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4ANTI-CARTEL ENFORCEMENT MANUAL

CARTEL ENFORCEMENT Subgroup 2 ICN cartels working group

May 2007

Chapter

Cartel case initiation4

ICN manual cover 4.indd 1 27/04/2007 3:02:11 PM

Contents

1 INTRODUCTION 1

2 DEFINITIONS 22.1 Complainant 22.2 Informant 22.3 Leniencyapplicant 22.4 Pre-investigatoryphase 22.5 Thirdparty 22.6 Whistleblower 2

3 METHODSOFDETECTINGCARTELSANDLAUNCHINGANINVESTIGATION 33.1 Introduction 33.2 Reactivemethodsofdetectingcartelsandlaunchinganinvestigation 3 3.2.1 Complaints 4 3.2.2 Whistleblowersandinformants 5 3.2.2.1 Whistleblowers 5 3.2.2.2 Informants 5 3.2.3 Leniencyapplicants 6

3.3 Proactivemethodsofdetectingcartelsandlaunchinganinvestigation 6 3.3.1 Otherleniency/settlementstrategies 8 3.3.2 Useofeconomics 8 3.3.2.1 Existenceoffactorsfacilitatingcartelbehaviour 9 3.3.2.2 Empiricalapproaches 9 3.3.2.3 Industryormarketstudies 9

3.3.3 Analysisofpreviouscartelcases 10 3.3.4 Analysisofothercompetitionwork 10 3.3.5 Monitoringofindustryactivity 10 3.3.6 Trackingofindividuals 10 3.3.7 Liaisonwithothercompetitionagencies 11 3.3.8 Liaisonwithotherdomesticlawenforcementagencies 11 3.3.9 Monitoringoftradepressandtheinternet 11 3.3.10 Infiltrationandothercontactwithindustryrepresentatives 12 3.3.11 Educationandoutreach 12 3.3.11.1 Internaleducation(informationsharingwithintheagency) 13 3.3.11.2 Externaleducation 13

3.4 Summary 14

4 CARTELCASESELECTIONANDPRIORITISATION 154.1 Introduction 15 4.1.1 Terminology 15 4.1.2 Context 16

4.2 Selectionandprioritisationcriteria 174.3 Criterion 1:publicinterest 17 4.3.1 Extentofpotentialconsumerdetriment 17

4.4 Criterion 2:agencypriorities 18 4.4.1 Prioritiesofparticularmarketsorsectors 18 4.4.2 Availabilityandstrengthofevidence 18

4.4.3 Availabilityofresourcesfortheinvestigationandadjudicationofthecartel 19 4.4.4 Anynovellegaloreconomicissues 19 4.4.5 Possibilityofdifferentactionresolvingtheproblem 19 4.4.6 Cooperation,coordinationandobligationstootherauthorities 20 4.4.7 Cooperationfromleniencyapplicants,informantsorwhistleblowers 20

4.5 Criterion3:economicconsiderations 20 4.5.1 Industry-wideconductorlikelihoodofconductspreading 20 4.5.2 Volumeofcommerceandmarketpowerofcompanies(abilitytoaffectprice) 20 4.5.3 Durationofcartelconduct 21

4.6 Criterion4:generalandspecificdeterrence 21 4.6.1 Potentialforeducationandpromotionofgeneralcompliance 21 4.6.2 Recidivism 21

4.7 Criterion5:legalconsiderations 224.8 Makingadecision 224.9 Summary 23

5 PRE-INVESTIGATORYPHASEOFCARTELALLEGATIONS 245.1 Introduction 245.2 Categorisationofcartelallegationsinapre-investigatoryphase 245.3 Receiptandscreeningofcartelallegations 25 5.3.1 Methodsforcomplaintsanddisclosuresbythepublic 25 5.3.1.1 Complaintsmadeinperson 25 5.3.1.2 Telephonecomplaints 25 5.3.1.3 Writtencomplaints 26 5.3.2 Complaintsreceiptandreviewprocedures 26 5.3.3 Agencyproceduresforscreeningandtrackingcomplaints 28 5.3.4 Disposingofmattersthatrequirenofurtheraction 28 5.3.5 Specialconsiderationsforwhistleblowersandinformants 28 5.3.6 Leniencyapplicants 29

5.4 Evaluatingcartelallegations 29 5.4.1 Obtainingandverifyinginformationofcartelviolations 30 5.4.2 Informationfromthesourceoftheallegations 30

5.5 Otherinformationsources 30 5.5.1 Publicsources 31 5.5.1.1 Mediareports 31 5.5.1.2 Internetresearch 31 5.5.2 Professionalassociationsandtradegroups 31 5.5.3 Thirdpartysources 31 5.5.4 Involvementofotherenforcementagencies:parallelinvestigations andinformationsharing 32 5.5.5 Paperordigitalevidence? 33

5.6 Decisiontoundertakeafull-scaleinvestigation 335.7 Summary 34

APPENDIXI:INFORMATIONFROMTHESOURCEOFTHEALLEGATIONS 35

APPENDIXII:GOODPRACTICESRELATINGTOCARTELCASEINITIATION 37

1 INTRODUCTION

Cartelsaretypicallyshroudedinsecrecyandtheirinitialdetectionandthestrategiesusedbyacompetitionagencywithintheinitialinvestigatoryperiodareoftheutmostimportancetoeffectiveenforcement.Thechallengetoenforcementisto:

• increaseinvestigativecapacitytodetectcartels

• initiaterobustinvestigationsand

• prioritisemultipleenforcementmatterstomakethebestuseofavailableresources.

Thischapterdrawstogetherselectedkeypracticesusedintheinitiationofacartelinvestigation,andidentifiessomestrategiesthatmaybeappliedinthedetectionstageandthroughouttheearlydevelopmentofacase.Itwillalsohighlightsomeofthemoreestablishedpracticesusefultocartelcaseinitiation.

Therelevanceandadoptionofparticularpracticesoutlinedinthisdocumentwilllargelybedeterminedbythelegalenvironmentineachjurisdictionthatgovernsanagency’senforcementactivities.Insomejurisdictions,certainpracticesmaynotbefeasibleduetolegislativeorpolicyconstraints.Forexample,intermsoftriagepractices—somecompetitionagencieshavereporteddedicatingalargeamountoftimetothepre-investigationstage,usuallybecauseoflegalpre-requisitestotheuseofinvestigativepowersthatrequiretheagencytomeetcertainthresholdsintheinvestigation.

Thechapterisdividedintothreeparts.

1. � exploresvariousmethodsacompetitionagencymightemploytodetectevidenceofcartelactivityandsubstantiatethebasisforthesubsequentlaunchofaninvestigation.

2. illustratesthefactorsthatmayinformdecision-makingastowhichcartelcasesanagencymaypursue,andhowcasesmaybeprioritised.Fivecriteria,includingarangeofobjectiveandsubjectivefactorsarelistedbywayofexampleandforconsiderationbyagencieswithintheirownpolicyorapproachforcaseselectionandprioritisation.

3. seekstopresentarangeofapproachesandtoolsthatcompetitionagenciesmayuseatthepreliminarystagesofaninvestigation.

Eachpartofthischapterincludessuggested‘goodpractices’whichsummariseandhighlighttechniquesacknowledgedfortheirusefulnessineffectiveenforcementbyanumberofmemberagencies.Theunderlyingcautionisthatnosingleapproachanswerstheneedsofeveryenforcementsituation.Effectivecomplaint-screeningandtimelyevaluationofmarketplaceactivitiesareindispensablewhenusingscarceagencyresourcestomaximiseanti-cartelenforcementresultsandincreasepublicawarenessandreportingofcartelactivity.

TheICN anti-cartel enforcement manualremainsaworkinprogress.ThesourcesconsultedtocreatethischapterincluderelevantreportsfromtheOrganisationforEconomicCooperationandDevelopment(OECD),proceedingsfromvariousinternationalcartelconferencesandworkshops.Mostimportantly,thetextreflectsthecontributionsofInternationalCompetitionNetwork(ICN)memberagencies.Asfaraspossible,thesecontributionsandtheoverallcommentsfrommemberagencieshavebeencapturedinthetext.Referencestoagenciesengaginginanyparticularpracticeorprocedureshouldnotbetakenasareflectionoftheexperienceofalltherespondingagencies.Insomeinstances,agenciesprovidedspecificadditionalinformationandwherepossible,thisadditionalinformationisincludedinthechapter.

2 DEFINITIONS

Thedefinitionsappliedtothetermsusedinthischapterdonotnecessarilyrepresentthedefinitionsusedbyallmemberagenciesinthecourseoftheirdailywork.Thetermsmayholddifferentmeaningsdependingonthejurisdictionandlegalcontextinwhichtheyareused,andarethusmeantaspointsofreferencetohaveacommonunderstandingamongagenciesforthepurposesofthischapter.

2.1 ComplainantApersonorgroupofpersonswhomakeacomplaint,verballyorinwriting,toanagencyaboutallegedcartelconductinviolationofthelaw.

2.2 InformantAperson,sometimesaparticipantinthecartel,whovolunteersmaterialinformationtoanagencyaboutcartelconductinviolationofthelaw.Informantstypicallyrequireaguaranteeofconfidentialityandanonymityandmayworkundercoveronbehalfofanagency.Insomecircumstances,informantsmaybewillingtoprovideinformationasawitnessduringthecourseoftheinvestigationandtogiveawitnessstatement.

2.3 LeniencyapplicantAcartelmemberwhoreportsitscartelmembershiptoanagencyandundertakestosatisfycertainconditions,includingfullcooperationwiththeagencytoobtainpartialortotalexonerationfrompenaltiesthatwouldotherwisebeapplicabletoacartel(seechapter2).

2.4 Pre-investigatoryphaseThefirstactionstakenbyacompetitionagencyafterreceivinginformationaboutanillegalcartelmaybecategorisedbytitlessuchas‘preliminaryinquiry’,‘preliminaryinvestigation’,‘preliminaryexamination’and‘firstlook’,tolistafew.Althoughmanydifferentjurisdictionsusethesametitle,theactivitiesdenotedandlevelofinquirypermittedvarywidely.Thismanualusestheterm‘pre-investigatoryphase’tocoveractivitiestakenwhenacompetitionagencyisinitiallyinformedofpotentialcartelactivitiesanduptothetimeadeterminationismadetoundertakeafull-scaleinvestigationintotheallegations.

Afull-scaleinvestigationisoftentriggeredbyanofficialagencyaction.Suchactionsincludeconductingasearch,raidorinspection,issuingasubpoena(oranalogousorderforproductionofdocuments),orcompellingattendanceataverbalexamination.Theseactionshavetheeffectofpubliclydisclosingtheexistenceoftheinvestigation.

Thestepsundertakenbytheagencyleadingtosuchactionsareaimedatevaluatingtheallegationsandmeetinglegalthresholdsfortheuseofinvestigatorypowers.

2.5 ThirdpartyAnindustryormarketparticipant,includingcustomers,suppliersandrepresentativesofassociations,whohaveknowledgeabouttheindustryormarketandmayhaveknowledgeaboutthecartel.

2.6 WhistleblowerAninsider,typicallyacurrentorformeremployee,whoreportscartelconductinviolationofthelawtoanagency.Suchanindividualalmostalwaysrequiresaguaranteeofconfidentialityandanonymity.Somejurisdictionsprovidewhistleblowerswhodiscloseinformationwithlegalprotectionfromvictimisationanddismissal.

3 METHODSOFDETECTINGCARTELSANDLAUNCHINGANINVESTIGATION

3.1 IntroductionThissectiondiscussesthevariousmethodsbywhichacompetitionagencymightdetectsignsofcartelactivityinanindustryandproceedtolaunchaninvestigationtobringthecarteltoahaltandpunishthecompaniesand/orindividualsinvolved.Itbeginswithabriefsummaryoftheprincipalmethodsofdetection,followedbyadiscussionofeachmethodinmoredetail.

Beforedefininganddetailingtherangeofproactiveandreactivedetectionmeasuresavailable,itisusefultosetthecontextforthissection.Cartelsarebytheirnaturehiddenandsecret.1Wherethereisalowriskofdetectionbyanagency,companiesparticipatinginacartelhavelittleincentivetoreporttheirbehavioursincethebenefitsderivedfromparticipationcanbeextensive.Conservativeestimatesassumethatpricesinacartelisedindustrytendtobeatleast10percenthigherthantheywouldbeifnocartelexisted.2Itfollowsthatprofitswillalsobesubstantiallyhigher.

Oneoftheprincipalmethodsofcarteldetection,leniency,isdiscussedinchapter2.Agenciesneedtohaveavarietyofeffectiveinvestigativetoolsandapproachesattheirdisposaltodetectcartelsandcannotrelyononetoolorapproach.Theextenttowhichthereisaperceivedriskofdetectiondependsonmanyfactors,includingahistoryofagencydetectionandabeliefthattheagencyhasstrongtoolstouse.Ifanagencydoesnothavesufficientcapacityormeanstodetectcartels,itsleniencyprogramislikelytobeineffective.Tooptimiseitslevelofdetection,anagencyneedstofind,amongotherthings,therightcomplementofreactiveandproactivedetectionmethods(asdefinedinsections3.2and3.3).

Thissectionbeginswithanoverviewofreactivemethodsofdetectingcartelsfollowedbysomespecificexamplesofhowanagencymightapplythosemethods.Theroleofwhistleblowers,informantsandleniencyapplicantsarealldiscussed,withthecaveatthattheuseofsomereactivestrategies(suchasaffirmativeamnesty)may,incertainjurisdictions,giverisetoconcernsregardingfairnessandequalityoftreatment.

Anoverviewandspecificexamplesofproactivemethodsofdetectingcartelsarethenprovided,includingtheuseofeconomicanalyses,monitoring,liaison,educationandoutreach.Throughoutthesection,goodpracticesfordetectingcartelsandlaunchinganinvestigationareidentified.

3.2 Reactivemethodsofdetectingcartelsandlaunchinganinvestigation

Reactivemethodsofdetectiontypicallyrelyonsomeexternaleventtotakeplacebeforetheagencybecomesawareofanissueandcanlaunchaninvestigation.Reactivemethodsofdetectionoftenincludereceivingaleniencyapplicationorthepresenceofawhistleblowerorinformant.

1 Seethe1998OECDreport,Recommendation of the council concerning effective action against hard core cartels)(www.oecd.org),andtheICNSG1report,Defining hard core cartel conduct.

2 See,forexample,US sentencing guidelines(2R1.1,Applicationnote3)(www.ussc.gov),whichstatesthat‘Itisestimatedthattheaveragegainfromprice-fixingis10percentofthesellingprice’.However,otherstudieshaveshownaverageoverchargestobeevenhigher—see,forexample,JohnMConnorandCGustavHelmers,Statistics on modern private international cartels,1990–2005,AAI(www.antitrustinstitute.org),andJohnConnorandRobertLande,How high do cartels raise prices? Implications for reform of sentencing guidelines,AmericanAntitrustInstituteworkingpaper04-01(3April2005)(www.antitrustinstitute.org).

Itisconsideredgoodpracticeforagenciestouseavarietyoftechniquesandmethodstodetectcartels,includingamixofbothreactiveandproactivemethodsthatwillincreasetheopportunitiesfordetectingcartelsandhelpdemonstratetheagency’senforcementcapacity.

� methods of detecting cartels and launching an investigation

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Thereisalwayssomeriskofdetection.Thelosersincartelisedindustriesarethebuyersofthecartelisedgoods,theircustomersandultimatelyconsumers.Anyofthesewrongedgroupsmaybecomeawareofthecartelactivityandreportittotheagencybywayofacomplaint.Alternatively,adisgruntledemployee(orex-employee)ofacartelparticipantmaychoosetoactasawhistleblowerandreportthecartelactivitytotheagency.Theserisksaffectthe‘probabilityofdetection’assessmentsmadebycartelparticipants.Acartelparticipantmayconcludethattheriskofdetectionisuncomfortablyhighandmaythereforedecidetoapplyforleniencyandreportthecartelbeforeanyoneelsereportstheconduct.

