Global Cartel Enforcement Report 2020

Despite the challenges of an unprecedented global pandemic, cartel enforcement activity in 2020 increased in many leading enforcement jurisdictions. Corporate fines, for example, more than doubled from 2019 in the United States, Mexico, South Korea, and Taiwan.

Other leading enforcement jurisdictions, however, saw a drop in 2020 of enforcement activity and fines, particularly in the European Union and Japan. Notably, no fines were imposed in Australia and India this past year.

New work-from-home policies among enforcers and limitations to business activities have resulted in significant delays to proceedings and difficulties in cooperation with third parties. Dawn raid activity also reduced in many jurisdictions due to the impact of social distancing policies on logistics. Although many competition authorities have temporarily relaxed enforcement to avoid shortages of essential supplies, they also have clearly stated that the exemptions are limited in scope and that enforcement has not been relaxed due to the pandemic.

Consequently, it appears likely that 2021 will see a resurgence in enforcement activity in terms of both delayed investigations and new investigations arising from pandemic-induced market disruptions.

Key Trends & Developments

• Key sectors involving global cartel enforcement activity—and which are likely to be a continuing focus in 2021—include healthcare and life sciences, technology and the digital economy, construction, retail and ecommerce, transportation, financial services, agriculture and food, and energy. Also expect a continued focus in the United States on horizontal “no poach” and wage-fixing agreements among employers.
• Top five fines collected from corporations in leading enforcement jurisdictions:
  1. $296.6 million: European Union, ethylene products
  2. $205.7 million: United States, generic pharmaceuticals
  3. $105 million: United States, generic pharmaceuticals
  4. $110.5 million: United States, poultry products
  5. $100 million: United States, oncology treatments
• Executive or individual liability remains an important consideration in global cartel enforcement activity. High-profile examples include:
  • United States: 14 individuals were prosecuted in 2020, including the ex-CEO of a canned tuna company convicted in a jury trial and sentenced to 40 months in prison and a $100,000 criminal fine based on a three-year price-fixing conspiracy.
  • Brazil: Two executives were fined $431,000 and $1.4 million for their involvement in a bid-rigging scheme to win ambulance and medical equipment contracts. Additionally, 11 individuals were convicted of various corruption and money laundering offenses in connection with the Petrobras price-fixing cartel.
  • United Kingdom: The UK Competition and Markets Authority is increasingly exercising its power to disqualify directors of companies who violate competition law. At the end of 2018 only 3 directors had been disqualified in total since 2002. Yet in 2019 alone 9 directors were disqualified and in 2020 another 6 were disqualified.
  • New Zealand: A new law introducing criminal penalties will come into effect in April 2021. New Zealand has also proposed revisions to its leniency program whereby an applicant for immunity concerning one cartel may obtain immunity by informing authorities of its conduct in a second cartel and thereby obtain immunity in both.

United States

• The US Antitrust Criminal Penalty Enhancement and Reform Act was renewed and its sunset clause repealed, thus assuring continuity to the regime that is a key component of the US Department of Justice’s (DOJ’s) Corporate Leniency Policy as it provides greater incentives for corporations to self-report and cooperate.
• The United States’ new Procurement Collusion Strike Force (PCSF) educates both buyers and sellers to deter antitrust crimes, while using a combination of criminal and civil enforcement penalties along with traditional investigative tools and cutting-edge data analytics to detect and investigate allegations of criminal conduct. More than one year after its creation, the PCSF has expanded and announced a public indictment against Contech Engineered Solutions in a nearly decade-long conspiracy to rig bids for aluminum structure projects, and noted that several new investigations have been opened.
• The DOJ continued its recent trend of resolving criminal cases by deferred prosecution agreements (DPAs) where significant collateral consequences may result from a plea conviction. Historically, the DOJ’s Antitrust Division used guilty pleas to resolve criminal antitrust cases and avoided using DPAs. In 2020, the division entered into DPAs with three companies to resolve potential criminal cases involving generic pharmaceutical sales. The increasing use of DPAs, however, raises questions about the circumstances in which they will be considered.
• The DOJ brought its first criminal wage-fixing case related to the labor market. Since 2016, the DOJ and the Federal Trade Commission have focused on bringing criminal and civil enforcement actions on no-poaching and wage-fixing agreements. For more, read our LawFlash. The DOJ has yet to bring a criminal “no poach” case, but the Antitrust Division continues to promise that such cases will be brought, and the division has been active in investigating such conduct.
• The recent trend in coordinated enforcement of antitrust laws and the US False Claims Act (FCA), which imposes penalties for the submission of “false claims” to the federal government, continued in 2020. The most substantial cartel fines issued in 2019 involved alleged collusion in bidding for fuel contracts to the military, and several of the companies that paid those fines also entered into settlements of FCA claims. That trend continued in 2020, with several resolutions of criminal antitrust cases also involving substantial payments for alleged FCA violations. Another major cartel case resolved in 2020—involving an alleged market allocation agreement between oncology companies—was prompted by a whistleblower complaint alleging FCA violations. The FCA includes provisions allowing whistleblowers to recover a portion of recoveries, which is intended to provide incentives to report and challenge potential FCA violations.
• The US Congress unanimously passed the Criminal Antitrust Anti-Retaliation Act, which provides new protections to an employee or another person who reports what he or she “reasonably believes to be a violation” of antitrust laws to the government, an internal supervisor, or company employee with authority to investigate the alleged allegations.
• The United States continued to extradite executives to face criminal charges, including the extradition and conviction of an executive nearly 10 years after the original charges were filed in the air transportation investigation, as well as another executive in an automotive parts investigation.

