5/15/2015
ANTITRUST ENFORCEMENT
TRENDS, PITFALLS AND
SOLUTIONS
Mark Krotoski & Kent Roger
May 20, 2015
© 2015 Morgan, Lewis & Bockius LLP
Overview
• Recent enforcement developments
• Sherman Act enforcement issues
• Common enforcement steps directed at industries
under investigation
• Key antitrust litigation issues
• How does the Leniency Program work and how can
it help?
• Practical strategies to avoid enforcement problems
2
Recent Enforcement
Developments
1
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2
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Sherman Act
Enforcement Issues
Sherman Act (1890)
Statute:
Elements:
“Every contract, combination in
the form of trust or otherwise, or
conspiracy,
1)
In restraint of trade or
commerce among the several
States, or with foreign nations
2)
Is declared to be illegal….”
3)
An agreement to restrain
trade (e.g., to fix prices,
rig bids or allocate
markets)
Knowingly become a
member of the conspiracy
Substantially affected
interstate or foreign
commerce
[15 U.S.C. § 1]
9
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An Agreement Can Be
Written
Oral
“A wink and a nod”
10
Sherman Act Violation
• Agreement completes the crime
• Even if not carried out
• Per se unlawful
– No need to prove loss or harm
• Irrelevant, inadmissible, excluded evidence
– Explanations or justifications
– Agreement never implemented or not followed
– Agreement did not affect outcome
11
11
When is the Corporation Liable?
Ninth Circuit
“[I]dentification of the particular agents
responsible for a Sherman Act violation is
especially difficult, and their conviction
and punishment is peculiarly ineffective as
a deterrent. At the same time,
conviction and punishment of the
business entity itself is likely to be
both appropriate and effective.
“[W]e conclude that … a corporation is
liable under the Sherman Act for the
acts of its agents in the scope of
their employment, even though
contrary to general corporate policy
and express instructions to the
agent.”
United States v. Hilton Hotels Corp., 467 F.2d
1000, 1006-07 (9th Cir. 1972)
Seventh Circuit
First, the offense was committed
by an employee of the company
Second, in committing the offense,
the employee intended, at least
in part, to benefit the company
Third, the acts by the employee
were committed within the
authority or scope of his
employment
Seventh Circuit Criminal
Jury Instruction § 5.03
12
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When is the Corporation Liable?
Jury Instruction from U.S. v. AUO (NDCA)
• The offense charged was committed by an agent or an employee of the
corporation, and
• The agent or employee was acting within the scope of his employment or
with actual or apparent authority.
– Act performed on behalf of corporation and directly related to performance of
duties agent has general authority to perform;
– Agent first must have intended that his act would produce some benefit
to the corporation, but need not actually have resulted in any benefit to
corporation
– Officer liable for acts of subordinate where knew of existence of conspiracy
and knowingly authorized, ordered or consented to subordinate’s participation
13
Enhanced Criminal Penalties
• Corporations [2004]
– Increased from maximum fines from $10 Million
– To $100 Million
[Antitrust Criminal Penalty Enhancement And Reform Act 2004]
• Alternative Fine Provision
– Twice the financial gain to defendant or twice the financial loss
to the victim which exceeds $100 Million (the maximum statutory
amount)
[18 U.S.C. § 3571(d)]
14
Significant Corporate Fines
• $100 Million Plus Fines
• $10 Million Plus Fines
– 27 corporations
– 123 corporations
– 25 involving international companies
– Many products and industries
15
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Prison Terms
• Individuals
– Prison terms up to 10 years
– Statutory fines of $1,000,000
– More if “twice” the gain or loss
– Prison terms trending up
16
Common Enforcement Steps
Antitrust Case Phases
Criminal
Civil
18
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How Cartels Get Discovered
• Anonymous report
• Complaint
– Protect identity to the full extent of the law
• Investigative agency
• Economic or market analysis
• News reports
• Leniency
19
Most Cases Start Under Leniency Program
“The majority of the [Antitrust] Division’s major international
investigations have been advanced through the cooperation
of an amnesty applicant.” (Nov. 2005)
Scott Hammond, Former Deputy Assistant Attorney General, Antitrust Division
“[N]o question corporate leniency is a key part of our
prosecutorial toolkit”
 Nearly two-thirds of cases start with a leniency applicant
 “[M]ore than a third of our current investigations began without a
leniency applicant” (Sept. 2014)
Bill Baer, Assistant Attorney General, Antitrust Division
20
Corporate Plea Agreement
• Company
– Conviction
– Fine
– Continuing obligation to cooperate under plea terms
– Includes production of foreign-located records and witnesses
– Probation or Corporate Monitor?
