Competition agency plays spymaster

Like a novel on industrial espionage by John Grisham, the National Competition Commission (CNC), Spain's anti-trust watchdog, wants to step up its pursuit of cartels by using moles to infiltrate groups conniving to divvy up a market among its participants.

The supervisor is beefing up its clemency program by specifically asking companies that blow the whistle on cartels they form part of to remain within the group in order to gather information on price-fixing and market quotas to help its probes. Those agreeing to collaborate in this way may be exempt from any fines imposed by the CNC in the case of a company being the first to alert the watchdog to illegal practices, or a reduced fine if they provide information that helps unravel cartels.

Under current regulations, companies found guilty of participating in illegal cartels may face fines of up to 10 percent of their revenues and, in the case of executives taking part, up to 60,000 euros.

The development conjures up Hollywood-style images of top managers recording secret conversations and photocopying documents in the early hours to hand over to the regulator - along the lines of a video produced by the Dutch anti-trust authorities that the CNC has dubbed into Spanish, showing a group of powerful businessmen in a luxury villa agreeing to inflate the price of their products and divide up the market among themselves. In the end, one of those in the cartel has a pang of conscience, spills the beans to the supervisor and benefits from the clemency on offer.

One case involved companies that had split the market for election envelopes

The Spanish Defense of Competition Law, which has been in force since July 2007, also allows for those who reveal to the CNC the existence of a cartel in which they form part to be granted a pardon. In order to encourage more informants to come forward, the CNC has asked the public for feedback on a program it has drawn up on the clemency option.

One of the points of the program, which will have no legal status, consists of the CNC asking companies that blow the lid on a cartel to remain infiltrated in the group.

"To allow the ongoing investigation of a cartel and not alert the rest of its participants, the investigation department may require the clemency applicant not to say he is ending his participation in the cartel and to authorize him to maintain the contacts or actions necessary to maintain the appearance of his continued participation for as long as it is necessary for the investigation management to prepare the appropriate measures," the program says.

The CNC guarantees that such espionage will not be deemed to constitute an infraction, as well as vouching for the anonymity of all informants. This has already been the arrangement practiced by the CNC in certain cases, but the watchdog believes this needs to be underlined to provide more guarantees.

Since it was set up in 2007, the CNC has imposed fines of 399 million euros in 16 probes initiated under the clemency arrangement. Of the total, it reduced the fines imposed on those who collaborated in the probe by 90.5 million euros. The United States goes further by giving the whistleblower part of the sums taken in by the authorities in fines.

Earlier this year the CNC imposed fines worth 44 million euros on 16 companies that had formed a cartel to divide up the market for election envelopes. The cartel had been operative during every election held since the restoration of democracy. One of the cartel members escaped a hefty fine by providing proof that helped dismantle the syndicate, while another two secured a reduction in their fines in exchange for collaborating with the CNC. In total, the clemency option saw a total haircut on the combined fine of 27 million euros.

Another well-documented case of whistleblowing occurred in 2011 and led to the break-up of a cartel for products for professional hairdressers that included well-known companies such as L'Óréal, Wella and the Colomer Group. Seven companies received a combined fine of 60.9 million euros. However, the CNC condoned a fine of 9.89 million euros imposed on Henkel for acknowledging the existence of the syndicate and identifying its participants.

The new protocol governing the clemency arrangement also allows for parent companies to be granted a pardon if they provide information on the illicit activities of their subsidiaries.