Managing multi-jurisdictional cartel investigationsAssessing the risks and developing an antitrust strategy

Overview

• The framework at European level• The framework at member state level• The conduct of cartel investigations• Managing multijurisdictional cartel investigations

The European framework

• The prohibition : Article 101 TFEU / national competition laws• The sanctions at European level

– The general framework: Administrative sanctions against companies• Fining guidelines provide some clarity … but do not always give you the full picture• Immunity and Leniency (Requirements / Markers / Level of reduction available)

– Practical results: Fines are increasing• The sanctions at member state level

– The basic approach is similar– But important differences do exist

• Non-criminal fines / criminal sanctions for individuals• Other administrative sanctions against individuals

• The enforcement authorities and their work– European Commission and 27 competition enforcement authorities– Powers are defined at European level (Regulation 1/2003) and member state

level (local competition laws & codes of administrative and criminal procedure)• Follow on actions for damages occur at member state level

The conduct of cartel investigations

• The starting point – always due to whistleblowers?• Dawn raids – it’s all about gathering information, right?• In depth investigation - Fight or flight: The possible race

for leniency• Reply to a statement of objections and oral hearings –

The heart of the defense …• Settlement discussions – More things to discuss than

may be obvious• The decision - Don‘t hold your breath?• The appeal - Having a second bite at the apple?

Multijurisdictional investigations

• Assess potential scope of investigations – Identify jurisdictions (potentially) involved in the investigation– Assess seriousness of infringement– Weigh quality of evidence already available to the authorities

• Consider potential consequences of investigations– Calculate potential fines and other sanctions (for company and individuals)– Consider means of reducing sanctions (is immunity/leniency still available,

what evidence does the company have etc.)– Consider threat of follow on litigation (damages & costs)

• Develop an antitrust strategy– Fight or flight : Is leniency an option?– Consider likely action by other market participants– Identify priority jurisdictions

• Allocate sufficient resources to implement the strategy

Assess scope of investigations

• Identify jurisdictions affected by the relevant behaviour– What was the content of the suspected coordination?– Sales into which jurisdictions were possibly affected?– Can nexus be established by other means (meetings held locally,

employees involved in suspected infringement located there etc.)?

• Assess seriousness of infringement– Direct coordination of competitive activities (prices, customers /

territories, quantities etc.) usually is a serious infringement while other forms (e.g. sharing sensitive information) must be carefully evaluated

– The duration of the potential infringement may be relevant

• Weigh quality of evidence already available to the authorities– What do they have?– What are they likely to get from others?

Calculate potential fines/other sanctions• For company: Usually percentage of affected sales with mark ups and reductions• For individuals: Various sanctions, depending on jurisdiction

– None– Financial penalties (criminal or administrative fines)– Incarceration– Professional disqualification

• Consider aggravating and mitigating factors– Various elements are relevant (e.g. repeat offender, ring leader / instigator, passive

participant etc.)– Does the existence of compliance programs matter?– Does the size of the company / group of companies matter?

• Distinguish maximum sanctions from likely sanctions, inter alia based on– which agencies are likely to pick up the matter, and– what are the agency‘s track record and aspirations?

• Will it be possible to enforce likely sanctions against the company and/or executives?

Consider means of reducing sanctions

• Consider for each jurisdiction in which sanctions may be imposed

–Is immunity/leniency still available locally?–What are local requirements for leniency (esp. re added

value)?–What evidence does the company already have?–What evidence can still be gathered?

• Document retention issues• Executives retire …

Consider costs of cooperation

• What are the costs of cooperating with the authority per jurisdiction?– outside local lawyers and economists– coordinating counsel – internal resources (legal department, diverted management attention)

• What are the effects on follow on actions locally or in other jurisdictions?– What type of information will become publicly available?

• Will fact of immunity / leniency application be made public?• Will leniency applications, corporate or individual statements be accessible to third

parties?• Will responses to information requests and documents submitted to the authority

be accessible to third parties?– When will such information become accessible to third parties?– Who will have access to such information?– Will immunity / leniency applicant be required to actively support third party

litigants?

Consider likelihood of follow on actions

• Today follow-on litigation is becoming the rule, rather than the exception (many other cases are settled out of court).

• Some jurisdictions allow for punitive / treble damages that greatly increase the financial exposure of defendants.

• Joint and several liability may further increase exposure of the individual defendant.

• Discovery procedures increase the amount of information third parties have access to as well as the costs associated with such procedures.

• Consider the overall civil litigation exposure associated with cooperating– In which jurisdictions are actions likely to be (successfully) brought?– Are actions usually settled or litigated (each has its own costs)?– Do immunity / leniency applicants enjoy privileges in follow-on actions?– Will immunity / leniency applicants bear special responsibilities in follow-on actions?

• Remember: Civil litigation risks may far outweigh the exposure from government investigations!

Develop an antitrust strategy

• Consider whether the company has a general strategy of dealing with antitrust issues that applies.

• For each jurisdiction that is affected– Find out the available options : Fight or cooperate (seek immunity or leniency /

plea agreement).– Assess the costs associated with each option (government investigation and

civil litigation).– Assess the level of risk of actions by agency or other companies involved.– Consider your ability to effectively implement relevant option.

• Merge results of country specific assessment in a global evaluation– What are the total costs / benefits?– Is it possible to adopt a mixed strategy?– Will you be able to effectively implement the global strategy (resources /

cumulative and partly conflicting cooperation requirements)?

Develop an antitrust strategy (contd.)

• Regardless of which option is chosen, the company will have to develop an implementation plan

– You can’t do everything, everywhere at once.– Developments become complex quickly, you need to stay focused to remain in

control

• Identify priority jurisdictions, based on a number of factors, including– the financial risk exposure / potential level of fine and threat of incarceration of

(senior) executives (including the availability of immunity / leniency),– the likelihood that agencies become active (enforcement track record),– the likelihood that other companies involved take action,– the risk of follow on actions in that jurisdiction or based on an investigation in

that jurisdiction, and– the risk that any sanctions imposed on the company or its executives will be

effectively enforced

Conclusion

• Develop an antitrust strategy– Even in straightforward cases a complex assessment – Complexity increases with the number of jurisdictions involved

• Identify priority jurisdictions, with a primary focus on– seriousness of exposure (level of fines / risk of incarceration)– ability to mitigate risk (immunity / leniency)– local enforcement track record

• Plan implementation of your strategy carefully– Allocate sufficient resources to the team– Make everyone understand that this is a top priority matter

• Remember the need for speed– BE THERE EARLY– MOVE QUICKLY

Managing multi-jurisdictional cartel investigationsAssessing the risks and developing an antitrust strategy