Agencieshavesoughttoincreasetheincentivetoreportbyintroducingleniencyprogramsthatprovidepartialortotalexonerationfrompenalties,suchasfinesandimprisonment.Thesignificantdetectionbenefitsofaleniencypolicy,andtheessentialconstituentpartsofaneffectiveleniencyprogram,arediscussedinchapter2.

Someagenciesalsooperateotherincentiveprogramstoencouragethirdpartiestobringrelevantinformationtotheirattention.Atleastoneagencyhasacartelinformantrewardprogramwhichoffersamonetaryrewardforinformationreceivedfromthird-partyinformantsnotformingpartofthecartel.

3.2.1Complaints

Anagencycanfirstlybecomeawareofcartelactivitythroughacomplaint,typicallyfromadirectorindirectpurchaserofthecartelisedgoods,orfromacompetitorwhomaybeexcludedfromthecartelarrangements.Alternatively,complaintsmayoriginatefromanymemberofthegeneralpublicwhomaybecomeawareofanissueorbesuspiciousofcartelactivities.

Agenciesalsotendtoreceivealotofcomplaintsaboutsuspectedcartelbehaviourfromconsumers.Througharigorousfilteringprocessmanyofthesecomplaintsarefoundrelativelyquicklytobewithoutlegalfoundation.Thishelpsavoiddiversionofvaluableresourcesawayfrominvestigationsintogenuinecartelbehaviour.Unfoundedcomplaintsgenerallyarisebecauseofconfusionbetweenillegalcartelbehaviourandlegitimateactivitiessuchasprice-fixing.Inrareinstances,complaintsmaybemadeaspartofanattempttocausetroubleforacompetitor.Itisimportanttokeepallpossibilitiesinmind,particularlyduringtheearlystagesofacaseasmoreinformationisobtainedaboutthebehaviourandthepartiesinvolved.

Genuinecomplaintsmaytaketheformofcustomerscomplainingthattheyhavebeenallocatedorarelockedintoaspecificsupplierandareunabletogoelsewhere.Alternatively,thecustomermayhavebeentoldbythesupplierthathisbusinesswaswoninsomesortofbackroomtransactionwithanothersupplier,orthatthesupplierwas‘owed’somebusinessbytheothersupplier.Procurersmayspotunusualbiddingpatterns,suchasrotationofbidsbetweencompetitors.

Agenciesmayusevariousmeasurestoinfluencethefocus/natureofcomplaintsbysettingoutatthebeginningoftheyearwhichsectorstheyaremostconcernedabout3bypubliclyidentifyingspecificsectorstargetedforenforcementfocus.Inadditiontoencouragingcomplaintsorleniencyapplications,agenciesmayencouragecompaniestocomplywiththejurisdictions’lawsandregulationsandmayevenhaveaformontheirwebsiteforprocurementauthoritiestocompleteiftheysuspectthatbid-rigginghasoccurred(seesection3.3.11.2).

Itwillusuallybenecessarytoprotecttheidentityofacomplainantthroughoutthelifetimeofacasetoavoidthepossibilityofreprisals,particularlyifthecomplainantisarivalcompetitor.Inatleastonejurisdiction,awrittencomplaintwillnotformpartofthefile,insteadonlyanoteforthefileisprovidedwithdetailsofthecomplaintwithoutreferringtothenameofthecomplainant.Oneconsequenceofnot

3 Basedonidentifieddeficienciesintheoperationofmarketsandindustries.

methods of detecting cartels and launching an investigation �

revealingtheidentityofacomplainantisthatinformationprovidedbythecomplainantcannotbeusedinevidencebutonlyasintelligenceinthesearchforevidence.Someagenciesrecogniseacomplainantasbeingathirdpartytothecase,withtherighttomakerepresentationsonkeydocuments.

3.2.2Whistleblowersandinformants

Agenciesmayalsobecomeawareofcartelactivitythroughinformationreceivedfromeitheraninformantorawhistleblower(seesections2.2and2.6).

3.2.2.1Whistleblowers

Awhistleblowerisaninsider,typicallyacurrentorformeremployee,whoreportscartelconductinviolationofthelawtoanagency.Suchanindividualalmostalwaysrequiresaguaranteeofconfidentialityandanonymity.Somejurisdictionsprovidewhistleblowerswithlegalprotectionfromvictimisationanddismissal.

Awhistleblowertypicallyisanemployeeorex-employeewhoresentshisemployerforsomereason,suchasademotionoradismissal.Whistleblowersareinpracticeoftenex-employeesandafairamountoftimemayhavepassedsincethewhistleblowerbecameawareofthecartelactivity,sothatanyincriminatingdocumentsmaynolongerexist.

3.2.2.2Informants

Informantsoftenhaveinformationobtainedfromwithinthecartelwhichcouldnotbeobtainedfromsourcesotherthanthetargets.Theymayagreetoworkundercoverandmaybedirectedtoundertakefurtherresearchintheformofcovertintelligencegatheringonbehalfoftheagency.Infiltrationbyanundercoverinformant,whereauthorisedbytheagency’slawsorregulations,canbeapowerfulinvestigativetool,butaveryonerousregulatoryregimesettingoutstrictrightsandobligationsfortheinformantandagencywillnormallyapplyduetothepersonalrisksofdiscoverythatmaybeincurredbytheundercoverinformant.Forexample,authorisationmightonlybegivenwheresuchactionisnecessaryandproportionate,andcollateralintrusioniskepttoaminimum.Allinformanthandlersmustbespeciallytrained,andtominimisetheriskofdiscovery,anyinformationreceivedfrominformantswilloftenbeimpartedtoacaseteamonlyasbackgroundintelligencewiththeoriginalsourceoftheinformationkeptconfidential.Insomejurisdictions,whistleblowersmaybetreatedbytherelevantagencyasaconfidential,undercoverinformant.

Atleastoneagencyoperatesacartelinformantrewardprogram.Thisprovidesfinancialincentivestothirdparties(i.e.thosenotactuallyinvolvedintherelevantcartel)inexchangeforinformationorevidenceprovidedaboutthecartel.Suchprogramscanfacilitatethegatheringofevidenceorinformationaboutcartelswithminimaleffortandcost,andcanalsohelptodetercartelbehaviour.

Providingfinancialincentivestoinformantsalsohavepotentialrisks.Providingmonetaryincentivesandrewardsforinformationwillnecessarilyraiseadditionalquestionsabouttheindividual’smotivationforprovidingtheinformation,aswellasraisequestionsaboutthequalityofevidenceprovided.

Itisconsideredgoodpracticeforagenciestohaveaformalcomplaintsysteminplaceforreceiving,handlingandrespondingtocomplaintsfromthegeneralpublic.

3.2.3Leniencyapplicants

Manyagenciesthroughouttheworldhaveintroducedleniencyprogramsasanincentiveforcarteliststoreporttheirbehaviourinexchangeforpartialortotalexonerationfrom,orasubstantialreductionin,finesorimprisonment.

Leniency4isagenerictermtodescribeasystemofpartialortotalexonerationfromthepenaltiesthatwouldotherwiseapplytoacartelparticipantwhoreportsitscartelparticipationtoacompetitionenforcementagency.Inaddition,agencydecisionsthatcouldbeconsideredaslenienttreatmentincludeagreeingtopursueareductioninpenaltiesornottoreferamatterforcriminalprosecutionforthatparticipant.

Leniencyisgenerallyareactivestrategyinwhichtheagencywaitsforcompaniestocomeforwardandapply.Itispossibleforleniencytoconstituteamoreproactivetool.Oneexampleofthis,usedbytheDepartmentofJustice(DoJ)intheUnitedStatesofAmerica,isaffirmativeamnesty.5Whereacartelissuspectedandleniencyisstillavailable,butnoleniencyapplicanthascomeforwardtoreporttheconduct,theDoJsometimesproactivelyapproachesoneofthesuspectedcompaniestoclearlysetoutthebenefitsthatleniencywouldgivetothecompany.Thismayoccasionallypromptacompanytoapplyforleniency.However,thereisthealternativepossibilitythatthecompanycoulddecidenottocomeforwardandinstead,havingbeenalertedtothepossibilityofasearch,raid,inspectionorotherinvestigativeaction,destroyanyincriminatoryevidenceinitspossession.6Insomejurisdictions,suchactscouldpotentiallybeprosecutedasobstructionofjustice.Itshouldbenotedthattheuseofsuchastrategymay,incertainjurisdictions,giverisetoconcernsregardingfairnessandequalityoftreatment.

3.3 ProactivemethodsofdetectingcartelsandlaunchinganinvestigationThemethodsofdetectiondiscussedthusfararereactiveinnature,sincetheyrelyonsomeeventexternaltotheirowninitiativetotriggeranagencyinvestigativeresponse.Forsomeagencies,particularlythosethathaveleniencyprogramsinplace,itmaybesufficienttorelyonreactivemethodsofdetectionastheseprovideasufficientsupplyandvarietyofgoodqualitycasesforinvestigation.However,thiswillnotusuallybethecaseandevenforsomeofthebusiestagenciestherecanbepeaksandtroughs.Agencieswillusuallywanttoalsousemoreproactivemethodsofcarteldetection.Proactivemethodsofdetectionareinitiatedfromwithintheagencyanddonotrelyonanexternalevent.Proactivemethodsofdetectionmayincludeanannouncementofleniencyperiod,theuseofeconomicsandmarketstudies,trackingofindividualsandmedia,liaison,infiltrationandeducation.

Agenciesmaychoosetouseproactivemethodsofdetectionforavarietyofreasons:

• Leniencyprogramsmayatsomestagestopprovidingagencieswithsignificantcases.Inthisrespect,thereisaneedforagenciestoshowabilitytopursuecasesproactivelysothatdeterrenceremainsacrediblethreat.Successfulleniencyprogramsdependontheexistenceofacrediblethreatofdetectionandpunishment,evenifnooneshouldapplyforleniency.

• Anagencymightcometotheendofastringofconcurrentinvestigationsintothesameindustry.

• Anagencymayhaveacquirednewpowersandbelookingtoputtheseintopracticetounderlinetheirdeterrenteffect.

4 Thetermsimmunity,leniencyandamnestyareusedinvariousjurisdictionstodescribepartialortotalexonerationfrompenaltiesbutarenotsynonymousinalljurisdictions.Thesignificantbenefitsofaleniencypolicy,andtheessentialconstituentpartsofaneffectiveleniencyprogram,arediscussedindetailinchapter2ofthismanual.

5 Formoredetails,seewww.usdoj.gov.

6 SeeSG1paper,Obstruction of justice in cartel investigations(www.internationalcompetitionnetwork.org).

• Theagencymayseektoincreasethevarietyofitscasesmoregenerally(eitherintermsofthesizeofcompaniesinvestigated,typeofconductorthetypeofindustryinvestigated)toimprovethedeterrenteffectofitsactivities.

Thefirstproactivemethoddiscussedinthissectionisamoregeneralleniency/settlementstrategy(tobedistinguishedfromleniencyprograms).Whenanagencyisconcernedaboutpossibleendemiccartelconductwithinaparticularindustry(e.g.oneagencyeffectivelyusedthismethodtocombataproblemwithbid-riggingintheconstructionindustry),itmaybeappropriatetoconsidersomemoregeneralleniency/settlementstrategiesunderwhichtheagencyinvitesimplicatedcompaniestocomeforwardunderconditionsakintoleniencybutwithanevengreaterdegreeofcertaintyandfinality.

Whenanagencyhasnodirectevidencetosupportasuspicionthatcartelconductmaybepresentinagivenmarket,itmayreferto:

• theeconomicmarketanalysesoftherelevantsector

• previousenforcementactivitiesbyotheragencies

• thesystematicmonitoringofindustryactivity—e.g.lookingatthepotentialofbid-rigginginpublicsectorprocurement

trackingindividualsthroughtheirdirectorshipsofaseriesofcompanies—andthiscanbeparticularlyusefulgiventhatrecidivismisoftenobservedincartelbehaviour.

Itisoftenthecasethataparticularindustry,and/orindividualswithinthatindustry,willexhibitanumberofillegalactivitiesindifferentareas.Forexample,theremightbeabusesofcompetitionlawaswellasexploitationofconsumersthroughunfaircontractsorsubstandardworkandevasionoftaxes.Forthisreason,liaisonwithotherdomesticlawenforcementagenciesmaygenerateusefulleads.

Aspartofanagency’sroleinmaintaininganoverviewofindustries,andinparticularwhenoneormoreoftheabovemethodshasgivenrisetoparticularconcerns,itcanbeusefultomonitor:

• therelevanttradepress

• internetchatroomsand/or

• thepubliclyvisibleactivitiesoftradeassociations

tosearchforsignsofcartelactivity.Thiscanbedonebywayofdesktopresearchorbyattendingpublicindustryevents(suchassalesconferences)andtalkingtokeyindustryfigures.

Finally,theimportanceofcompetitioneducationandoutreachinraisingawarenessabouttheillegalityofcartelconduct,theharmitcausesandhowtodetectitshouldnotbeunderestimatedasatooltogeneratesignificantleads.Anagencywillgenerallyseektopubliciseitsworkthroughvariousmethods,suchasgeneralandtradepressarticles,itsownwebsiteandbygivingspeechesatconferences.Whenthereisasuspicionofcartelactivityinaparticularindustry,itisworthconsideringtargetingparticularindividualsorgroupsforeducation(e.g.targetingauditorsinthepurchasingdepartmentsofthecustomerssothattheycanlookoutforsignsofsuspiciousactivitysuchasunusualbiddingpatterns).

3.3.1Otherleniency/settlementstrategies

Thefirstproactivemethoddiscussedinthissectionisamoregeneralleniency/settlementstrategy(tobedistinguishedfromanagency’sleniencyprogram).Whenanagencyhasfoundacartelproblemtobeendemicwithinaparticularindustry,itmaybeappropriatetoconsidersomemoregeneralleniencystrategytosecurebothapunishmentandadeterrentwithouttheneedtofullyinvestigateunmanageablylargenumbersofpartiesand/orcases.

Atleastoneagencyadoptedastrategyinwhichitannouncedthattherewouldbealeniencyperiodforcompaniesadmittingparticipationinacartel.Companiesmakingadmissionswithinthegivenperiodweregivenmorelenienttreatmentthanthosecompanieswhichdidnotmakeanyadmissionandweresubsequentlyfoundguilty.Insomeinstances,companiesmaybetreateddifferentlyinthefutureregardingtenderingforpublicsectorprocurementcontractsand/ortheymayfacearelativelylowlumpsumfinancialpenaltyfollowingashortandresource-lightinvestigation.

3.3.2Useofeconomics

Someagenciesmayuseanalyticaltoolssuchaseconomicstudiesandanalysisofpreviouscasestotryandidentifypossiblecartelsmarkets.

Whethereconomicsareusedatallandtheweightplacedontheoutcomesofanyeconomicstudiesundertakenwilldifferbetweenjurisdictionsandwillalsobeinformedbythelegalsysteminthatjurisdiction.Mostagencies,includingmanywell-establishedagencies,donotuseeconomictoolsordatatodetectcartels,relyinginsteadonothertoolsthattheyconsidermoreeffective.7

Eachagencydeterminesthebestpracticefortheirjurisdictioninthecontextoftheirlegalregime.

Ontheirown,economicstudiesareunlikelytoprovidesufficientinformationtopassanythresholdforcommencingafullinvestigation.Instead,theyaremoresuitedtoidentifyfactorsthatcouldbeindicativeofcollusionormarketsthatmayberipeforcollusion.

