Recognizing compliance and ethics heroes and pioneers

In the compliance and ethics field we have a number of people who have become high profile and well recognized.  The recognition has been substantial for these leaders.  But as in any area there are also the innovators who go unrecognized. In this piece I want to recognize a pioneer in compliance that very few, outside of the economists working in antitrust compliance, know.

I first had contact with Dr. Rosa Abrantes Metz (Romy) when I read a piece she and another colleague wrote about “screening” – what they described as a sophisticated form of data analysis used to detect cartels. I found this fascinating and contacted her to see if this could be harnessed for antitrust compliance programs. Her interest was immediately engaged, and we agreed to write a piece together on this aspect of screening. 

I then learned more about her background, and we have kept contact over the years on this important topic. The relatively recent shift by DOJ to emphasize data analytics bears out the foresightedness of her work.  

Early on, Romy developed interest in statistics and econometrics, finance and monetary economics.  She received her PhD from the University of Chicago in 2002, and then started work at the FTC, where she was hired for her technical skills.  The FTC had just then launched monitoring of gasoline prices using time series data.

Econometrics was one of her main areas of expertise, so this was a natural fit for her. The FTC was using statistics to detect unusual patterns in the marketplace.  The FTC then brought in a new chief economist, Vanderbilt professor Luke Froeb. He’d been at DOJ, and worked on various collusion cases. He became her mentor in her time at the FTC. 

Romy wrote a working paper with Luke and two other co-authors about the use of screens in 2004, that was published in 2006. This was on the analysis of data relating to  a cartel on perch fish that had been prosecuted by the DOJ.  They were able to base this on data Luke had brought from the DOJ. They studied the patterns on collusion in this market for perch, creating a chart that demonstrated  very clear patterns.  They  then applied these to look for collusion in the gasoline market in Louisville, KY.  They decided to call these tools to flag potential collusion, screens.

Johns Hopkins Professor Joe Harrington, an outstanding expert on the topic of collusion, picked this up. He provided a platform for gaining global attention for this remarkable tool. His global presentations  helped draw additional attention to the topic and to the prior perch paper as well. As the chief economist at the FTC, Luke Froeb also talked about this work in his travels.

After the FTC, Romy engaged in consulting. She was contacted by the Brazilian competition authority, CADE, who wanted to  try using screens to unearth cartels. In their test of this methodology they were able to narrow their nationwide review down to  10 markets from a base of hundreds.  They conducted dawn raids and uncovered direct evidence of collusion in 6 out of the 10 markets.  This was a remarkable result, reached without the benefit of an inside informant.   

The Mexican competition authority contacted  Professor Pat Bajari who then contacted Romy.  The Mexican authority similarly launched into this, resulting in another huge success for screens in detecting cartels. 

While the first application of screens was to detect cartels, Romy has also found that the same methodology can address unilateral, or monopolistic, conduct. 

In the mid 2000-2007 period there was considerable focus on NYMEX and COMEX for potential abuse in the metals markets. Romy  learned how these benchmark systems worked, and quickly became worried about the integrity of these systems. Ever the economic detective, she then started focusing on Libor rigging as well. 

While the effectiveness of screening was by now established, as Romy talked about screens around the world, she still found many skeptics. As many of us have experienced, there is something about new ideas that scares many.  From this resistance she knew that she had to uncover something noteworthy with screens in order to show their power.

In 2008 she gave her first talk about LIBOR – the London Interbank Overnight Rate for lending.  She did a paper on LIBOR one month before Lehman failed, and everyone was only focused at that time on the financial crisis. But sometime later she started getting calls about LIBOR from investigators

Only in March 2011 was it publicly learned that UBS was being investigated on LIBOR  (UBS disclosed this then in an SEC filing). The entire LIBOR debacle started unraveling in June 2012, when Barclay’s entered into the first settlement with authorities. That was really when the whole scheme started to become public and a major scandal emerged. 

