On March 13, 2020, the President of the Republic of Chile submitted to the Congress a bill to increase criminal sanctions to cartels, and to provide the Fiscalía Nacional Económica (FNE), the Chilean Competition Authority, with new techniques for their investigations. If this bill is approved, will it open a new stage to cartel enforcement in the country?
Background
On October 18 2019, a social unrest began in Chile. Millions of Chileans took to the streets to protests against economic inequalities and to demand social reforms. Amid the inequalities was the perception that the Chilean law lacked severity against white collar crimes. As a response to the protests, in December 2019 the Chilean President announced on national television an anti-abuse agenda, in order to strengthen the fight against all types of abuses and protect consumers. As part of this agenda, on March 13, 2020 the Chilean President submitted four bills to the Congress aiming at increased enforcement of the laws against white collar crimes in matters such as cartels, the misuse of privileged information and electoral crimes. In addition, the bills, if entered into law, will increase the protection of whistleblowers.
Key takeaways of the proposed amendment to the Chilean Competition Law
- New techniques for the investigation of cartels
The bill proposes to grant the FNE two new techniques exclusively to investigate cartels: (i) surveillance techniques, such as the power to order the photography or filming of people or places and to arrange the recording of live conversations; and (ii) to obtain banking records (such as deposits and transactions) of the companies or individuals under investigation. To use any of these tools, the FNE will require a warrant issued by the Court of Appeals of Santiago, and prior authorization of the Competition Tribunal.
- Criminal sanctions for opposing dawn raids
The bill incorporates a sanction of up to 3 years of imprisonment for the act of hiding, destroying or impeding the access to premises, objects or documents that are the subject of a dawn raid.
- Increase of criminal sanctions for certain type of cartels
The bill increases to 5 years the minimum imprisonment sanction for cartels that affect goods or services of first necessity, i.e. goods or services that are of high relevance to people’s daily life, or that are of massive use. The maximum imprisonment for this and any other cartel will remain 10 years.
- Regulation of whistleblowers
The bill incorporates the protection of individuals who request anonymity when filing a complaint before the FNE. If the FNE does not dismiss the complaint outright, the whistleblower’s name, surname, profession or trade, domicile, place of work, or any other data that may serve to identify the whistleblower, shall not be contained in the investigatory file.
As mentioned in the bill, this amendment is in line with several recommendations of the OECD concerning effective action against hard core cartels, such as protecting the anonymity of whistleblowers, providing for surveillance techniques and imposing sanctions for obstruction of the investigation. [1]
Comment
Since 2009, when the powers to perform dawn raids, wire tapings and the leniency program were incorporated into the Chilean Competition Law, cartel enforcement increased significantly. Those techniques allowed the FNE to gather hard evidence of the existence of cartel, which was absent in several of the most relevant prior cases. Since 2009, the number of companies sanctioned and the amount of fines imposed more than tripled compared to previous years. It seems unlikely that the bill, if approved, will have a similarly significant impact.
As opposed to dawn raids, surveillance techniques require a detailed knowledge of the operation of the cartel to be effective. In order to carry out the filming or recording of a live meeting, the authority does not only need to have convincing evidence of the existence of a cartel and the parties and individuals involved in it, but also evidence of the time and place of the anticompetitive meeting, Without such information, it remains difficult to meet the standard required to obtain the judicial warrant required by law. Usually, details about the operation of a cartel are obtained from a leniency applicant. The assistance of the applicant is crucial for the authority to determine where and what to search. However, the Chilean law requires the applicant to cease any participation in the cartel immediately after the submission of the application, and the bill does not provide for any exception for this requirement. This does not affect the effectiveness of a dawn raids, since such technique aims at recovering already existent evidence of the cartel. But an exception is indispensable for the effectiveness of a surveillance operation, that aims at capturing live evidence of the cartel, and therefore requires – at least for a short term – the continued participation of the leniency applicant in the anticompetitive conduct.
In addition, the bill only aims at the protection of whistleblowers, but does not provide incentives for individuals to report cartels like, for example, the rewards mechanisms existent in South Korea and the United Kingdom and recently incorporated in Peru. This is odd considering the fact that the parallel bill submitted to increase the enforcement of the laws against the misuse of privileged information does provide for a reward of up to USD 1 million for whistleblowers.
In addition, the increase of the minimum imprisonment sanction for cartel violations does not seem necessary, given the fact that these criminal sanctions for cartels were only introduced into Chilean law in 2017 and there have been no criminal cases so far.
Finally, there are more effective possible measures that could be incorporated into the Chilean law which would enhance the use of the current investigatory tools of the FNE and which would be in line with the OECD’s recommendations. In particular, there are certain key elements of a leniency program that are missing in Chilean law, such as the obligation of the applicant to provide continued co-operation to the authority in an investigation, and the protection of the applicant against the use of the information submitted with the application in the subsequent enforcement of follow-on compensation claims. Also absent from the Chilean law are provisions dealing with the access to electronic information. For example, provisions could be included allowing for the disclosure of information that is held by a third party provider or that is stored on a foreign server.
In
conclusion, although the recently submitted bill is in line with the OECD recommendations
concerning effective action against hard core cartels, it falls short of the
mark. The Chilean Competition regime is consolidated, but it is far from been
perfected, so an amendment aimed at increasing enforcement is always welcomed. However,
there are more pressing needs for improvement then the ones envisaged by the
recently submitted bill.
[1] https://legalinstruments.oecd.org/en/instruments/OECD-LEGAL-0452
