International legal approach to liability and prosecution for concluding and participating in anti-competitive agreements

Troyanov Yaroslav Olegovich Postgraduate Student, Department of Law Enforcement, Criminal Law and Process, Pskov State University 196128, Russia, Saint Petersburg, Varshavskaya str., 23k1, sq. 52 jaroslawt96@mail.ru Other publications by this author

introduction

Most of the leading countries of the world recognize anti-competitive agreements (both between competitors (cartels) and vertical agreements) as a form of market monopolization, one of the most dangerous offenses in the field of economics and competition.

Competition did not immediately become a sphere of state control. The understanding of the importance and necessity of maintaining and developing competition has been formed relatively recently, since the middle of the 20th century.

According to D.I. Seregin, "modern competition law began to take shape in Western Europe only in the post-war period. Eastern Europe and Russia are forming the legal framework necessary to protect competition at the end of the 20th century, during the transition to the market" [Seregin, 2022:15].

This circumstance, in our opinion, is due to the fact that after the transition to a market economy, which caused the rapid growth of industry and commodity markets, the governments of these countries realized the advantages of a competitive market and free competition.

All developed and developing countries understand the need to develop competition and prevent its restriction. The legislation of such countries and interstate associations (for example, the responsibility for concluding anti–competitive agreements is provided for by the regulations of the European Union (hereinafter - the EU)) prohibits the restriction of competition. At the same time, as in the Russian Federation, cartels are recognized as the most dangerous acts restricting competition. The types of liability for entering into anti-competitive agreements vary from country to country.

As one of the leading branches of law, competition law has received fairly wide coverage in the Western legal literature. At the same time, in Russian science, most of the literature contains general information on the international legal approach to combating anti-competitive agreements.

Among the domestic researchers considering these issues and the features of anti-competitive manifestations in the international context, it is necessary to highlight the works of I. Y. Artemyev, S. B. Avdasheva, Teplyakov S.N., P. A. Kalinichenko, S. Y. Kashkin, A. Y. Kinev, A. G. Sushkevich, Klimenkov I.N. At the same time, there are currently no Russian-language scientific works, devoted to the comparative analysis of the international legal approach to combating anti-competitive agreements.

THE LEGISLATION OF DEVELOPED COUNTRIES REGARDING THE FIGHT AGAINST ANTI-COMPETITIVE AGREEMENTS.

Liability for anti-competitive agreements (as a form of restriction of competition) can be criminal, civil, administrative or mixed (i.e. include several types of liability at once, depending on the consequences, subjects and other circumstances provided for by law).

Having analyzed the legislation of the countries of Europe, Asia and the USA, it is possible to come to a virtually unified legal understanding and interpretation of the anti-competitive agreement. Thus, an anticompetitive agreement is understood as an agreement between business entities aimed at extracting uncompetitive advantages by the parties to the agreement by rejecting competition and harming the competitive market. Differences in the understanding of such agreements are not significant, which makes it possible to use a single terminology to describe this phenomenon within the framework of this work.

The legislation of most countries provides only for administrative liability for the commission of the offense in question. Cartel participants – legal entities can be fined (both administrative and criminal).  At the same time, individuals, in turn, can be sentenced not only to fines, but also to criminal liability in the form of imprisonment (for example, in the USA, Canada and Japan).

Thus, the Antitrust Department of the US Department of Justice (the USA ranks tenth in the IMD World Competitiveness Ranking 2022) believes and in its practice adheres to an approach, the essence of which is that only a real threat of imprisonment can stop the management of companies from entering into cartel agreements.

The main law governing liability for entering into and participating in anti-competitive agreements in the United States is the Sherman Act, approved in 1890. In accordance with this document, a cartel means any agreement or agreement aimed at limiting competition between the parties to such an agreement (Article 1). For participation in such an agreement, articles 1-2 provide for serious liability – a large monetary fine (up to $ 10 million) or imprisonment for up to 3 years (before the 2004 amendments – up to 10 years old).

The most serious sanctions for cartels are provided for by Canadian law. Thus, for the conclusion of an anti-competitive agreement, liability is provided in the form of imprisonment for up to 14 years. In Ireland, the parties to such an agreement can receive a sentence of 10 years in prison, in Australia and Mexico – 10 years in prison, in Germany – 5 years.

Serious sanctions for cartels are also provided for by Japanese law. At the same time, A.V. Danilovskaya notes that the peculiarity of regulating this issue in Japan is the fact that legislation allows for the conclusion of cartel agreements in a number of commodity markets (air transportation, insurance, etc.). The Criminal Code of Japan provides for criminal liability for monopolization of the market (including through the conclusion of anti-competitive agreements) in the form of imprisonment up to 5 years or a large monetary fine [Danilovskaya, 2020: 4].

