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POWELL, GOLDSTEIN, FRAZER & MURPHY LLP ORIGINAL IDEAS. UNCOMMON SOLUTIONS. U.S. INTERNATIONAL CARTEL ENFORCEMENT Presented by Neil R. Ellis Vienna, Austria.

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Presentation on theme: "POWELL, GOLDSTEIN, FRAZER & MURPHY LLP ORIGINAL IDEAS. UNCOMMON SOLUTIONS. U.S. INTERNATIONAL CARTEL ENFORCEMENT Presented by Neil R. Ellis Vienna, Austria."— Presentation transcript:

1 POWELL, GOLDSTEIN, FRAZER & MURPHY LLP ORIGINAL IDEAS. UNCOMMON SOLUTIONS. U.S. INTERNATIONAL CARTEL ENFORCEMENT Presented by Neil R. Ellis Vienna, Austria October 13, 2000 Presented by Neil R. Ellis Vienna, Austria October 13, 2000

2 POWELL, GOLDSTEIN, FRAZER & MURPHY LLP U.S. CARTEL ENFORCEMENT  Expansion of U.S. enforcement against cartels  Enormous increase in criminal fines and prison terms  Increase in percentage of investigations of cartels with international participants  Expansion of U.S. enforcement against cartels  Enormous increase in criminal fines and prison terms  Increase in percentage of investigations of cartels with international participants

3 POWELL, GOLDSTEIN, FRAZER & MURPHY LLP U.S. CARTEL ENFORCEMENT  U.S. anti-cartel enforcement based on Section 1 of the Sherman Act  Declares every “conspiracy in restraint of trade” to be illegal  Imposes stiff penalties:  Up to $10,000,000 fine on corporations  Up to $350,000 fine and 3 years in prison for individuals  U.S. anti-cartel enforcement based on Section 1 of the Sherman Act  Declares every “conspiracy in restraint of trade” to be illegal  Imposes stiff penalties:  Up to $10,000,000 fine on corporations  Up to $350,000 fine and 3 years in prison for individuals

4 POWELL, GOLDSTEIN, FRAZER & MURPHY LLP U.S. CARTEL ENFORCEMENT  Another U.S. statute authorizes far larger criminal penalties:  Up to twice the unlawful gain obtained by the conspirators or the losses imposed on victims  Also, U.S. law permits private suits for treble damages  Criminal conviction and evidence can be used in “follow-on” private suits  Another U.S. statute authorizes far larger criminal penalties:  Up to twice the unlawful gain obtained by the conspirators or the losses imposed on victims  Also, U.S. law permits private suits for treble damages  Criminal conviction and evidence can be used in “follow-on” private suits

5 POWELL, GOLDSTEIN, FRAZER & MURPHY LLP U.S. CARTEL ENFORCEMENT  “Effects” test: Conduct outside U.S. that has “effects” in U.S. can be subject to U.S. antitrust laws  Extremely controversial with foreign governments  “Comity” principles limit extraterritorial application of U.S. antitrust law  “Effects” test: Conduct outside U.S. that has “effects” in U.S. can be subject to U.S. antitrust laws  Extremely controversial with foreign governments  “Comity” principles limit extraterritorial application of U.S. antitrust law

6 POWELL, GOLDSTEIN, FRAZER & MURPHY LLP U.S. CARTEL ENFORCEMENT  U.S. Supreme Court severely limited application of comity in 1993 Hartford Fire Insurance decision  Held U.S. courts should exercise jurisdiction unless “there is in fact a true conflict” between U.S. and foreign law  Question is whether conduct that violates the U.S. antitrust laws is compelled by a foreign sovereign  U.S. Supreme Court severely limited application of comity in 1993 Hartford Fire Insurance decision  Held U.S. courts should exercise jurisdiction unless “there is in fact a true conflict” between U.S. and foreign law  Question is whether conduct that violates the U.S. antitrust laws is compelled by a foreign sovereign

7 POWELL, GOLDSTEIN, FRAZER & MURPHY LLP U.S. CARTEL ENFORCEMENT  Three major reasons for increased cooperation despite Hartford Fire:  Increasing international acceptance of basic competition principles  Development of new vehicles for cooperation  1993 revisions to the Antitrust Division’s Leniency Program  Three major reasons for increased cooperation despite Hartford Fire:  Increasing international acceptance of basic competition principles  Development of new vehicles for cooperation  1993 revisions to the Antitrust Division’s Leniency Program

