/ Is Chile’s leniency program under threat by the New Constitution?

6 June, 2022

The FNE, Chile’s antitrust prosecutor, thinks so.

One of the proposals contained in the draft may have a direct impact on Chile’s up to know very robust and successful leniency program.

 Felipe Cousiño

Chile is in the middle of a complete overhaul of its Constitution. A Constitutional Convention was elected in April of 2021 which operates separately from Chile’s Congress, and whose remit is to draft a new Constitution. The work of the Convention is almost completed, since it has already approved the permanent provisions and is currently working on the transitional articles and final proofread and numbering of the articles (which are now close to 500). The deadline to submit a definitive text is July 4th 2022. Thereafter, a referendum will take place on September 4 of this year for an approve or reject vote on this draft.

One of the proposals contained in the draft may have a direct impact on Chile’s up to know very robust and successful leniency program.

Under the latest reform to Chile’s antitrust statute (DL 211) the leniency program was strengthened by on the one hand adding criminal sanctions to bigger civil penalties and at the same time providing that the Chilean antitrust prosecutor (FNE) have the exclusive authority to initiate criminal proceedings. This means that that the Public Prosecutor’s office cannot prosecute cartel infringements until the FNE files a criminal complaint. Furthermore, the FNE may only file the criminal complaint once the competition court (TDLC) finds that a cartel has existed. The above enables leniency applicants to have certainty that if their application with the FNE is successful and has been approved by the TDLC, they will not be criminally prosecuted. This is a key element of the success of Chile’s leniency program.

This exclusive authority of the FNE is repealed under the proposed text.

Indeed, the FNE, in its annual speech made last week, pointed out that article 386, paragraph 3 of the draft Constitution provides that the “exclusive power of certain agencies of the administration to file criminal complaints shall not prevent the Public Prosecutor’s Office from investigating and exercising public criminal action, in the case of crimes that violate probity, public property or injure the collective legal good.”

The FNE went on to state that cartel activity/collusion, enshrined as a crime in article 62 of DL 211, could be understood as a crime that threatens a collective legal good, such as free competition as part of Chile’s economic public order.

The FNE continued its reasoning by pointing out that  while the new constitutional text does not modify the rules of DL 211 relating to the sequence of steps for criminal prosecution of the crime of collusion and the definitive granting of leniency, the entry into force of article 386 of the draft of the New Constitution could mean that, with respect to those applicants that have already been granted leniency or future leniency applicants,  criminal proceedings for collusion could be initiated, or even terminated, without regard to the proper procedural instance required under current law (i.e. disregarding that it is up to the FNE and subsequently to the TDLC to  approve a leniency application and determine that a cartel has existed).

The FNE concludes that, as is evident, this problem would not only make the leniency program, which is an essential tool for the detection and prosecution of cartels in Chile and throughout the world, unfeasible, but could render defenseless those who have already used or will use this mechanism in the legitimate expectation that they would be or will be exempt from criminal liability at the time that the criminal investigation is initiated. For this reason, the FNE has formally requested that the Committee on Transitional Provisions of the Constitutional Convention submit to the Plenary of the Convention a transitional provision relating to the third paragraph of article 386 of the draft of the New Constitution, so that the FNE continue to have the exclusive authority to grant leniency  benefits until DL 211 is adapted to the New Constitution, if the latter is approved.

The objective of the FNE proposed transitional provision is not to challenge or delay the entry into force of article 386 of the draft New Constitution, in that it grants authority to the Public Prosecutor’s Office in relation to the criminal prosecution of those crimes against the collective legal good, such as collusion, but only to safeguard the leniency program as a tool, by delivering the certainties that are indispensable while the legislator adapts DL 211 to the New Constitution, if approved.

For the sake of Chile’s anti-cartel public policy, which has been significantly strengthened by the leniency program, the FNE expects a favorable treatment to its proposal.

The FNE’s proposal is scheduled to be debated in a hearing of the Transitional Provisions Committee of the Convention.

This whole debate is taking place in the context of strong public sentiment against cartel prosecution in Chile given that while the TDLC has been effective in imposing severe civil penalties, the prosecution before the criminal courts has not been as effective. However, such shortcomings are more apparent than real given that cartels were only recriminalized in 2016, so the investigations regarding cartel activity that may have taken place after said year have only recently been able to conclude given the inherent complexity of such cases.