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ICN Cartel Workshop2013 South Africa

Plenary I: Alternative Means of Cartel Detection (AGENCY ONLY)

Stephen BlakeSenior Director - Cartels and Criminal

EnforcementUK Office of Fair Trading

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Introduction

●Investigating cartels – challenges:

- Limited value of traditional sources of information• Complainants• Economic and market data analysis

- Need for ‘inside’ information

●Limitations of leniency

- Dependent on cartelists’ perception of the risk of detection absent leniency

- Tend to catch ‘late stage’ or failing cartels and to miss cartels involving smaller businesses

- Jury hostility to testimony of immunised offenders

●Other sources of intelligence

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Building an in-house intelligence function

●Developing ability to make use of the full range of investigative tools

- Including covert surveillance and other intelligence gathering powers

●Key steps

- Hiring staff with an intelligence background and experience

• Including appointing the OFT’s first Director of Investigations and Criminal Enforcement

- Training existing staff

- Developing partnerships with the police and other criminal enforcement agencies

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●Cartels Hotline

- Usually the first point of contact between members of the public / company employees and OFT

●Informant rewards

- Up to £100,000 for information about cartel activity

- Amount will depend on:• value of the information• the amount of harm to the economy and consumers

which the information has helped us to stop and/or has helped disclose

• the effort invested by the informant, including the level of risk taken

Sources of intelligence

Sources of intelligence (2)

●Other sources of intelligence

- On-line open source information services, including Companies House, FAME, market reports, trade press and newspaper archives

- Market studies or merger inquiries

- Intelligence from other UK enforcement agencies: Police, the Serious Fraud Office, the National Crime Agency, Trading Standards Services (including shared use of the MEMEX intelligence tool), the Financial Conduct Authority and the sectoral regulators (OFGEM, OFWAT, CAA, OFCOM, ORR, Monitor)

- Information sharing with EU and other overseas competition authorities (subject to restrictions on disclosure and use)

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Developing intelligence (1)

●Under the Regulation of Investigatory Powers Act 2000 (RIPA) the OFT can:

- undertake covert surveillance

- acquire communications data from communications service providers

- task covert human intelligence sources (CHIS) to establish or maintain a relationship to obtain information covertly

●RIPA provides a legal basis for the interference with the rights of individuals to respect for their private and family life, home and correspondence

- Protected under the European Convention on Human Rights, Article 8 and Article 12 of the Universal Declaration of Human Rights

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Developing intelligence (2): definitionsCovert surveillance (may be ‘directed’ or ‘intrusive’):

‘any surveillance which is carried out in a manner calculated to ensure that the persons subject to the surveillance are unaware that it is or may be taking place’

Directed surveillance is surveillance which is covert, but not ‘intrusive’, and undertaken:

- for the purpose of a specific investigation or specific operation

- in such a manner as is likely to result in the obtaining of private information about a person, and

- otherwise than by way of an immediate response to events or circumstances the nature of which is such that it would not be reasonably practicable for an authorisation… to be sought for the carrying out of the surveillance

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Developing intelligence (3): definitionsIntrusive surveillance is covert surveillance which:

- is carried out in relation to anything taking place on any residential premises or in any private vehicle, and

- involves the presence of an individual on the premises or in the vehicle or is carried out by means of a surveillance device

Installing a surveillance device will also usually involve property interference, requiring authorisation

Communications data is information relating to the use of a telecommunications system or postal service

- Includes subscriber details and details of telephone calls made

- Does not include information relating to the content of a communication

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Developing intelligence (4): definitions

A CHIS is a person who establishes or maintains a personal or other relationship for a covert purpose and uses it to:

- obtain information

- provide access to information, and / or

- covertly disclose information obtained

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Developing intelligence (5): use of powers

●RIPA powers only used for the purpose of cartel investigations (criminal or civil)

●Use of directed surveillance and CHIS must be:

- necessary for the purpose of preventing and detecting crime, or

- in the interests of the economic well-being of the United Kingdom, and

- proportionate to what it seeks to achieve

●Acquisition of communications data, intrusive surveillance and property interference can only be used in criminal cases

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Developing intelligence (6): use of powers

●Key considerations - necessity and proportionality

- could the information reasonably be obtained by less intrusive means?

- ‘collateral’ intrusion

●CHIS – welfare and security

- Duty of care

- Confidentiality - normally used for intelligence, not evidence

- Handling of expenses and rewards

●Avoiding ‘unauthorised’ activity

- CHIS – importance of mutual trust

- Authorisation will not extend to the commission of offences

Developing intelligence (7): oversight●Use of the OFT’s investigation powers under

RIPA is closely regulated

- Regular inspections by the Office of Surveillance Commissioners (and, as regards communications data, the Interception of Communications Commissioner’s Office)

●Higher level powers (intrusive surveillance and property interference) require authorisation by the OFT Chairman and prior approval of the Surveillance Commissioner

- Other powers may be authorised by an OFT director responsible for cartels and criminal enforcement

●Use of RIPA powers also subject to Codes of Practice

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Intelligence: analysis and dissemination

●Creation of ‘problem profiles’ summarising intelligence received

- ‘Sanitised’ as necessary to protect confidential sources

●Drives strategic and tactical tasking within the intelligence and investigation teams

- May be shared with other agencies: e.g. if the intelligence reveals other criminality

●Assessment of the quality and reliability of the intelligence obtained

●Decision whether to open a formal investigation or to undertake further intelligence work

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Early results (1)

●Still early days

●Reduced reliance on leniency

- Almost half of all new OFT cartel investigations opened in the last three years have been intelligence-led

●OFT increasingly thinking and behaving like a mainstream criminal enforcement agency

- Co-ordination and joint working with the Police and other enforcement agencies

- Also undertaking bigger operations: e.g. inspections at the end of 2012 involved deployment of 70 investigators across five sites throughout the UK, the arrest of four individuals and coordination with six police forces

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Early results (2)●Leniency

- Remains the main tool for detecting cartels – critical that leniency remains attractive to potential applicants

- Track record of successful intelligence-led enforcement should also increase incentives to apply for leniency

●Even in intelligence-led investigations, leniency can still be a useful source of evidence/ corroboration

●Also, in leniency cases intelligence techniques may be used to develop a case before it goes overt

●Economic and market data analysis

- Still a valuable source of additional information – including to inform prioritisation decisions

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The future

●This time next year the UK’s Office of Fair Trading will have been replaced by a new Competition and Markets Authority (CMA), bringing the OFT and UK Competition Commission together

●Enforcement, including cartel enforcement, will remain a key priority for the new authority

●Reforms to cartel offence should mean that a higher proportion of criminal investigations result in prosecution

●Additional funding to support cartel enforcement has been announced from 2015

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Any questions?

?

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ICN Cartel Workshop2013 South Africa

Plenary I: Alternative Means of Cartel Detection (AGENCY ONLY)

Stephen BlakeSenior Director - Cartels and Criminal

EnforcementUK Office of Fair Trading