8 POWELL, GOLDSTEIN, FRAZER & MURPHY LLP U.S. CARTEL ENFORCEMENT  Increasing international acceptance of competition principles  In 1990s, large number of governments enacted competition laws for the first time  Some have coordinated with U.S. to enforce existing laws more rigorously and consistently  International organizations (OECD, WTO) have encouraged adoption of competition laws  Increasing international acceptance of competition principles  In 1990s, large number of governments enacted competition laws for the first time  Some have coordinated with U.S. to enforce existing laws more rigorously and consistently  International organizations (OECD, WTO) have encouraged adoption of competition laws

9 POWELL, GOLDSTEIN, FRAZER & MURPHY LLP U.S. CARTEL ENFORCEMENT  Development of new vehicles for cooperation:  Agreements between competition authorities  Enactment of International Antitrust Enforcement Assistance Act of 1994 (“IAEAA”)  Mutual legal assistance treaties (“MLATs”)  Development of new vehicles for cooperation:  Agreements between competition authorities  Enactment of International Antitrust Enforcement Assistance Act of 1994 (“IAEAA”)  Mutual legal assistance treaties (“MLATs”)

10 POWELL, GOLDSTEIN, FRAZER & MURPHY LLP U.S. CARTEL ENFORCEMENT  IAEAA  Grants authority to U.S. enforcement agencies to enter into “antitrust mutual assistance agreements” with foreign governments  U.S. agencies may request from, or provide assistance to, foreign competition authorities  First agreement under IAEAA entered into with Australia in 1999  IAEAA  Grants authority to U.S. enforcement agencies to enter into “antitrust mutual assistance agreements” with foreign governments  U.S. agencies may request from, or provide assistance to, foreign competition authorities  First agreement under IAEAA entered into with Australia in 1999

11 POWELL, GOLDSTEIN, FRAZER & MURPHY LLP U.S. CARTEL ENFORCEMENT  MLATs  Authorize assistance by one government in the other government’s criminal investigations  U.S. currently has 36 MLATs in effect  MLATs  Authorize assistance by one government in the other government’s criminal investigations  U.S. currently has 36 MLATs in effect

12 POWELL, GOLDSTEIN, FRAZER & MURPHY LLP U.S. CARTEL ENFORCEMENT  1993 Revisions to Antitrust Division’s Leniency Program  Result has been an increase in amnesty applications from 1-2 per year to over 20 per year  First party in a cartel that voluntarily cooperates with the Division is immunized from criminal prosecution  1993 Revisions to Antitrust Division’s Leniency Program  Result has been an increase in amnesty applications from 1-2 per year to over 20 per year  First party in a cartel that voluntarily cooperates with the Division is immunized from criminal prosecution

13 POWELL, GOLDSTEIN, FRAZER & MURPHY LLP U.S. CARTEL ENFORCEMENT  1993 revisions:  Amnesty automatic if the party volunteers before investigation launched  Amnesty available (though not automatic) even after investigation already commenced  Amnesty granted to all cooperating officers, directors, and employees  1993 revisions:  Amnesty automatic if the party volunteers before investigation launched  Amnesty available (though not automatic) even after investigation already commenced  Amnesty granted to all cooperating officers, directors, and employees

14 POWELL, GOLDSTEIN, FRAZER & MURPHY LLP U.S. CARTEL ENFORCEMENT  Amnesty agreements require commitment to make personnel and documents available, even if outside the U.S.  Provides access to foreign information that the Antitrust Division would have difficulty obtaining  Has enabled the Division to successfully prosecute foreign cartel members  Amnesty agreements require commitment to make personnel and documents available, even if outside the U.S.  Provides access to foreign information that the Antitrust Division would have difficulty obtaining  Has enabled the Division to successfully prosecute foreign cartel members

15 POWELL, GOLDSTEIN, FRAZER & MURPHY LLP U.S. CARTEL ENFORCEMENT  Currently, over 30 grand juries are investigating cartel activities in 100 cities in 35 countries  Since late 1997, approximately half of all corporate defendants in criminal cases were foreign-based  In most instances involving fines of $10 million or more, corporate defendants included foreign-based companies  Currently, over 30 grand juries are investigating cartel activities in 100 cities in 35 countries  Since late 1997, approximately half of all corporate defendants in criminal cases were foreign-based  In most instances involving fines of $10 million or more, corporate defendants included foreign-based companies

16 POWELL, GOLDSTEIN, FRAZER & MURPHY LLP U.S. CARTEL ENFORCEMENT  Penalties have increased enormously each year:  In 1992, largest fine to this point was $2 million  In 1997, $100 million fine on ADM in lysine case  And in 1999, record was broken again  $500 million fine on F. Hoffmann-La Roche in vitamins case  $225 million fine on BASF in vitamins case  Penalties have increased enormously each year:  In 1992, largest fine to this point was $2 million  In 1997, $100 million fine on ADM in lysine case  And in 1999, record was broken again  $500 million fine on F. Hoffmann-La Roche in vitamins case  $225 million fine on BASF in vitamins case