Economicstudies8aregenerallybasedononeormoreofthefollowingapproaches:

• areviewofeconomicliteraturetoassesswhatfactorshaveprovedusefulinaccuratelymodellingtheformationandstabilityofcartels

• anempiricalapproachusingrecentevidenceofpublicinfringementdecisionsandeconomicdatatoidentifyfactorsthatarerelevantinidentifyingcartels

• economicmodellingtoprovidepredictionsoftheprobabilityofcartelswithinvariousindustrytypesand/or

• anumberofindustryormarketstudiesdirectedtoestablish,forexample,whethertheseprovideadditionalinsightintotheeconomicunderstandingofcartels.

Thecostofeconomicstudieswillalwaysbeassessedagainstanylikelybenefitsandmayinsomecases(particularlyforsmalleragencies)beprohibitive.Nevertheless,withinformation-sharingacrossagenciesitispossibleforbenefitstobemorewidelyrealised.

7 Forexample,theAntitrustDivisionoftheUSDOJdoesnotuseeconomictoolsordatatoattempttodetectcartelactivity.SucheffortsinthepasthavenotprovenfruitfulandtheUSDOJdoesnotbelievethatsucheffortsareagooduseofitsresources.

8 See,forexample,anOfficeofFairTrading(UnitedKingdom)economicdiscussionpaper(2005),Predicting cartels(www.oft.gov.uk).

3.3.2.1Existenceoffactorsfacilitatingcartelbehaviour

Asshown,economicliteraturehasidentifiedseveralfactorswhichfacilitatecartelbehaviour.Thesefactorsmayalsoprovideagencieswithsomeindicatorsofcartelconduct.Factorsidentifiedincludethefollowing:

• smallnumberoffirms—easiertomanagecovertrelationshipsandagreements

• highentrybarriers—preventsnewcomersfromdisruptingorundercuttingthecartel

• excesscapacityandstocks

• shrinkingmarketsanddecliningindustries—thedifficultcircumstancesencouragefirmstocolludetosurvive

• stablemarketconditions(evenwithinshrinkingmarkets)—makescheatingonthecarteleasiertodetect

• frequencyofinteractionthroughtradeassociations—e.g.peoplemovingbetweencompanies

• closegeographicallocation—e.g.wherearawresourceisbeingextractedandrefined

• markettransparency—e.g.inbid-riggingwhereopennessmakesiteasiertomonitorforcheating

• homogenousorfungibleproductssuchaschemicalproducts,vitaminsandfoodadditives

• endingofapricewar—concertedmoveto‘disciplinethemarket’

• existenceofjointventures

• commonalityofcosts

• maturetechnology.

3.3.2.2Empiricalapproaches

Empiricalapproachesoftenuseeconomicevidence(modelscontainingrelevanteconomicvariables)frompreviouscases(seesection3.3.3)topredicttheindustriesinwhichfuturecartelsmaybediscovered.Industrieswherecartelshavenotpreviouslybeendetectedmaybeidentifiedasbeingsusceptibletocartelactivitybymeansofsuchapproaches.Patternsofcartelisationobservedfromsuchstudiesincludetheimportanceofdemandfactorssuchasscale(intermsofturnover)andalackofvariabilityingrowthofdemand.Strongpositivecorrelationshavealsobeennotedbetweencartelisedindustriesinsomejurisdictions.Itshouldbenoted,however,thatsuchstudiesmaysufferfromsampleselectionproblemsduetothefactthatmanycartelsareyettobedetectedandinfactmayneverbedetected.9

3.3.2.3Industryormarketstudies

Industryormarketstudiesmaybeconductedintoparticularindustrieswherecartelsarehistoricallymostprevalentandsuchstudieshaveidentifiedanumberofcommonthemes.Forexample,cartelsmaybepromptedbyadeclineinpricesorbyintensecompetitionfollowingtheexpansionofanincumbentoralargenewentrant.Destabilisationofacartelmaybeencouragedbyentryorthethreatofpotentialentry,andthismayincreasetheincumbents’needtocoordinatetheiractivities,therebymakingthecollusiveagreementmoreexplicitandeasiertoprove.Thelikelihoodofcollusioncanbeinverselycorrelatedwiththenumberoffirmsandthedegreeofconcentrationinthemarket.

9 JHarrington,Modelling the birth and death of cartels with an application to evaluating antitrust policy,workingpaper532,JohnHopkinsUniversity,2006,pp.1–29.Thepapernotesthatthecartelpopulationislargelyunobservableandwecanonlyobservethepopulationofdiscoveredcartels.

�0 methods of detecting cartels and launching an investigation

Suchstudiesaregenerallybasedonlyonpubliclyavailableinformation.Alternatively,somejurisdictionsmayconsiderseekinginformationfromothergovernmentalentitiesorrequestinginformationonavoluntarybasis.Thederivationoftheinformationmayhaveimplicationsfortheuseoftheinformation—itwilloftenbepossibletoonlyuseitasgeneralintelligence,ratherthanasspecificevidenceformingpartofasubsequentinvestigation.Further,inacriminalcontextagencieswillusuallyneedreasonablegroundstoseekinformationfrompotentialtargets.

3.3.3Analysisofpreviouscartelcases

Analysisofpreviouscasesisarelativelylow-costmeasurewhichmayhelpanagencytofocusitseffortsoncartelbehaviourinparticularindustries.Theagencymightexamineitsrecordsofsuccessfulcartelcasesandalsoofthosecaseswhichultimatelydidnotgoanywhere,perhapsbecausetheydidnotreachaparticularthresholdforinvestigation(formoreinformation,seesection4‘Caseselectionandprioritisation’).Furtheranalysisofpreviouscasesmayeitherreinforcetheoriginalsuspicionsorshedlightondifferentcartelactivityexistingwithintherelevantindustry.

Asanalternative,theagencymightundertakeananalysisofcasesconductedbyotheragencies.Casesthathaveariseninotherjurisdictionswilltendtoactasausefulpointertolikelycartelisedindustriessincecartelshavehistoricallygenerallytendedtoariseinsimilarindustries,mainlybecauseoffacilitatingfactorssuchasthosesetoutinsection3.3.2.1.Thiswillparticularlybethecasewherethereissomelinkbetweenthecompaniesoperatingindifferentjurisdictions.

3.3.4Analysisofothercompetitionwork

Marketanalysesundertakeninnon-cartelareaswithinacompetitionagency(e.g.inmergersorabuseofdominancematters)maydiscloseacartelorprovideimportantbackgroundinformationonaparticularindustry.

3.3.5Monitoringofindustryactivity

Someagenciesundertakesystematicmonitoringofindustryactivity.Forexample,someagencieshaveintroducedasystemtoanalysethepotentialforbid-rigginginthepublicsector.Publicprocurementagenciesareaskedtocompleteabiannualreturnwithdetailsofprocurementactivitiesintheprecedingtwoyears,includingexpectedbidvalue,namesofbiddersandbidssubmitted,anddecision-makingmethods.Theresultsareanalysedandinvestigationslaunchedwherethegreatestsymptomsofbid-riggingarepresent.Suchmethodsarealsohighlyusefulfromaneducationalperspective,sincetheydrawprocurers’attentiontothepotentialforbid-rigging.

3.3.6Trackingofindividuals

Theemploymenthistoryofmanagersinvolvedincartelsmaybeusefulassimilarconductmayhavetakenplacewithintheothercompaniesforwhichtheyhavepreviouslyworked.Someagenciesfollowthecareerprogressionofcertainindividualsfromcompanytocompanyquitecloselyandrecordthesedetailsonadatabase.Cartelshavebeenuncoveredasaresult.Otheragencieshavecitedbarrierstothecollectionofsuchinformation,suchasstrictprivacylegislation.

methods of detecting cartels and launching an investigation ��

3.3.7Liaisonwithothercompetitionagencies

Cooperationwithotheragenciesisanaturalpartofmostagencies’work,andtheexperienceofotheragenciescanbehighlybeneficial.However,therearewaystoincreaseandvarysuchcooperationtoimprovethesuccessofcarteldetectionandcasegeneration,suchas:

• agenciesinformingeachotherwhentheyuncoverevidenceofapossiblecartel—atitsmostextreme,thiscouldbedonebeforetheagencyreacheditsthresholdforopeninganofficialinvestigation10

• visitsbetweenagenciestoshareexperiencesof,andsolutionsto,cartel-relatedissuesand

• specificone-offdiscussionswithnamedindividualsatotheragenciesregardingparticularissuessurroundingcarteldetectionandcasegeneration.

3.3.8Liaisonwithotherdomesticlawenforcementagencies

Itisoftenthecasethataparticularindustryand/orindividualswithinthatindustrywillcarryoutanumberofillegalactivitiesindifferentareas.Forexample,theremightbeabusesofcompetitionlawaswellasexploitationofconsumersthroughunfaircontractsorsubstandardserviceandevasionoftaxes.Forthisreason,liaisonwithotherdomesticlawenforcementagenciessuchastradingstandardsauthoritiesandtaxcollectionauthoritiesmaybringforthusefulleads(seesection5.5.4).

3.3.9Monitoringtradepressandtheinternet

Aspartofanagency’sroleinmaintaininganoverviewofindustries,andinparticularwhenoneormoreoftheabovemethodsraisesuspicions,itoftenwillbepossibletofindadditionalinformationonpotentialcartelbehaviourinanindustrybytargetingtradepressandonlinetradeinformationsuchaschatroomsandbulletinboards.Thefollowinglistillustratesthetypesofinformationthatmightbefound:

• allegationsofprice-fixing,marketsharing,non-competing,bid-riggingand/orexchangeofpriceinformation(e.g.amagazineinterviewsacompanywhichallegesthatothersareengagedinsuchactivities—ormaybecontainsaletterfromadisgruntledcustomerwhothinkshe’sthevictim)

10 Referto2005OECDpaper,Best practices for the formal exchange of information between competition authorities in hard core cartel investigations(www.oecd.org).

Itisconsideredgoodpracticeforagenciestodevelopgoodworkingrelationshipswithinternationalcounterpartstoencourageandfacilitatethesharingofinformation,aspermittedbyapplicablelaws,treatiesoragreements,thatmayprovideasourcefortheinitiationofcartelinvestigations.

Itisconsideredgoodpracticeforagenciestohaveregularcontactswithotherdomesticlawenforcementagenciestodevelopanunderstandingofthepossiblelinkswithcompetitionlawenforcementtodevelopgoodworkingrelationshipsandtodrawontheirsourcesofinformationasameansofgeneratingleadstodetectandinvestigatecartelconductandpromotecooperationandcoordinationforfurtherinvestigations.

�� methods of detecting cartels and launching an investigation

• onecompanyputtingpricesup(orperhapsdown)andother(s)doingexactlythesamearoundthesametime

• acompanylosingbusinesstoothers,combinedwithsomethingsuspiciousthatisindicativeofcollusiveactivity(theothercompaniesmaybeengaginginconcertedaction)

• apparentlycoordinatedrestrictionsofsupply(thiswilldriveuptheprice)

• coordinatedortemporallysuspicious(i.e.aroundthesametime)activitiessuchasintroductionofsimilardiscountsand/orincentiveschemes

• signalssuchaspublicisedstatementsorinterviewsincludingthingslike‘It’stimetheindustrytookactiontoincreaseitsmargins’

• peoplesayingthattheyhavebeentoldbyasupplierthatnoonewillquoteadifferentprice

• regularintra-industrycontactbetweenkeyindustryfigures

• industryjournalistswhomightbeopentoanapproachfromtheagencyforinsideindustryinformation

• industryconferences/meetingsthattheagencymightbeabletoinfiltrate(seesection3.3.10).

Difficultiesmaybeencounteredwithmonitoringwebsitesbecausethemostrelevanttradeinformationiskeptonsecuresitesaccessibleonlybypassword.Theremayalsobelimitsontheagency’spowerstosetupanonymousaccountstoaccesssuchsitessothemonitoringoftradepressmaythereforeprovemoresuccessful.

3.3.10Infiltrationandothercontactwithindustryrepresentatives

Afurtherstepthatmaybetakenintheinvestigationofanindustryisinfiltrationoftheindustryinsomeway.Thefirstexampleofthisisinfiltrationbyagencystaffattendingsalesconferencesandtalkingtokeyindustryfigures.Secondly,itmaybepossible(dependingonthecircumstancesofthecaseandontheagency’spowers)todoavarietyofthings,suchasestablishingcontactswithintheindustryortradebodiesusinginformantsfromwithintheindustryorevenconductingalong-termexerciseusingpeopleasundercoverinformants(seesection3.2.2.2).Suchactivities,mustbetightlycontrolledtoguaranteecompliancewiththejurisdiction’slegalrequirementsandthesecurityandpersonalsafetyofthoseparticipating.

Itmayalsobepossibletoencouragepre-emptiveactionbywritingletterstocompaniesorconductingvoluntaryvisitstoaskquestionsandobtaininformation.Thepurposeofsuchquestionswouldbetodestabiliseanyexistingcartelandencourageanapplicationforleniencyand/orawhistleblower.Articlesmaybeplacedinthetradepressexpressingconcernsaboutparticularsectorstopromptwhistleblowerstocomeforwardtojournalistsortheagency,orthatsomeonetakespre-emptiveactionandappliesforleniency.Thismay,however,carrythepotentialdisadvantageoftippingoffoffendersandpromptingthemtodestroyevidence.

3.3.11Educationandoutreach

Theimportanceofeducationandoutreachshouldnotbeunderestimated.Anagencywillgenerallyseektopubliciseitsworkthroughvariousmethods,suchasgeneralandtradepressarticles,itsownwebsite,andthroughspeechesatconferences.Wherethereisasuspicionofcartelactivityinaparticular

Itisconsideredgoodpracticeforagenciestoregularlyandconsistentlymonitorrelevantindustryandtrademedia,internetsitesandotherpubliclyavailableindustryandtradeassociationsourceswhichcanprovideanindicationandearlywarningsignofcartelactivity.

methods of detecting cartels and launching an investigation ��

industry,itisworthconsideringtargetingparticularindividualsforeducation.Forexample,theauditorsinthepurchasingdepartmentsofcustomerscanlookoutforsignsofsuspiciousactivitysuchasbiddingpatterns.Educationandoutreachtypicallycomesintwoformats:internalandexternal.

3.3.11.1Internaleducation(information-sharingwithintheagency)

Beforeincreasingtheawarenessoftheillegalityandpotentialharmofcartels(andthemethodsusedtoidentifythemamongindustrybodiesandauthorities,itisimportanttoensurethattheagencyismaximisingtheopportunitiesforcooperationbetweenitsowndepartments.Otherdepartmentsarenodoubtalreadybroadlyawareoftheworkofthecartelsdepartment,butthisawarenesscanbemaximisedbyholdingseminarsoncasestudies,economicsandotherissues,andbyforgingcloserlinkswiththosepeopleworkingonparticularareasandindustriesthatarelikelytobethesubjectofcartelactivity(see,forexample,sections3.3.9and3.3.10).

Itmightbeparticularlybeneficialtoshareinformationbetweencartelsandmergersdepartments,sincethelatteroftenperformavaluablemarket-monitoringfunction,particularlyinjurisdictionswithmandatorymergernotificationregimes.Hovevertheremaybeissuessurroundingtheinternaldisclosureofinformation—e.g.theinformationmaybeuseableasintelligenceonlyifitcanbereliedonforthepurposeforwhichitwascollected.

3.3.11.2Externaleducation

Themainfocusofeducationwilltendtobeonexternalorganisationsandindividuals,toincreaseawarenessofthepotentialforcartelactivity(e.g.intheformofbid-rigging)sothattheindicators11canberecognised.Individualsmaythenbecomecomfortablewithapproachingarecognisedcontactattheagencywiththeirsuspicions,evenifthesedonotinitiallyappeartoconstitutestrongevidence.Otherproactivemeasurescanthenbeemployedtotargettheareainquestionandinvestigatewhetheritisasituationthatislikelytoreachtherelevantevidentialthresholdforstartinganinvestigation.

