defending international cartel cases kenneth ewing tel: +1 202.429.6264 e-mail: [email protected]
TRANSCRIPT
US Substantive Law – Highlights
Sherman Act § 1 forbids agreements among competitors to set prices, restrict output, or allocate customers or markets
Per se illegal – no chance to argue that “no significant effect on customers” or “traditional culture to cooperate”
Jurisdiction is based on effects in the United States– Conduct outside the US that affects sales in the US counts
if the conspirators know the US is involved
Time period is indefinite in practice – five years can be extended
Leaving a conspiracy requires “noisy exit”– “We are no longer participating in these illegal meetings and agreements. Stop
sending us invitations or information about them”
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US Criminal Penalties
Corporations– Fines are often 15% to 40% of total US volume of commerce
• Statute permits up to twice the extra profits or twice the extra costs to customers
• Judge considers the size of the business, the number of years, the involvement of high-level managers, the extent of help to DOJ, and other factors
– Plus possible debarment from US government sales
Individuals– Over 75% of individuals who are convicted go to prison
– Prison sentences averaged about 25 months in 2012 (about 16 months for non-US citizens)
• Statute permits up to 10 years
– Plus fines up to $1 million
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US Criminal Investigation Process
Leniency program
Secret recordings
Surprise search of company or private premises
Grand jury subpoena to produce documents and information
Grand jury testimony of individuals
Secret orders to stop and question individuals entering or leaving the US
Strong penalties for lying or hiding/destroying evidence
Guilty plea settlement negotiations – after investigation is largely done
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US Leniency Program
Generates more than half of DOJ’s international cartel cases
DOJ grants amnesty (no criminal penalties) to the first company to reveal a cartel
Significant fine reductions and other benefits for other cooperators – no public guidelines but practice– Must quickly provide significant new information
– “Second-in” and “third-in” cooperators get largest fine reductions (up to about 30% reduction) and immunity for all employees except a short list of “carve-outs”
Amnesty Plus/Amnesty Minus– Plus: companies in one investigation tell DOJ about another cartel
– Minus: companies helping in one investigation fail to tell DOJ about another cartel
ACPERA statute guarantees single damages and no joint liability to companies granted amnesty by DOJ who cooperate with civil plaintiffs
In practice these rules often mean a race to DOJ when a conspiracy starts to break up – often only a few hours or days to decide
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US Private Damages Actions
Clayton Act § 4 and state laws – treble damages, joint and several liability, extendable four-year limitations period
Facts in criminal guilty pleas are assumed true
“Contingent fees” for plaintiffs’ lawyers
Class action Rule 23 permits one plaintiff to sue on behalf of many
Indirect purchasers can sue in many states
Liberal (expensive) discovery of evidence – more than DOJ!
Limited practical defenses
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International Cartels Are a Major Focus
DOJ typically has about 50 international investigations open at any time– 2009-2012: 33 companies with fines above $10 million each in five cartels
• Both purely US and foreign cartels
– All involved direct harm to final consumers
– All involved direct harm to other businesses
• Almost $3 billion in total fines against the 33 companies, ranging from $11.9 (Panalpina – air cargo) to $500 million (AU Optronics – LCD displays)
Coordinated dawn raids– Marine Hose – hotel raid by DOJ/FBI officials in Houston, Texas; home visits by
OFT officials in the UK; indictments filed in Miami, Florida; jail sentences in US and UK
– Air Cargo – simultaneous dawn raids in several US and European cities
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International Coordination
“International Competition Network” – Best practices
– Convergence of standards and procedures
– Policy developments
– Teaching and networking to help “new” antitrust enforcers
Bilateral cooperation agreements– Criminal “mutual legal assistance treaty” – e.g., Korea-US
– Antitrust “cooperation agreement” – e.g., EU-Korea (also EU-Korea FTA)
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Effectively Defending International Cartel Investigations
1. Hire lead counsel quickly to coordinate globally and help plan strategically
– Broad understanding of multi-jurisdictional interrelationships of law/procedure
– Able to delineate legal and business decisions
– Can give clear legal advice and risk assessment
• Frames legal issues (e.g., likely fine levels; determination of culpability)
• Declines to intrude in client’s business decisions (e.g., whether to seek leniency, plea bargaining or settlement)
– Use outside lawyers for investigations, to preserve privilege in US and EU not to turn over results of investigations
• No protection in US or EU for investigations by business people
• No protection in EU for investigations by in-house lawyers
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Effectively Defending International Cartel Investigations
2. Get the facts as quickly as possible– Many complex decisions by client and lawyers are needed, often very quickly –
facts make decisions easier and better
• “Get the bad news early!”
or
• Get quick start on strong defenses
– Secure documents and other evidence immediately
• “Losing” documents makes getting the facts harder and risks obstruction of justice charges in the US
• Look for document processing vendor very early
– Interview key personnel immediately
• Anyone targeted or mentioned by authorities
• Co-workers in the relevant marketing groups
3. Evaluate all options provisionally: – Plead guilty? Cooperate? Defend? – aggressively or passively?
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Effectively Defending International Cartel Investigations
4. Consider hiring expert economists if some liability seems likely– Help to frame responses to data requests from authorities, to minimize fines
later
– Assess possible economic defenses and potential amount of civil damages liability
– Document collection and review takes a long time – design the review with the overall strategy in mind to avoid redoing it
– In-person interviews are critical for counsel to assess witness credibility – but often multiple interviews are needed, as more documents are discovered
5. Anticipate costs realistically: cut fat, not muscle
6. Manage outside counsel carefully– Frequent communication – often daily in the first weeks
– Mix written emails and telephone calls to ensure mutual understanding
– In-person meetings to set strategy or consider major decisions
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Major Decisions
If no investigation yet, do we self-report for amnesty?
If investigation has started, do we cooperate for leniency?
Do we self-report to other countries?
Do we try to settle civil cases early?
Do we change any market-place conduct – e.g., pricing formulas?
Do we fire or discipline any employees?
How do we respond to press inquiries?
What disclosures do we make to financial markets?
Do some executives need to limit their international travel?
Do we provide documents from outside the US?
Do we pay for lawyers of former employees?
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Major Factors to Consider
What are the company’s highest goals – reducing fines, protecting corporate executives from jail, maintaining customer goodwill, changing company compliance culture?
What countries were affected and which might start cartel enforcement, which have civil damages?
What total revenue of sales was affected in each country?
What possible fines in each country?
How much time do we have to decide whether to seek amnesty/leniency?
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