Early resolution of cartel cases in Latin America and the Caribbean

2. Overview of early resolution of cartel cases

This section provides an overview of the objectives that competition authorities have when designing their own early case resolution systems applied to cartels and the benefits for the investigated parties.

2.1. Objectives of early resolution of cartel cases

In cartel enforcement, competition authorities face several challenges, including the detection of cases and the gathering of evidence that may be sufficient to warrant a penalty. However, fighting cartels requires the allocation of resources (both human and financial resources), which are limited for competition authorities. In this context, competition authorities in several jurisdictions have developed an interest in accelerating anti-cartel proceedings through mechanisms of early case resolution, such as settlements and plea negotiation.

The most common objectives for adopting early case resolutions in cartel investigations are:

• Efficient use of time and resources. Instead of investing them in a prolonged investigation and prosecution of a cartel case, a competition authority can quickly move forward in closing the case and focus on the detection, investigation and prosecution of additional cases (ICN, 2008[5]). This provides the authority with the opportunity to have an expanded reach in its enforcement activities by handling more cases.

• Enhanced cartel enforcement through the duty to co-operate. Some authorities use these tools to help with the investigation in a similar way to leniency, by requiring investigated parties to co‑operate with the investigation by providing information that may be helpful for the investigation and subsequent prosecution of the other cartelists (Hammond, 2006[6]).

• Certainty and finality. The early resolution involves a mutual understanding between the authority and the investigated parties on certain issues. This provides the opportunity to reduce the risk of appeal proceedings or subsequent reviews based on the terms agreed upon (Bellis, 2014[7]).

• Earlier results. The early resolution of a case can provide the authority with a faster impact on the market than a full adversarial procedure. Commitments or corrective measures set in place in a timely manner can mitigate the negative effects of cartels and repair or restore competition quicker (Wils, 2008[8]).

• Contribution to deterrence. The early resolution may be tied to a penalty, commitments and/or corrective measures, and the consequences may be more dire in the event of recidivism or non‑compliance. For the market in general, early resolution tools send the message that the authority is active on the subject, increasing the fear of cartels being detected (ICN, 2008[5]). And, as argued by Ascione and Motta (2008[9]), deterrence arising from reduced consequences, such as penalty deductions, obtained through early case resolution tools may not be diluted if the freed resources of the authority are aimed at the detection of other cartel cases.

The effectiveness of early case resolution mechanisms also depends on the willingness of parties to participate in them. As a result, the design of these tools must provide incentives that sufficiently address the interests of both competition authorities and the parties concerned. In this regard, certain objectives may align. Greater certainty and predictability regarding the outcome of the proceedings, as well as a faster resolution of cases, can benefit both authorities and parties by reducing the costs, risks and burdens associated with lengthy adversarial proceedings and potential appeals. In addition, early case resolution may provide parties with reduced financial exposure through fine reductions or lower pecuniary obligations, reflecting the procedural efficiencies generated by their participation. Depending on the jurisdiction and the specific design of the mechanism, parties may also benefit from the possibility of negotiating commitments or corrective measures tailored to the circumstances of the case. These incentives are often essential to encourage participation and, consequently, to enable competition authorities to achieve the efficiency and enforcement objectives pursued through early case resolution.

Jurisdictions across the world consider these objectives and incentives differently when devising their own early resolution programmes. The United States and European Union, for example, have different approaches as to the objectives of their early resolution programmes when it comes to cartel cases, with co-operation during the investigation being a distinctive element between the two of them.

Box 1. Comparative approaches to the objectives of early resolution of cartel cases in the United States and the European Union

United States: A tool that can assist the investigation

One objective of early resolution in cartel cases in the United States through plea agreements in criminal cartel enforcement is to obtain information that may assist the investigation and prosecution of other cartel participants. Plea agreements may be available to defendants that do not qualify for non‑prosecution protection under the corporate leniency policy of the Department of Justice (DOJ). In exchange for the information provided, if the co-operation and other obligations undertaken by the defendant are useful and timely, then, the defendant may benefit from reduced penalties and, where applicable, other sentencing benefits.

After a plea agreement has been reached by the DOJ and the defendant, it is submitted to the court which may accept it, reject it or defer a decision on whether to accept it. In practice, however, most plea agreements and related sentencing recommendations in criminal cartel enforcement recommended by DOJ have been accepted by courts, offering a significant degree of predictability as to the outcome of a plea agreement.

