Better Results and Fairness Through Transparency, Confidentiality, and

Procedural Fairness

Russell W. DamtoftAssociate Director

Office of International AffairsUnited States Federal Trade Commission

September 10, 2015

The views expressed herein are those of the speaker and do not necessarily represent the views of the Federal Trade Commission or any individual Commissioner

Why We Care

• Ensuring procedural fairness results in:– Better outcomes;

• More informed decisions• Less likelihood of chilling procompetitive conduct

– Better cooperation with parties;– Better credibility for competition agency;– Fairness to all

• Expression of procedural fairness differs according to legal system, but certain elements are fundamental

International Consensus

• International Competition Network– Members are most of the world’s competition

authorities, including AMCU– Developed consensus recommended practices

on procedural fairness and transparency.

• OECD Recommendation on Merger Review

Five Types of Transparency

• Standards and Procedures

• Investigative Stage– Engagement and Transparency– Different considerations when conduct is covert

(e.g., cartel) and overt (e.g., non-cartel agreements, abuse of dominance, mergers)

• Internal Decision-Making

• Adjudication

• Judicial Review

Standards and Procedures

Transparent Procedures and Standards

• Legislation• Rules and Regulations• Agency procedures and policies

– Guidelines

– Explanation of rationale for particular cases

– Speeches and publications

• If agency standards are transparent, firms can better conform their conduct to them

ICN Recommended Practice: Enforcement system transparency should include the substantive legal standards …, any agency guidelines for analysis, the processes and investigative tools …, the framework for judicial review, and the sanctions and remedies available …. -- Guidance on Investigative Process 4.1

Making it Transparent

Investigative Stage

Investigative Stage: Key Elements

• Engagement with Parties

• Protection of Confidential Information

• Timing of Investigations

• The Myth of Secrecy

Transparency and Engagement

• Regular Engagement with Parties During Investigation– Sharing agency concerns about conduct

– Continuous dialogue – not just at set times

– Parties may submit oral and written points

– Discussion can help focus investigations• Helps identify real issues and eliminate non-issues

• Allows agency to sharpen and test its theory of harm

• Helps reduce scope of document requests

• Note: During covert stage of a cartel investigation, different considerations apply

ICN Guidance

During an investigation, agencies should inform parties of the basic facts and nature of evidence gathered, as well as the agency’s theories of competitive harm. -- Guidance on Investigative Process 5.2

To the extent that it does not undermine the effectiveness of an investigation, agencies should notify parties as soon as feasible that an investigation has been opened, and identify its legal basis, the conduct under investigation, and where possible, the expected timing of the investigation. -- Guidance on Investigative Process 5.2

At key points in the investigation, agencies should provide the parties with updates of the investigation’s scope, status, and any significant developments, such as changes to the competition concerns notified to the parties. -- Guidance on Investigative Process 5.3

Transparency and Engagement

• Engagement can lead to settlements by consent– Saves resources– Remedies are more likely to be effective when

informed by understanding of business considerations

• Third parties have the right to present concerns– But do not necessarily have rights of parties

Transparency and Engagement

• ICN and OECD have addressed benefits of transparency and engagement:

Member countries should ensure that the rules, policies, practices and procedures involved in the merger review process are transparent and publicly available, including by publishing reasoned explanations for decisions to challenge, block or formally condition the clearance of a merger.

-- Recommendation of the Council on Merger Review I.A.2

Competition agencies should provide opportunities for meaningful engagement during an investigation, including the opportunity for parties under investigation to present evidence and arguments/defenses.-- Guidance on Investigative Process Section 6

Benefits of Regular Engagement

• Providing adequate notice of charges is fundamental to justice in all systems

• Regular engagement with parties prevents surprises for agency– You know what the defense looks like

in advance

– If parties know what the issues are, they know how to address your concerns, focus document production, propose remedies, and mount a defense.

Protecting Confidential Information

• Competition agencies must address both:– Protection of business confidential information– Respect for applicable legal privileges

– And

– Providing firms with the information they need to be able to respond to concerns

• Procedures may include protective orders, redacting sensitive information

ICN Guidance

Any legal framework for competition law enforcement should include protections for confidential information submitted during investigations.-- Guidance on Investigative Process Section 8

Confidentiality rules and determinations of confidentiality during an investigation should take into account the commercial interests of submitters, the procedural rights of parties under investigation, and the overall public interest in the efficiency and transparency of enforcement efforts. -- Guidance on Investigative Process 8.1

Timing

• “Justice delayed is justice denied.”• Some systems have statutory

deadlines• In the absence of deadlines, others

impose them by policy

In the absence of deadlines, procedures should ensure that merger review occurs without delay.-- Recommended Practice on Merger Notifications IV.C

Internal Decision-Making

Internal Process to Evaluate Cases• Process to evaluate cases at important stages

– Opening

– “Phase 2”

– Enforcement recommendation

• Key questions to evaluate– Adequacy of evidence

– Sound legal and economic theories

– Consistency with agency priorities

• Concerns to address– Inertia: an object in motion tends to remain in motion

– Selective presentation of information

– Policy goals of agency leaders

– Coordination with regional offices

Form of Process Can Vary

• Evaluation committee• “Devil’s advocate” panels• Independent analysis by economists and lawyers• Separate management recommendations from staff• “White Papers” from parties

Adjudication

Adjudication: Key Elements

• Separation of investigation and adjudication

• Notice of concerns and opportunity to respond

• Presentation of evidence

• Representation by counsel

Separation of Investigation and Adjudication

• When adjudication is internal, careful attention must be paid to separation of investigation and adjudication

• Critical to avoid perception that roles of investigator, judge, jury, and executioner are combined.

Notice and Opportunity to Respond

• Adequate notice of charges

• Access to evidence supporting charges

• Opportunity to provide evidence

ICN Recommended Practice: After formal allegations of competition violations and presentation of legal arguments are made, parties should be provided with access to the evidence relied upon as the basis for the agency’s allegations and an effective opportunity to respond.-- Guidance of Investigative Process 5.4.

Explaining the Rationale

• Transparency is benefitted by policies that:– Publish the decision– Explain the rationale for the decision– Explain, when appropriate, decisions not to

bring a case

• Publication on website, through media, and explained in speeches and other outreach efforts

Judicial Review

Judicial Review

• In cases where adjudication is conducted in the same agency as investigation, a neutral and meaningful judicial review is essential to procedural fairness.

• Judicial review should encompass both substantive and procedural aspects of the case.

ICN Recommended Practice: Merger review systems should provide an opportunity for timely review by a separate adjudicative body.-- Recommended Practice on Merger Notifications VII.B.

Concluding Points

• Attention to procedural fairness benefits agencies, parties, and markets

• Continuous substantive engagement means we are more likely to get it right

• Doubts about procedural fairness cast doubts on substantive outcome

• A process seen as fair bolsters agency credibility