At the same time, in most countries and state associations, priority is given to such a type of punishment as a fine (so the largest fine was imposed on the American companies Hoffman and LaRoche with a total amount of more than 500 million dollars for participating in the so-called "vitamin cartel"), criminal liability is provided only in the presence of aggravating circumstances, certain conditions and special danger in the actions of cartel members (for example, the scope of the cartel's activities, the amount of income extracted or damage caused).

INTERNATIONAL LEGAL ACTS AIMED AT COMBATING ANTI-COMPETITIVE AGREEMENTS

The international approach to responsibility for restricting competition is a systematic approach to combating international crimes, primarily in the field of violations of antimonopoly legislation. Due to the globalization of the economy and the expansion of international relations, the possibilities of corporations and organized crime are increasing, which requires the development of multilateral agreements and the unification of legal norms for liability in case of violations.

The largest interstate association (in terms of financial resources) is the EU. This association includes a large number of countries that occupy leading positions in the international economy.

Tambovtseva G.M. and Malykhina T.A. believe that such an integration association as the EU has high competitiveness in international markets, pursuing a unified foreign trade policy, including in terms of regulating the norms of current legislation. The EU is a developed system of effective legal regulation of competition [Tambovtseva, Malykhina, 2015: 16].

In the European Union, antimonopoly policy is not only a guarantee of the functioning of a space without internal borders, but also a prerequisite for the existence of a free market economy, protected from state interference and monopolistic actions of enterprises that violate free competition. The goals, objectives and general principles set out in the founding agreements are of paramount importance.

The main provisions on measures to ensure and protect competition in the EU are set out in the Treaty Establishing the European Economic Community of 1957 and the Treaty on the Functioning of the EU of 2007.

One example of multilateral agreements at the international level is the EU Cartel Damage Claims. This document is aimed at protecting the rights of consumers and entrepreneurs who suffer from abuses in the form of price collusion or market division.

At the same time, the national competition authorities of the EU interact with each other within the framework of the European Competition Network in terms of informing each other, providing methodological support, exchanging evidence and conducting joint activities.

At the same time, the current EU legislation does not provide for criminal liability for participation in anti-competitive agreements.

One of the reasons for the lack of criminal liability for cartels at the level of the European Union is the lack of harmonization of legislation in the field of antimonopoly regulation of the member states, since the main ideas and priorities for the implementation of antimonopoly regulation within each state are determined by various factors (economic, political and others). At the same time, there are a significant number of publications in the scientific community in which experts and scientists consider the introduction of criminal liability for cartel agreements as positive legislative changes [Riley, 2011: 14].

An example of international legal regulation of criminal liability is the Organization for Economic Cooperation and Development (hereinafter - the OECD), which develops international standards in the field of antimonopoly legislation and coordinates the actions of member States.

In particular, the OECD members adopted the Agreement "On the Prosecution of Corruption Crimes", Recommendations "On improving Competition Law" and a Methodological document "Harmonization of procedures for registration, investigation and suppression of violations of anti-competitive legislation", which unify the legislation of the participating countries and allows international cooperation in the investigation of corruption crimes, which include anti-competitive agreements.

According to the Report on the practice of application by OECD countries of the Recommendations "On improving Competition Law" (Hard Core Cartels: Third report on the implementation of the 1998 Council Recommendation 2005), the policy of imposing high fines for cartel is an integral part of a successful anti-cartel program, many countries provide for them in their legislation.

But still, these measures are not sufficient to effectively counter the cartels.  The OECD members are recommended to establish criminal liability of individuals for participation in cartels, to carry out appropriate work among law enforcement agencies, convincing them of the need to apply criminal sanctions in the fight against cartels, to establish cooperation between antimonopoly and law enforcement agencies. In addition, the Report indicates the need to improve cartel liability mitigation programs using best practices (the issue of types and procedures for mitigating liability was not considered in the Report and is not the subject of this work).

In 2003, the United Nations (hereinafter – the UN) adopted the "UN Convention against Corruption", which includes an approach to the anti-corruption fight against elements of criminal liability. This convention includes articles on combating corruption in the economic sphere, including countering violations of antimonopoly legislation.

The most common forms of restriction of competition are related to the misuse of intellectual property. Their international legal protection is based on numerous international conventions, but it is the WTO legal acts that are designed to ensure their compliance and protection when using intellectual property in the field of trade and production. Most of the WTO agreements were adopted as a result of the Uruguay Round negotiations in the period 1986-1994. These include the Agreement on Trade in Services (GATS) and the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), signed on 04/15/1994.

Paragraphs 23-25 of the Ministerial Declaration adopted by the World Trade Organization on 11/14/2001 in Doha are devoted to issues of competition protection policy, as well as its impact on international trade. In particular, the parties agreed to develop provisions on tougher liability for cartel agreements. However, a special document on the protection of competition within the WTO has not yet been adopted, although certain competition rules have been introduced into significant international WTO acts since 1946 [Danilovskaya, 2021:2].

