Cartel enforcement remains a priority
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Publications: 08 February 2024
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Overall, global fine levels for cartel activity in 2022 (USD2.1bn) were just half the 2021 total (USD4.0bn). However, the high 2021 total was largely attributable to a small number of significant fines imposed by the European Commission (EC) in the car emissions case (EUR875m) and financial services cases (totalling EUR744m). 2022 in fact saw a slight increase in the total number of cartel enforcement decisions, from 205 to 220.
Financial services: watch this space for further enforcement
While the financial services sector has been a consistent area of focus for cartel enforcement in recent years, in 2022 there were just nine enforcement decisions totalling USD35.5m.
Despite this, financial markets look set to remain on antitrust authorities’ radars, and a key enforcement priority in certain jurisdictions. The UK Competition and Market Authority (CMA)’s financial services sector cartel investigation remains ongoing and, in December 2022, the EC sent a statement of objections to two banks in its euro-denominated bonds cartel investigation.
In Australia, the Federal Court imposed suspended prison sentences on four individuals linked to Vina Money Transfer and fined the company for fixing the exchange rate between the Australian dollar and Vietnamese dong and for fixing the fees they charged customers. It is the first time that individuals have received prison sentences under Australia’s criminal cartel offences.
By contrast, the Australian Competition and Consumer Association (ACCC)'s criminal cartel case against three banks and six senior banking executives, in relation to the alleged withholding of shares by the underwriters of a failed share placement, collapsed in February 2022. The ACCC’s withdrawal of charges ahead of trial, and before any substantive issues were determined by the court, leaves some uncertainty as to whether this type of conduct may give rise to antitrust issues.
Cartel decisions by sector, 2022
The UK CMA’s financial services sector cartel investigation remains ongoing and, in December 2022, the EC sent a statement of objections to two banks in its euro-denominated bonds cartel investigation.
Key themes in cartel enforcement
Forms of cartel conduct
Bid-rigging: a target across multiple sectors
As in 2021, bid-rigging was the most commonly enforced type of cartel conduct in 2022 (43% of decisions), with investigations progressed and concluded in a number of jurisdictions.
The construction industry continued to be the sector of focus, with active cases and enforcement in Austria (in an ongoing cartel probe targeting more than 40 construction companies), the UK (where the CMA provisionally found that ten construction firms colluded on prices when submitting bids in competitive tenders and had engaged in “cover bidding”) and Spain (where construction companies were fined for coordinating on technical bids rather than economic terms). Significantly, in the Spanish case, the companies may also face a ban from participating in public procurement tenders.
Other sectors were the subject of bid-rigging enforcement elsewhere. In South Korea, the Korea Fair Trade Commission (KFTC) fined rolling stock manufacturers USD45.2m for rigging bids in public tenders for rail vehicles. Fines were levied in Japan in relation to data printing services and pharmaceutical procurement, in Italy in relation to water meters, in Hungary in relation to an anaesthesia and ventilation equipment tender, and in France in relation to waste management services.
Individuals also faced significant sanctions for bid-rigging conduct in 2022. In July, a U.S. Department of Justice Antitrust Division (DOJ) probe resulted in a military contractor pleading guilty to rigging tenders on public military contracts. The individual faces a maximum penalty of ten years in prison and a USD1m criminal fine.
Cartel developments to watch
Labour markets: authorities hard at work
Building on developments seen in 2021, last year a number of regulators on both sides of the Atlantic ramped up campaigns against anti-competitive conduct in labour markets. Investigations in particular targeted wage-fixing agreements (where employers agree to set or fix employee wages) and “no-poach” agreements (where employers agree not to hire each other’s employees).
In the U.S., the DOJ secured its first no-poach/wage-fixing criminal enforcement conviction against a healthcare staffing company for entering into and engaging in a conspiracy with a competitor to allocate employee nurses and to fix the wages of those nurses. In Brazil, the Administrative Council for Economic Defense (CADE) fined six healthcare companies approximately USD6.6m following an unprecedented probe into benchmarking and exchanging information on wages and benefits.
In Europe, Poland’s Office of Competition and Consumer Protection (PCA) issued its first decision concerning a no-poach infringement. The PCA found that after the 2019/2020 season (terminated early due to the Covid-19 pandemic) several basketball clubs, with support from the basketball league, agreed not to pay their players’ wages for the remainder of the season and to terminate their contracts. In Romania and Turkey, the antitrust authorities have opened investigations into companies suspected of entering into no-poach agreements in the automotive and software industries.
With new legislation in prospect across several jurisdictions, labour markets look set to remain a focus for antitrust authorities in 2023. The most high profile of these is the U.S. Federal Trade Commission’s proposed rule, announced in January 2023, to prohibit employers from imposing non-compete restrictions on their employees and require any existing non-compete agreements to be rescinded, with limited exception. The proposed ban has met with criticism from outgoing Commissioner Wilson, as well as from business groups and other stakeholders. Outside the U.S., in Canada, the introduction of a new criminal conspiracy offence for wage-fixing and no-poach agreements is due to come into force in June 2023. In February 2023, the UK CMA published guidance for employers on how to avoid anti-competitive behaviour in labour markets.
Guilty by (trade) association
A number of authorities, particularly in the APAC region, continued to investigate and penalise the activities of trade associations.
In China, the Shaanxi Administration for Market Regulation fined 13 concrete firms and an industry body USD64.6m in relation to a monopoly agreement under which the companies negotiated and agreed the timing and range of several price hikes. The trade association organised meetings and online chats between the companies’ decision-makers, facilitated discussions on cement product prices, and coordinated implementation of the price increases.
In South Korea, the KFTC issued fines totalling USD141.4m against 38 container shipping companies and two trade associations for price-fixing. The companies raised minimum freight rates on routes between Korea and Southeast Asia and Japan, agreed not to poach each other’s clients, and monitored compliance through the shipping industry associations.
The decisions highlight the importance of having robust safeguards in place to minimise the risk of anti-competitive conduct via trade associations.