Procedural Fairness in Antitrust and Competition Enforcement: DOJ and the ICN

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Author: Luis Blanquez

Makan Delrahim, Antitrust Chief for the United States Department of Justice, made news on June 1, 2018, when he announced that the United States will finalize and join the Multilateral Framework on Procedures in Competition Law Investigation and Enforcement.

Delrahim explained why due process is a priority for antitrust and competition enforcement: “With more than 140 competition agencies, and increased international commerce, including digital commerce, it is more and more critical that we share a common set of principles that affords due process to individuals and businesses in investigation and enforcement.” (p.2).

We applaud this effort and agree that companies—including those that do business on several continents and governed by multiple enforcers—should receive fair treatment worldwide by competition authorities.

In his speech, Delrahim mentioned the International Competition Network (ICN), among other groups, as likely substantive sources for the multilateral framework.

It just so happens that the ICN recently addressed this issue at its 17th annual conference, hosted by the Competition Commission of India on March 21-23, 2018. Indeed, the ICN adopted new guiding principles for procedural fairness in competition agency enforcement.

For those that are not familiar with it, the ICN is a network of 104 competition agencies, enriched by the participation of non-governmental advisors (representatives from business, consumer groups, academics, and the legal and economic professions), with the common aim of addressing practical antitrust enforcement and policy issues. The ICN promotes more efficient and effective antitrust enforcement worldwide to the benefit of consumers and businesses.

Because antitrust and competition agencies are now prioritizing due process, we will do a deep dive into the specific due process issues that the ICN described in its report.

One of the ICN’s several working groups is the Agency Effectiveness Working Group (AEWG).  The AEWG aims to identify key elements of well-functioning competition agencies, including good practices for strategy, planning, operations, enforcement and procedures. To that end, the AEWG recently developed an ICN Guidance on Investigative Process paper, which offers helpful tips on investigative transparency and due process. This paper follows previous reports on Investigative Tools, Competition Agency Transparency Practices, and Competition Agency Confidentiality Practices.

Following these guidance reports, the AEWG has now produced new Guiding Principles for Procedural Fairness, together with some recommendations for internal agency practices and implementation tips for good agency enforcement process.

You can access the ICN report here.

Following the two-day conference in India, the AEWG adopted the following Guiding Principles for procedural fairness in competition agency enforcement:

Impartial Enforcement

Competition agencies should conduct enforcement matters in a consistent, impartial manner, free of political interference. Agency officials should not have relational or financial conflicts in the matters on which they work. Agencies should not discriminate on the basis of nationality in their enforcement.

The AEWG highlights that agency officials should not have relational or financial conflicts of interest relevant to the investigations and proceedings they participate in or oversee. To ensure the impartiality of investigations and decision making, agencies should have ethics rules to prevent potential conflicts. And they should consider a systematic process to check for potential conflicts for all personnel working on a specific investigation.

Effective Enforcement

Competition agency enforcement should be effective and capable of identifying, prioritizing, and addressing competition law violations. Agencies should have sufficient investigative powers and their use should be adapted to the needs of the matter. To ensure effective enforcement, competition agencies should have tools and rules that enable them to cooperate with other public agencies or foreign counterparts.

The AEWG recommends that agencies establish procedures that allow for meetings with market participants, as well as settlements, remedies and commitments to facilitate prompt resolution of complaints and investigations, as well as to reduce costs for both the agency and private parties. Furthermore, competition authorities should back their compulsory investigative tools with the ability to enforce compliance, including appropriate and effective sanctions for non-compliance and obstruction.

The AEWG also encourages agencies to engage with parties on timely proposals for commitments, settlements or remedies, as well as allow them to respond to agency concerns and offer amended proposals. Agencies should also invite or contact relevant third parties for their expertise and perspective during an investigation but should consider potential bias in their arguments.