Someexamplesofeducationstrategiesthatmightbeadoptedinclude:

• Raisingawarenessamongpublicprocurementagencies—wherelargefunds(orrepeatbusiness)areavailableforprojects,collusivetenderingandothercartelactivitiesareattracted.Thismightbebywayofpresentations—e.g.apresentationonbid-riggingforprocurementofficers(principallylocalauthoritypublicpurchasingofficersandauditors).Presentationslidescanbeusedinitiallyasaspeakeraccompanimentandsubsequentlydesignedtobeself-standingsothattheycanbeemailedtoinquirerswitharequesttorespondtotheagencywithanysuspicions.

• Distributionof‘model’letterstolocalauthorities,throughlocalgovernmentassociations,forthemtosendtocontractedsuppliers.Thelettersshouldstatethattherelevantlocalauthorityisworkingwiththeagencytoraiseawarenessofcartelsandtoimprovetheflowofinformationbetweenthelocalauthorityandtheagencywherebreachesofcompetitionlawaresuspected.Thelettersshouldsetoutthedetrimentaleffectofcartelsonconsumersandotherbusinesses,thepotentialpenaltiesforcartelparticipants,detailsandbenefitsoftheagency’sleniencyprogram,andadescriptionofbid-rigging.Contactdetailsshouldbegivenforthosewantingtoreportacartel.

11 Examplesofsuchindicatorsaresetoutinsection3.3.2.1.

Itisconsideredgoodpracticeforagenciestopromoteandengageinopenandactivecommunicationswithintheirorganisationsandacrossworkunitsinordertofacilitatetheexchangeofinformationaboutredundantcasesthatmaysignalpossiblecartelconduct.

�� methods of detecting cartels and launching an investigation

• Dispatchofnotesdescribingbrieflytheworkoftheagency(includingitsleniencyprogram)andnotifyingthesendingofthe‘model’letterdiscussedabovetothelocalauthoritycoordinatorsofregulatoryservices,toincludeintheirregularpublicationswhichmaybecirculatedtootherbodiessuchastradingstandardsauthorities.Suchnotesmightincludeastatementtotheeffectthattheagencyissteppingupitseffortstoworkwithlocalauthoritiestodetectandtakeactionagainstsupplierswhocollaboratewitheachotherwhensubmittingtendersforlocalauthoritycontracts.

• Certificatesofindependentbiddeterminationtobeusedforgovernmentandlocalauthoritybids.Thesewouldrequireadeclarationonthepartofthebiddertotheeffectthatitsbidhasbeenpreparedindependentlyandthatithasnotengagedinanyformofcollusion.However,thediscoverythattheregularuseofsuchformswheneverbid-riggingtakesplaceindicatesthattheymaynotbeaseffectiveasagencieswouldwish.

• Encouragingcomplianceprogramsamongprivatecompanies.Proactiveinvolvementinsuchprogramscanalsoencourageearlyinformingofbreachesoftheprogrambyresponsibleofficersofthecompanies.Itmayevenbepossibletoassistwithauditingandmonitoringofemployeeconduct.

3.4 SummaryThispartofthechapterhasdiscussedavarietyofreactiveandproactivemeasuresthatagenciescanusetoassistthemindetectingacartelandinitiatingasubsequentcartelinvestigation.Asnoted,theuseofsomestrategies(suchasaffirmativeamnesty)may,incertainjurisdictions,giverisetoconcernsregardingfairnessandequalityoftreatment.Onceacartelhasbeendetected,anagencywilltypicallyneedtomakedecisionsaboutthecasesitwillselecttopursue,aswellasthecriteriathatmaybeconsideredwhenprioritisingoneinvestigationoveranother.Thisinformationisdetailedwithinthenextpartofthischapter.

Itisconsideredgoodpracticeforagenciestoengageinoutreachprogramstoraiseawarenessaboutanti-cartellawsandtheharmfuleffectsofcartels—inordertoeducatepeopleabouttheoperationofthelawandthetypicalsignsofcartelconduct,andtogenerateleadsaboutcartelactivitythatcanbesourcesofinformationleadingtotheinitiationofformalinvestigations.

4 CARTELCASESELECTIONANDPRIORITISATION

4.1 IntroductionOnceacartelhasbeendetected,itisessentialforcompetitionagenciestomakeinformeddecisionsregardingcaseselectionandprioritisation.Beforedetailingthecriteriaformakingdecisionsoncaseselectionandprioritisation,itisusefultosetthecontextwithinwhichagenciesinvestigateandadjudicatecartels.Avarietyoffactorsimpingeonthedecisionsthataremadeaboutcartelinvestigationsincluding:

•availableresources(bothfinancialandhuman)

•relevantlegislation

•thecurrentregulatory,judicial,politicalandeconomicenvironments

•internationaldevelopments

•governmentpriorities

•activitiesundertakenbyotherdomesticandinternationalagencies.

Allthesefactorscreateaneedforconsistentandcoherentprocessesthroughwhichtheselectionandprioritisationofcartelcasesaremanaged.

Theaimofthispartofthechapteristoraiseawarenessofsomeofthefactorsthatmayimpingeonthedecision-makingsurroundingcaseselectionandprioritisation.Thispartofthechapterintroducesthecontextwithinwhichagenciesinvestigateandadjudicatecartels.Thefivecriterialistedwithinthispartexplorearangeofobjectiveandsubjectivefactorsthatagenciesmaywishtoincorporateintotheirownframeworkforcaseselectionandprioritisation.Thesecriteriaaddressissuesrangingfrompublicinterestconcerns,agencyprioritiesandeconomicconsiderationstodeterrenceandlegalrequirements,beforethepartconcludeswithasummaryofgoodpractices.

4.1.1Terminology

Caseselectionisanenforcementthresholdtoolthatoccursbeforeprioritisation.Thethresholdiscreatedthroughasetofcriteria.Ifapotentialinvestigationisfoundtomeetcertaincriteriaorhavecertainattributesandthereforepassesthethresholdpoint,adecisionwillbemadetoproceedtoprioritisation.Criteriaorattributesfoundwithinacaseselectionthresholdmightincludeenforcementparameters,thelikelihoodofsuccessfuladjudicationorthepotentialforevidencetobeobtained.

Prioritisationoccursonceadecisiontoconductsomelevelofinvestigationhasbeenmadeandconsistsofweighingavarietyoffactorstoadvancesomeinvestigationswhileatthesametimedevotingfewerresourcestootherinvestigationsorperhapsevenabandoningthemaltogether.Prioritisationofonematteroveranothermayoccurforavarietyofreasons,includingstrategy,toceaseconductthatmaybeconsideredofgreaterdetrimentand/orlegalrequirementssuchastheimpendingpassageofalimitationperiod.

Theterms‘caseselection’and‘prioritisation’maybeusedsomewhatinterchangeablyandthismakesdefiningeachtermalittleambiguous.Thispartofthechapterusesbothtermsascomplements.Insomeinstances,itmaybedifficulttomakeaninformeddecisiononcaseselectionandprioritisation,particularlyasthefullextentoftheallegedconductmaynotbecomeevidentuntilaftertheinvestigationhasstarted.Further,prioritisationfollowingthecommencementofaninvestigationmightresultwherecertainparametersaresettomaximisethelikelihoodofsuccessfuladjudicationand/ortouseavailableresourcestotheirgreatestextent.

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�� cartel case selection and Prioritisation

4.1.2Context

Eachjurisdictionwillchoosecasesdifferentlyandwillhavevaryingpriorities,investigationstrategiesandresources.Insuchanenvironment,theissueforthecompetitionagencyiswhichcartelinvestigationitprioritisesoverothers.Makingthesedecisionsinaninformedmanner,throughwhichparticularcriteriaaremeasuredandanalysed,willgosomewaytoensuringthatlimitedresourcesareusedinthebestpossiblewaytoenforcethelaw.Ideally,informeddecision-makingaboutcaseselectionandprioritisationmayalsoresultinsuccessfuladjudicationofoutcomes,leadingtoeducation,deterrenceandareductionincartelformation.

Therearenumerousapproachestocaseselectionandprioritisation,whichdependsomewhatonthelegal,economic,politicaland/orregulatoryenvironmentsinwhichthecompetitionagencyisworking.Itisnotuncommonfortheretobelargedisparitiesbetweentheenforcementresourcesandprioritiesindifferentjurisdictions12,orforinvestigationstobedelayedbecauseofresourceconstraints.13Thedecisionregardingwhethertoinvestigateacasecanbeheavilyinfluencedbytheresourcesavailable.Decisionsmaybemadewithconsiderationforthepossibilityofcostsbeingawardedagainsttheinvestigatingauthority.

Inlightoftheseconsiderations,itcanbeusefulforacompetitionagencytohavespecificselectioncriteriainplacetoassesswhichelementsofapotentialoffenceandthesurroundingcircumstancesaremostimportanttotheagency,itsenforcementprioritiesanditsavailableresources.Casesmaythenbeweightedagainstsuchcriteriatodeterminewhichmatterswillwarrantinvestigation,or,alternatively,movebeyondaninitial‘threshold’investigation.(Theremayevenbejurisdictionswhereinvestigationstriggerappealmechanisms).Objectivecriteriamaybeusefulinassessingavailableinformationtoenabledecisionstobemadeonwhetherornottoinstigateaninvestigationwithoutsettingoffanysuchtriggers.

12 GSpratling,‘Detectionanddeterrence:rewardinginformantsforreportingviolations’,George Washington Law Review, 69(5/6),2001,798–823.

13 PMassey,Using immunity to fight criminal cartels–new strategies that can help win the war against cartels,2000,retrieved6March2006fromwww.tca.ie/home/index.aspx.

Itisconsideredgoodpracticetohaveageneralpolicyorapproachsettingoutthestepsintheagency’sinvestigativeprocess,tohaveinaplaceamethodtoassessandweightherelativemeritsofcartelmattersandtofacilitatedecision-makingregardingtheselectionandprioritisationofcases.

Itisconsideredgoodpracticeforinvestigatorstohaveagoodunderstandingoftheobjectivesofthepolicyorapproachandtobewelltrainedinitsuseandapplicationoftheframework.

Itisconsideredgoodpracticeforagenciestohaveapolicyorapproachwitheasilymeasurableobjectivecriteriathatalsoreflecttheparticularpolitical,economicandregulatoryenvironmentwithinwhichtheagencyinvestigatescartelconductandenforcesitscompetitionlaw.

Itisconsideredgoodpracticeforagenciestoassigndifferentweightstothecriteriainthepolicyorapproachtoreflecttherelativeimportanceofeachcriterion.

cartel case selection and Prioritisation ��

4.2 SelectionandprioritisationcriteriaCompetitionagencieswilloftenbecomeawareofmorecasesofcartelbehaviourthanavailableresourceswillenableittoinvestigate.Itisthereforeusefultohaverobustcriteriatoevaluatemattersbroughttotheattentionoftheagencytodetermineinanobjectiveandconsistentmannerwhichinvestigationstopursue.Applicationofsuchcriteriatoeachcasereceivedbytheagencyisconsiderednotonlyresource-efficientbutisalsodefensiblyfair.Publishingsuchcriteriamayfurtherdemonstrateopenness,objectivityandaccountability.Insomecircumstances,anagencymaychoosenottoadoptaweightingsystemwithformalselectioncriteria,yetitisstilllikelythatcaseswillbeselectedbasedonassessingamatteragainsttheagency’sgeneralpriorities.Includedinthispartarefivesuggestedcriteriaforcaseselectionandprioritisation.

4.3 Criterion1:publicinterestCartelsareusuallyofmajorpublicinterestorconcernduetotheextensiveharmcausedtoconsumersaswellaslocal,nationalandinternationaleconomies.Conductsuchasprice-fixing,market-sharingandbid-rigginggenerallyincurheavypenalties(includingsubstantialfines)forbusinessesandindividuals.Insomejurisdictions,cartelconductisconsideredsodamagingthatcriminalsanctionshavebeenintroducedthatincludejailsentencesforindividualsinvolvedincartels.Factorstoconsiderwhenassessingthepublicinterestofaparticularinvestigationincludetheextentofpotentialconsumerandmarketdetriment.

4.3.1Extentofpotentialconsumerdetriment

Studiesintocartelsestimatethattheaveragelengthofacartel’soperationissixyears,andduringthattimethepriceofaffectedcommoditiesusuallyrisesbyatleast10percent.ItisestimatedthattheworldwideeconomiccostofcartelsexceedsmanybillionsofUSdollarseveryyear14andcausesextensiveharmtolocal,nationalandinternationaleconomies.

Agencieswillmostlikelyprioritiseacartelmatteroverothertypesofanti-competitivebehaviourduetotheknowneconomiceffectofcartelconduct.Inprioritisingonecartelinvestigationoveranother,agenciesmaytakeintoaccounthowwidespreadtheeconomicimpactmaybeandthevolumeofcommercethatisaffectedandthedurationoftheconduct.Inassessingthefactors,theagencymayallocatealesserprioritytothosecaseswheretheeffectisnotasgreat.

Theharminflictedbycartelsontheeconomyandthegeneralpublicmayinclude:

• consumersbeingforcedtopayhigherpricesforgoodsorservices—alternatively,consumersmaybeunabletoaffordtheproductsatall

• businessesbeingforcedtopayhigherpricesorhavingtopassthiscostontotheircustomers

• governmentagenciespayinghigherpricesforgoodsandservicesandpassingthesecostsontotaxpayers

• businessesinvolvedincartelshavinglessincentivetoinnovateoroperateefficiently.15

Insomejurisdictions,consumerdetrimentmaybemeasuredprincipallybythelevelofpricechangesforconsumers.Thatis,weightmaybegivenaccordingtothepercentageofthepricechangeaffectedbytheoffendingconductovertimewheremoreweightisgiventosituationsinvolvingahighpricechange

14 ThesecondOECDreport,Report on the nature and impact of hard core cartels and sanctions against cartels under national competition laws, states ‘Theworldwideeconomicharmfromcartelsisclearlyverysubstantial,althoughitisdifficulttoquantifyitaccurately.Conservatively,itexceedsmanybillionsofU.S.dollarsperyear’,2002,p.7.

15 OrganisationforEconomicCooperationandDevelopment, Report on the nature and impact of hard core cartels and sanctions against cartels under national competition laws,2002(www.oecd.org).

overashortperiod.Suchcalculationsmayoftenprovedifficultandmayrequiretheengagementofexperteconomicadvicetocalculatetheextentoftheconsumerdetriment.Thisneedistypicallybroughtaboutduetothecomplexityofseparatingelementsofpricerisesthatareduetonaturalchangessuchasincreasesincostofrawmaterialsorlabour.Itshouldalsobenotedthatwhenproductsareessentialcommodities,theeffectofcartelbehaviourcanbeconsiderable.

4.4 Criterion2:agencyprioritiesItisnotuncommonfordecisionsoncaseselectionandprioritisationtobemadeinlightoftheoverarchingagencyprioritiesthatarepre-determinedbyanagency’smanagementgroup.Someagenciesissueanannualdeclarationoftheindustryorsectorsthatareofparticularinterest.Forexample,someagenciespublishannualcorporateplansandprioritieswhichsetouttheconduct,orparticularsectorsoftheeconomy,inwhichenforcementofthelawisapriority.Suchplansthenenableeasycomparisonsbetweenthemattersathandandtheoverarchingagencyprioritiestoassistinmaximisingthecaseselection.Otherfactorsthatimpingeondecisionsmadeunderthiscriterionincludetheprioritiesofparticularmarketsorsectors,thestrengthofevidence,availabilityofresources,novellegaloreconomicissues,alternativeactionandtheavailabilityofreceivinginformationfromanotheragency,leniencyapplicant,informantand/orwhistleblower.

