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

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

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

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

Statutory Framework n Other countries with criminal antitrust statutes: u Canada u UK n Extradition

Government Investigation Techniques n Grand Jury n Search Warrants n “Ambush” Interviews n Video and Audio Tapes

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

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

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

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

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

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

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

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

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

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

Pleas and Sentencing n ACPERA (2004) u Single damages u No joint liability u Requires “cooperation” with plaintiffs

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