3 (12 out of 37) respondents have experience tackling cross-border cartels, despite most jurisdictions considering cross-border cartels to be a significant threat to their economies. Many jurisdictions set their competition laws recently and, so far, had no chance to gain experience and knowledge on how to combat cross border cartels.

There are certain legal barriers that hinder the fight against cross-border cartels. The first legal question arising in the course of combating cross border cartels is the capabilities of competition authorities to take legal action in relation to foreign companies and/or individuals that participate in cartel activity. The lack of a principle of extraterritoriality thus complicates the investigation. Moreover, developing jurisdictions often do not have the capacity to establish their own leniency programmes or effectively use them.

Lastly, Mr Ivanov explained some of the significant challenges in enforcement when combating the cross-border cartels, such as evidence gathering, presence of foreign defendants at case hearings, evidence gathering and receiving information from outside of national jurisdiction. The above is why the developing countries often lack the resources to deal with the cross-border cartels – 

"Only when they are in the view of big developed jurisdictions they are dealt with; when the cross-border cartel affects only the developing jurisdictions – it is forgotten". 

According to Mr Ivanov, there are cases where – "everybody kind of knew about the cartel, but nobody could do anything...".

Anna Pozdnyakova delivered the second part of the presentation. Ms Pozdnyakova spoke on the international cooperation and ways forward for the developing countries. She emphasized that in such cases, international cooperation is an essential element for efficient enforcement, especially when considering the results of the previously mentioned Empirical study, which clearly shows that some jurisdictions lack the necessary experience in the field of cross-border cartel combating. Thus, 14 Competition Authorities do not have experience of international cooperation in specific cases and the ones who have international cooperation experience prefer to use non-binding tools. International cooperation can include measures such as request for information, virtual consultations, in-person consultations, exchange of opinion on investigative methods, exchange of options on absence/existence of a violation, exchange of confidential information, exchange of confidential documents, simultaneous dawn raids, joint market inquiries, joint dawn raids, enforcement actions on behalf of a foreign jurisdiction.

Anna explained the potential ways forward that could help alleviate the problems currently faced by the jurisdictions. Amongst such possible solutions are: convergence of national competition legislation – which would allow for easier international cooperation; creation of global approaches and standards or creating a unified international database on cross-border cartel cases; more active international cooperation directly between competition authorities or through international organizations dedicated explicitly to combating cross-border cartels.

Overall the presentation was concluded by summing up all of the aforementioned points, with Mr Ivanov stating that one of the most critical problems is the lack of trust between the competition agencies, which leads to a situation where developed jurisdictions rely on agreements and share information only with each other. In contrast, many of the developing ones do not have extraterritorial reach or agreements and often lack access to the necessary information due to a lack of trust. International cooperation is an important step towards solving the problem of cross-border cartels, and the international competition community can significantly contribute to enhancing cross-border cartels enforcement worldwide. 

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