• “Carve Out” Executives
– Separately prosecuted
– DOJ Standard
– “[C]arve out employees who we have reason to believe were
involved in criminal wrongdoing and who are potential targets of our
investigation”
21
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Traditional Corporate Resolution
• Information filed
– Determine which Court is assigned to the case
• Press release same day
– Announcement of filing
– Agreement to pay fine and other terms
• Plea hearing scheduled
– Fed. R. Crim. P. 11(c)(1)(C) (binding plea terms)
• Sentencing same day as plea hearing
– Discretion of the Court
22
Trial
• Antitrust Division increasingly willing to proceed to
trial
• Recent trials
– AUO (NDCA 2012)
– $500 million criminal fine
– Apple (SDNY 2013)
– Bazaarvoice (NDCA 2014)
– American Express (EDNY 2015)
23
International Law Enforcement Tools
Red Notices for fugitives
• International arrest warrant
• 2001 Policy to “plac[e] indicted
fugitives on a ‘Red Notice’ list
maintained by INTERPOL”
Border Watches
Extradition
Cooperation Obligations
• Providing Foreign-Located
Evidence
Memorandum of Understanding
• Safe passage to the U.S.
Mutual Legal Assistance Treaty
(MLAT) requests
Bilateral Antitrust Mutual
Assistance Agreements
• Under the International Antitrust
Assistance Act of 1994
Jointly Coordinated Law
Enforcement Actions
24
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International Coordination
http://www.jftc.go.jp/en/pressreleases/yearly-2008/feb/individual_000147.html
25
Antitrust Case Phases
Criminal
Civil
26
Follow-On Civil Litigation
• Class actions
– By direct purchasers under the Sherman Act
– By indirect purchasers under state laws
• Recent cases
– Growing number of opt-out litigations by large direct
purchasers (e.g., Dell, HP, AT&T, Costco, Best Buy in
LCD)
– State AGs also may bring actions seeking civil penalties,
damages for government purchases and/or damages on
behalf of citizens
27
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Civil Follow-On Cases
• Automatic trebling
– Except for leniency applicant, which gets single damages
• Joint and several liability
• No right of contribution
• Attorneys fees and costs
28
Private Damages Awards / Settlements
Transaction Fees
$17,833,000,000
Graphite Electrodes
$676,000,000
Vitamins
$4,398,000,000
LCDs
$1,642,000,000
DRAM
Securities
$746,000,000
$1,027,000,000
29
Key Antitrust Litigation Issues
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Key Antitrust Litigation Issues
• New eCommerce Investigation
• Extraterritoriality Reach
• Extradition
• Obstruction of Justice
• Compliance Program
31
eCommerce
• Former art.com executive conspiracy to fix the
prices of certain posters sold on Amazon
Marketplace, site for third-party sellers
– Commercially-available algorithm-based pricing
software to set prices.
– Software collects competitor pricing information for
specific products and applies pricing rules set by
the seller
– Adopted specific pricing algorithms for the agreedupon posters
– Topkins wrote computer code that instructed
software to implement the agreed-upon algorithm
– Under plea terms, he will pay a fine of $20,000 and
cooperate in the ongoing investigation
• Division has “an ongoing federal antitrust
investigation into price fixing in the online wall
décor industry,” which is being investigated by
Division’s San Francisco Office
United States v. Topkins (April 2015)
32
eCommerce
• “first criminal prosecution against a conspiracy
specifically targeting e-commerce”
– AAG Baer: “We will not tolerate anticompetitive
conduct, whether it occurs in a smoke-filled room
or over the Internet using complex pricing
algorithms. American consumers have the right
to a free and fair marketplace online, as well as in
brick and mortar businesses.”
• Modern cartels using technology rather than
relying upon secretive communications to set,
monitor and enforce pricing agreements
• Will this provide a new avenue for the Division
to identify cartels without relying solely on
leniency applicants?
United States v. Topkins (April 2015)
33
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Extraterritoriality Reach
• Foreign Trade Antitrust Improvements Act (FTAIA)
• Sherman Act applies to conduct outside the United States
that either:
1) “Involves” U.S. import commerce; or
2) Produces “direct, substantial and reasonably foreseeable effects” on US
commerce
• DOJ’s Position
– Sales of components outside the U.S. that are incorporated in products sold in
the U.S. satisfies both of the above standards
34
Foreign Trade Antitrust Improvements Act
Language
[The Sherman Act] shall not apply to conduct involving trade or commerce (other than
import trade or import commerce) with foreign nations unless –
(1) such conduct has a direct, substantial and reasonably foreseeable
effect –
(A) on trade or commerce which is not trade or commerce with
foreign nations, or on import trade or import commerce with
foreign nations; or
(B) on export trade or export commerce with foreign nations, of
a person engaged in such trade or commerce in the United
States; and
(2) such effect gives rise to a claim under the provisions of [The
Sherman Act], other than this section.
