As chief compliance officers realize the importance of criminal antitrust compliance, it is important to identify the real risk factors. All too often we get lost in the mumbo-jumbo (a technical term, I know) of compliance, tone-at-the-top, communication, training, and other obvious terms.

While I often have suggestions on how to enhance a company’s risk assessment process, antitrust risks require precision and careful cost-benefit analysis. The criminal antitrust risks center around interactions with competitors — communications, contacts and meetings – along with certain market conditions that increase the risk of anti-competitive cartel activity.

Antitrust cartels have a long history and can be very lucrative to the participants. The United States is known in the global economy for criminal enforcement against antitrust cartels. Years ago, many countries did not prohibit cartel activity; much less send anyone to jail for engaging in a cartel. Global companies fear US antitrust prosecutions because of criminal penalties but also are aware that the US is often the most lucrative market to sells their products and services. Cartels or collusion among competitors can involve a number of areas, including price, customers, geographies, entry or exit in product or service markets, bid-rigging and other market arrangements.

When reviewing company activities, a CCO has to conduct (or obtain information) about current competitive conditions. The CCO has to examine individual markets and ask several questions:

• Who are my competitors?
• Where are they located?
• What are the respective market shares of the competitors?
• Are there any significant potential entrants to the market?
• Are we or anyone else involved in a joint venture with our competitors?

To the extent a relevant market is concentrated, meaning that there are few competitors who compete against each other, the risk of cartel activity increases.

A second risk factor is the homogeneity of a specific product, meaning can a competitor’s product be easily substituted for my product without any significant functional difference. For example, the current global investigation involving electronic capacitors focuses on products are that fairly simple to make and easily substitutable among the competitors offerings. In this case, the risk of cartel activity, especially focused on price-fixing, is heightened.

The third risk factor focuses on industry meetings, trade associations and interactions. At first glance, CCO might brush this aside because of the variety of ways we communicate with each other – emails, texts, chat rooms, social media, and other offerings.  A cartel, however, often requires discussions among the participants that require face-to-face confirmations. Of course, I have witnessed cartel activity that is largely conducted through text messages and telephone calls, but there usually is come context where meetings can occur.   CCOs have to be sensitive to the positive role that industry and trade associations can serve, while recognizing the risk of cartel activity can increase when such meetings occur.

When assessing risk, however, it is easy to focus on sales staff. They often interact with competitors’ sales staff and aware of price and product information. A singular or even concentrated focus on sales staff is not a good idea. Of course, they can be conduits and even facilitators of a scheme but in my experience, higher-ups are often aware or supportive, or even direct cartel activity. Sometimes the sales staff is surprised to find out that the company has been involved in a cartel. My point is to be aware that the risk of criminal cartel activity is often not limited to sales or marketing staff.

Also, in my experience, a joint venture between competitors is often a significant risk factor to be assessed. A joint venture between competitors gives legitimacy to meetings among personnel who are otherwise competitive foes, and can provide a perfect opportunity to collude.   If your company is engaged in joint ventures with competitors in a concentrated market, you have to devote time and attention to this area.

These are just some of the significant risk factors surrounding antitrust cartel risks. Once you understand your competitive profile, antitrust compliance controls have to be designed in a manner that is tailored to these risks.

While every antitrust compliance program will cite the existence of a compliance policy, training and communications as the elements of a required program, the true test of an antitrust compliance program is in monitoring and auditing the program. For too long, Chief Legal Officers and CCOs have been administering formulaic antitrust compliance programs that barely address policies, training and communications while significant risks continue to be ignored. A robust monitoring and auditing program is the most effective tool for mitigating criminal antitrust risks.

A CCO, with the collaboration of the CLO, needs to implement creative monitoring and auditing strategies using well-established practices focused on high-risk markets and/or activities. Some examples include:

• Audits of files and emails of key personnel to determine whether they have been in contact with competitors and/or possess competitively-sensitive information;
• Monitoring of competitive conditions and significant bids or tenders in concentrated markets with follow-up audits of potential communications and interactions among key personnel;
• Audit of activities and communications among staff attending industry or trade association meetings; and
• Audit of joint venture activities and communications among participants to identify suspicious communications.

These are only a few ideas. CCOs would be surprised to learn that company officials and staff often use email communications to engage in questionable behavior, sometimes even extending into basic prohibited cartel activity. An email audit, or even a desk calendar audit, can provide some significant insights. Sampling of such sources is a great way to reduce the resources needed to conduct such audits.