In addition, there are multilateral agreements between different countries, for example, the Miami Memorandum, which was signed in 1995 between the member States of the Organization of American States. It is aimed at combating international cartel activity and includes a wide range of measures to prevent, identify and suppress violations of anti-competitive legislation.

Thus, we see that the international community understands the importance and necessity of countering cartels. An important step in solving the problem of cartels at the international level may be the adoption of a regulatory act at the UN level.

Due to the absence of such an act, a number of problems arise related to the lack of a unified approach to the concept of a cartel and the consequences of such agreements. It is necessary to recognize the legal acts of other countries and avoid double punishment.

AN INTERNATIONAL LEGAL APPROACH TO INVESTIGATING ANTI-COMPETITIVE AGREEMENTS

Regarding the procedure for bringing to justice and agencies involved in the disclosure and fight against anti-competitive agreements, it is customary to distinguish two groups of regimes.

The first group includes countries in which the antimonopoly authority monitors compliance with antimonopoly legislation while simultaneously bringing responsible persons to administrative and criminal responsibility (for example, Canada, the United States, the United Kingdom, etc.). The first group also includes countries in which a high level of interaction has been achieved between the competition protection agency and law enforcement agencies. Such a regime is currently established in most countries of Europe and America. This approach is the most effective and rational, since it eliminates a number of problems related to the procedural features of criminal prosecution, for example, in terms of the procedure for collecting evidence.

The problem of bringing to criminal responsibility for cartels is the very procedure for initiating a criminal case on the grounds of Article 178 of the Criminal Code of the Russian Federation. The basis for initiating a case is most often a decision of an antimonopoly authority that does not have the authority of law enforcement agencies, which subsequently leads to difficulties in collecting evidence and assessing damage or income, due to long periods of investigation of cases of violation of antimonopoly legislation.

So, for example, the identification and investigation of anti-competitive agreements in Canada is handled by the Competition Bureau (Antimonopoly Agency of Canada), which establishes the existence of a cartel, the amount of damage (income) and subsequently transmits the collected materials with the conclusion to the Director of State Prosecution for criminal prosecution and court proceedings. At the same time, the Director of State Prosecution in the framework of a criminal case consults with the antimonopoly authority on recommendations regarding the prosecution process and determining the amount of punishment.

The second group includes countries where law enforcement and antitrust authorities do not work together (for example, Israel). The problem with such a regime is the possibility of bringing a person to several types of liability of one person at once in the case of such a statement on his part.

In addition, in such jurisdictions, the probability of detecting an anti-competitive agreement by implementing a liability mitigation program by voluntary recognition (the so-called "surrender") by the participants of such an agreement is significantly weakened, unlike in the countries of the first group, in which the liability mitigation program for such recognition applies to both administrative and criminal production. In contrast to this approach, the legislation of the countries of the second group is structured differently, cartel participants (their officials) may face criminal prosecution, even if they receive full immunity as part of an antitrust investigation.

The current legislation of Australia provides for civil, administrative and criminal liability for cartels. At the same time, the process of bringing to administrative and civil liability takes place during the trial in accordance with the general procedures provided for by civil law, in which the Australian Antimonopoly Authority, the Australian Competition and Consumer Commission, participates on behalf of the state. The criminal investigation of cases and the proof of the conclusion of an agreement are carried out by law enforcement agencies in isolation from the results of administrative and civil proceedings.

conclusions

According to the results of the study, it can be concluded that the importance (and hence the danger of cartels) of combating anti-competitive agreements is understood in most countries with leading economies.

This danger is recognized both at the level of the state itself and at the level of state unions and organizations. The international community pays great attention to the issue of competition. The competition law of developed countries and the international organizations in which they are composed is a well-developed system of effective regulation.

The legislation of countries and international organizations provides for serious sanctions (both criminal and administrative) for concluding and participating in anti-competitive agreements. A good initial basis for interstate cooperation in the fight against cartels has been developed.

In order to optimize the interaction of law enforcement agencies and agencies involved in the fight against cartels, it is necessary to create common information bases, regulate the exchange of documents and information. In our opinion, it seems necessary to develop and implement the institute of joint events by foreign agencies (working groups, summits, forums).

conclusion

At the moment, the Russian Federation is one of the initiators of the adoption of a document at the UN level aimed at combating transnational anti-competitive agreements and the creation of an international organization to combat cartels in order to provide mutual assistance to law enforcement and competition agencies of different countries in the investigation of cartel crimes.

The Russian Federation is striving to integrate state regulation of antimonopoly legislation with the EU. This fact is evidenced by the conclusion of the Partnership and Cooperation Agreement between the EU and Russia in 1994, according to which our country undertook obligations to unify antimonopoly legislation with EU legislation.