Criminal Antitrust Practice

1. Criminal Antitrust Practice Donald C. Klawiter J. Clayton Everett, Jr. Jennifer M. Driscoll

2. Statutory Framework • Section 1 of the Sherman Act • Contracts, combinations or conspiracies in restraint of trade a felony. • Other criminal antitrust statutes (Section 2, R-P Act) are not prosecuted.

3. Statutory Framework • Only hard-core cartel activities prosecuted: • Price fixing • Market allocation • Customer allocation • Prosecutions by the Antitrust Division of the U.S. Department of Justice • Deputy Assistant Attorney General for Criminal Enforcement: Scott Hammond • National Criminal Enforcement Section • 7 Regional Offices (NY, SF, DA, PH, AT, CH, CL)

4. Statutory Framework • Maximum corporate fines = • $100 million • Twice the gain • Twice the loss • Maximum individual fines and prison terms: • $1 million • 10 years

5. Statutory Framework • Other countries with criminal antitrust statutes: • Canada • UK • Extradition

6. Government Investigation Techniques • Grand Jury • Search Warrants • “Ambush” Interviews • Video and Audio Tapes

7. Grand Jury Investigations • Grand Jury: investigates possible criminal violations of federal laws • Secret proceedings • Subpoenas for documents and witnesses may be issued • Return of indictment marks beginning of criminal antitrust litigation

8. Witness Immunity • Fifth Amendment rights • Statutory Immunity—18 U.S.C. §6002 • Allows compelled testimony • “Use-Fruits” Immunity • Must be approved by court • Contractual immunity—”Queen for a day” • Use immunity • Usually only offered to individuals government has decided it is unlikely to prosecute

9. Corporate Leniency Program • To date, the most effective tool for deterring cartel activity. • A company can qualify for leniency even if the Division has opened an investigation, provided that certain criteria are satisfied. • Principles of post-investigation leniency grants include • The importance of being first in and fully cooperative; • The significance of restitution to injured parties; and • The role of the Division in determining the fairness and propriety of leniency.

10. Pleas and Sentencing • Sentencing Guidelines • No longer mandatory, but still provide framework • “Volume of Commerce Affected” • Culpability Score • Fine/Sentence Range • Cooperation Discounts

11. Pleas and Sentencing • “Volume of Commerce Affected” • Defendant’s U.S. sales during period of conspiracy • 20% of VOC = base fine

12. Pleas and Sentencing • Culpability Score • Size of organization and seniority of participants • Prior violations • Violations of court orders • Compliance program • Acceptance of responsibility/ cooperation • Determines length of sentence for individuals • Determines multiplier for corporations • Multipliers range from 1.0 to 4.0

13. Pleas and Sentencing • Components of plea agreement: • Factual basis • Defendant’s cooperation obligations • Government’s agreement not to prosecute • “Carve outs” • Vary depending on (a) timing of plea (b) degree of cooperation

14. Pleas and Sentencing • Types of Pleas • Type B: defendant must live with whatever punishment is imposed by court • Type C: plea agreement may be nullified if court does not accept agreed plea

15. Pleas and Sentencing • Cooperation Discounts • Amnesty typically available to first cooperator • Second cooperator typically gets best fine discount and smallest number of “carve outs” • Subsequent cooperators tiered

16. Pleas and Sentencing • Guilty plea is prima facie evidence of violation for subsequent civil cases. • Civil exposure = 3x damages + attorneys’ fees • Joint + several liability; no right of contribution • Importance of appropriately defining the scope of the conduct at issue

17. Pleas and Sentencing • ACPERA (2004) • Single damages • No joint liability • Requires “cooperation” with plaintiffs

18. Multi-Jurisdictional Issues • Each jurisdiction has different leniency requirements and will demand a separate application. • Discovery of documents and witnesses located outside US is difficult, but competition authorities do share information. • There is a risk that written statements to competition authorities abroad will be discoverable in US civil actions.