Competition Law Around the World

01 March 2007

China is considering the adoption of a comprehensive anti-monopoly law. Both Hong Kong and Malaysia are currently considering whether to adopt competition laws of general application. International organisations, such as the International Competition Network (ICN) and the Organisation for Economic Co-operation and Development (OECD) provide new competition authorities with the opportunity to learn from the successful experience of others, thereby enabling them to move quickly up the ‘enforcement learning curve’. 

Increasing convergence in the adoption and application of national and supranational competition law is generally to be welcomed as it can enhance the predictability of antitrust enforcement worldwide, provided the competition laws: 

• are objective and are applied in a nondiscriminatory fashion to all companies (in both the public and private sector); 

• are based on general and widely understood principles of international antitrust, and are no more onerous to business than such widely accepted principles (in particular, antitrust laws should not apply to intra-Group agreements – ie agreements within a single economic entity); 

• are limited to those objectively necessary to protect consumers and preserve the competitive process, and favour the process of competition rather than the mere preservation of individual competitors; 

• apply only to conduct which has a clear effect on competition within the relevant country, and that countries do not attempt to exert extra-territorial jurisdiction over activity which has no real impact within that country. 

Current practice, however, shows that competition laws and their enforcement still vary significantly between jurisdictions. Of key concern are developments that undermine the ability for business to reasonably predict the outcome of the competition law enforcement, such as jurisdictional disputes between agencies. 

At the same time, risks involved with noncompliance are increasing around the globe.

Complacency is not an option 

Leniency programmes have proven to be an efficient instrument in encouraging businesses to ‘blow the whistle’ on co-conspirators in a cartel, thereby enhancing detection. Countries that currently operate leniency programmes include: Australia, Canada, Israel, Japan, South Africa, Switzerland, the US, and the vast majority of the EU Member States. For the revised EU Leniency Programme, see the Commission Notice on Immunity from Fines and Reduction of Fines in Cartel Cases (2006/C 298/17). 

More and more jurisdictions are developing or implementing their own leniency programmes; and those with existing leniency programmes are looking at further strengthening them, whilst enhancing antitrust enforcement through higher fines, the introduction of criminal sanctions and facilitating (and encouraging) private enforcement actions. 

Competition authorities are discovering the merits of taking a proactive approach in investigating markets, instead of relying on the traditional reactive (case-based) approach. In the European Union, for example, the enforcement landscape has changed radically with the launch by the European Commission of the energy and financial sector inquiries (see the EU website for futher details).

Not surprisingly, interaction between agencies has evolved from mere cooperation on ‘best’ practices and information exchanges to inter-agency co-ordination in the launch of investigations. Within the European Union, the European Competition Network (ECN) has over the past three years proven to be a powerful tool for European competition authorities in the enforcement of national and European competition law. On a more international plane, the European Commission is not only increasingly launching investigations in concert with other agencies (eg the investigation launched by the European Commission in December 2006 on the TFT/LCD industry, MEMO/06/485), but also undertakes coordinated dawn raids with other competition authorities (eg the dawn raid of air cargo carriers in the US and overseas in connection with its investigation of anti-competitive practices in the air cargo industry). It is to be expected that the time lag between the launch of an investigation in one jurisdiction and follow-on investigations in other jurisdictions will further shorten in the future. 

In 2006, the European Commission imposed a historic amount of more than €1.8 million in antitrust fines for cartels, bringing the total fines imposed over the past four years to more than €3.3 billion for cartels alone (see ‘Competition: Commission action against cartels – Questions and answers,’ MEMO/06/451). 

With the advent of the new Guidelines on the Method of Setting Fines (2006/C 210/2), fines are expected to increase in Europe, not least due to the broad interpretation of the notion of ‘recidivism’, where each prior infringement sanctioned by the European Commission or a competition authority of a member state may result in an increase of the fine by up to 100 per cent. 

The use of criminal sanctions to deter anti-competitive behaviour is also becoming more widespread. Already common in the US, foreign defendants now no longer benefit from a ‘no jail’ sentencing recommendation: individuals from over nine non-US jurisdictions have served, or are currently, serving time in US prisons for breaches of US competition law. In Europe, over ten EU member states (including Ireland and the UK) have the power to apply criminal sanctions for competition law violations. Other jurisdictions, both in Europe and further a-field, are considering the introduction of criminal sanctions. There is discussion in the Netherlands on a bill introducing criminal sanctions (Kamerstukken II 2006-2007, 30 071), and in Australia, where a draft bill is expected to be introduced to Parliament during 2007, with the aim of introducing criminal sanctions for serious or hard-core cartel conduct. 

Plea-bargaining, where the companies involved pay a fine in return for the closing of an investigation, originated in the US, but is likely to garner a heightened interest within the competition enforcement community. In Brazil, Australia, Canada and New Zealand plea-bargains are now possible. In Europe, Commissioner Kroes has indicated that she would not be adverse to this option being added to the enforcement measures she has at her disposal. 

Business itself is also discovering the benefits of bringing antitrust actions. While this was once the preserve of the US, civil litigation as a tool to seek redress in antitrust cases is becoming increasingly common in other jurisdictions. 

When launching its Green Paper on Damages Actions for Breach of the EC antitrust rules in December 2005, the European Commissioner for Competition, Neelie Kroes, stated: 

“Businesses and individuals who suffer losses because of illegal activities such as cartels have a right to compensation. Currently, this right is all too often theoretical because of obstacles to exercising this right in practice. This Green Paper sets out options for making that right a reality, and so making companies that break the competition rules pay for the harm that they do.”

Following a round of public consultations, the European Commission is to draft a White Paper in 2007, in which it will further develop certain options to enhance the availability of private damages actions while maintaining the efficacy of leniency programmes (the Green Paper and comments received thereto can be seen on the EU website). 

Business is also showing a healthy appetite to litigate antitrust cases before the courts. In Europe this resulted for the first time in the annulment, at the request of a third party, of a decision of the European Commission approving a merger (see Case T- 464/04, Independent Music Publishers and Labels Association (Impala) v Commission, judgement of 13 July 2006).

Response of business and their counsel 

This constant evolution of the regulatory environment poses unique challenges for both in-house and external counsel. 

To be able adequately to advise a company on proposed acts or transactions, in-house and external counsel need to be well versed in principles of competition law and policy – for some companies, in relation to multiple jurisdictions. They are required: to be experienced in the application of the law by the local competition authority; to be able to understand and incorporate an economic analysis of the effects of a proposed act or transaction into their advice; and to appreciate that antitrust issues often involve multiple jurisdictions with their own nuances. At the same time, external counsel need to strive for increased efficiency and be costconscientious given the heightened focus of business on cost-control. 

Last but not least, adequate protection of communications between businesses and their in-house and external counsel lawyers is essential to properly allow counsel to advise on proposed acts or transactions. In this context it remains to be seen whether, within the European Union, the scope of legal privilege will be extended to include correspondence with, and internal opinions of, in-house counsel (see Cases T-125/03 & T-253/03, Akzo Nobel Chemicals & Akcros Chemicals v Commission).

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