In talking with Romy you quickly discover her enthusiasm for this work. She loves mysteries and you can hear this in her voice as she talks about her data detective work!  Discovering the collusion in financial benchmarks was exciting to her.  As an expert and consultant she gets hired for quite a bit of that type of work. 

In the US antitrust community the FTC was more open to considering these approaches, but cartel conduct was less of a focus because they do not handle the criminal cartel cases. They did, however,  have responsibility to monitor gasoline prices. 

The DOJ for some time tended to resist the concept, given the tremendous success of their leniency program that rewarded the first cartel member to turn in its co-conspirators. There may have even been some concern that  screening would undercut the highly productive leniency approach.

In 2013 she gave a presentation on screens at the OECD Competition Committee’s meeting.  DOJ’s submission about screens was not supportive of the approach. But Romy had answers to all the counter arguments.

The success with LIBOR and the financial benchmarks changed this at DOJ.   In 2015-16 they invited her to speak at DOJ about the use of screens.  Then Luke Froeb became the Chief Economist at the DOJ in 2017-18.  Sometime after that, the Antitrust Division began to see value in this process.  In its key guidance on antitrust compliance programs the Division specifically referenced screens as the type of tool they would expect companies to use in their compliance programs to detect anticompetitive conduct. This was a true breakthrough.  By that time, dozens of competition authorities around the world had started using screens 

Much to Romy’s vindication, governments are falling into line in seeing the value of screens, both for them to uncover cartels and for companies that are serious about their compliance programs.  But just as initially Romy had to overcome government resistance to this dramatically effective but new technique, there is still foot dragging in the private sector.

In industry there is concern that this method would be resource intensive.  No surprise here –  they don’t really want to spend any money, and are resistant to things that are new. She has explained that huge resources are simply not necessary.  She can do the type of  work that is necessary over one weekend!  It is not a drain on resources; it just takes a willingness to be serious about detecting misconduct, and the expertise to read the numbers.

Romy has been able to help companies with this, but she has found that even very large companies do not have the same commitment they say they have publicly. It is ironic that companies claim their full commitment to compliance and swear that they have a world-class diligent program,  but resist even small expenditures. 

Overall, though, there is much more interest now, and regulatory demands are huge. For it to work within a company the compliance people really need access to information so they know what is happening inside that company.  For small companies this could be a relatively expensive tool, but Romy believes AI can help with this. 

We are all reading the signals from the enforcers about the need for data analytics in our compliance programs.  What is the difference between screening and data analytics?  Data analytics is the broader universe, consisting of  the use of data in a variety of ways, not necessarily just as a detection tool for potential anticompetitive conduct. Screens are detection tools, and Romy has focused on collusion detection.  They can also assist in detecting monopolistic conduct.  While Romy’s experience is in antitrust, she knows that screens can apply to many more settings.

Can screens be used to deal with corruption?  She has not personally connected with anyone in this area, but there is obviously potential.  In dealing with cartels her screens use public data, e.g., about the market.  To deal with corruption would require more nonpublic data.  But screening would work internally for companies to detect corruption using their own data.  Being a detective at heart she sees the potential in this area and finds it very interesting. 

In our discussion we shared a story I thought was funny and ironic, but also validating.  A few years ago, a law firm associate was interviewing her for an ABA panel. Since he was younger he just assumed advanced econometrics would be new to her, so he kindly offered to explain to her what screens are!  She realized that screens had now become such common knowledge in the field that the more junior lawyers knew them too.  But she also had to realize they did not know the story of how screens came to be a recognized tool – they did not know her story.

In Compliance and Ethics:  Ideas & Answers we offer you the story of how screens came to be recognized, first as an enforcement tool, and then as a key way for companies to develop truly effective compliance and ethics programs.  Romy was there to help develop the tools that are now used in screening and cracking these cartel cases. Billions of dollars have been paid in settlement of these cases.  Companies can now prevent those costs by using the tools Romy and her colleagues have developed and proselytized for so many years.   

Thank you, Romy, for your outstanding work, and for bringing this exciting tool to us in the compliance and ethics field.