2012 Conference Review – Third Session
June 25, 2012 Leave a comment
(review by Ed Ball, CCP PhD Student)
The third session of the conference began shortly after afternoon coffee, chaired by the Centre’s Stephen Davies, the session focused on deterrence.
Christine Parker, of Monash University Australia began by presenting:
“The futility of getting tough on corporate crime – lessons from the ‘war on cartels’”.
The paper is joint work with amongst others Caron Beaton-Wells and Fiona Haines, with the original research, inspired by similar work of the Centre’s Andreas Stephan, conducted under the auspice of the Melbourne Cartel Project with the aim to seek and assess how the arguably ambiguous goals of the Australian Competition and Consumer Commission are each achieved in practice, and whether compliance, and as such specific deterrence, therewith is different as between large and small businesses.
Such research was conducted by supplying some 1300 members of the public with differing competition related scenarios in order that an understanding of the public’s impression of the competition rules might be understood. Results showed that the public opinion and what competition policy in Australia is actually seeking to achieve do not sit well with one another. One of the starker insights showing that despite a realisation of the wrongfulness of some competition violations, there is still a significant downturn in public support for gaol as an appropriate sanction for such violations.
Similar scenarios were also supplied to just shy of 600 business persons. From these it was seen that there was a much greater appreciation of the likelihood of sanctions for the various actions presented in the scenarios. This ranged from knowing that fines are available for such conduct, through to such actions being criminal. Nevertheless <25% of the business persons assessed knew that gaol is an available sanction for such conducts, yet in spite of this seeming shortfall in knowledge, there remained a significant variation in the appreciation of the legality of various competition related behaviours, and the corresponding sanctions available, as between the general population and business communities. Business persons were also more likely to be correct in their estimation as to sanctions available than the general population.
One of the scenarios, seeking to assess perceived levels of detection and enforcement, detailed a market sharing example. Some participants were told that the conduct detailed was criminal, while others were told it to be civilly actionable only. Levels of perceived detection and enforcement were higher if the participants were told that the conduct was criminal as opposed to not being so. Though even when told that the conduct was criminal there was still a low level of perceived detection and enforcement. This became all the more interesting when the general population and business community answers were compared; again a significant increase was seen within the business community was seen. It seems therefore that there are innate cognitive biases within the general population, as against absolute criminalisation, that are not present within the business sphere. Such biases seemingly form a barrier against effective criminal deterrence.
The second part of the paper as presented by Parker involved more personal interviews with individuals who had actively been involved in civil litigation within Australia. Such interviews included 25 participants in total, including 6 in-house lawyers of undertakings, with the remainder owners of businesses and other executive positions as appropriate. 2 participants were female (both in-house lawyers), with the remainder being male.
From these interviews the general controversy of competition enforcement in Australia can be seen. The 25 were split into what Parker termed ‘innocents’ and ‘players’, representing small community businesses and big business undertakings respectively.
The ‘innocents’ typically comprised of small businesses who, prior to their litigation, had had no prior relationship with competition law, were generally unaware and somewhat naïve of the severity of their actions and corresponding consequences. Often such businesses saw the various competition violations that they undertook as a normal management strategy for dealing with everyday business stresses; such a tone being noted as not one of the individuals concerned as being above the law, but the law in fact being above them. As a consequence of such a stance and naivety, when caught, such small companies were not able to defend themselves with any vigour, nor it seemed were they able to fully comprehend why they had been punished so ‘severely’. One such example where being where one individual prior to their hearing was expecting a fine of perhaps $500-$1,000AUS, when in fact they were fined $46,000AUS
A complete contrast to this was the ‘players’, who knowing the law and the intricacies of the ‘game’ going on around them were able to pre-empt various actions and consequently take appropriate actions to avoid the incurring of costs. Failing this, strategies to divert bad publicity away from the company were often developed so as to limit the reputational harm as much as possible. It was also noted that ‘players’ usually also had vast swathes of employee handbooks, in which often there would be found a competition compliance policy statement, which knowing the possible future ‘game’ to be played usually formed an advanced vanguard as against a case, enabling the directing of fault at individuals rather company itself. Consequences of such preparation and knowledge of the likely courses to be undertaken often meant that ‘players’ could make efforts against a case as well as in mitigation, allowing the game to run its course – the end aim of which, from the ‘players’ perspective was to incur the lowest costs possible.
In sum, Parker noted that due to the cultural resistance of ‘innocents’ and the instrumental avoidance of ‘players’ effective criminalisation within Australia will be a long, complex and ambiguous journey.
Stephen Davies took questions from the floor, with an overall observation being that education, particularly at the level of the ‘innocents’ may well solve the issues outlined, or at least go some way in aiding the resolution of such issues.
Following this Davis introduced Cento Veljanovski, of Case Associates, who presented:
“Deterrence recidivism and European Cartel Fines”
The focus of Veljanovski’s paper fell about how the ability to discern a level of certainty within the European Commission’s fining policy would go a fair way to aiding deterrence as against recidivists. Notably that there ought to be a fixed percentage increase in the amount fined for those who commit second or later violations of competition law – concurrent offences were noted as not necessarily bringing about the recidivist’s increase, despite other literature adducing as such.
A comparison of the current 2006 fining guidelines and the earlier 1998 guidelines was also undertaken as to illuminate as to how the Commission actually arrives at the level of fine it does in cases, to see if any additional deterrence effect can be adduced as to further deter recidivists.
It was noted that the general aim of all fines, as noted at  in the fining guidelines is to deter undertakings from breaching the law. Such guidelines containing provisions for both general and specific deterrence elements, as one might expect, given the need to seemingly further deter those who’ve already be found to have breached competition law and appropriately punished.
The discussion detailed the extent to which the guidelines, despite providing estimations, formula and guiding steps which are to be undertaken during total fine evaluation failed to provide, with sufficient certainty, any overt or sufficient deterrence for recidivists. Further encompassing discussion noted issues relating to how leniency seems to have increased over the intervening years, in combination with the absolute amount of fines having also increased quite significantly – the likely relation here was also noted. Despite the increased certainty in outlining the procedure within the guidelines, effective deterrence and certainty itself was not always achieved and at times was dubious due to the Commission frequently departing from its own guidelines.
From these and other calculations and comparisons made within the paper the picture painted in relation to fining levels and effective deterrence – particularly for recidivists – is seemingly incoherent at best. This however does not mean to say an absolute effective deterrence is unobtainable, even if it remains relatively incoherent, or even very far away for that matter, given other recent research in related areas.
Davies again opened the floor to questions, and following a number of observations and comments the third session, and first day, of the conference came to a close.
Delegates departed to St Andrew’s Hall in the centre of Norwich for the evening conference dinner and drinks – during the evening, delegates sung happy birthday to a member of the CCP’s staff, as Andreas Stephan celebrated his 21st birthday again, for an undisclosed consecutive time.