4.4.1Prioritiesofparticularmarketsorsectors

Agenciesmayquestionhowrelevantagivenindustryorsectoristotheprioritiesoftheagency.Someagencieswillundertakeadetailedanalysisofvariousindustrieswhentryingtodetectcartels.Thismaybeasaresultofintelligenceindicatingthatparticularindustriesaremorelikelytogeneratecartelbehaviour,oralternatively,secondaryindustriesidentifiedbycartelparticipantsinotherinvestigationsorthroughaleniencyapplication.

Mostagenciesinvestigatethescopeofcartelconductinthecontextofthemarket(s)inwhichthecarteloperates.Identifyingamarket—includingidentifyingthesellersandbuyerswhopotentiallyconstrainthepriceandoutputdecisionsoftheplayersinthatmarketisanintegralpartofacartelinvestigation.Itisimportanttoestablishhowlargethemarketis—specifically,whetheritissubstantialenoughfortheallegedcartelconducttohaveasignificanteffectonbusinessesandconsumers.Thelargerthemarket,themoredetrimentislikelytooccurandthemorelikelyitisthattheagencywillprioritiseonecaseoveracaseconcerningasmallermarket.Agenciesmayalsoconsiderwhethercartelbehaviourisendemicinaparticularindustryandwhetherthisisanothercaseinapatternofcasesaffectingthatindustry.Thismaymeanthatmoreneedstobedonetoeducateandmonitoraparticularindustry.

4.4.2Availabilityandstrengthofevidence

Thestrengthoftheavailableevidencewillbeasignificantfactorinanagency'sdecision-makingprocess.Whiletheremaybeaverystrongsuspicionthatacartelisoccurringinaparticularmarket,itisnotworthcommittingresourcestoamatterthatdoesnothavestrongevidenceandthereforeisnotlikelytobeasuccessfulcaseinsubsequentlitigationorappeal.

Differentagencieswillusedifferentmethodsfordeterminingtheavailabilityandstrengthofevidence.Insomeagencies,anevidencematrixiscreatedtosetouttheevidencetrail.Thepurposeofusinganevidencematrixtoplananinvestigationinitsformativestagesistodeterminewhethertheevidenceobtainedsofarislikelytosustainadjudicativeproceedings.16Inothersituations,moreweightwillbegiventoamatterifthereis‘directevidence’(e.g.documentsorwitnesses)andlessweightgiventomatterswithcircumstantialevidence.

16 ILawrence,‘Evidencegatheringtechniques’,workshoppresentedtoparticipantsattheICNCartelWorkshop,Sydney,Australia,2004.

Decisionsregardingthestrengthandavailabilityofbothdirectandcircumstantialevidencenecessarilyinvolveaprocessofongoingandregularassessment.Therefore,anyinvestigationplansorevidencematrixescanbeviewedas‘living’documentsthatenabledecision-makerstoassesstheappropriateprioritylevelofanyparticularmatterastheinvestigationproceeds.

4.4.3Availabilityofresourcesfortheinvestigationandadjudicationofthecartel

Oncethestrengthoftheevidencehasbeendetermined,thenextissuetobefacedbyanagencyistheresourcesithastoinvestigateandadjudicateacartel.Theseresourcesincludestaff,travel,expertsandlegalservices.Someagenciesmayhavelimitedbudgetsandcanonlyundertakeafewcasesatatimeormakedecisionsaccordingtosetratios(e.g.oneinvestigationperyear).Insomeagencies,staffundertakingcartelinvestigationsmayworkacrossanumberofareasthatdealmorebroadlywithcompetitionmatters,suchasmergersanddominanceissues.Agenciesmayweightmattersaccordingtothefinancialandhumanresourcesrequiredtopursuethecasetoresolutionandthismaysomewhatdependonthetypeofevidenceneededaswellasthecomplexityofissuesstilltoberesolved.

4.4.4Anynovellegaloreconomicissues

Anagency’sdecisionmayalsobeinfluencedbyitsneedsanditsassessmentofthebenefitsthatmayflowfromanyaction.Forexample,adevelopingagencymayoptforasimpler,shortercasetobuildcredibilityandexpertise,andtodemonstrateitseffectivenesstopoliticians,policy-makersandothersofinfluence.Prioritymaythereforebegiventomatterslikelytoleadtonewcompetitioncaselaworonthepoliciesandpracticesoftheagency.Someagenciesmayhavetotesttheextentofjurisdictionorobtainajudicialinterpretationoflegalprovisions,andaparticularcasecouldbepursuedwiththisasamajorobjective.

4.4.5Possibilityofdifferentactionresolvingtheproblem

Someagenciesmayconsiderwhetherinvestigationandadjudicationisthebestwaytoresolveaparticularcartelproblem.Somecartelsarebroughttoanendnaturally,perhapsbecausetheindustryispronetocompetitionorbecauselargebusinesscustomersareabletodestabilisethemthroughtheexerciseofbuyerpower.17Theuseofalternativecaseresolutionstrategiesmaydependontheparticularlawsgoverningcartelconductinthejurisdiction.Inothercases,differentactionsuchaseducation,encouragementofprivateenforcementorthecommencementofawiderinvestigationmaybeequallyormoreeffectiveand,insomecases,mayevenusefeweroftheagency’sresources.

17 See,forexample,JBraithwaite,‘Rewardsandregulation’,Journal of Law & Society,29(1),2002,pp.12–26,2002;andalsoJClarkeandSEvenett,‘Thedeterrenteffectsofnationalanticartellaws:evidencefromtheinternationalvitaminscartel’,Antitrust Bulletin,48(3),2003,pp.689–727.

Itisconsideredgoodpracticeforthegeneralpolicyorapproachtobeappliedconsistentlytoallcartelmattersatthepre-investigativestagethatmayrequiresignificantagencyresourcesduringtheinvestigativestage.

Itisconsideredgoodpracticetoreviewtheapplicationofthepolicyorapproachatpre-determinedtimeintervalstoensurethattheresultsarestillvalidanddetermineiftheapproachtakenregardingaparticularcartelmatterneedstoberevised.

�0 cartel case selection and Prioritisation

4.4.6Cooperation,coordinationandobligationstootherauthorities

Competitionagenciesmayturntootherlawenforcementoradministrativeagenciesforinformationthatcouldfurtherinformthedecisionsaboutcaseselectionandprioritisation.Whereassistanceiseitherrequiredorprovidedbyotherinvestigatoryoradministrativeagencies,approvalprotocolsattheproperlevelsbetweenboththerequestingandassistingagencyshouldbeclearlyestablishedandfollowed.

Adecisiontoproceedwithaninvestigationandsubsequentadjudicationofacartelmattermayalsoresultinanexpectationand/orobligationfromotherdomesticorinternationalauthoritiesthatcooperationandcoordinationwillbeforthcoming.Suchexpectationsandobligationsmayaffectthelimitedresourcesavailabletothecompetitionagency,butthebenefitsofsuchrelationshipsarebelievedtofaroutweighthedisadvantages.

4.4.7Cooperationfromleniencyapplicants,informantsorwhistleblowers

Thepresenceofaleniencyapplicant,informantand/orwhistleblowermayaffectanagency’sdecisionsregardingcaseselectionandprioritisation.Typically,aninvestigationwithaleniencyapplicant,informantand/orwhistleblowerfeaturessubstantiallevelsofevidentiarymaterialandcooperation.Giventhistendency,theremaybeanassumptionthatmattersfeaturingaleniencyapplicant,informantand/orwhistlebloweraresomewhat‘easier’.Thismayormaynotbethecaseandshouldnotdetractfromrigorousinvestigations.

4.5 Criterion3:economicconsiderations

4.5.1Industry-wideconductorlikelihoodofconductspreading

Cartelconductwillalmostalwayshaveasignificanteffectontherelevantindustryandsometimesevenassociatedindustries.Itisalsolikelythat,forothercompetitorsinthemarket,reprisalmaybeusedtoencouragethemtojointhecartel.Therefore,ifthereisnointerventiontostopthecartelconduct,itislikelytheconductwillbecomeevenmorewidespread.

Underthesecondpartofthiscriterion,cartelsaremorelikelytobetreateddifferently.Caseshavingabroadergeographic(i.e.national)effectmaybeweightedmoreheavilyduetoanassumptionthattheywillhaveagreaterimpactonthepopulationandeconomythanonewithmorelimited(typicallyregionalorlocal)impact.

Inassessingthemarket,agencieswillgenerallyallowadegreeofflexibilitytoaccountforbothqualitativeandquantitativeaspectsofaparticularmarket.Forexample,aproductorservicemaynotbelargeintermsofitstotalmarketorintermsofthepercentageofinputintoparticulardownstreamoperations,butmaybeessentialintheproductionprocesswithanimpactonproductsorservicesthatinturnaresubstantialmarkets.

4.5.2Volumeofcommerceandmarketpowerofcompanies(abilitytoaffectprice)

Someagenciesmaysetacertainminimumlevelofcommercialvolumethatneedstobeaffectedbeforethematterisprioritisedoveranother.Alternatively,agenciesmayhaveageneralpolicythatthehigherthevolumeofcommerce,thegreatertheprioritygiventothatmatter.Whilecartelarrangementsthataffectlargevolumesofcommercemaybemoreofapriorityforsomeagencies,itisimportanttokeepinmindthatcartelsdonotjustaffectmulti-milliondollarcontracts.Insomecircumstances,cartelscanariseatamorelocallevelandbeonasmallerscaleyetcanstilldamagetheeconomyandbusinesses.Mostagencieswillaimtoinvestigateabroadrangeofcartelsinvolvingcompaniesofdifferentsizesandwithdifferentvolumesofturnovertobalancethedeterrenceofcartelbehaviouracrossallpartsoftheeconomy.

Inadditiontothevolumeofcommerceaffected,theagencymayalsolookatthemarketpowerofthecompaniesinvolved.Thehigherthecombinedmarketshare,thegreatertheweightthatmaybegiventothatparticularcasebytheagency.Careshouldbetakeninapplyingthiscriteriaastheremaywellbestrongdeterrentvalueinbringingactionincaseswheresmallercompetitorscollude,forexampleinattemptingtocombatalargercompetitor.

Themarketpowerofthecartelists’businesscustomersmayalsobeimportant(providedthecostofthatinputisnotinsignificant).Ifthosecustomersareabletoexertsignificantbuyingpowerthecartelmaybeunderminedand/ordestroyedthroughnaturalmarketforces,enablingtheagencytodevoteitsvaluableresourcestoothercases.Aswithmanyothercriteria,thismaydependlargelyontheprohibitionsgoverningcartelconductinparticularjurisdictions.Forexample,theextenttowhichthe‘puttingintoeffect’ofanagreementisanintegralpartofthelegislativeregime.

4.5.3Durationofcartelconduct

Theaveragelengthofacartelissixyears,thoughitisnotuncommonforcartelstoexistformorethan20years.18Giventhepreviouslymentionedeconomicdamagecausedtoconsumersandeconomiesasaresultofacartel’sexistence,thedurationofthecartelmaybeafactorthatcouldleadtoonecartelbeinginvestigatedinpreferencetoanother.

4.6 Criterion4:generalandspecificdeterrenceThepreventionofharmbeinginflictedonconsumersandgeneraldeterrenceshouldbetheprimarygoalsofanycompetitionlegislationoranti-cartelprogram,andthesegoalsareachievedbydetecting,adjudicatingandpenalisingthosefoundengagingincartelconduct.19Bothgeneralandspecificdeterrencewillresultifothersarediscouragedfromcommencingorcontinuingtoengageintheillegalbehaviour.Whenconsideringcaseselectionandprioritisation,thereisanopportunitytoassessthepotentialforeducationandanypossiblepromotionofgeneralcompliance.Otherrelevantfactorsmayincludeanyblatantdisregardofenactedlawand/ortheoccurrenceofrecidivistbehaviour.Onthisnote,cartelsareseenasoneofthemostserioustypesofanti-competitivebreachesand,inmanycases,cartelconductconstitutesablatantdisregardofthelawandisthereforeahighpriorityforacompetitionagencytoinvestigate.

4.6.1Potentialforeducationandpromotionofgeneralcompliance

Agenciesmayprioritisematterswhereitisanticipatedthattheresolution(i.e.fines,imprisonment,undertakings,privatelitigationand/orpublicity)willhaveasignificanteducativeanddeterrenteffectonfirmsinthatindustryandonpotentialcartelistsinotherindustries.Thismayalsoassistwithrepeatoffenders.

4.6.2Recidivism

Ifanallegedcartelparticipantisarecidivist(i.e.eitheranindividualoracompanyisknowntotheagencyand/orhasahistoryofpreviouscontraventions),itismorelikelytheagencywouldwanttopursuethatindividualorcompany.Anagencywilltendtoconsiderwhether:

• thepartiesarelikelytobepartytoothersimilararrangements

• theissueconsideredaffectsthewholeindustryandnotjustthepartiesbeinginvestigated

18 WWils,‘DoestheeffectiveenforcementofArticles81and82ECrequirenotonlyfinesonundertakingsbutalsoindividualpenaltiesinparticularimprisonment?’,paperpresentedattheEuropeanUnioncompetitionlawandpolicyworkshop.SeealsoCVeljanovski(2006),‘Penaltiesforpricefixers:ananalysisoffinesimposedon39cartelsbytheEUCommission’,European Commission Law Review(9),2001,pp.510–13.

19 PMassey,Using immunity to fight criminal cartels—new strategies that can help win the war against cartels,2000;retrievedfromwww.tca.ie/home/index.aspx.SeealsoMDelrahim,‘Thebasicsofasuccessfulanti-cartelenforcementprogram’,paperpresentedattheSeoulCompetitionForum,RepublicofKorea,2004.

• itisawiderissueaffectingotherindustries

• otherrecentcaseshavecoveredthesameindustryorissues.

Higherfinesorlongerimprisonmentmayactuallybesoughtand/orimposedincasesofrecidivism,particularlyifrecidivismisviewedintheadjudicationprocessasanaggravatingfactor.

4.7 Criterion5:legalconsiderationsCompetitionagenciesshouldbemindfulofanylegalrequirementsorconsiderationsthatmayimpingeontheirabilitytodecideoncaseselectionandprioritisation.Examplesofsuchrequirementsmaybetheimpendingpassageofalimitationperiod,whetheracompanyevenexistsanymore(orhasperhapsbeenliquidated)and/orwhetherthereareanytargetswithinagivenjurisdictiontoadjudicateagainstshouldaninvestigationproceed.

4.8 Makingadecision

Dependingontheinternalprocessesofanagency,therelevantstaffmaydeterminethe‘weight’or‘score’ofpotentialmattersagainstthecriteriaorprioritiessetbytheagency.Adecisioncanthenbemadeastowhichmattersmeetthecriteriamostsuccessfullyandshouldthereforebepursued.Particularagenciesmaycreatespecialcommitteesofseniormanagerswhoseroleitistoassessstaffrecommendationsbasedontheagency'sprioritiesandpolicysettings.Alternatively,assessmentcanbereviewedbysomeonenotworkingonthematter.

Theuseofestablishedandwell-developedselectionandprioritisationcriteriainprioritysettingshouldgreatlyenhanceanindividualagency’seffortstobringafocused,strategicapproachtocartelinvestigations.However,whileobjectivecriteriaareessentialtoanagencybeingabletorightlyarguethatitisselectiveandconscientiousinitstargetingofallegedanti-competitiveconduct,theexperienceandexpertiseofdecision-makersandinvestigatorsremainsafundamentalstrengthofanyagency.Thereisnoall-encompassingtemplatefordeterminingwhatasignificantmatteris,butratherarangeofcriteriathatcanbeusedtoguidedecision-makers.Caseselectionisbynecessityamatter-by-matterissuewherebythedecision-makers’discretionisguidedbyexperienceandinformedbytheevidencebeforethem,thereforemakingtheprocessacombinationofobjectiveandsubjectivefactors.

