Jasvinder Nakhwal Partner, Business Crime Department Peters & Peters Solicitors

1. LexisNexis: Corporate and Economic CrimeThursday, 21 June 2012Cases and trends in UK criminal cartel enforcement Jasvinder Nakhwal Partner, Business Crime Department Peters & Peters Solicitors jnakhwal@petersandpeters.com

2. Criminal enforcement – cases (1) • First and only OFT success to date – R v Whittle, Brammar & Allison (June 2008) • Supply of marine hoses market • Close coordination with competition authorities in other jurisdictions including European Commission and US Department of Justice • Innovative plea agreement - three individuals pleaded guilty • Imprisonment terms for the three individuals in the UK and agreed in the US – 2.5 years to 3 years (reduced on appeal to between 20 months to 2.5 years) • €131 million fines imposed by the European Commission

3. Criminal enforcement – cases (2) • The collapse of the British Airways case – R v George, Crawley, Burns and Burnett (May 2010) • Airline passenger fuel surcharge market • Leniency applicant Virgin Atlantic granted civil and criminal immunity • Four employees of BA charged • Flawed investigation and LPP issues • Substantial volume of electronic documents discovered at late stage in the proceedings • Case withdrawn and all four employees acquitted • Project Condor Board Review

4. Criminal enforcement – cases (2) • The collapse of the British Airways case – R v George, Crawley, Burns and Burnett (May 2010) • BA Case raised difficult issues of disclosure rules and leniency programme • Disclosable material: s. 3 Criminal Procedure and Investigations Act 1996 • OFT obligations to search for and disclose material to the defendant • Leniency applicants: “continuous and complete cooperation” • OFT expectation that applicant will waive LPP when necessary • Changes expected in leniency regime as a result

5. Criminal enforcement – cases (3) • Agricultural bale wraps (August 2011) • Criminal investigation commenced in 20 April 2010 • Execution of search warrant at business premise in West Midlands • Case closed - insufficient evidence to prosecute • Automotive sector (October 2011) • Criminal investigation commenced in February 2010 – taking longer to establish dishonesty? • Close coordination with a number of competition authorities • Case closed – another failure to enforce powers under the Enterprise Act 2002

6. Criminal enforcement – cases (4) • Commercial vehicles (December 2011) • Criminal investigation commenced in September 2010 • On-site inspections at Milton Keynes office of Mercedes Benz, other truck manufacturers asked to supply information • One person arrested, but subsequently released on police bail • Criminal case closed – again, insufficient evidence to prosecute any individual • Competition Act investigation still on-going

7. Criminal enforcement – trends • More criminalized Member States in the EU • Dishonesty requirement in section 188 of the Enterprise Act 2002 so far a stumbling block in the UK? • Section 188 Enterprise Act 2002 • An individual is guilty of the cartel offence where he or she dishonestly agrees with another person that two (or more) undertakings will engage in one or more of the following types of cartel behaviour: • price fixing, • market sharing, • limitation of production or supply; or • bid rigging. • Two Tier Test: (R v Ghosh [1982] QB 1053) • But is dishonesty enough on its own for the cartel offence? • Norris v USA [2008] UKHL 16

8. Criminal enforcement – trends • Dishonesty, continued The dishonesty element of the cartel offence “seems to make the offence harder to prosecute” and “puts the UK at odds with developing international best practice on how to define a hard core cartel offence”. (BIS Report, March 2011) • Why was ‘dishonesty’ included in the first place? • Legal tolerance of price-fixing agreements • Would a jury find cartel behaviour to be dishonest? • No chance to test ‘dishonesty’ element in a contested case • Legal uncertainty without dishonesty element?

9. Criminal enforcement – trends • Dishonesty, continued • BIS Report, March 2012: Government has decided to propose legislation to remove ‘dishonesty’ and modify offence so that it excludes arrangements entered into openly • Will require publication in London Gazette or similar • Criticisms: • Harm to commercial secrecy • How to ensure the average consumer is aware of arrangement? • Even with knowledge of cartel, consumer may not be able to avoid it • Not all parties to agreement necessarily have authority to publish details of arrangement • Makes the offence too wide – will not necessarily capture only the most appropriate cases • Lack of clear mens rea, if any at all

10. DOJ – update • Major successes in the 2011 Division update • In 2011 financial year, ATD filed 90 cases (which was more than it had filed in nearly 25 fiscal years) - 75% against people and 25% against companies • Individual criminal accountability rates high • 78% of individual defendants sentenced to prison terms in FY 2010 • Recently handed down longest prison sentence for antitrust only offence – 48 months • Rise in average prison term – nearly 17 months in FY 2011 (foreign nationals averaged 10 months) • More (and longer) prison terms for foreign executive defendants • Financial Penalties • The Division obtained $500 million in criminal fines during financial year 2011 • Has already obtained more so far in 2012 - $567 million in criminal fines • Sherman Act Violations Yielding a Corporate Fine of $10 Million or more • As of 1 February 2012 : 91 such fines • 19 fines of $100m or more

11. DOJ – update • It’s all about the numbers: US focus on personal liability increasing • Increased jail time, including for foreign nationals • Increase in number of executives exposed to potential liability by being carved out from the corporate plea • Second in 3-4 carve outs, third in 4-5 carve outs, etc. • Increasingly becoming a hard rule, not a judgment call • AU Optronics LCD conviction – Key takeaways • Rare trial and victory for DOJ against corporate • Confirmed DOJ’s view about scope of affected commerce (i.e., sales of entire conspiracy), which is a big hammer in plea negotiations • Two foreign nationals convicted, but two found not guilty and jury hung as to the fifth • Mixed results for trials of individuals continue • Lower level employees have a shot at getting off at trial • Awaiting sentencing