In addition, agencies should subject compulsory agency Requests For Information (“RFIs”) to internal review before they issue them. They can do this, for example, through a specialized office, by management or central office, by sharing them across different enforcement units, or by the use of templates as a starting point for common RFIs. Without jeopardizing an informed investigation, agencies should also limit RFIs in scope, time period, persons impacted, issues addressed, and required-response format. They should include an agency contact point and necessary information (i.e. legal basis and required time for response), allowing case handlers to interact with RFI recipients.

Lastly, the AEWG states that cooperation with other public agencies is critical for robust competition and should involve formal tools such as agreements or MOUs as well as informal tools, such as exchange of experience, and cooperation with investigators from different agencies.

Transparent and Predictable Enforcement

Competition agencies should conduct enforcement matters under transparent rules and practices that provide parties under investigation with timely notice, as appropriate to the type of matter, that an investigation has been opened and its subject matter, agency concerns, allegations, and supporting evidence. Enforcement decisions should be transparent and explain the findings of fact, relevant legal and economic analysis, and any commitments or sanctions.

To promote enforcement transparency, the AEWG encourages agencies to publish guidelines on agency analysis and enforcement interpretations, substantive legal standards, and investigative tools for investigations. In particular, the AEWG suggests topic-specific guidance on issues such as access to the file and discovery, settlement and commitment processes and sanctioning methodology, among others.

Furthermore, agencies should publish statements or explanations of how the agency sets investigative priorities, conducts investigations, and applies procedures in support of informed and robust decision making. The extent of investigative transparency is subject to agency discretion and should take into account the specific needs of the investigation and obligations to protect confidential information.

In addition, when appropriate, agencies should explain the likely timing of an investigation.  If set by statute, they should clearly communicate the timetable, including the dates for significant milestones. If there are no deadlines or phases for an investigation, agencies should consider providing non-binding time projections or estimates, even if such guidance is only general or for the next investigative steps.

Likewise, during the investigation, agencies should inform the parties of the basic facts and nature of evidence gathered, as well as the agency’s theories of competitive harm. At key points during the investigation, agencies should provide the parties with updates of the investigation’s scope, status and significant developments (i.e. change in potential allegations that the agency is pursuing or a change in the expected timing of the investigation).

After formal allegations are made, but before a final finding of a violation, agencies should first provide the parties with a written statement of the charges (i.e. a complaint, a statement of objections, a case officer report), specifying in detail the nature of the alleged offense and supporting facts, addressing the legal, factual, and economic issues, claims pursued, and evidence relied upon.

Also, in compliance with procedural rules and confidentiality requirements, agencies should provide the party with access to, or discovery of, all relevant evidence obtained in the investigation, both exculpatory and inculpatory.

Finally, subject to appropriate protection for confidential information, agencies should provide a publicly available version or summary of the decision, which explain their findings of fact, legal and economic analysis, and any commitments or sanctions.

Meaningful Engagement

Competition agencies should seek and take into account relevant information and views from parties and third parties to inform their consideration of enforcement matters. Agencies should offer meaningful communication with parties on significant factual, legal, economic, and procedural issues at key points during enforcement. This includes opportunities to meet with agency officials to discuss the status of the investigation and the merits of the case.

As a good practice example, the AEWG considers the acceptance of voluntary information provided from parties and third parties with legitimate interests on their views during an investigation, as well as their arguments and perspectives, with the caveat of potential bias and confidentiality. In addition to interaction with parties through formal investigative tools such as RFIs and hearings, agencies should consider less formal ways to solicit party responses and views through phone calls, letters, emails and meetings.

Furthermore, effective engagement concerns a two-way dialogue on the merits of an investigation, with agency staff explaining their evolving views of facts and potential allegations. Where appropriate, case teams should offer to meet with the parties at key stages of the investigation.

Likewise, early discussion of issues and concerns with parties need not limit an agency’s discretion to pursue new or additional theories of harm that may emerge during the investigation. But the agency should incorporate such new theories into any ongoing engagement, and it should consider updating parties on significant changes, as appropriate.