Theapplicationofsubjectivefactorsmayimpingeontheperceivedopennessandobjectivityofthecaseselectionandprioritisationprocess.Forexample,somejurisdictionsdifferentiatebetweenhard-corecartelsandthosethatmaybelessegregiousbasedonmoresubjectivefactors,suchasthedegreeofculpabilitythelevelofunderstandingorseriousnessoftheactionsbythepartieswhethertheactionswereconspiratorial(demonstratingacontemptfortheantitrustlawsandbusinessnorms)thedegreeofsecrecy,andtheextenttowhichcoercionhasbeenbroughttobearonanyoftheparticipants.

Itisconsideredgoodpracticetodocumentandsourcetheassessmentofthecriteriawhenapplyingthepolicyorapproachtoaparticularcartelmatterandtohavetheassessmentreviewedbysomeonenotworkingonthecartelcase.

Althoughthesefactorsmaybebetterconsideredatthepenaltystage,itmayalsobeworthnotingthemduringthecaseselectionandprioritisationstage,astheymayinfluenceinitialdecisionsandrecommendationsrelatingtotheinvestigationoftheconduct.Thismaybeespeciallysoinjurisdictionsusingdiscretionregardingwhethercriminalorcivilproceedingsarepursued.

Asnotedinsection4.1.2,incertainjurisdictionsthedecisionnottoproceedtoadjudicateacomplaintmaybeopentochallenge—oratleastconsideration—byadministrativeauthorities.Decision-makersandagencystaffmaythereforenotbeasfreetousethecriteriatodecidewhetherornottoproceedtoamoreformalinvestigationstageastheyaredeemedtohavebeguntheinvestigationbyvirtueofgatheringinitialinformation.Eveninthesesituations,thecriteriapresentedinthispartmaystillberelevantandmayevenassistinreviewsofdecisionsbydemonstratingthatthosedecisionsaremadewithinadefensibleandsoundframework.Ifitisdecidedthatthecomplaintdoesnotwarrantfurtheraction(forwhateverreason),thereportanddecisionshouldbeformalisedandarchivedinamannerthatwillfacilitateeasyretentionandaccessinthefuture(seesection5.3.4).

Itisalsolikelythatjurisdictionswithleniencyprogramswillplaceahighpriorityoninvestigationsinitiatedthroughthoseprograms.Thesecriteriamaystillbeofvalueastheymaybeusedtoassesswhetheraninvestigationshouldbecontinuedand,ifso,thelevelofresourcesthatshouldbemadeavailabletoit.Whereitisdecidednottoinvestigateamatterfurther,itispossibleforalternativeremedialorcorrectiveactionstobetaken.Suchactionmaytaketheformofanadministrativeresolutionorevenundertakingsnottoengageinsimilarbehaviouragain.Individualagenciesmaychoosetheextenttowhichdecisionsnottopursueamatterarepublicised,andfurtheractionmayresultdependingonwhetherthedecisioncanbeappealedorchallenged.

4.9 SummaryThispartofthechapterhasintroducedamixtureofobjectiveandsubjectivefactorsthroughwhichagenciescandevelopapolicyorapproachtomakedecisionsaboutcaseselectionandprioritisation.Publicinterestconcerns,agencypriorities,economicconsiderations,deterrencefactorsandlegalrequirementshaveformedthebasisofthefivecriteriapresentedwithinthispart.Oncedecisionsregardingcaseselectionandprioritisationhavebeenmade,theagency'snextstepistoembarkonthepre-investigatoryphaseofthecartelallegations.Thisissueisaddressedinthenextpart.

5 PRE-INVESTIGATORYPHASEOFCARTELALLEGATIONS

5.1 IntroductionInformationconcerningcartelactivitiescomestotheattentionofcompetitionagenciesfromavarietyofsources.Theearlystagesfollowingreceiptofinformationaboutanallegedcartelareparticularlydelicate,andactionstakenatthebeginningcaninfluencetheultimatesuccessofaninvestigation.Timelyscreeningandearlyevaluationofallegationsisnecessarytoassignresourcesappropriatelytotakefurthersteps.Itisrecognisedthatdifferenttypesofevaluationmayberequiredinjurisdictionsthathavecriminalenforcementforcartelviolations.Toalargeextent,however,thetypesofinquirytakenduringapre-investigatoryphasearethesamewhethercartelenforcementproceedsoneitheracriminalorcivilbasis.

Systemsdesignedtoresponsivelydealwiththepublicarecritical.Development,articulationandapplicationofclearstandardsfordealingwithcartelallegationscanincreasepublicconfidencethatviolationswillbepursued.Establishingmethodologiesforearlyverificationandassessmentwillassistcompetitionagenciestomakedeterminationsaboutthelikelihoodofdevelopingtheallegationsintosuccessfulcases.

Thissectionpresentsamenuofapproachesandtoolsthatcompetitionagenciesmayuseatthepre-investigatoryphase.Whilenosingleapproachanswerstheneedsofeverysituation,thegoalsofcomplaintscreeningandearlyevaluationaretoassignscarceagencyresourcestoenhanceanti-cartelenforcementandtoincreasepublicwillingnesstoreportcartelactivity.

5.2 Categorisationofcartelallegationsinapre-investigatoryphase

Apre-investigatoryphaseshouldenableacompetitionagencytoplaceallegationsofcartelactivitiesexpeditiouslyintooneofthefollowingthreegeneralcategories:

CategoryI:fast-trackmatterswhichrequirenoagencyactionandwillbedealtwithsummarily.

CategoryII:uncertainmattersthatrequirefurtherevaluationtodeterminewhetheragencyactionisrequired,orcontainallegationsofanti-competitivebehaviourotherthancartelconductthatwillbereferredtoothersectionsoftheagencyforevaluationandpotentialenforcement.

CategoryIII:plausiblecartelallegationsthatrequirefurtherinformationorverificationbeforeafull-scaleinvestigationisinitiated.

Withregardtoeachcategoryofallegations,theagencyshoulddevelopclearproceduresthatmaybeuniformlyappliedbythosehandlingcomplaintsintake,screeningandpre-investigatoryphases.

Itisconsideredgoodpracticeforagenciestoestablishmethodologiesfortheearlyverificationandassessmentofallegedcartelsduringthepre-investigativephase.

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Pre-investigatory Phase of cartel allegations ��

5.3 ReceiptandscreeningofcartelallegationsCartelsaredifficulttodetect.Theexistenceofillegalcartelactivityishiddenandcartelparticipantsrelyonsecrecytofurtherandpreservethebenefitsoftheiranti-competitiveagreements.Toencouragedisclosureofcartelactivities,agencieswidelypublicisemethodsforpubliccomplaints.Whenacartelisbroughttotheattentionofanagency,itisimportanttoensurethatitishandledappropriately.Earlyinteractionbetweenacomplainantandthecompetitionagencymaydeterminefuturesuccess.

5.3.1Methodsforcomplaintsanddisclosuresbythepublic

Cartelallegationsmaybereceivedbythecompetitionagencyinperson,bytelephoneandthroughwritten(includingelectronic)correspondence.Agencieswillwishtoestablishanduseeffectivesystemstodealwitheach.

5.3.1.1Complaintsmadeinperson

Individualswhomakecomplaintstotheagencyinpersonarestronglymotivatedtodoso:ittakesmoreefforttocometotheagencyandmakeacomplaintinpersonthantopickupthetelephoneorsendanemail.However,thesecomplainantsmaynotnecessarilyhaveinformationthatisinherentlybetterormoreusefulthantheoneprovidedbytelephoneorbyemail.Drop-incomplainantsmaybeserialcomplainantswhohavemadetheroundstootheragenciesandwhoseallegationshavenorelationshiptocompetitionviolations.Suchindividualsneverthelessmustbedealtwithprofessionallyandassistedwherepossible.

Occasionallyadrop-incomplainantwillarrivewithinformationofgreatinteresttotheagency.Suchanopportunityshouldbeseized.Sufficientresourcesattheappropriatelevelwithintheorganisationshouldbedevotedtosuchacomplainant,recognisingthatthefirstmeetingmaybethebestopportunitytoobtainalltheinformationthecomplainantwishestoimpart.Thereforeagencystaffshouldbealerttoaskingthecomplainantasmanyquestionsfromthelistbelowaspossible(seesection5.4.2andappendixI).Itisimportantinthefirstmeetingtolistencarefully,thinkaboutwhatissaidandaskfollow-upquestions.

5.3.1.2Telephonecomplaints

Respondingtocomplaintsmadebytelephonerequiresparticularthoughtonthepartoftheagency.Evenwhencomplaintsaredirectedtoaspecificintakepoint,telephonecomplaintsmaybereceivedbyalmostanyoneintheagency.Itis,therefore,importantthatclearproceduresareestablishedandallstaffareinformedaboutthemandtrainedonhowtoapplythem.

Telephonecomplainantsoftenpickupthetelephonebasedonimpulseoremotion.Onceincontactwiththeagency,theymaybecomereticentorhavedifficultyarticulatingtheinformationtheypossess.Nonetheless,suchcomplainantsmaypossesssolid,verifiableinformationthatisextremelyvaluableandwhichmayformthebasisforveryfruitfulinvestigations.

Telephonereceptionistsandotherswhosetelephonenumbersarereadilyaccessiblebythepublicshouldhavecleardirectionsabouthandlingtelephonecomplaints.Evenifcallswillimmediatelybeforwardedforinitialscreening,basicinformationsuchasthenameofthecallerandacall-backnumberincaseofadisconnectionshouldbeobtainedandrecorded.Becausereceptionistsarelikelytobeinterruptedbyothercalls,complaintsscreenerstowhomthecallmaybeforwardedareagooduseofresources.

Somelargeragenciesalsohaveestablishedphonebanksforcomplaints,includinganonymouscomplaints,tobetaken24hoursaday.Thesemaybemonitoredbypersonnelespeciallycontractedforthatpurpose.Agencieswithoutthesizeorresourcestojustifysuchphonebanksmaywishtohavewell-publicisednumbersthatallowforafter-hourscallerstoleaveamessageandwhichincludeanout-goingmessagetothepublicencouragingthecallertoleaveinformationonthesystem.

�� Pre-investigatory Phase of cartel allegations

Someagencieshavedeterminedthattheywillnotacceptanonymouscomplaints.Suchapolicydoesnotmean,however,thatananonymouscallershouldbedealtwithsummarilyordiscouragedfrommakingafullairingoftheirallegations.Insomeinstances,withproperencouragementovertime,suchcallerswilldisclosenotonlytheiridentities,butalsoprovidevaluableinvestigativeleads.Sometimesthisrequirestheagencytofieldmultiplecallsfromthesameanonymouscalleroveraperiodofmonths.Accordingly,itisimportanttoelicitasmuchinformationfromtheanonymouscalleraspossibleduringtheirfirstcall.Detailedinformationaboutagencyproceduresshouldbesupplied.Todeveloparapport,theanonymouscallershouldbesuppliedwithdirectdialnumberstothescreenerforfuturecalls.

Iftheinformationprovidedbyanonymouscallerscanbecorroborated,itmayprovidesufficientbasisforanagencytolaunchaninvestigationwithoutknowingtheidentityofthecomplainant.Indeed,ifsufficientresourcesareavailabletotheagency,suchanonymouscallsmaybegroundsforinitiatingsomemarketinquiriesortheapplicationofaproactivemeasuresuchasaffirmativeamnesty(seesection3.2.3above).Alternatively,corroborationmayprovideforcontinueddialoguewiththecaller,whichovertimemaycreatesufficientconfidenceintheagency’sprocessesandconfidentialityprotectionstoenablethemtorevealtheiridentity.

5.3.1.3Writtencomplaints

Fromthestandpointofreceiptandreviewprocedures,writtencomplaints,receivedeitherbyletterorelectronically,aregenerallyeasiertoprocessbecausetheytypicallyprovidespecificinformationrelatingtoconductand/orcompanies.Someagencieshaveapolicyofnotprocessingcomplaintsotherthanthosemadeinwriting.Whensuchproceduresareadopted,thosereceivingverbalcomplaintsmustensurethatitiscleartothecomplainantwhatactionisrequiredforacomplaintfiletobeopenedandforacomplainttobeinvestigated.Undersuchcircumstances,telephonecomplainantsshouldbegiveninstructionsaboutwhatinformationisrequiredandmethodsforsubmittingwrittencomplaints.

Emailprovidescomplainantswithareadilyaccessiblewayofputtingtheircomplaintsinwriting.Agencywebsitesshouldcontainclearproceduresandeasy-to-useprocedurestomakeelectroniccomplaints.

5.3.2Complaintsreceiptandreviewprocedures

Itisconsideredgoodpracticeforagenciestoestablishproceduresanddeadlinesforthepre-investigativephaseofacomplaintregardinganallegedcartel.

Itisconsideredgoodpracticeforagenciestoestablishclearandstandardproceduresfordealingwithcomplainantsregardinganallegedcartelinthepre-investigatoryphase.

Itisconsideredgoodpracticeforagenciestoprovideongoingtrainingtotheirofficersaboutmethodologiesandtechniquesforconductingapre-investigationphaseincludingproceduresfordealingwithcomplainants.

Itisimportantforagenciestostandardisetheproceduresforthepublictomakecomplaintsandusefultotrainallstaffaboutthoseproceduresandtheirapplicationsinpractice.Thepublicshouldreceiveconsistentinformationregardlessofwhomtheyspeaktowithintheagency.Proceduresshouldbeestablishedforrecordstobemadeofallcontactswiththepublic.Someagencieshavedevelopedandappliedwrittenstandardsfordealingwiththepublicwhichrequirestaffto:

• treatmembersofthepublicwithcourtesyandconsideration

• attendpromptlytopeoples’questionsandneeds

• exercisetheutmostintegrityinprovidingservices

• refrainfromdisclosinginformationacquiredincarryingouttheirfunctions,exceptaspermittedbylaw.

Ingeneral,informationaboutcomplaintsproceduresshouldbereadilyavailableinwrittenformonwebsitesandinagencypublications.Complainantsshouldbegivenclearinformationaboutwhattheymayandmaynotexpectfromtheagencyregardingtheircomplaint.Complainantswillbeconcernedaboutthelevelofconfidentialityanddisclosureprotectionsaccordedbytheagencytotheircomplaint.Agencieswillwishtomakecertainthattheseprotectionsareclearlyarticulatedtocomplainants.Complainantsmaycontinuetohavequestionsaboutagencyproceduresafterthefirstcontact.Ifdocumentdisclosuresarepartofthecomplaint,thesemaypresentadditionalquestionsthatneedtobethoughtaboutinadvance(seesection5.5).

Someagenciesconfirmreceiptofacomplaintinwriting,whileothersmakenosuchprovision.Insomeagenciesthecomplainantmayexpecttobeapprisedoftheprocessingofthecomplaintandtheprogressoftheinvestigation,whileotheragenciesmakeitapracticeattheoutsettoinformthecomplainantthatnofurtherdisclosureonthecourseoftheinvestigationmaybeexpected.Someagenciesviewthecomplainantandthirdpartiesaspotentialstakeholdersintheprocess.Otheragenciestaketheview,basedonpolicyorbecauseoflegalorothernon-disclosurerequirements,thatcomplainantswillbeprovidedwithnoinformationconcerningtheprogressoroutcomeoftheirallegationsapartfromthosegiventothegeneralpublic.Whateverapproachanagencyadoptsshouldbeclearlystatedandwidelypublicised.

