Detecting and investigating cartels Limits with pro-active and re-active detection tools Antonio Capobianco Senior Competition Law Expert OECD Competition Division 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 leniency Source: 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 6

… 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 7

Leniency programmes are not always effective Strong enforcement record is needed. 8

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 9

Structural ScreensBehavioral Screens Focus of the analysis Structural characteristics of markets Behaviors of participants in the market DifficultyRather 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. OutcomeFind 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” 10

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

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

Media monitoring Market studies Red flags for collusion Other Proactive Detection Methods 13

Thank you! Find out more about the work of the OECD on competition: 14

Detecting and investigating cartels Limits with pro-active and re-active detection tools Antonio Capobianco Senior Competition Law Expert OECD Competition Division ICN Annual Conference - Sydney, 18 April – 1 May 2015