How Anticorruption Enforcement Can Undermine Antitrust Amnesty Programs, and What To Do About It

One of the most important law enforcement techniques that has emerged in the last few decades to combat cartels (anticompetitive collusion between competitors) is the use of programs that promise automatic amnesty to the first member of a cartel to self-report the illegal enterprise. These amnesty programs enable law enforcement authorities to gather the evidence they need to build strong cases against other members of the scheme, and, perhaps more importantly, these amnesty programs destabilize cartels—and might even deter their formation—by taking advantage of the incentive that individual cartel members have to cheat on each other. Since the 1990s, after the success of the amnesty program pioneered by the Antitrust Division of the U.S. Department of Justice (DOJ), antitrust amnesty programs have been replicated in many jurisdictions, leading some to declare a “leniency revolution” in competition law.

But the existing amnesty programs have a weakness They usually only offer protection for violations of antitrust laws, leaving even the firm that self-reports the antitrust violations potentially liable for other unlawful conduct that the cartel members engaged in as part of their anticompetitive scheme. And many of these anticompetitive schemes turn out to involve corruption, especially in the public procurement context. Cartels often bribe the official in charge of the procurement process, because a corrupt official can monitor and punish defections from the cartel, facilitate the exclusion of non-aligned competitors, and ensure an equal distribution of cartel profits. A firm that hopes to take advantage of an antitrust amnesty program might have to report all of this to qualify for amnesty, as often the programs require, as a condition for amnesty, reporting on the involvement not only of other cartel members, but of any public officials who may have facilitated the collusive conduct. But the fact that a self-reporting cartel member is not guaranteed amnesty from prosecution for corruption or other associated wrongdoing (such as money laundering) complicates the operation of antitrust amnesty programs, because this lack of guaranteed amnesty weakens the incentive of cartel members to self-report in cases where the cartel has engaged in bribery. The problem is especially pronounced when the penalties for bribery are much more severe than those typically imposed in cartel cases.

This is less of a problem in jurisdictions where anticorruption and antitrust authorities are departments of a single agency, as with the US Department of Justice (DOJ). But in many other jurisdictions, such as the EU, Brazil, and Mexico, competition law enforcement—and administration of the antitrust amnesty programs—are handled by enforcement agencies that do not have authority to prosecute corruption cases. From a potential self-disclosing company’s perspective, this poses a challenge: Disclosing participation in a bribe-paying cartel to the competition authority may also trigger an enforcement action by the separate agency responsible for prosecuting corruption, meaning the company will have to negotiate with both agencies, with the anticorruption agency not bound by the antitrust amnesty program. Indeed, in many countries anticorruption agencies may not have the same authority as antitrust agencies to grant leniency to self-reporting companies. In Brazil, for instance, though an antitrust amnesty program has been in place since 2000, settling corruption cases only became possible in 2014. In Mexico, the antitrust amnesty program was created in 2006, but a program for self-reporting bribery cases only entered into force in 2016. In both countries, although there is an established process for settling corruption investigations, there is no immunity provision for self-reporting; a discount in the applicable fines is often the best a firm can hope for. And even when both the antitrust agency and the anticorruption agency have authority to settle and grant leniency, the mere fact that a company knows it will need to enter into two or more separate negotiations increases the uncertainty and costs associated with self-disclosure, undermining the effectiveness of the amnesty program.

How should this problem be addressed in those countries where merging authority over antitrust and anticorruption enforcement in a single agency is not feasible or desirable? There are several possibilities:

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AMLO Cannot Put a “Final Period” in Mexico’s History of Corruption Without Addressing the Past

The trial and conviction of the notorious drug lord “El Chapo” has shed new light on the rampant corruption that exists at even the highest levels of the Mexican government. To take just a couple of the most startling examples: During the trial, a witness testified that Mexico’s former president Enrique Peña Nieto accepted a $100 million bribe from El Chapo, while another cartel member testified that he paid at least $3 million dollars to the Public Security Secretary of former president Felipe Calderon and at least $6 million dollars to President Calderon’s head of police. In other countries these accusations would have shaken citizens to their very core. But in Mexico, long perceived as one of the world’s most corrupt countries, citizens have sadly grown accustomed to allegations of this nature, and the revelations from the El Chapo trial were met with little more than a shrug.

That doesn’t mean that Mexicans don’t care about corruption. Quite the opposite. Indeed, frustration at this flagrant culture of corruption was one of the key factors that helped Mexico’s new president, Andrés Manuel López Obrador (AMLO), to capture his constituents’ faith and votes. AMLO has promised to eradicate corruption through a “Fourth Transformation” of Mexico (the previous three were Mexico’s independence from Spain, the liberal reforms of the 1850s, and the 1910-1917 revolution). Yet despite these sweeping promises, AMLO has decided not to investigate the allegations against his predecessors that have emerged in the El Chapo trial. In fact, AMLO’s stance has been not to prosecute any officials for corruption that took place in the past, before he took office. (AMLO has wavered on this position—though only slightly—after receiving backlash during his campaign; he has since stated he would prosecute past corruption offenses only if the administration has no choice due to “internal pressure” from citizens.) AMLO has justified his opposition to investigations and prosecutions of past corruption crimes by using the language suggesting the need for a fresh start. He speaks of a need to put a “final period” on Mexico’s history of corruption, and to “start over” by not focusing the past.

But how can one eradicate corruption by granting numerous “Get Out of Jail Free” cards? AMLO’s support of a de facto amnesty for corrupt ex-Mexican officials’ casts doubt on the seriousness of his pledge to eradicate corruption. Rather than simply saying that it’s time to turn over a new leaf, AMLO should demand accountability for grand corruption, and he should start by ordering a full independent investigation into the veracity of the corruption allegations that came to light during the El Chapo trial. Continue reading

Impunity and Immunity: When (if Ever) Should We Sacrifice Accountability for Past Corruption Crimes?

I’ve been meaning to write a bit more about last month’s International Anti-Corruption Conference (other than my snarky reflections about anticorruption conferences generally). The conference theme was “Ending Impunity,” and indeed most of the panels and speeches emphasized, in one way or another, the importance of ending the culture of impunity and holding corrupt actors (criminally) accountable for their actions. I couldn’t agree more about the importance of ending the culture of impunity. Indeed, I suspect few people would dispute that objective; the controversies, such as they are, involve questions of means. And as a general matter, I’m also all for accountability. Who wouldn’t be? But here my commitment is more qualified, and I think the issue is a bit more complicated then some of the rhetoric sometimes implies. In fact, in the context of corruption offenses, there may be sometimes be good, or at least plausible, reasons for sacrificing accountability in order to advance some other interest.

I recognize that statement may be controversial, perhaps even heretical. Is it really ever OK to insist on less than full accountability for past corruption crimes? If so, when? The first panel I attended at the IACC, entitled “Breaking the Cycle of Impunity: Why Truth Telling and Accountability for Past Economic Crimes Matters,” brought these difficult questions to the fore. The four excellent panelists (Hennie Van Vuunen, Osama Diab, Gladwell Otieno and Transparency International Chair Jose Ugaz) all came out (unsurprisingly) against impunity and in favor of accountability. But as the subsequent discussion revealed, the impulse to hold the corrupt (fully) accountable sometimes conflicts with other legitimate interests. Although everyone agrees that those who commit corruption offenses should never have impunity, there are reasonable arguments for sometimes granting them (full or partial) immunity. Consider a few possible scenarios in which one might be tempted to exchange (full) accountability for something else: Continue reading