Generallynoviewsshouldbegivenonthevalidityofacomplaint.Someagenciesmayfinditappropriatetoinformcomplainantsabouttheprivaterightsofaction,orotherroutesforself-helpthattheymayavailthemselvesof,particularlyinthosesystemswherepublicenforcementconfersnorightsorstatusonthecomplainantandwhereseparateprivaterightsofactionmayexpireorbecomejudiciallytime-barred.

Complainantsshouldbegivenaclearunderstandingof:

• theproceduresthatwillbefollowedregardingtheircomplaint

• theagency’sexpectationsofthemintermsofprovidingadditionalinformation(inthecasewhereacomplainantcomesforwardvoluntarily)

• thelevelofinformationthattheagencywillimparttotheminthefutureaboutthestatusof theircomplaint.

Someagenciesmakeitapracticeofinformingacomplainantwhenaninvestigationiscompletedorclosed,whileothersexplicitlydonot.

Itisconsideredgoodpracticeforagenciestoprovideinformationtocomplainantsoutlininghowtheircomplaintwillbeevaluatedandtheagency’sexpectationsofthem.

5.3.3Agencyproceduresforscreeningandtrackingcomplaints

Allagencieswillhaveestablishedproceduresforinitialscreeningandprocessingofcomplaints.Theobjectistodeterminethevalidityofthematter,disposingofthosethatdonotdiscloseacartelissueandreferringthosethatrequirefurtherevaluationtotherelevantdivision.

Someagencieshavescreeningcommitteesthatmeetonaregular(weeklyorbi-weekly)basistoscreencomplaintsexpeditiouslyandinaroutinemannerandtodisposeofcomplaintsthatrequirenofurtheraction.Otheragenciesrelyontheindividualcomplaintsscreenerstoassessthecomplaintstheyreceiveandtodisposeofthosecomplaintsforwhichnofurtheractioniswarranted.Someagencieshavedevelopedstandardisedresponseletters,whicharetobepersonalisedtothespecificsofacomplaintand,insomeinstances,sentoutwithinaprescribedtimeafterthecomplaintisreceived.Theseagenciesuseformlettersintheinterestofadministrativeefficiencyanduniformtreatmentofthepublic.Otherstakealessuniformapproach.

Electronicdatabasesandsearchablefilesareparticularlyvaluabledevicesforagencies.Suchtools,ifconscientiouslyemployed,allowagenciestoassociatemultiplecomplainantsorsourcesofevidenceconcerningaparticularcartel.Robusttrackingsystemsprovideresourcesforlarge,geographicallydiverseagencystafftodrawoninstitutionalexpertiseorpriorcasestoassistinassessinganddevelopingnewcomplaints.

5.3.4Disposingofmattersthatrequirenofurtheraction

Totheextentpossible,agencieswillfinditusefultoestablishtighttimeframesfortheinitialscreeningandreviewofcomplaints,particularlythosethatfallintocategoriesIandII(seesection5.2).Eachagencyisbestplacedtoestablishitsowntimeframes,butasageneralruleofthumb,categoryIandIIdecisionsmaybemadewithinaperiodofafewdaystoafewweeks.Ifitisdecided(forwhateverreason)thatthecomplaintdoesnotjustifyfurtheractionatthattime,thereportanddecisionshouldbeformalisedandarchivedinamannerthatwillfacilitateeasyretentionandaccessinthefuture.CategoryIIIcomplaints,whichrequiremoreverification,maytakelonger,althoughsomeagencieshavetightdecisiontimeframes.

Electronicdatabasesandinformationretrievalsystemscanassistindevelopingso-calledinstitutionalmemoryconcerningindustries.Individualswithintheorganisationwhohavepreviouslydealtwithallegationsorcasesinanindustrycanbereadilyidentifiedandmayprovidevaluableearlyassistanceinevaluatingallegations.Insomeinstances,multiplecomplaintsconcerninganindustry,madeseparatelyandoveraperiodoftime,whicharenotindividuallysufficienttojustifyfurtherinquirymay,whenevaluatedtogether,provideabasisforafruitfulinvestigation.

5.3.5Specialconsiderationsforwhistleblowersandinformants

Whistleblowersandinformantsgenerallypossessvaluableinformationthattheyareeagertosharewiththeagency.Theyareoftenindustryinsiderswhohavedecidedtocomeforwardwithcarteldisclosuresdespiteriskstotheircontinuedemploymentorreputationsshouldtheybeidentified.Becauseofthenatureoftheirdisclosures,theyoftenviewthemselvesasstakeholdersintheprocessandmaywantspecialconsiderationbyagencies.Agencypoliciesfordealingwithwhistleblowersandinformantsrequirecarefulthoughtandwhistleblowersandinformantsshouldbeclearlyinformedaboutthosepoliciesatallstagesoftheprocess.

Itisconsideredgoodpracticetoimplementinternalprocedurestoassessandevaluateinformationandcomplaints.

Somejurisdictionshavewhistleblowerprotectionstatutes,whileothersdonot.Agenciesshouldbepreparedtoinformwhistleblowersoftheleveloftheirownandancillarywhistleblowerprotectionlegislation.Itisimportanttoensurethatexpectationsareproperlymanagedaboutthelevelofinformationandinvolvementthatthewhistleblowermayexpectintheagencyinvestigation.Iftherearealternativeroutesthatwhistleblowersmaypursue,itisusefulfortheagencytoinformthewhistlebloweraboutthoseoptionsattheoutsetsothattheyarenotlaterforeclosedbecauseoftimebarsfromself-helporprivaterightsofaction.

5.3.6Leniencyapplicants

Whenacomplainantisanindividualorarepresentativeofacompanythatisseekingleniency,additionalconsiderationswillapplytotheintakeofthecomplaint.Leniencyprogramsandsuggestedproceduresaredealtwithinchapter2oftheICNanti-cartelenforcementmanualandwillnotbereiteratedhere.Whereleniencyisanoption,agencieswillhavewell-publicisedrequirementsandproceduresforleniencyapplicants.Beforemakinganydisclosures,thecomplainantwillwanttoknowwhetherleniencyisavailableandtheagencywillwanttoencouragedisclosuretobeabletoassesstheallegationsadequatelyandanswerthequestion.

Someagencieshaveadoptedproceduresthatpermitdisclosureofallegationstobemadeinthefirstinstancebymeansofahypothetical,oftenpresentedbylegalcounsel,whichprovidesforsomemeasureofprotectionandanonymityforthecomplainant,butallowstheagencytoassesstheallegationsanddeterminewhetherleniencyisavailable.Likewise,someagencieshavenowadoptedproceduresthatallowverbalstatementsofallegationstobemadebyleniencyapplicants.

Injurisdictionswherethereisthepotentialformorethanonegrantofleniency,itisimportantforagenciestoadoptclearmethodsforestablishingthepriorityofleniencyapplicantsandinformpotentialleniencyapplicantsoftheiroptions.Theeaseofmakingleniencydisclosuresandtheconfidencecreatedbyagencyproceduresfordealingwithleniencyapplicationsmaysetthestageforthesuccessoftherelationship.Whereproceduresaretransparentandagenciescreateconfidenceamongleniencyapplicants,thosefactorscanleadtotheon-goingsuccessoftheleniencyprogram.

5.4 EvaluatingcartelallegationsWhenthescreeningprocessestablishesthatthecomplaintcontainscartelallegationssufficienttorequirefurtheraction(i.e.allegationsofcategoryIII),itisthennecessarytoevaluatethecomplaintwithreferenceto:

• credibility/accuracyofcomplaint/complainant

• possibilityoffurtherpersonswithknowledge

• identityofpossible/potentialwitnesses

• possibleextent/seriousnessoftheillegalactivity

• previousorsimilarcomplaintsregardingthesector

• structureofthesectorormarket,andthepositionoftheallegedcartelwithinthatmarket

• anyinternationaldimensiontocomplaint/thosecomplainedof.

Theresultsofthoseinquirieswillformthebasisfordeterminingwhetheramattershouldprogresstothenextinvestigativelevelandwhetherafull-scaleinvestigationintotheallegationsisundertaken.Suchadeterminationwillnecessarilybeevaluatedin-house,andsomeagencieshaveestablishedwrittenformatsandformaldecisiontreestocarryoutthisevaluation.

�0 Pre-investigatory Phase of cartel allegations

Eveninjurisdictionswithoutformalpublishedcriteriaforcaseselectionandprioritisation,agencyresourcesarescarceandmustbeassignedforthemaximumpublicbenefit.Agencieswillwishtoensurethattheirpracticesforassigninginvestigatoryresourcestoallegationsareinkeepingwithcaselaw(seesection4above).

Itisimportantthatagencieswhichpursuecartelallegationsaseithercriminalorcivilcasesdeterminethetheoryofharmandtheirinvestigativerouteasearlyaspossible.Thisearlydeterminationmaycarryadditionalobligationsandprohibitions.Cleardecisioncriteriaandproceduresshouldbeestablishedwithintheagencytoassistsuchdeterminations.

5.4.1Obtainingandverifyinginformationofcartelviolations

Duringthepre-investigatoryphase,theagencywillbeobtaininginformationaboutthecartelallegationsandassessingthequalityoftheallegationsandofthecomplainant.Itisdesirableatthisstagefortheagencytoobtainasmuchdetailaspossibleabouttheoperationofthecartelandtheindustryfromthecomplainant.Thetimingoftheinterview(s)andtheextenttowhichtheagencywillbeabletocontroltheflowofinformationdependsonthecomplainantandthequalityofinformationtheypossess.

Theamountofinformationavailablewillvarywidelydependingonthesourceofthecomplaint.Unlikeleniencyapplicants,publiccomplainantsandwhistleblowersperipheraltotheindustrymaypossesslessknowledgeandtheirallegationsmayrequiremoreverification,whichwillcreatechallengesfortheinquiry.Attheearlystagesofverifyingacomplaint,whenthecartelmaystillbeinoperationandtheparticipantsunawarethatdisclosureshavebeenmadetotheenforcers,secrecyabouttheinquiryisextremelycritical.Theelementofsurprisemustbepreserveduntiltheappropriatemoment.

Thefollowingconsiderationsaredesignedtohelpthepre-investigatoryphaseofcartelallegations.Theyarenotmeanttoformanexhaustivelistanditwouldbeneithernecessarynordesirablethatallareansweredbeforedeterminingwhethertoinstituteafull-scalecartelinvestigation.Theyareofferedonlyassuggestions.Obtaininganswerstotheseconsiderationswillrequirestrategicthoughtandwillinvolvetakingthespecificpracticesoftheindividualenforcementagencyintoaccount.

5.4.2Informationfromthesourceoftheallegations

Agenciesshouldverifyinformationaboutthecomplainant,itscredibility,generalandspecificinformationaboutthecartel,theindustryandmarketsectorsconsiderations.SuggestionsforundertakingthisverificationarecontainedinappendixI.

5.5 OtherinformationsourcesVerificationoftheallegations,evenifsuchverificationisextremelylimited,isnecessarytodeterminewhethertoinitiateafull-scaleinvestigationandthemannerinwhichsuchaninvestigationwillbelaunched.Verifyingallegationsfromsourcesofinformationwithoutriskingdisclosureandprematurelygivingtheindustrynoticeaboutaninvestigationmaybeextremelydelicate.Evenseeminglynon-publicsourcesofinformation,suchastheinternet,mayactualltytipoffthecartelparticipantstoaninvestigation.Thereforetheuseofthird-partysources,evenpublicagencies,meritssomerisk/benefitassessmentbeforebeingusedatthepre-investigatoryphaseandshouldbedeterminedonacase-by-casebasis.

Itisconsideredgoodpracticeforagenciestoverifyandcorroborateallegationsbeforeproceedingtotheinvestigatoryphase

5.5.1Publicsources

5.5.1.1Mediareports

Mediareportsmayprovideausefulsourceforverifyingcomplaints;conversely,theymaybethesourceofinformationinthefirstinstanceabouttheexistenceofacartel.Investigationsthathaveresultedinmulti-hundredmillion-dollarfinesandjailtermshavesometimescometolightthroughthepublicmedia.Althoughsuchinstancesareunderstandablyrare,thepublicmediaareaveryusefulsourceofinformationaboutindustriesandfromwhichthedetailsassociatedwiththeexistenceofacartelmaybeverified.

5.5.1.2Internetresearch

Internetresearchcanprovideaninexpensive,quickandrobustsourceofinformationaboutindustries,individualsandsectorsoftheeconomy(seesection3.3.9).Theuseofsearchengines,industry-specificwebsites,pressreleasesandproduct/serviceinformationareveryusefulinassessingthebonafidesofcomplaints.However,becausetheyarepublicandcanbereadilymonitoredandminedbythosewhooperatewebsites,informationtechnologytoolsthatblockthetakingof‘cookies’andothertoolsthatwillnotdisclosetheidentifyoftheagencysearchshouldbeused.Someagenciesinstallsecuresitesthatcanbeusedforinternetsearcheswhileotherswillusealiasesorothertoolstoavoiddetection.

5.5.2Professionalassociationsandtradegroups

Professionalassociationsandtradegroups,alongwithindustryjournalsandtradepublicationssupportingindustryactivities,canbeextremelyvaluablesourcesofinformationabouthowindustriesoperate.Suchgroups,whicharecomposedofmembersoftheindustry,havelargerisksassociatedwiththem.Thesegroupsmaybeactivelyinvolvedinthecartel,complicitincartelbehaviourormerelyawareofsuchactivities.Obtaininginformationfromprofessionalgroupsandtradeassociationsalmostalwaysrisksdetectionwiththeconsequencethattheoffenderswillbetippedoff.Publicationsmayalsoprovideessentialinformationaboutproductpricesandpricetrends.However,complainantsactivelyinvolvedinsuchgroupsmaybewellawareofhowtheyareusedtoadvancethecartel.Publicationsmayprovideinformationaboutindustryparticipantsandhowthecarteloperates.

5.5.3Thirdpartysources

Amongthepossiblethirdpartysourcesofinformation,particularlyusefulwhenassessingbid-riggingallegations,arefundingsources,estimators,publicofficialsandprocurers.Eachofthemhasthepotentialforbothknowledgeofthecartelandcomplicityinit.Accordingly,theextenttowhichanagencywillusesuchsourcesbeforetheinvestigationbecomespublicwilldependonacase-by-caseassessment.

5.5.4Involvementofotherenforcementagencies:parallelinvestigationsandinformation-sharing

Duringthepre-investigatoryphaseitmaybecomeapparentthattheallegations:

• arecompetitionallegationsbestsuitedtoinvestigationbyanotheragencywithinoroutside thejurisdiction

• involvewrong-doingoutsideofthecompetitionlawthatshouldbeinvestigatedbyanotherenforcementagencyor

• includebothcartelviolationsandothercriminalviolationsthatareancillarytothecartel,suchasfraud,tax-evasion,perjuryorobstruction.

Agenciesshouldhaveclearreferralmechanismsinplaceformattersthatarebestplacedoutsideoftheagency.Similarly,competitionagenciesmayturntootherlawenforcementoradministrativeagenciesforinformationthatwouldfurtherorassistevaluationoftheallegationsortheinquiry.Clearchannelsandmechanismfordisclosureapprovalofsuchinformationshouldbeestablishedandstaffshouldbetrained.Theuseofsourcesshouldbecarefullydocumented,withkeenappreciationfortheprivacyandotherrightsofindividualcitizensassociatedwithinformationinthepossessionofotheragenciesandlegalprohibitionsonsharinginformation.Whereinformationhasbeenimproperlyobtainedithasthepotentialtotaintallinvestigatoryleadsflowingfromit.