Objective and Sound Enforcement

Competition agencies should review and examine their conclusions and theories of harm, applying sound economic and legal analysis, as appropriate, to support informed decision making. Enforcement decisions should be based solely on the facts and evidence, both inculpatory and exculpatory, obtained through investigation.

The AEWG encourages agencies to establish a process of oversight or internal consultations for investigations, between the investigation unit and specialized units such as litigation offices, legal services, economist divisions, or policy offices. This is particularly important when the agency considers key issues such as opening, expanding, closing and concluding investigations or compulsory investigative measures.

Furthermore, the AEWG suggests agencies hold ad hoc or regular internal meetings between the case team and agency management or other coordinating offices to reassess the progress, strategy, evidence, theories, timing and plans at key points during an investigation. They should create a case file or other internal record in every investigation.

Likewise, agencies should objectively apply appropriate legal and economic analysis to the facts and evidence gathered in a particular matter. They must ensure that the views of all relevant internal components (legal services, case handlers, economists) are included in the evaluation of enforcement matters.

Lastly, agencies should establish a transparent process for thorough internal review of staff recommendations before final agency decision by officials or an office outside of the investigation team (i.e. a peer review panel of other investigators or management, a legal services entity, officials from other enforcement phases, an economist unit, or other experts).

Opportunity to Respond

Competition agency enforcement proceedings should include opportunities for parties subject to possible adverse findings to review evidence, respond to the agency’s allegations of anti- competitive conduct, and present evidence and their views.

As a good practice example here, the AEWG suggests agencies provide formal opportunities to respond (i.e. hearings, responses to statement of objections or complaints, and access to the file or discovery obligations). Furthermore, the AEWG encourages agencies to provide a formal opportunity for the party to respond in writing to the objections and allegations, within a reasonable time considering the length, scope and complexity of the investigation, the urgency of the case, and whether the party has had prior access to information.

Judicial Review/Appeals

Competition agency enforcement proceedings should include the right to seek impartial review by an independent judicial body.

Here, as a practice example, the AEWG encourages agencies to allow parties to challenge alleged improper use of investigative powers, through internal review, recourse to an internal administrative appeal, or an independent court.

Confidentiality Protections

Competition agency enforcement proceedings should include a process for appropriate identification and protection of confidential business information and recognition of privileged information. The decision to disclose confidential information should include consideration of the confidentiality claims, rights of defense, rights of third parties, incentives to provide information, effects on competition, and transparency to the public.

As a good practice example, the AEWG invites agencies to establish clear, transparent rules and practices for the protection of business secrets and other confidential information obtained during investigations. They also advise that agencies issue guidance about how parties can designate information as confidential, how these designations are assessed, the process for determining whether to disclose confidential information, and how to challenge such disclosure.

In addition, the AEWG encourages agencies to require parties to identify confidential or privileged information in their submissions, as well as have them substantiate such claims, as appropriate. When an agency denies a party request for confidential treatment during an investigation and contemplates disclosure, it should provide the submitter with timely notice and an opportunity to object before it discloses the information.

Lastly, agencies should consider appropriate safeguards to protect confidential information, including protective orders or confidentiality rings. Agencies should also establish procedures on applicable legal privileges: determine how parties may claim them and how the agency may respond to assess or challenge such claims.

Efficient and Timely Investigation

Competition agencies should conduct enforcement within a reasonable time, appropriate to the circumstances of the matter, and avoid unreasonable costs and burdens for parties, third parties, and agencies.

As a good practice example, the AEWG encourage agencies to strive to meet all enforcement deadlines imposed by competition laws and agency rules. Agencies should ensure that parties meet deadlines, so the overall investigation stays within its required or projected timing.

Furthermore, the AEWG encourages them to set reasonable deadlines for parties to respond to an investigation to avoid delay, as well as conclude investigations once they determine that the allegations lack merit.

Lastly, the AEWG encourages agencies to review and consider international best practices on agency process from organizations such as ICN and OECD, as well as private attorney and company consultations.

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