1. Ensure that restrictive business practices do not impede or negate the realization of benefits that should arise from the liberalization of tariff and non tariff barriers affecting trade.
2. Attain greater efficiency in international trade and development, in accordance with national aims of economic and social development and existing economic structures such as through the creation, encouragement and protection of competition, controlling concentration of capital and or economic power and encouraging innovation.
3. Protect and promote social welfare in general and in particular the interests of consumers in both developed and developing countries
4. To eliminate the disadvantages to trade and development which my result from the restrictive business practices of transitional corporations or other enterprises and thus help to maximize benefits to international trade.
5. To facilitate the adoption and strengthening of laws and policies in this areas at the national, regional and international levels
Enforcement of Leniency Program as a Competition Policy Tool
One of the tools in implementation competition policy and law is the enforcement of Leniency Program. Leniency Program was one of those tools reviewed at the Six United Nations Conference hosted by UNCTAD last year. The Conference reviewed all aspects of the Set of Multilaterally agreed equitable principles and rules for the control of restrictive business practices.
According to UNCTAD, leniency program is a system, publically announced, of, “partial or total exoneration from the penalties that would otherwise be applicable to a cartel member which reports its cartel membership to a competition law enforcement agency”. Enforcement of leniency program can be effective if there is; a high probability of catching the cartel in question, high degree of the penalty to the parties reported in the cartel much more than that of the reporter, clear benefits to the reporter, track record of success, transparency and predictability of the response by the authority to the reporter and sufficient protection of the curtain raiser, among others.
Enforcement of the leniency program increases the probability of both exposure and punishment of hard core cartels and thus provides a higher level of deterrence. The Leniency program has a preventive dimension in that it implants mistrust within cartels that a member will report it to the authorities. Enforcement of the Leniency program is therefore a cost effective investigation tool although it supplements and is not a replacement for ex officio investigations.
Enforcement of the leniency program can be effective in detecting existence of the cartels given that by their nature they involve a lot of secrecy. The leniency program destabilizes cartels given that the parties have to ensure that they trust each otherwise they risk having one of them report the cartel. Factors relating to jurisdictions of the companies involved should be put into consideration when designing the leniency program. Countries that have adopted enforcement of Leniency program include the US, Brazil, Pakistan, South Africa, EU, Chile, Mexico and Russia.
Looking at the above factors one can conclude that enforcement of Leniency program works well in an environment where a competition authority in place has enough financial and human resources to be able to detect existence of a cartel. The authority must be transparent enough and the undertakings should be able to know of their rights and consequences of one, involving into a cartel and secondly reporting such a cartel. Jurisdictions of the undertakings also matters if the enforcement of leniency program is to be effective. Undertakings which fall into two jurisdictions especially multinationals can be very hard to detect their involvement into a cartel and later alone effectively sanction them.
It is not surprising therefore that most of the countries that have effectively implemented the Leniency program are developed or developing countries. This then brings the question as to whether less developed countries can effectively employ and enforce the Leniency Program given that they normally lack adequate resources and skilled manpower; they have less sophisticated investigative systems and inadequate protection of whistler blowers and are characterized by higher level of corruption. Now that the enforcement of Leniency program seems to be the way forward, what then should the international community do enable the least developed countries effectively adopt the program? Any way that is the question i will discuss next time.
Details on enforcement of Leniency Program
The following are reasons why enforcing Leniency Program is important for managing hardcore cartels.
1. Hardcore cartels are infringements and their perpetrators are fully aware of the blatant illegality of their actions. This is why the enforcement policy should deter such undertakings from entering into or continuing with a cartel.
2. The Leniency Program can be alternative tool especially in situations where an undertaking cannot abstain from joining in a cartel because the prospect of loss resulting from the sanctions is not necessary higher than the prospect of gain.
3. The general deterrent effect of fines is obviously influenced by their level but also by the probability of the cartel being uncovered. Owing to their secret nature, cartels are generally very hard to unearth and investigate.
4. Leniency Program grants cartel members a lenient treatment in exchange for information because;
I. Leniency is supposed to increase the probability of both exposure and punishment, and thus the overall level of deterrence.
II. Leniency has a preventive dimension in that it implants mistrust within cartels that a member will report it to the NCAs.
III. Leniency is a cost effective investigation tool.
5. Leniency Program supplements although it cannot replace ex officio investigation.
Some statistics from some of the Countries that are enforcing the Leniency Program
At least jurisdictions on have adopted some sort of leniency Program. In the EU On average, 24 leniency applications received every year. Of these at least 15 immunity applications are granted and since 2000, almost all cartel cases have included a leniency applicant. In the US, on average, 24 leniency applications are received every year. In South Africa 18 leniency applications received in 2008/2009
Granting of Immunity under the Leniency Program
In enforcing the Leniency Program, an applicant can either be exonerated, or have his or her fines reduced. In order to qualify for immunity, one of 2 alternative tests can be done.
Under the first test the applicant must be the first to submit inside information and evidence which permits the Authority to undertake a targeted inspection to the cartel in question. An applicant qualifying under this test can be granted full immunity or total exoneration.
If however the Authority has already sufficient information to effect an inspection on its own, immunity under the first test may not be provided to the applicant. However, the applicant can still qualify for immunity under the second test which require that applicant must be the first to submit evidence which permits the Authority to find an infringement of a cartel but such evidence must be new to the Authority. Under test the applicant can qualify for partial immunity such as the reduction of fines. Test two however is more demanding as it requires the applicant to submit very concrete and directs evidence of the infringement in question.
In both situations whether under test one or test two, only one applicant can successfully be granted immunity per cartel. If the Authority grants immunity under test one or test two, no further applicant from the cartel in question can be eligible for any immunity.
Other Conditions for Immunity under the Leniency Program
Besides the tests, the applicant must meet the following additional conditions in order for him or her to be granted immunity. The applicant is required;
· to genuinely, fully, continuously and expeditiously work together with the Authority in its investigations on the case;
· to terminate participation in the cartel;
· not to destroy or falsify information with a view to play down their own role in the infringement;
· not to reveal the immunity application to others;
· not to have taken steps to force other undertakings to join in the infringement;
In conclusion, enforcement of Leniency Progam is proving to be a very efficient tool to unearth cartel infringements and it is thus significantly increasing the overall deterrence effect. However, transparency and legal certainty must be ensured for the enforcement of leniency program to become a success and a leniency notice must be drafted accordingly
Kkams
