Detecting and investigating cartelsLimits with pro-active and re-active detection tools

Antonio Capobianco

Senior Competition Law ExpertOECD Competition Divisionantonio.capobianco@oecd.org

ICN Annual Conference - Sydney, 18 April – 1 May 2015

Cartel Detection Tools - Two types

Source: Hüschelrath, “How Are Cartels Detected? The Increasing Use of Pro-active Methods to Establish Antitrust Infringements”, in Journal of European Competition Law & Practice, 2010, Vol. 1, No. 6. 2

Cartel Detection Tools - Two types

Source: Hüschelrath, “How Are Cartels Detected? The Increasing Use of Pro-active Methods to Establish Antitrust Infringements”, in Journal of European Competition Law & Practice, 2010, Vol. 1, No. 6. 3

Proliferation of Leniency Programs

Source: Borrell, Jiménez and García (2012) 4

Leniency Proved an Effective Cartel Detection Tool

of fines imposed since 1996 can be traced to leniency

applications

of cartel decisions from 2002 through 2008 were triggered

by leniencySource: Werden, Hammond and Barnett (2012), European Parliament, Parliamentary

questions: E-0890/09, E-0891/09, E-0892/09, 2 April 2009, and Riley (2010) 5

Examples of cross-border investigations

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… however:

•They do not work effectively in every country (e.g. small economies)

•They detect mostly mature and dying cartels

•The are effective only in a limited set of industries

Importance of ex-officio investigations!

Important Caveats with Leniency Programmes – In General

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Leniency programmes are not always effective

Strong enforcement record is needed.

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Leniency may not be as effective to detect bid rigging as one would hope for several reasons:

– Bid rigging conspiracies are very stable over time because of transparency in procurement• Easy detection of deviations from bid rigging agreement• Easy and timely punishment because of repeated opportunitites to bid

– Risk of detection by procurement agency is very low

– Leniency programme may not cover criminal liability or other sanctions (debarment)

Importance of ex-officio investigations!

Important Caveat with Leniency Programmes – In Bid Rigging

Cases

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Structural Screens Behavioral Screens

Focus of the analysis

Structural characteristics of markets

Behaviors of participants in the market

Difficulty Rather straightforward and relatively simple. Less data intensive (or need data which is easier to collect)

Need econometric analysis or extensive staff training. Rather data intensive.

Outcome Find out markets in which cartels are more likely to form. Useful to develop an initial list of industries that are worthy of further scrutiny

Find our firms behaviors which are more likely to be consistent with collusions.

Cartel Screens

Cartel screens are “economic tools” to help competition authorities to detect cartels. Two types of cartel screens- “structural” and “behavioral”

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• Screens do not distinguish explicit cartels from tacit collusion.

– A collusive equilibrium may be a result of an explicit agreement, but, at the same time, it may come from a tacit arrangement or conscious parallelism.

• Screens can generate false positives (flagging cases which do not merit further scrutiny) or false negatives (failing to identify collusion)

• Structural screens are based on industry classifications not on antitrust markets and are exposed to criticisms on weighting of factors

Limits with the Use of Screens - 1

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• No off-the-shelf beavioural approach for screens

• Beahvioural screens are usually both:

– Data intensive• Sufficient relevant and accurate information and data are necessary from screen design, to the implementation of the screen, up to the interpretation of its results.

– Resource intensive• Econometrics for data collection and processing, training personnel, running the screen, interpreting results…

Limits with the Use of Screens - 2

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•Media monitoring

•Market studies

•Red flags for collusion

Other Proactive Detection Methods

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Thank you!

Find out more about the work of the OECD on competition:

http://www.oecd.org/daf/competition

/

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Detecting and investigating cartelsLimits with pro-active and re-active detection tools

Antonio Capobianco

Senior Competition Law ExpertOECD Competition Divisionantonio.capobianco@oecd.org

ICN Annual Conference - Sydney, 18 April – 1 May 2015