17 POWELL, GOLDSTEIN, FRAZER & MURPHY LLP U.S. CARTEL ENFORCEMENT  Total fines have increased dramatically

18 POWELL, GOLDSTEIN, FRAZER & MURPHY LLP U.S. CARTEL ENFORCEMENT  Substantial penalties on foreign individuals:  $10 million fine on the CEO of a German company in vitamins case  Prison terms imposed on the executives of Swiss and German companies in vitamins case  Substantial penalties on foreign individuals:  $10 million fine on the CEO of a German company in vitamins case  Prison terms imposed on the executives of Swiss and German companies in vitamins case

19 POWELL, GOLDSTEIN, FRAZER & MURPHY LLP U.S. CARTEL ENFORCMENT  Developments have dramatically changed the atmosphere at the Antitrust Division  Success has led to higher goals  The FBI is taking antitrust more seriously  Officials are willing to devote more resources to criminal antitrust investigations  Developments have dramatically changed the atmosphere at the Antitrust Division  Success has led to higher goals  The FBI is taking antitrust more seriously  Officials are willing to devote more resources to criminal antitrust investigations

20 POWELL, GOLDSTEIN, FRAZER & MURPHY LLP U.S. CARTEL ENFORCEMENT  Appropriate response: Take antitrust seriously if you do business in the United States  Even if your U.S. business consists just of shipping merchandise to that market  Even if you do not have an office or personnel in the U.S.  Appropriate response: Take antitrust seriously if you do business in the United States  Even if your U.S. business consists just of shipping merchandise to that market  Even if you do not have an office or personnel in the U.S.

21 POWELL, GOLDSTEIN, FRAZER & MURPHY LLP U.S. CARTEL ENFORCEMENT  Two basic means of taking antitrust seriously  Antitrust audit  Antitrust compliance program  Two basic means of taking antitrust seriously  Antitrust audit  Antitrust compliance program

22 POWELL, GOLDSTEIN, FRAZER & MURPHY LLP U.S. CARTEL ENFORCEMENT  Antitrust audit should include:  Evaluation of knowledge of antitrust rules by personnel in sensitive positions, such as:  Positions of authority  Positions with regular contact with your competitors and trade associations  Antitrust audit should include:  Evaluation of knowledge of antitrust rules by personnel in sensitive positions, such as:  Positions of authority  Positions with regular contact with your competitors and trade associations

23 POWELL, GOLDSTEIN, FRAZER & MURPHY LLP U.S. CARTEL ENFORCEMENT  Antitrust audit (cont.)  Review of participation in trade associations  Review of documents  Review of rules by which documents are retained or destroyed  Antitrust audit (cont.)  Review of participation in trade associations  Review of documents  Review of rules by which documents are retained or destroyed

24 POWELL, GOLDSTEIN, FRAZER & MURPHY LLP U.S. CARTEL ENFORCEMENT  Antitrust compliance program:  Establish on-going program before authorities come knocking  Will not immunize the company or personnel, BUT --  It is a factor considered in reducing penalties  Antitrust Division considers it in deciding how aggressively to pursue a target  Antitrust compliance program:  Establish on-going program before authorities come knocking  Will not immunize the company or personnel, BUT --  It is a factor considered in reducing penalties  Antitrust Division considers it in deciding how aggressively to pursue a target

25 POWELL, GOLDSTEIN, FRAZER & MURPHY LLP  Antitrust compliance program should include:  Education sessions for new employees  Regular updates, particularly for officers and personnel in sensitive positions  “Surprise” interviews and reviews of document  Antitrust compliance program should include:  Education sessions for new employees  Regular updates, particularly for officers and personnel in sensitive positions  “Surprise” interviews and reviews of document U.S. CARTEL ENFORCEMENT

26 POWELL, GOLDSTEIN, FRAZER & MURPHY LLP  Antitrust compliance program (cont.)  Review of the company’s document retention and destruction programs  Review of the company’s participation in trade associations and standard setting organizations  Processes to ensure that antitrust issues are handled on a “real time” basis  Antitrust compliance program (cont.)  Review of the company’s document retention and destruction programs  Review of the company’s participation in trade associations and standard setting organizations  Processes to ensure that antitrust issues are handled on a “real time” basis U.S. CARTEL ENFORCEMENT


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