Custodial Sentences Against Individuals Is Most Effective Deterrent Of Cartelisation, Says Richard
Whish
New Delhi, May 14, 2006
CUTS Institute for Regulation & Competition organised an
Interactive Seminar on Competition Law in the capital on May 13, 2006. The event had Mr Richard Whish,
Professor of Law, King’s College, and Non Executive Director at the Office of Fair Trading, UK and Mr
Pradeep S Mehta, Secretary General, CUTS International address the issue ‘Competition Law of India with
focus on International Cartels’ from an international and national perspective, respectively.
Richard Whish said that countries across the globe should seek opportunities to further increase corporate
fines, and that they should consider introducing sanctions against individuals, including criminal sanctions
whenever any cartel is detected.
The principal purpose of sanctions in cartel cases is deterrence, Whish said. Strong sanctions against
enterprises and individuals increase the effectiveness of leniency programmes. The level of penalties being
imposed on firms is now substantial, and it can be anticipated that this trend will continue. The
interesting development to watch for in the years ahead will be to see whether more countries pursue the
idea of introducing criminal sanctions against individuals including imprisonment as well as the imposition
of fines, he added.
Giving examples, Whish said that several countries including Canada, France, Germany, Ireland, Japan, Korea,
Mexico, Norway, the Slovak Republic and the US provide for criminal sanctions, including in some cases
imprisonment, to be imposed on individuals. These provisions attempt to address the problem that imposition
of fines on companies may not have a sufficiently deterrent effect. This is especially in cases where cost
of fines is simply transferred to customers through higher prices. Further, if a fine is so large that it
results in insolvency and liquidation of a company, this will result in the loss of a competitor from the
market, a somewhat perverse achievement for a system of competition law.
The obvious target of any system of law must be agreements between independent firms that are restrictive of
competition. The hum-drum cartel that fixes the price of cement, or air fares, or insurance premiums does
not provoke the same kind of debate as predatory pricing, tying and bundling; and yet cartels are the most
harmful anti-competitive practice known to competition law, and should be the prime target of competition
authorities.
Quoting the UNCTAD’s Model Law on Competition of 2004, Whish said that the crucial issue is how effectively
these provisions are applied in practice, and the extent to which competition authorities and courts around
the world have had to grapple with very much the same problems of interpretation of anti-cartel legislation.
Elaborating on the various tools available to competition authorities to battle against cartels, Whish said
that firms that participate in cartels are usually fully aware of the unlawfulness of their conduct. It
follows that competition authorities may find it very difficult to compile evidence that will satisfy a
court to the required standard of proof that there has been illegal behaviour. Without doubt the adoption of
whistleblowing and leniency programmes has been immensely important as it may be able to provide an
authority with richly informative data about meetings, contacts, the participants in the cartel and the
range of practices covered. It is vital that competition authorities are given the powers of investigation
needed to track down evidence of sufficient quality to satisfy the standard of proof set by the law.
Citing the example of South Korea where the Korean Fair Trade Commission has established a reward system for
those who report or give information about competition law violations, he stated that a ‘Reward Review
Committee’ has been established to ensure a fair and transparent process for determining reward eligibility.
The identification of informants is kept confidential.
Cartels appear to be alive and kicking throughout the world. Competition authorities around the world are
more determined today than they have ever been to eradicate cartels. Even the adoption of competition laws
with tough sanctions has not been sufficient to suppress cartel activity, as is demonstrated by the number
of prosecutions that have been brought in recent years. It must be recognised that competitors are meant to
compete with one another for the business of their customers, and not to cooperate with one another to
distort the process of competition, Whish said.
In the years ahead the debate will be about the additional tools that are needed to make the battle against
cartels more effective, and it is likely that more countries will decide that custodial sentences against
individuals are, ultimately, the most effective deterrent, Whish observed.
Pradeep S Mehta spoke on the evolution of competition law in India. He informed participations about relevant
provisions for tackling cartels in the Monopolies and Restrictive Practices (MRTP) Act of 1969 (the now
outgoing law), and the Competition Act of 2002 (the newly enacted competition law). Mehta informed that the
MRTP Act failed to deal with anti-competitive practices, as there is no definition or even a mention of
certain offending trade practices. Some of the anti-competitive practices such as abuse of dominance,
cartels, predatory pricing and bid-rigging are not specifically mentioned in the Act. The MRTP Commission
was also unable to take any action against any of the international cartels that attracted the attention of
other competition authorities. Cartel cases in vitamins, cement, transport (trucking) pharma-retailing, BOPP
film (Biaxially Oriented Polypropelene film, used for packaging), rubber films were touched upon.
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