3 March, 2017

Compliance and Cartels

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I will be attending the Outlook Plus conference in São Paulo, Brazil next week. This is a conference organised by EDANA and INDA and is always very successful with the nonwovens and hygiene industry.

During the conference, I will have the privilege of presenting a paper on the topic of cartels and compliance.

presentationMy presentation, titled “Latin America Hygiene Markets and Competition Law” will use a few case studies of recently uncovered cartel activities in the absorbent hygiene products and tissue markets in South America.

In preparing this presentation, I read through reams of reports from competition authorities and they read like a bona-fide espionage novel!

Of course, I don’t pretend to be a lawyer, so I will be looking at the cases through the eyes of a businessman and how cartels have affected mostly well-meaning international companies.

I will talk about how, even a belated compliance program, can help companies – with the right intentions – uncover possible infringements of competition law and how they can exonerate themselves from prosecution.

Cartels are inherently unstable and those in the tissue and hygiene sector are no different. Game theory and the famous “prisoners’ dilemma” is a perfect illustration for this instability. In Latin America, all the conditions came together to create a fertile ground for the formation of cartels. What is, however, surprising is the fact they existed, in some cases, unchallenged for over a decade.

Most cartels are plainly illegal, especially when they are designed to manipulate prices.  Some, however, can be beneficial, if they exist to pool procurement efforts in a bid to reduce purchasing costs, or aim at developing innovation and technology for the ultimate benefit of consumers. Then there are those that are state-sponsored, such as OPEC against which very little if anything at all can be done, due to sovereignty principles.

I will discuss how competition authorities are putting more efforts into identifying cartels and how, in more mature economies, the fines being imposed have over the past few years grown exponentially, with fines of up to $1 billion becoming more common.

I hope to see you at Outlook Plus in Brazil!

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