10 Key Takeaways — Developments in International Cartel Enforcement and Observations From the International Cartel Workshop

Latham’s cartel defense lawyers joined leading antitrust practitioners and enforcers to discuss the current state of cartel enforcement and anticipated future developments at the American Bar Association Antitrust Law Section’s 15th International Cartel Workshop (Workshop) on June 24-26, 2024. The three-day event brought together practitioners from 24 jurisdictions and enforcers from 13 jurisdictions, including the US, UK, Australia, Austria, Belgium, Brazil, Canada, Germany, Ireland, Japan, Mexico, Portugal, and Spain.

Enforcers from a number of jurisdictions, including from the Department of Justice (DOJ) and European Commission (EC), emphasized their commitment to targeting a wider range of conduct for cartel enforcement under new policies and through novel investigative approaches.

1. Ex officio (non-leniency) investigations on the rise: Enforcers from almost every jurisdiction at the Workshop stated that they are pursuing: (i) a greater number of cases through investigations not instigated by a corporate leniency application (i.e., ex officio investigations); (ii) a wider range of conduct (i.e., atypical cartels); and (iii) the development of additional detection methods that do not rely on cooperation from leniency applicants.

• The EC reported roughly 50% of early-stage portfolio cases are through ex officio investigations, and Spain (CNMC) reported roughly 72% of its cases are through ex officio investigations. The EC’s priority is to pursue a mix of ex officio and leniency investigations, and it believes it has the right tools to do so.
• While the US does not publicly disclose percentages, enforcers from the DOJ noted an upward trend of the number of investigations developed outside the Leniency Program,See https://www.justice.gov/atr/leniency-program. and that they are focused on further generating their detection mechanisms.
• In Brazil (CADE) and Spain (CNMC), enforcers have invested significant resources in developing AI screening tools to increase proactive investigation.

2. Enforcers are expanding their detection toolbox: Enforcers are utilizing a wider array of detection tools and are focused on undertaking more proactive detection approaches than ever. There was a strong emphasis on encouraging whistleblowers, market insiders, and anonymous reporters to step forward,The EU reported it receives roughly 200 reports per year. Australia reported it has received over 108 reports in the first 10 months of setting up its whistleblower tool. as well as using other means to detect cartels outside of leniency cooperation, including:

• Enhanced communication with enforcers from other jurisdictions to share investigative tips and practices
• Training non-competition law enforcers to source potential leads
• Offering financial incentives for reports of cartel conductIn the UK, informants receive up to £250,000 for providing relevant information for an investigation (increased in 2023 from £100,000).
• Sourcing leads from merger reviews and second requests
• Sourcing leads from market studies, web scraping, and data collection
• Monitoring industries, pricing trends, and public announcementsEnforcers from the EU stated their continued efforts to monitor public announcements and press releases for potential leads. Enforcers from Germany stated that one of the agency’s largest cases was brought forth by analyzing Wikipedia entries which revealed price uniformity.
• Developing public databases, such as those mandated in Spain and Portugal, which require public companies to share certain bidding and sales information
• Developing artificial intelligence programs to recognize collusive conduct, including through screening and machine learning technologies
• Hiring retired FBI agents in the US to exclusively investigate antitrust violations and expand the DOJ’s ability to follow up on potential investigative leads

3. Destruction of evidence during investigations will be dealt with severely: Competition authorities are strengthening their approaches to holding companies and individuals accountable for document and data retention. In particular, there is a focus on requiring preservation of ephemeral and other types of messaging. Enforcers stressed that companies risk severe consequences if employees use messaging and social media applications but that data is not preserved.

• Enforcers from the DOJ stated they have experienced a surge in obstruction cases and are increasingly bringing criminal actions when they uncover attempts to destroy evidence. Interestingly, the DOJ stated that the use of digital communications has made some of their obstruction cases easier to prosecute, citing the digital trail left by missing documents obtained from cooperating witnesses. This emphasis is consistent with recent guidance issued by the DOJ on preservation obligations and consequences.See https://www.justice.gov/opa/pr/justice-department-and-ftc-update-guidance-reinforces-parties-preservation-obligations.
• The EC recently imposed a €15.9 million fine on International Flavors & Fragrances after a senior employee deleted messages during a dawn raid. Enforcers from the EC, including Maria Jaspers, Director at Directorate General Competition, emphasized that obstruction attempts will face severe consequences.See https://ec.europa.eu/commission/presscorner/detail/en/ip_24_3435.

4. Heightened collaboration among enforcers was noted throughout: Enforcers and practitioners observed the trend of increased international collaboration among competition authorities, including through open lines of communication, development of relationships with partners overseas, willingness to intervene as needed in foreign cases through court letters and public comments, and potential collaboration on the timing of investigations. A number of enforcers also stated that they observe practices in other jurisdictions to help guide their own policies.

5. There is heightened focus on the accountability of individuals in several jurisdictions: Enforcers from the US, UK, and Spain stressed the significance of increased individual accountability and prosecution.A recent study presented during a workshop by the Organization for Economic Cooperation and Development (OECD) found that 71% of countries now have sanctions for individuals for competition law violations.

