The pandemic has forced many of us to stay in and slow down. But for antitrust authorities, this downturn in activity started even earlier. According to a recent OECD report, there was a significant decline in antitrust enforcement between 2015 and 2020. However, spring has sprung – competition authorities are now coming out of their dens with reinforced tools and will be back on track in 2022.

The OECD report at a glance

• Cartels and leniency: The number of cartel investigations and decisions decreased in almost all jurisdictions in the period from 2015 to 2020, with fewer ex-officio investigations and, in particular fewer leniency applications, which declined by 70% in Europe and the Americas over this period.
• Dawn raids: These actually increased between 2015 and 2018, before decreasing by about one-third globally in 2019. Unsurprisingly, they dropped by 52.3% in 2020 due to the pandemic.
• Market studies: Most global authorities moved away from using market studies as a detection tool between 2015-2019. The Asia-Pacific region was an outlier, with a significant (and increasing) number of market studies per agency.
• Abuse of dominance: Enforcement for alleged abuses of dominance bucked the trend, with a record number of nearly 700 investigations launched worldwide in 2016 alone. Between 2017 and 2019, that number was lower (closer to 400), but still significant.
• Fines: While cartel investigations decreased, cartel fines actually increased by 56% during the 2015-2019 period. They peaked in 2019 at €7.1 billion and in 2021 were up by 229% compared to 2020. If you include fines for abuse of dominance, the value of fines imposed reached €9.3 billion in 2019.
• Budgets: Competition authorities increased their resources considerably, with a compound annual growth rate of 4.3% in nominal budget terms and 1.7% in terms of staff between 2015 and 2020.

Why did enforcement decline so markedly in 2015-2020?

There are several possible explanations for this fall in cartel enforcement. First, the leniency applications pipeline, a key source for cartel detection, seems to have dried up. The OECD report, in line with the views of most commentators, blames the rise in private damages claims for this. But the US has also seen a decline in cartel enforcement, despite private enforcement there having mostly remained unchanged in recent years (in contrast to the EU and UK). In addition, authorities seem to be receiving fewer tip-offs from whistle-blowers.

Another possible explanation is that watchdogs’ resources were tied up with merger review processes; the OECD report stated that notifications increased 15% between 2015 and 2019. Globally, the 8,636 merger decisions dwarf the 212 abuse of dominance and 449 cartel decisions for the same period. But do they, alone, account for the decrease in enforcement activity, given that, over the same period, competition authorities’ budgets and staff increased? Especially coupled with the fact that the OECD found that 95% of mergers are cleared without remedies in Phase I.

Finally, in the most recent two-year period, of course Covid lockdowns also prevented dawn raids: a key means of collecting evidence necessary to fuel cartel enforcement.

What are authorities doing to reverse this trend?

Whilst cartel enforcement seems to have taken a back seat in recent years, legislators and antitrust authorities are now working hard to reverse this trend:

• New incentives for leniency applications

Leniency applications have been key for finding infringements and authorities are looking for ways to re-incentivise companies to self-report. One of the main proposals in some jurisdictions such as Germany is to confer immunity from private claims (in addition to immunity from fines). This would remove a major concern for companies when deciding whether to self-report.

• Dawn raids

While offices remained closed, some regulators have been creative, coming up with new technologies to conduct remote inspections: virtual data rooms, surprise video conference interviews, teaming up with other authorities with wider powers (e.g. tax authorities) to take advantage of their tools, and IT shadowing programmes to gain access to computers.

And in any event, we can expect a strong rebound this year as the pandemic recedes. EU Commissioner Vestager has already stated that a wave of dawn raids is coming in 2022, and similar statements have been made by her colleague Andreas Mundt from the German Bundeskartellamt. International raids are also back on track, with competition authorities “hunting in packs” with their counterparts in other jurisdictions and we have seen a number of raids at European and UK level.

• Cartel detection

The pandemic has meant the effective adaptation by many agencies of improved digital capabilities. For example, data screening tools based on algorithms can be used in the fight against cartels; notably in relation to public procurement. A screen is a method to detect patterns and deviations in market prices through algorithms to reveal where coordination might be taking place.

While leniency programmes may be past their prime, authorities are not giving up on hearing from whistleblowers. Some are introducing electronic channels where anonymous complaints can be sent. And while leniency applications were limited to participants in the cartel, through these tools, any employee, customer, supplier or competitor can lodge a complaint. For instance, according to Commissioner Vestager, the EU’s tool “now handles about a hundred relevant messages each year – and the quality of leads it produces is getting better”.

• Agency coordination

In an increasingly globalised world, authorities know that infringements often cross borders, and even continents. So, they are joining forces. For example, earlier this week, the European Commission and UK CMA coordinated on dawn raids over the recycling of end-of-life vehicles, after announcing parallel probes into Google and Meta over their adtech practices last week.

Another example is the “Five Eyes” nations focused on reinforcing and improving existing cooperation and coordination on investigations. Competition authorities from the US, the UK, Australia, Canada and New Zealand have formed a working group to put companies on notice over suspected supply chain collusion. They plan to exchange information on cases and assist each other in individual competition investigations. Michael Grenfell, the CMA’s executive director of enforcement, made clear that “these are global issues that are best addressed together. With support and intelligence from partner agencies across the world, we can step in and take enforcement action if we find evidence of anti-competitive behaviour”.

Ever-increasing fines and budgets – a cause for sleepless nights?

It’s clear we can expect authorities to emerge stronger from their hibernation of recent years. And their fines are likely to have more of a bite too. Although the OECD report finds that the majority of total fines in the recent period were cartel fines (typically between 80% and 95%), changes to abuse of dominance fines drove the overall trend. These increased in all regions over the period 2015-2018, with an 132% annual growth rate, which was mostly due to large fines imposed in digital cases in Europe. In addition, the number of cartel cases in which individuals were imprisoned more than tripled from 2015 to 2018 before falling back again between 2018 and 2020.

We also saw authorities increase their resources considerably, with more staff and higher budgets. Authorities are validating this with fines in 2019 that were 10 times the size of those imposed in 2015. And bigger budgets coupled with an exit from pandemic hibernation can only mean one thing – the hunt for cartels is about to begin in earnest.

Tips to help you sleep easy

Some actions can help you rest more easily:

• review your compliance programme and ensure it’s fit for purpose;
• review your training calendar and make sure senior management is well-versed on antitrust risks and possible consequences;
• refresh your antitrust risk assessment and think about audits to test compliance;
• be dawn raid ready;
• consider establishing an internal whistleblower hotline as an early warning tool; and
• do internal investigations and consider the strategy for any settlements with agency with an eye to private enforcement.