Europe

• The broad scope of the European Commission’s (EC) dawn raid powers were recently upheld by the Court of Justice of the European Union (CJEU) in its judgment in the Nexans case. In particular, the CJEU confirmed that the EC has the right to take copy-images of data without first examining the nature of documents as well as the right to remove copies of the data and continue the inspection at its own premises. The legality of EC dawn raids, however, may be reviewed for the first time by the European Court of Human Rights upon the application of a member of an alleged ethanol cartel claiming that they breach the fundamental right to the protection of private and family life and to a fair trial.

Asia

• Enforcers worldwide continue to encourage the use of compliance programs to prevent cartel conduct. For example, the Anti-Monopoly Bureau of China’s State Administration for Market Regulation published guidance that provides a framework for business operators to establish their anti-monopoly compliance systems, which includes, for example, encouraging senior executives to make compliance commitments, reporting their compliance situations to anti-monopoly enforcement agencies, setting up compliance management departments, and appointing compliance managers.
• Japan introduced new rules protecting attorney-client privilege for the first time but only in respect of Japanese antitrust law advice given by independent (generally external) lawyers qualified in Japan, where such advice is separately stored and specifically designated as privileged and to which access is limited.
• South Korea approved a sweeping revision to its Monopoly Regulation and Fair Trade Act in December 2020. When effective, the Korea Fair Trade Commission will be able to regulate the exchange of information as part of cartel conduct for the first time since the act’s inception 40 years ago. In addition, fines for cartel conduct will be doubled. Korea and the United States also signed a memorandum of understanding that will facilitate sharing information and evidence related to criminal cartel investigations and prosecutions.

What’s Next?

• COVID-19. Many competition authorities moved swiftly during 2020 to demonstrate that they are willing to show flexibility during the COVID-19 pandemic regarding cooperation to support the viability of supply chains. However, there has not so far been much industry interest in obtaining formal approval for crisis-era conduct, so few precedents exist. Consequently, it seems likely that any cooperation in these areas has not been approved and may be the subject of enforcement action going forward as authorities have repeatedly stated that “crisis cartels” are not permitted and that crisis-related overcapacity issues should be resolved by market forces rather than competitor cooperation.
• New US Administration. With the election of a new US president, changes are expected in DOJ leadership, along with a focus on new or different policies, including in relation to cartel enforcement. It remains to be seen who will lead the Antitrust Division and what emphasis will be placed on enforcement. However, the incoming administration has already stated its intention to “eliminate non-compete clauses and no-poaching agreements that hinder the ability of employees to seek higher wages, better benefits, and working conditions by changing employers.” Congress has also focused on reforming antitrust enforcement tools with respect to technology companies and big data.
• Big Data. A 2020 paper published by the International Competition Network (ICN) highlights two aspects of digitalization of the economy that are having an increasing impact on global cartel enforcement. First, the ICN notes that big data and algorithms can be a new vehicle for collusion—this is clearly a focus of the new teams established by enforcers to look at digital markets. Second, the ICN notes the different ways in which big data and algorithms are increasingly being used by competition agencies as a tool to detect cartels.
• Brexit. As of January 1, 2021, the EC will lose its ability to enforce against cartel conduct in the United Kingdom except in cases that it had already initiated before December 31, 2020. The UK Competition and Markets Authority has indicated that it expects to continue a number of investigations in parallel to the EC.

OUR CARTEL INVESTIGATIONS AND LITIGATION PRACTICE

Morgan Lewis has acted as US, European, and global coordinating counsel for multinational corporations in virtually every major international cartel investigation of the last 25 years, guiding clients through every stage of the process.

Our antitrust lawyers have coordinated multijurisdictional cartel investigations and civil litigation and defended some of the world’s largest corporations in high-stakes treble damages class actions involving allegations of price-fixing and other cartel conduct. We also assist clients in establishing compliance programs to prevent or detect potential cartel conduct that may result in substantial criminal liability. We help design compliance programs that mitigate the sentencing consequences in the criminal justice system that are consistent with recent US DOJ compliance standards.

Our team includes a number of former high-level government enforcers with superior insights into enforcement agendas and practices around the world, including a former assistant chief of the National Criminal Enforcement Section in the DOJ’s Antitrust Division, and several lawyers who have direct experience prosecuting cartel matters with the DOJ.

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