Canadian COMPETITION LAW

January 10, 2013

The American Antitrust Institute (AAI) has published an interesting new working paper on cartels in the energy industry entitled Collusive Agreements in the Energy Industry: Insights into U.S. Antitrust Enforcement.  Abstract:

“This working paper examines collusive agreements in the U.S. energy industry, with a focus on Section 1 energy cases brought by the U.S. government since the early 1990s.  It observes that public Section 1 enforcement in various segments of the domestic energy sector appears not to follow the pattern of enforcement against anticompetitive agreements more generally.  Anomalies are apparent in terms of the relative number of cases won, a preponderance of civil (versus criminal) enforcement actions, and liberal use of injunctions.  The paper proceeds to examine possible explanations for these observations, including the roles of regulation and judicially- created antitrust immunities in restraining a more vigorous approach to public enforcement.  It concludes with observations and policy recommendations.”

Some of the key conclusions in this paper include relatively few energy cases being enforced under Section 1 of the Sherman Act (compared to more aggressive enforcement in relation to mergers), price-fixing in the gasoline sector likely being subject to criminal prosecution (while other types of coordination, such as output restraints, tend to more likely face civil enforcement), U.S. enforcement agencies predominantly pursue enforcement in the energy sector civilly generally and through injunctions rather than monetary penalties and antitrust immunities have not played a strong role in enforcement.  These conclusions, if accurate, are in contrast to Canada in some key respects, including the fact that the Competition Bureau continues to pursue criminal enforcement in the downstream oil and gas sector and routinely seeks criminal fines and penalties, including against individuals.

Some of the recommendations made by the AAI include increasing energy sector antitrust enforcement beyond mergers, pursuing agreements that directly affect prices (e.g., bid-rigging) criminally, abandoning injunctions as a standalone remedy, recognizing that financial sanctions are more likely an effective deterrent and providing more guidance on the intersection between U.S. antitrust laws and energy regulation.

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