Making the Decision: What to Do When Faced with International Cartel Exposure
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The 2010 Competition Law Spring Forum presented by The Canadian Bar Association’s National Competition Law Section and the Continuing Legal Education Committee MAKING THE DECISION: WHAT TO DO WHEN FACED WITH INTERNATIONAL CARTEL EXPOSURE DEVELOPMENTS IMPACTING THE DECISION IN 2010 By Gary R. Spratling & D. Jarrett Arp Gibson, Dunn & Crutcher LLP San Francisco, CA • Washington, DC Toronto, Canada May 17, 2010 TABLE OF CONTENTS I. Introduction......................................................................................................................................2 II. The Decision: What To Do When Faced With International Cartel Exposure...............................4 A. Recognition Of And Adjustment To The Starting Point In The Risk Analysis...................................................................................................................................4 B. Assessment Of Evidence Of Possible Cartel Violation. .........................................................4 C. Projection Of Potential Exposure To Enforcement Authority Sanctions. ..............................5 D. Identification And Evaluation Of Opportunities To Avoid Or Mitigate Sanctions.................................................................................................................................5 E. Analysis Of Civil Litigation Costs..........................................................................................5 F. Integration Of The Foregoing Considerations. .......................................................................6 III. A Paradigm For Making The Decision............................................................................................6 RULE NO. 1: SPEED WINS. ...............................................................................................................6 RULE NO. 2: IF YOU REPORT IN THE U.S., YOU LIKELY WILL WANT TO PROMPTLY REPORT IN THE EU, CANADA, THE U.K., AND BRAZIL, AND POSSIBLY IN JAPAN, KOREA, AND AUSTRALIA AS WELL.........................................................8 RULE NO. 3: YOU CANNOT AVOID – AND THEREFORE MUST NOT FAIL TO CONSIDER – AMNESTY PLUS, PENALTY PLUS, AND THE OMNIBUS QUESTION........................9 1. Amnesty Plus.................................................................................................................9 2. Penalty Plus..................................................................................................................10 3. The Omnibus Question ................................................................................................10 RULE NO. 4: NEVER FORGET THE CIVIL LITIGATION.....................................................................11 RULE NO. 5: MOST IMPORTANTLY, AND BECAUSE OF THE FOREGOING, YOU MUST SWIFTLY ENGAGE IN A SIMULTANEOUS RELATIONAL ANALYSIS OF OPPORTUNITIES AND RISKS IN DIVERSE JURISDICTIONS. ......................................................12 1. Immediately gather the facts, interview key witnesses and, where feasible, review significant documents........................................................................12 2. Conduct a jurisdiction-by-jurisdiction analysis of the potential leniency application. ....................................................................................................12 3. Evaluate the scope of civil litigation exposure in all relevant jurisdictions concurrent with assessing whether you can and/or should apply for amnesty.........................................................................................................13 4. Continually evaluate the potential “snowball” effects that flow from Amnesty Plus, Penalty Plus, and the Omnibus Question.............................................14 i IV. Significant Developments In The Factors Companies Must Consider When Making Decisions About Cartel Exposure ....................................................................................14 1. Significant Increases In Fines ......................................................................................15 2. The Rising Likelihood Of Prison Sentences................................................................24 3. Increased Cooperation Among Enforcers....................................................................36 4. Increasingly Aggressive Investigative Techniques......................................................43 5. Increased Focus On And International Cooperation With Respect To Interference With The Investigatory Process...............................................................44 6. The New Specter Of Extradition..................................................................................47 7. The EC’s New Settlement Procedure ..........................................................................50 V. The United States Leniency Policy And International Cartels: A Brief History And Primer.....................................................................................................................................54 A. The U.S. Leniency Program..................................................................................................54 B. The Impact Of The Revised Amnesty Policy On Criminal Enforcement In The United States..................................................................................................................63 1. The Race To The Prosecutor........................................................................................64 2. Increase In The Number Of Applications For Amnesty..............................................65 3. Increase In Caseload: The Amnesty Policy As A Significant Generator Of New Cases .............................................................................................65 4. Increase In Penalties – Fines And Jail .........................................................................68 5. International Prosecutions............................................................................................70 C. International Cartel Enforcement Outside The United States: Leniency Fever, Convergence And Stepped-Up Enforcement.............................................................72 1. Convergence in Leniency Policies...............................................................................72 2. Increased Enforcement Worldwide..............................................................................95 VI. The Rise Of Civil Litigation In The New International Enforcement Environment ...................110 A. Growth In Cartel-Related Civil Litigation In The U.S. ......................................................111 1. Direct Purchaser Actions ...........................................................................................111 2. Opt-Out Litigation.....................................................................................................112 3. Indirect Purchaser Actions.........................................................................................112 B. Policy Issues Raised By Criminal And Civil Proceedings In Cartel Cases........................113 C. Potential Growth In Cartel-Related Civil Litigation In Europe..........................................117 D. Procedural Issues Raised By Amnesty And Leniency Applications ..................................117 1. Discovery Of Written Amnesty Submissions And The “Paperless” Process .......................................................................................................................117 2. Cooperation With The DOJ And Testimony .............................................................118 E. Developing Private Civil Damages Liability Considerations.............................................119 ii 1. De-trebled Damages For Amnesty Applicants ..........................................................120 2. Decreasing, But Still Potential, Risk Of Lawsuits For Foreign Damages.....................................................................................................................123 3. Class Action Fairness Act: Streamlining And Coordination of U.S. Litigation....................................................................................................................130 4. Development of Foreign Private Actions ..................................................................131 VII. Conclusion: Trends & Challenges For The Future.....................................................................133 A. Further Convergence Among Enforcement Authorities Worldwide..................................133 B. The Future Of International Cartel Enforcement................................................................135 iii MAKING THE DECISION: WHAT TO DO WHEN FACED WITH INTERNATIONAL CARTEL EXPOSURE DEVELOPMENTS IMPACTING THE DECISION IN 2010* by Gary R. Spratling & D. Jarrett Arp** * Although this paper is dated May 17, 2010, it was prepared on April 28, 2010, for inclusion in the program materials. This paper is an updated and revised version of papers presented at the ABA Section of Antitrust Law’s 58th Antitrust Law Spring Meeting (Washington DC, April 2010), the ABA National Institute on White Collar Crime (Miami, February 2010), the ABA/IBA International Cartel Workshop (Paris, February 2010), Global Competition Review 2009 Competition Law Review (Brussels, Belgium, November 2009), Criminalisation of Cartel Conduct Workshop (Adelaide, Australia, April 2009), the ABA National Institute on White Collar Crime (San Francisco, March 2009), the Law Council of Australia 2008 Trade Practices