European Union: An alternative procedure after the investigative phase

Settlements in the European Union are an alternative procedure available in cartel cases. The procedural choice is made once the investigation is completed, as the evidence gathered and the Commission case are disclosed to the parties in bilateral parallel meetings for them to be heard and to make up their mind.

If the Commission chooses to explore the parties’ interest in entering into settlement discussions, all the parties to the case will be offered the possibility to engage. If settlement discussions succeed, the undertakings would introduce a submission acknowledging their participation in a cartel, the relevant facts and the legal assessment, including the liability for the infringement and the range of potential fines (which are not negotiated); and procedural economies materialise (short statement of objections reflecting the settlement submissions followed by the corresponding short decision with fines within the range, without the need for an oral hearing, access to file limited to evidence).

The settling party gets a 10% reduced fine, while the Commission gets to handle more cases with the same resources and reduces drastically the number or scope of appeals to the EU courts. Through this, the decisions become final and enforceable earlier than through the ordinary procedure.

If a settling party had previously also applied and obtained leniency benefits, the benefits of the leniency and the settlement will add up.

If settlement discussions fail, the case returns to the ordinary procedure for the relevant parties. In so‑called “hybrid” procedures, some parties may settle, while others contest the case in the ordinary procedure.

Sources: Hammond, S. (2006[6]), The U.S. Model of Negotiated Plea Agreements: A Good Deal With Benefits For All. Address to the OECD Competition Committee Working Party No. 3, https://www.justice.gov/archives/atr/file/518421/dl?inline=; Commission Notice on the conduct of settlement procedures in view of the adoption of Decisions pursuant to Article 7 and Article 23 of Council Regulation (EC) No 1/2003 in cartel cases, OJ 2008 C167/1.

The approaches reflect the different legal systems of competition enforcement (i.e. prosecutorial in the United States and administrative in the European Union), but they also demonstrate that early case resolution does not follow a single enforcement model. There are several types of tools that can be adapted depending on the different institutional needs. The significance that each jurisdiction assigns to objectives such as co-operation, procedural efficiency and legal certainty influences the design of the programme, including its timing, requirements and incentives. Regardless of the approach adopted, early case resolution tools are not isolated and operate within the wider framework of cartel enforcement. Therefore, as in an adversarial procedure, decisions taken with respect to the design of the tools must take into consideration the overarching objective of deterring cartel conduct.

In Latin America and the Caribbean, jurisdictions have adopted approaches that have procedural efficiency as a central objective, but many early resolution tools in the region also incorporate requirements aimed at encouraging co-operation, promoting compliance, restoring competition or addressing broader policy concerns through corrective measures and commitments.

Since they pursue several objectives simultaneously, competition authorities may face trade-offs when designing these tools. For example, and as further explored in Section 3, greater flexibility in the negotiations with respect to requirements such as the admission of guilt or facts may facilitate participation and procedural efficiency, but may also affect other enforcement objectives, such as the adequate compensation of cartel victims through private damages. Conversely, stricter requirements, including extensive co-operation obligations or high amounts of financial obligations, may strengthen certain enforcement outcomes, but they may also reduce the incentives of investigated parties to resolve cases early and lead them to opt to defend the case through the adversarial path. Careful balancing of these policy considerations is necessary to design these tools.

As a result of these different policy objectives, jurisdictions in the region have a diversity of institutional arrangements that reflect their enforcement priorities. This means that what works in one jurisdiction may require some adaptation before being implemented in another. Nevertheless, there are common elements, experiences and challenges that can inform policymakers and competition authorities in the design of early case resolution tools.

2.2. Broader policy considerations

2.2.1. Interplay with leniency policy

Through leniency programmes, and in exchange for full immunity or a reduction of penalties, cartel members have the opportunity to report their conduct and provide information and evidence of the infringement at a lower cost to the agency compared to a regular investigation. Leniency programmes are credited with increasing the number of detected cartels in many jurisdictions and facilitating the successful prosecution of cases (OECD, 2022[10]). Leniency also provides for deterrence, due to the risk that one of the members blows the whistle on the cartel, which may discourage potential members from engaging in the conduct (Vera and Fernández, 2024[11]).

While some of the objectives of leniency and the early resolution of cases may concur, as both involve a degree of co-operation, the main focus of each mechanism is different. Leniency programmes are a key tool to detect cartel infringements (ICN, 2005[12]), while early resolution tools seek to terminate existing proceedings in a speedier manner.