Whereassistanceisrequiredfromotherinvestigatoryoradministrativeagencies,approvalsattheproperlevelswithinboththerequestingandassistingorganisationsshouldbeclearlyestablished.Statutoryrequirementsandproceduresformeetingthemshouldbeclearlyidentifiedtowithstandlegalchallenges.

Certaintypesofinvestigationsmaybesufficientlysensitivetorequirehigherlevelsofapprovalbeforetakingevenpreliminaryinvestigativemeasures.Forexample,insomejurisdictions,investigationsthatrequirethesubpoenaingofmembersofthemediaorinvestigationsthatinvolvelawyersturningovermaterialabouttheirclientsareconsideredsufficientlysensitivetorequireadditionalapprovals.Whereinvestigationsinvolvethoseoutsideofthejurisdiction,otherconsiderationswillnecessarilycomeintoplay.

Whereviolationsinadditiontocartelviolationsarediscoveredinthecourseofapre-investigativephase,adeterminationshouldbemadeonhowtoproceed.Someagencieshavetheauthoritytoinvestigatecrimesancillarytocarteloffences,suchasfraud,falsestatements,taxandrevenueviolations,perjuryandobstruction,whileotheragenciesmustreferevidenceofsuchviolationstootherbranchesoflawenforcement.

Somejurisdictionsprovideforthepossibilityofjointorparallelinvestigationsoftheadditionalcriminalallegations,whileinotherjurisdictionsthecompetitionagencymustwhollydivestitselfofsuchmattersandrelyonotherlawenforcementtopursuethoseleads.Wherethelatteristhecase,itisparticularlyimportantforthecompetitionagencytodevelopopenlinesofcommunicationsothatneitheragencyjeopardisestheinvestigationsoftheother.

Itisconsideredgoodpracticeforagenciestoestablishclearreferralmechanismsandclearproceduresforinter-agencyassistanceandinformationsharingduringthepre-investigatoryphase.

Bothformalandinformalmeansforintra-agencyassistanceandinformation-sharingshouldbeclearlyestablishedwithinandamongjurisdictionsandtheappropriatelevelsofapprovalsanddocumentationshouldbesetoutinadvancetoenhancethelevelsofassistanceandavoidunnecessaryduplicationofeffortandthewastingofpublicresources.

Ataninternationallevel,awidevarietyofinformation-sharingprotocolsandproceduresareinplacetofacilitateinformation-sharing.Caseofficersandcomplaintscreenersshouldbeknowledgeableabouttheseregimes.Manycountries,regionsandagencieshaveinplaceformalorinformalmechanisms—includingnotices,regulationsandbilateralormultilateralagreementsorarrangements—forsharinginformation.

5.5.5Paperordigitalevidence?

Complainants,whistleblowersandinformantsmaypossessevidence(includingpaperordigital)thatcorroboratestheirallegations.Attimestheyrightfullypossessevidence;inotherinstances,evidencehasbeenobtainedawaythatcouldpotentiallysubjectthecomplainant,whistleblowerorinformanttolegalconsequences.Somejurisdictionshavelawsgoverningthedisclosureofconfidentialinformationbyinformantsandwhistleblowers;inothers,theprotocolsandlegalrequirementsareuntested.

Beforeagenciesacceptevidencefromcomplainants,informantsorwhistleblowerstheyshould,ataminimum,determinethesourceofthedocumentsandcircumstancesunderwhichtheywereobtained.Theanswertothesequestionswilldeterminewhatstepsaretakenregardingthedocuments.Ininstanceswherethecomplainant,informantorwhistleblowerisstillemployedatthefirmagainstwhichallegationsaremade,agenciesshouldensurethattheyarenotcreatingarelationshipwiththecomplainant,informantorwhistleblowerthatmightlaterimplicatethecompetitionagencyinwrongfullyobtaininginformation.Forexample,anagencyshouldhaveclearproceduresinplacesothatitdoesnotinadvertentlyturnawhistleblowerintoanagentofthegovernment.

Inthesamewayasanagencywouldcreateclearprotocolsandlegalchecksbeforeusinganinformantorwhistleblowertoundertakevoluntarilytoobtaininformationaboutanongoingcartelthroughtheuseofsurveillanceandconsensualmonitoringtechniques,itshouldgiveextrathoughttothetreatmentofevidenceobtainedfromcomplainants,informantsorwhistleblowers.Anagencyshouldensurethatlaterinvestigatoryandenforcementstepsarenotcompromisedandevidencepotentiallyexcludedbecauseofafailuretoadheretorequiredlegalprocedures.

5.6 Decisiontoundertakeafull-scaleinvestigationSomecompetitionagencieshavespecificcriteriathatmustbemetbeforeafull-scaleinvestigationcanbeinitiated,whileothershavemoreinformalcriteria.Agenciesthatdonothaveformallypublishedcriteriaforcaseselectionandprioritisationgenerallywillhavedevelopedinformalmeansforprioritisinginvestigatoryactivitiesandassigningcases.Thosecriteriaarediscussedatsection4.2ofthischapter.

Itisconsideredgoodpracticeforagenciestoclearlyidentifycriteriaandestablishproceduresfordecidingwhetheramatterbeingexaminedshouldproceedtotheinvestigatoryphase.

Eachagencywilldeterminewhatevidenceissufficientandwhatstepsmustbetakentojustifyactivitiesthatwillmaketheinvestigationpublic,suchasasearch,raidorinspectionorsubpoenasorordersforproduction.Whereauthorisationtoconductasearch,raidorinspectionistobeobtainedtolaunchthefull-scaleinvestigation,theagencywillhaveclearwrittenprocedures.Itmaybeparticularlyimportanttorelyoninformationobtainedfromcomplainantsandothersourcesinsupportoftheauthorisation.Accordingly,thereisnosubstituteforkeepingmeticulousrecordsofstatements,investigatoryleadsandotherinformationobtainedfromcomplainants.

Wherehard-corecartelbehaviourisallegedandthereissufficientcorroboration,thedecisiontoproceedtofull-scaleinvestigationmaybeswiftlytaken.Insituationswhereajurisdictionisunsurewhethertheinvestigationshouldproceedasacivilmatterorcriminalinvestigation,legalconsiderationsmaydeterminehowtoassignthematter.Insomejurisdictionsthecourtsandotherauthoritiesmayprohibitsharinginformationbetweencriminalandcivilinvestigations.Inotherjurisdictionstheconsiderationsaremoreinformalandinvolvetheburdenofproof—forinstance,whether,foraspecificjurisdiction,itiseasiertoconvertacriminalinvestigationwherecrimesaretobeprovedbeyondareasonabledoubtintoacivilcaseinvolvingalesserstandardofproof,ortheotherwayaround.

5.7 SummaryThispartofthechapterhasaddressedsomeoftheapproachesandtoolsthatcompetitionagenciesmayuseduringthepre-investigatoryphaseofacartelinvestigation.Thekeymessagefromthispartisthatearlyinteractionbetweenacomplainantandthecompetitionagencyisaparticularlydelicateandimportantphasebecauseitmaydeterminetheultimatesuccessofaninvestigation.Inaddition,timelyscreeningandearlyevaluationofallegationsisnecessarytoappropriatelyassignresourcestotakefurthersteps.Thereforeestablishingmethodologiesforearlyverificationandassessmentofcartelallegationsarecrucialforcompetitionagencies.

Thissectionhaspresentedvarioustoolsandapproachesthatcompetitionagenciesmayuseatpreliminarystages:systemsdesignedtohandlecomplaintsreceivedundervariousforms(inperson,byphoneorinwrittenform),proceduresforreviewandscreeningofcomplaints,trackingmethods,procedurestodealwiththepublic,checklistforearlyverificationofcartelallegation,and,finally,mechanismsforinter-agencyassistanceandinformation-sharing.

Thesectionhasalsopointedouttheimportanceforcompetitionagenciestoprovideongoingtrainingtotheirinvestigatorsaboutmethodologiesandtechniquesforearlyassessmentofcartelallegations,includingproceduresfordealingwithcomplainantsandthepublicingeneral.

APPENDIXI:INFORMATIONFROMTHESOURCEOFTHEALLEGATIONS(a)Thecomplaint

• Originofthecomplaint.

• Arethecomplainedeventsillegal/withintheambitofcompetitionlaw/appropriate forinvestigation?

• Doanywaivers,exemptionsorexoneratingdecisionsapply?

• Issuggestedscenariocredible?

• Isitpractical—whataretheadvantagestothecartelparticipants?

• Degreeofdetail—istheresufficientdetailinit?

(b)Credibilityofthecomplaint

• Background—whistleblower,customer/client,concernedcitizen.

• Isthisaserialcomplainant?

• Iscomplaintvexatious?

• Degreeofknowledgeofevents.

• Degreeofinvolvementinevents.

• Benefittocomplainant.

• Doesthecomplainanthaveanexpectationofsomepersonalreward—financial,etc.?

• Doesthecomplainantanticipatepotentialbusinessadvantagefromoutcome?Coulditberevenge/retribution?

• Willthecomplainantbackuptheallegationswithspecificevidence—statement,documents,names,locationsofmeetings?

• Isthecomplainantwillingtogoontherecord?

• Assessmentofcomplainantaspotentialwitness.

• Protection/anonymity.

(c) Informationaboutthecartel

• Howandwhendidthecartelstart?

• Whatisthelevelofinvolvement,awarenessandsupportfromseniormanagement(includingfromregional/headofficeswhichmaybeoverseas)?

• Isthecartelstillactive?

• Howdoesthecarteloperate?

• Whoaretheparticipants/ringleaders?

• Howisthecartelpolicedandarethereanyindividualswhohaveleftthecartelandcancorroboratethestory?○ geographiclocation/proximity○ existenceoftradeassociation

��

�� aPPendix i

○ inter-partymovementofpersonnel○ uniquenessofservice

- limitedavailableexpertise- highdegreeofspecialisation

○ individualparticipantshistory- involvementinpreviouscontraventionsofcompetitionorconsumerlaws(recidivism)- involvementinviolationsotherthancompetitionviolations(e.g.fraud)- involvementinshoddyservice

○ Supplylines.○ Management/administration/salesunitsize.

(d)Theindustryandmarketsectorconsiderations

• Structureofsector.

• Background—sales,marketshare,location,capacityandsizeofplants,otherlinesofbusiness,etc.

• Listofcustomers—top25customers(name,address,telephonenumberandcontactperson).

• Otherproducersandestimatedsalesandmarketshares.

• Plaindescriptionoftheproblemandcustomers'harm.

• Whatisrelevantproduct/geographicmarket?

• Anynewentrantsintothemarketinpastfewyears?

• Marketbuoyancy(abuoyantmarketcanmoreeasilyabsorbhighercostspassedonfrom cartelactivity).

• Degreeofdemandfluctuation.

• Evidenceofbidrotation.

• Recentsectorhistory,fromcompetitionperspective.

• Experienceinotherjurisdictions.

• Overspillintoothersectors.

• Geographicareacoveredbytheallegations.

• Howpervasiveistheallegedcartelactivity/howlonghasitbeeninoperation?

• Horizontalandverticalissuesinvolvedintheallegations.

APPENDIXII:GOODPRACTICESRELATINGTOCARTELCASEINITIATION

METHODSOFDETECTINGCARTELSANDLAUNCHINGANINVESTIGATIONItisconsideredgoodpracticeforagencies:

• Touseavarietyoftechniquesandmethodstodetectcartels—includingamixofbothreactiveandproactivemethods—whichwillincreasetheopportunitiesfordetectingcartelsandhelpdemonstratetheagency’senforcementcapacity.

• Tohaveinplaceaformalcomplaintsystemforreceiving,handlingandrespondingtocomplaintsfromthegeneralpublic.

• Todevelopgoodworkingrelationshipswithinternationalcounterpartstoencourageandfacilitatethesharingofinformation,aspermittedbyapplicablelaws,treatiesoragreementsthatmayprovideasourcefortheinitiationofcartelinvestigations.

• Tohaveregularcontactwithotherdomesticlawenforcementagenciestodevelopanunderstandingofthepossiblelinkswithcompetitionlawenforcementandwiththeirinternationalcounterparts.

• Todevelopgoodworkingrelationshipswithotherdomesticlawenforcementagenciesandtodrawupontheirsourcesofinformationasameansofgeneratingleadstodetectandinvestigatecartelconductandpromotecooperationandcoordinationinfurtherinvestigations.

• Toregularlyandconsistentlymonitorrelevantindustryandtrademedia,internetsitesandotherpubliclyavailableindustryandtradeassociationsources,whichcanprovideanindicationandearlywarningsignofcartelactivity

• Topromoteandengageinopenandactivecommunicationswithintheirorganisationsandacrossworkunitstofacilitatetheexchangeofinformationaboutredundantcasesthatmaysignalpossiblecartelconduct.

• Toengageinoutreachprogramstoraiseawarenessaboutanti-cartellawsandtheharmfuleffectsofcartels,whichwilleducatepeopleabouttheoperationofthelawandthetypicalsignsofcartelconductandwillgenerateleadsaboutcartelactivitythatcanbeasourceofinformationfortheinitiationofaformalinvestigation.

CARTELCASESELECTIONANDPRIORITISATION

Itisconsideredgoodpractice:

• Tohaveageneralpolicyorapproachsettingoutthestepsintheagency’sinvestigativeprocess.

• Tohaveinaplaceamethodtoassessandweightherelativemeritsofcartelmattersandtofacilitatedecision-makingregardingtheselectionandprioritisationofcases.

• Forinvestigatorstohaveagoodunderstandingoftheobjectivesofthepolicyorapproachandtobewelltrainedintheuseandapplicationoftheframework.

• Foragenciestohaveapolicyorapproachwitheasilymeasurableobjectivecriteriathatarealsoreflectiveoftheparticularpolitical,economicandregulatoryenvironmentwithinwhichtheagencyinvestigatescartelconductandenforcesitscompetitionlaw.

• Foragenciestoassigndifferentweightstothecriteriaintheframeworktoreflecttherelativeimportanceofeachcriterion.

• Forthegeneralpolicyorapproachtobeappliedconsistentlytoallcartelmattersatthepre-investigativestage,whichmayrequiresignificantagencyresourcesduringtheinvestigativestage.

• Toreviewtheapplicationofthepolicyorapproachatpre-determinedtimeintervalstoensurethattheresultsarestillvalidanddeterminewhethertheapproachbeingtakenregardingaparticularcartelmatterneedstoberevised.

��

�� aPPendix ii

• Todocumentandsourcetheassessmentofthecriteriawhenapplyingthepolicyorapproachtoaparticularcartelmatter,andtohavetheassessmentreviewedbysomeonenotworkingonthecartelcase.

PRE-INVESTIGATORYPHASEOFCARTELALLEGATIONSItisconsideredgoodpracticeforagencies

• toestablishmethodologiesfortheearlyverificationandassessmentofallegedcartelsduringthepre-investigativephase

• toestablishproceduresanddeadlinesforthepre-investigativephaseofacomplaintregardinganallegedcartel

• toestablishclearandstandardproceduresfordealingwithcomplainantsregardinganallegedcartelinthepre-investigatoryphase

• toprovideongoingtrainingtotheirofficersaboutmethodologiesandtechniquesforconductingapre-investigationphaseincludingproceduresfordealingwithcomplainants

• toprovideinformationtocomplainantsoutlininghowtheircomplaintwillbeevaluatedandtheagency’sexpectationsofthem

• toimplementinternalprocedurestoassessandevaluateinformationandcomplaints

• toverifyandcorroborateallegationsbeforeproceedingtotheinvestigatoryphase

• toestablishclearreferralmechanismsandclearproceduresforinter-agencyassistanceandinformation-sharingduringthepre-investigatoryphase

• toclearlyidentifycriteriaandestablishproceduresfordecidingwhetheramatterbeingexaminedshouldproceedtotheinvestigatoryphase.

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