• Enforcers from the US highlighted that (i) their focus has been on individual accountability as one of the biggest deterrents to cartel activity, (ii) and in 2023, the DOJ obtained the highest number of total days for incarceration in a single year for individuals prosecuted for antitrust violations in the last decade.
• Enforcers from the UK stated that they have continued to increase the use of disqualifications for individuals from director positions if they are found guilty of a competition infringement (a practice that their courts have upheld as valid). To date, there have been 35 disqualifications.
• There is a proposed increase in Spain, from €60,000 to €400,000, for the maximum limit of fines for individuals found to have committed a competition infringement.

6. Leniency applications are still coming in: Several enforcers noted an increase in leniency applications after reporting a period of downward trends.

• DOJ enforcers stated that leniency applicants have been increasing each year since the COVID-19 pandemic, with the second highest number of leniency applicants in the last decade received in 2023.
• Enforcers from the EU, Germany, UK, and Australia referenced similar trends. After a period of decline, they are now seeing an increase. In the EU, UK, and Australia, roughly 40-50% of cases are brought forth by leniency applicants.

7. There is an increase in dawn raids in Europe and that trend is having a broader impact:

• The number of dawn raids have continued to rise, including in the EU, India, Ireland, and Portugal.
• Similarly, in Germany, the validity of search warrants in ex officio investigations, while recently challenged, has now been upheld by its courts.
• We have observed a trend in which European investigations and dawn raids in certain industries appear to have led to US civil damages actions and, in some cases, DOJ criminal cartel investigations.

8. Enforcers are taking expansive views on what constitutes a cartel: A major refrain at the Workshop reflects what we are seeing in enforcement practice across jurisdictions, which is that enforcers are developing cases without reliance on direct evidence of traditional hardcore cartels. While some jurisdictions have established law that allows the use of presumptions to find a cartel through a concerted practice, the US traditionally has a higher threshold which requires finding of an actual cartel agreement, and not merely the exchange of information.

Enforcers from the DOJ, however, highlighted that this burden can be met by relying on circumstantial evidence and pointed to new technologies that allow for delegating decisions to software and pricing algorithms that, in their view, could amount to a cartel agreement. Practitioners noted that US enforcement appears to be moving towards prosecuting practices that do not appear to be hardcore cartel conduct (e.g., information exchange cases), in effect embracing a lower concerted action threshold that is unsupported by US caselaw.

9. Information sharing through pricing algorithms and AI are in the line of sight of cartel enforcers globally: Enforcers from a number of jurisdictions — including the US, EU, Brazil, Germany, Japan, Portugal, and Spain — highlighted applying competition law principles to new types of information exchange cases in the context of developing technologies.

• Enforcers from the EU noted that in these cases (i) formal agreements may not be necessary if business decisions are still happening jointly, and (ii) hub and spoke and horizontal price fixing agreements can occur even without repeated and direct contact with competitors, as companies rely on software and pricing algorithms.
• US enforcers are focused on investigating non-traditional forms of collusion with an interest in developing competition law to apply to advancing technology by examining whether (i) the concerted action constitutes a horizontal agreement, and (ii) it qualifies as an unreasonable cartel restraint.
• Enforcers in Brazil, Germany, Japan, Portugal, and Spain stated that AI and pricing algorithms create possibilities for collusion that were not previously possible. In Portugal, enforcers stated that they intend to be at the forefront of this issue and they have found that 30% of companies use pricing algorithms. 

• While the DOJ has experienced a string of court defeats in labor market criminal prosecutions in recent years, it remains committed to continuing to bring labor market cartel cases for no-poach and wage-fixing agreements on the right facts. Consistent with this, we have observed a higher level of selectivity in terms of which cases to advance for prosecution.
• In the UK, enforcers have remained focused on labor markets, and are currently pursuing several cartel offences. In Portugal, enforcers are currently pursuing no-poach cases related to football leagues which have been brought to attention by a leniency applicant. In Australia and Hong Kong, enforcers have been looking into workers’ restraint cases, such as those resulting from non-competes.
• The EC is conducting labor market cartel investigations and carried out an inspection relating to a suspected no-poach arrangement. The EC also issued policy guidance that, while most cases will be taken up by national competition authorities, no-poach and wage-fixing agreements would normally qualify as by-object cartel infringements.See https://competition-policy.ec.europa.eu/document/download/adb27d8b-3dd8-4202-958d-198cf0740ce3_en.

As competition authorities are exercising their enforcement powers in new markets and in novel ways, and pursuing expanded theories of what constitutes a cartel, companies and those they employ face uncertainty. Several enforcers stated they are endeavoring to provide guidance through new guidelines, statements of interest, court intervention methods, public communications, and opening channels of communication to help companies navigate whether conduct rises to the level of anti-competitive concern. However, some made clear that they will provide guidance principally through enforcement practice. 

If you have questions regarding these developments, please contact a member of our Antitrust Practice Group or the Latham lawyer with whom you normally consult.