Dijkstra and Seifert (2022[13]) argue that there is an interdependence between the fine reductions offered in cases of leniency and settlements. They state that, if the competition authority has limited resources, the leniency programme should offer maximal fine reductions with minimal reductions to settling companies. Alternatively, if investigated parties cannot be incentivised to apply for leniency, then the early case resolution tool could also offer maximal reductions in exchange of co-operation with the investigation, in an attempt to maximise welfare.

However, because of their different policy objectives, both mechanisms can coexist.

2.2.2. Interplay with private damages

The exposure to private damages caused by the cartel contributes to overall deterrence, by adding up to the costs that would be incurred by a cartelist in the compensation to parties affected by the conduct. Therefore, an issue to reflect on when devising an early resolution tool for cartel cases is its interaction with private litigation.

In this regard, an admission of guilt or of the relevant facts may facilitate private damages, which may occur through the voluntary or negotiated admission by an investigated party in an early case resolution proceeding, triggering the exposure.

The design of early case resolution tools can have other implications. While some of them also require co-operation with the investigation or the provision of evidence, others may involve limited evidentiary requirements or shorter decisions, which may affect the burden of private litigants when arguing their case. These issues can be addressed by avoiding shortcuts in the drafting of decisions and publishing them with descriptions of the alleged conduct that include the relevant elements obtained by the authority.

Therefore, competition authorities and policymakers may consider the interaction between early resolution and private damages when designing these tools. In many cases, they may operate in a complementary manner, pursuing distinct but mutually reinforcing objectives.

2.2.3. Interplay with criminal law

The participation in cartels is a criminal offence in several jurisdictions. However, as sanctions in this context may be imposed on individuals, they may have an effect on the incentives of managers and directors of investigated parties to opt for an early case resolution agreement (Furquim De Azevedo and Lauri Henriksen, 2010[14]).

The extent of the interaction between early case resolution tools and criminal enforcement depends on whether the benefits granted through the agreement can be considered for criminal proceedings. If the early case resolution only operates within the context of the administrative competition law and does not cross into criminal law, investigated parties may continue to face criminal exposure even after reaching an agreement with the competition authority and, in some cases, co-operating with the investigation against other investigated parties.

2.2.4. Impact on precedents

The use of early case resolution tools may have an impact on the development of competition law through the establishment of precedents or case law that can provide guidance on how to approach cases, the criteria for the assessment of infringements and the interpretation of the legal provisions. Precedents can contribute to legal certainty for market participants and reinforce deterrence by clarifying issues related to cartels, as well as competition law more broadly. This consideration may also apply to the reduced exposure of judicial review, as court decisions contribute to this objective.

There is an argument that the use of this early case resolution tool for cartels should be approached cautiously if enforcement is in its initial stages (OECD, 2008[3]), as there may be insufficient incentives for investigated parties who may prefer to attempt to prevail in the case through the adversarial proceeding and the courts.

To increase the incentives of investigated parties to opt for early case resolution, competition authorities may consider setting a credible possibility of meaningful and effective sanctions (Pereira, 2022[15]), supported by a track record of successfully detecting and prosecuting cases through the adversarial proceedings (ICN, 2008[5]).

Still, a competition authority that is in its initial stages of cartel enforcement may use early case resolution strategically as an additional tool in the development process. This may help in creating an enforcement record and achieving deterrence more quickly by detecting and prosecuting more cases thanks to the procedural expediency of early case resolution tools. To do this, the benefits should be sufficiently clear and meaningful to the investigated parties.

Additionally, an option that can help in developing a track record of sanctions and an early case resolution programme is to consider going through the adversarial proceedings with some investigated parties and allowing others to benefit from the procedural alternative. This ensures that the issues of the case can be addressed through the mechanisms that contribute to the development of precedents and case law, while still enabling the competition authority to obtain some of the efficiency gains associated with negotiated procedures.

Some authorities may also be less inclined to use early case resolution tools for cases that involve novel or complex issues (Snelders and Opdebeeck-Wilson, 2021[16]), as there may be greater value in obtaining a final decision that clarifies the application of competition law. This connects to wider enforcement policies as the interpretation of the law may be of particular significance for future cases, reducing legal uncertainty and contributing to the development of cartel enforcement policy.