1. Non-leniency Tools for Detecting and Investigating Cartels: Overview and Chilean Experience Felipe Irarrazabal National Economic Prosecutor SYDNEY, BOS2 CWG April 30 th, 1420-1535 1

2. OVERVIEW ICN’s Anti-Cartel Enforcement Manual recommends to use a variety of techniques and methods to detect cartels, including reactive and proactive methods. Methods outside of leniency include the following: Cooperation with other government agencies Foster international cooperation between competition agencies Ex officio cartel investigations require performing economic analysis based on the structural conditions of markets and/or behavioral screening Non Leniency Tools | FISCALIA NACIONAL ECONOMICA 2

3. MARKET SCREENING Market Screening Structural screening: in order to identify markets prone to collusive behavior high concentration few players barriers to entry market transparency homogeneous products multimarket contact, etc Behavioral screening: intended to identify behavior that is more consistent with collusion than with competition typical signs of suspicious behavior include: unusual increase in prices; prices that do not reflect cost; less variance in prices; etc. Non Leniency Tools | FISCALIA NACIONAL ECONOMICA 3

4. CHILEAN EXPERIENCE WITH MARKET SCREENING Since 2009, Chilean agency has made efforts to encourage leniency applications. However, proactive methods for detecting collusion are important: Results of the analysis have been used to obtain authorizations for dawn raids. Behavioral market screening as indirect evidence of collusion. Market screening to prioritize and discard cases. Non Leniency Tools | FISCALIA NACIONAL ECONOMICA 4

5. CHILEAN EXPERIENCE: TO OBTAIN SEARCH WARRANTS Product 1 Product 1 Non Leniency Tools | FISCALIA NACIONAL ECONOMICA 5 Bid rotation between firms regarding two different formats of the same product from 2007 to 2011. Structural screening showed a concentrated market, barriers to entry, multi-market contact and price transparency.

6. FNE´S EXPERIENCE: EVIDENCE OF COLLUSION DURING TRIAL Pharmacy chains cartel case. Behavioral screening showed a structural break in prices of multiple drugs in a case with no evidence of direct contact between competitors (Chow Test). Non Leniency Tools | FISCALIA NACIONAL ECONOMICA 6 Evolution of Daily List Price of one of the products (2006-2008)

7. FNE´S EXPERIENCE: EVIDENCE OF COLLUSION DURING TRIAL Poultry Producers Case. Chilean Poultry prices did not co-integrated with the price of the imported chicken. Non Leniency Tools | FISCALIA NACIONAL ECONOMICA 7

8. FNE´S EXPERIENCE: EVIDENCE OF COLLUSION DURING TRIAL Poultry prices variation did not reflect costs variation. Non Leniency Tools | FISCALIA NACIONAL ECONOMICA 8 Table 3: Correlation Matrix raw prices (wheat, soy ) and poultry prices

9. FNE´S EXPERIENCE: EVIDENCE OF COLLUSION DURING TRIAL Stability of market shares 2002-2010. 9

10. FNE´S EXPERIENCE: MARKET SCREENING AS A TOOL FOR PRIORITIZATION Preliminary observations appeared to show suspiciously break in margins in an oligopolic market. However, demand estimates were not inconsistent with a Cournot competition setting with 6 firms in the market before and after the break. Non Leniency Tools | FISCALIA NACIONAL ECONOMICA 10 Table 4: Margins Screening (2008 -2010)

11. ADVANTAGES AND CHALLENGES Advantages: By allocating resources for market screening, the agency sets its priorities (focus on domestic highly sensitive markets) Good tool for prioritization by discarding cases Signals the market about how proactive the agency is in uncovering collusive behavior Data gathered may be used in assessing damages Challenges: High costs both in resources and human capital Timing issue Data intensive Not substitute of hard evidence Non Leniency Tools | FISCALIA NACIONAL ECONOMICA 11

12. Thanks! Felipe Irarrazabal National Economic Prosecutor SYDNEY, BOS2 CWG April 30 th, 1420-1535 12