17 November 2017

PhD: How to address cross-border cartels in Latin America


On 13 October 2017 Pierre Martin Horna Chicchon defended summa cum laude his PhD thesis in International Studies, entitled “Cross Border Cartels in Latin America: A Transnational Competition Assessment”, at the Graduate Institute. Professor Damien Neven presided the committee, which included Professor Joost Pauwelyn, Thesis Director, and Professor Ariel Ezrachi, from the Faculty of Law at the University of Oxford. Mr Horna has been a legal affairs officer at the Competition Law and Consumer Policy Branch of the United Nations Conference on Trade and Development (UNCTAD) for almost fourteen years. His thesis, to be published in 2018, aims to provide younger and smaller competition authorities with novel solutions for addressing certain types of cross-border cartels that impact their emerging economies.

How did you come to study cross-border cartels in Latin America?

More than sixteen years ago, in 2001, when the first liquid oxygen cartel case was prosecuted by Panama, I was standing before another jury to get my law degree back in Peru. Later, six other Latin American countries launched domestic investigations of the same cartel conduct and became the reason why I embarked on this academic adventure in 2009.

Indeed, looking back to my preliminary thesis dissertation defence, I had the vision that a regional competition regime for Latin America was the way to go in addressing cross-border cartels and avoid the unfortunate experience of the seven liquid oxygen cartel cases that sprung over a decade.

However, since 2013 Latin America saw a tremendous progress in terms of boosting a respectable anti-cartel enforcement record that enabled them – notably Brazil and Mexico – to successfully address cross-border cartels. It is for this reason that I decided to pursue a more ambitious project. A project that would go beyond regional cross-border cartels to tackle more international and complex ones.

Can you describe your thesis?

The thesis puts forward a useful framework for the majority of Latin American younger and smaller authorities in dealing with complex international cartel cases. It is structured in three parts and eleven chapters. Part one outlines the manuscript’s conceptual framework by classifying cross-border cartels into five types/categories: multinational, transnational, regional, export and import cross-border cartels. Part two examines the challenges that competition authorities in emerging markets face with each type of cross-border cartels. Part three critically assesses the previous solutions for deterring cross-border cartels and proposes novel solutions for two types of cross-border cartels that are more relevant to competition authorities in emerging markets: transnational and regional cross-border cartels. Indeed, the manuscript explains why past solutions to the problems in cooperation have failed and proposes novel ideas on how to improve cooperation and coordination in certain types of cross-border cartel investigations (notably for transnational and regional cross-border cartels).

The novel proposals are based on consultations with key enforcers, observations and expertise gained from my work in the United Nations for almost fifteen years. as well as recent interviews carried out with leading enforcers from newer, smaller, older and larger jurisdictions across the world. Indeed, I had the privilege to receive first-hand comments from enforcers coming from jurisdictions worldwide, in particular those located in Latin America. I can only say emerging jurisdictions are more and more conscious of the problem of cross-border cartels.

Can you tell us more about the thesis’s novel proposals and their policy relevance?

Interviews were carried out at the latest International Competition Network (ICN) Annual Conference in May 2017, whereby a sample of enforcers worldwide were asked about the thesis’ proposals on (1) trust, (2) sharable information and (3) the platform through which the information would be exchanged.

On the issue of trust development between mature or large and young or small authorities, several interviewees from mature authorities agreed that trust is an essential and unavoidable issue that needs to be secured in order to facilitate any type of cooperation that could happen between any authorities. As such, measures to develop the first stage of trust (calculus-based trust or CBT) is to suggest activities that would close the gap between these authorities, such as technical assistance and capacity building in selected beneficiary jurisdictions. The role of technical assistance and capacity building would be to facilitate interaction between officials and provide the opportunity for the mature or large authority to slowly appreciate the domestic enforcement record, the seriousness of the authority and the recognition of the local constituencies in terms of being independent and accountable vis-à-vis the central government. One opinion was to incorporate third parties to provide the credentials of trustee between competition authorities that have not had any type of institutional interaction before.

On the issue of incorporating a new concept of “sharable” information, key mature authorities say that the benchmark of what constitutes sharable information should be provided on the basis of trust if they are to share intelligence information during the pre-investigatory phase and through informal cooperation mechanisms. Sharable information should be exchanged at the investigatory or post-investigatory phase, preferably when waivers are provided by the leniency applicants. In the absence of these waivers, conditional information gateways could be the alternative only if enough institutional trust is in place, that is to say, if mature or large competition authorities had already achieved a workable CBT as discussed above. It would be very rare to share information without waivers, even when the information is declared non-confidential.

On the issue of the platform proposed, the maximisation of the available instruments provided by the ICN and the UN can be complementary provided that they do not increase the costs of cooperation. International cooperation has become expensive given the complexity of the international competition arena. Hence, to maximise the efforts made by competition authorities, there should be a move of direction from bilateral to multilateral platforms such as the adoption of the multilateral memorandum of understanding at the International Organization of Securities Commissions (IOSCO), or the adoption of an European Competition Network (ECN) modified structure. Others have proposed the adoption of a convention on cartels. In any of these proposals, there is a need to take into account the domestic dynamics over which each jurisdiction enforces its anti-cartel laws. As María Luisa Tierno Centella from the EU Commission said in 2016, “there is no single ideal system which fits for all [as] anti-cartel enforcement regimes are incorporated in a certain culture and legal order”.

In sum, cooperation in transnational cartel investigations can be improved if the three-building-block proposal is triggered in a sequential manner so as to reduce the increasing costs of cooperation as well as the duplication of efforts due to parallel investigations of the same cartel practice in selected transnational jurisdictions. This solution could be an alternative to the “spaghetti bowl” of ineffective bilateral cooperation agreements.

How will you remember your doctoral experience?

The challenge was of course to be concise and clear in order to better transmit the message to the readers. Leonardo da Vinci once said, “Simplicity is the ultimate sophistication.”

What are you doing now?

As said earlier, emerging jurisdictions are more and more conscious of the problem of cross-border cartels. That is the basis for more research on this topic and from my work experience at the UN, I will continue to assist these countries and provide the best of my knowledge and expertise in the years to come. In particular, going back to my work at the UN in Geneva would mean to continue assisting developing countries and countries in transition. In this regard, UNCTAD has launched in 2017 a discussion group on international cooperation which I have the privilege and honour to conduct.

I am excited to continue this work and see concrete results at the policymaking level for the benefit of all, in particular young and small competition agencies not only in Latin America but all over the world.

Full citation of the PhD thesis: Horna Chicchon, Pierre Martin. “Cross Border Cartels in Latin America: A Transnational Competition Assessment”. PhD thesis, Graduate Institute of International and Development Studies, 2017.