[15 U.S.C. § 6a]
35
FTAIA – Recent Decisions
• Consensus Forming:
– FTAIA is not a limitation on subject matter jurisdiction but
rather substantive requirement of the Sherman Act
– Second and Ninth Circuits joining Third and Seventh in
holding that
• Import Commerce:
– Ninth Circuit upheld the criminal conviction of AUO in LCD
price-fixing prosecution, holding that government sufficiently
pleaded and proved conspirators engaged in import
commerce with the United States, and therefore, that the
FTAIA did not apply
36
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FTAIA – Recent Decisions
• Giving Rise Element:
– Seventh Circuit – in civil action based upon LCD conspiracy – held that,
FTAIA barred domestic importer (Motorola) from seeking damages
based upon price-fixed components purchased by foreign subsidiary and
incorporated into finished products imported into United States
– Court reasoned that even if higher prices paid by U.S. entity were “direct,
substantial, and reasonably foreseeable” effects of the conspiracy, the prices
paid by US entity did not “give rise” to the importer’s injury
– Importer was injured, if at all, by the higher prices its foreign subsidiaries paid
abroad for the components.
• Giving Rise Element:
– Second Circuit affirmed dismissal on FTAIA grounds, holding that, even if
patent lawsuit in China might hypothetically have requisite effect on U.S.
commerce, that effect could not “give rise” to antitrust claim by alleged
infringer that claimed to have been hindered in competing against the
patentee
37
FTAIA – What’s Next?
• AUO and Motorola both seeking Supreme Court
review based on circuit inconsistencies
– Import Commerce Exclusion
– Commerce that is “directed at” the US
– Commerce directly between foreign sellers and domestic buyers
– “Direct Effect”:
– “Reasonably proximate causal nexus”
– “Immediate consequence of the defendant[s’] activity”
– “Gives Rise To”:
– How is this standard applied to injury arising from foreign sales?
– Does Illinois Brick’s bar to indirect purchaser claims apply
38
Extradition
• In 2014, Antitrust Division successfully extradited two
foreign executives
– Italian executive arrested at Frankfurt, Germany airport while traveling
and ultimately extradited by German court
– Canadian national
• Since 2010, four foreign executives have been extradited in
Antitrust Division cases
• Red notice
– International arrest warrant
– Under seal charges pending
39
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Extradition
40
Extradition
41
Obstruction of Justice
• Witness tampering
– Getting “stories” straight
– Aggravates facts and resolution of the case
• Destruction or removal of records
– Branch Offices
– Subsidiaries
• Aggressive DOJ enforcement
– Higher sentencing penalties
– Additional charges
42
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Obstruction of Justice Charges
• Destruction of records [§ 1512(c)(1)]
• Destruction of records in anticipation of an investigation [§
1519]
• Witness tampering, intimidation [§§ 1512(a), (b)]
• Obstruction of proceedings [§ 1505]
• Influencing or injuring officer or juror generally [§ 1503]
• False statements [§ 1001]
• Perjury [§§ 1621, 1623]
Obstruction of Justice
Recent Corporation Case
• Tokai Rika (2012)
• Plea agreement conviction
– Price fixing
– Obstruction of justice by destroying
records after search warrant
• Criminal fine $17.7 million
44
Compliance Programs and Monitors
• DOJ recently announced policy focus on need for effective
antitrust compliance programs
“We reserve the right to insist on probation, including the use of
[corporate] monitors, if doing so is necessary to ensure an effective
compliance program and to prevent recidivism.”
Bill Baer, Assistant Attorney General for the Antitrust Division
Factors that lead DOJ to seek monitor:
1.
2.
3.
4.
5.
No showing of remorse;
No acceptance of culpability;
Indication of risk of recidivism
No compliance program; and
Allow guilty employees to remain in sensitive roles.
45
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Compliance Programs and Monitors
• Objectives of an Effective Internal Compliance
Program:
1. Prevention: Prevent conduct that could lead to significant criminal
and civil liability and damage to business reputation
2. Detection: Early detection of potential conduct allowing company
to correct and potentially apply for leniency protection
3. Mitigation: In the event of prosecution, may provide basis for
mitigating criminal fine and/or probation period
46
Compliance Programs and Monitors
•
Factors Division considers in evaluating effectiveness:
– Program should be tailored to specific company, industry and risks
– Senior management should “support and cultivate a culture of
compliance”
– Compliance commitment should pervade entire company
– Program should be proactive – training, forum for feedback, monitoring
and auditing “risk activities” and evaluating effectiveness
– Company should “discipline employees who either commit antitrust crimes
or fail to take reasonable steps necessary to stop the criminal conduct in
the first place”
– Company should take steps to prevent reoccurrence after criminal
antitrust conduct has been discovered
47
Compliance Programs and Monitors
• Recent Developments
–
Apple
–
AUO
–
Deutsche Bank
48
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How Does The
Leniency Program Work?
How Can It Help?
Leniency Program
• Three Cornerstones
– Severe sanctions
– Heightened fear of detection
– Transparency in enforcement policies
• DOJ Key Objectives
– “[C]reate a race among conspirators to disclose their conduct to
enforcers”
– “[Q]uickly crack cartels that may have otherwise gone undetected”
50
Leniency Program
• Leniency Program
– 1978: Established
– 1993: Corporate Program Modified
– 1994: Individual Program
• Identity of applicant and information provided held
in strict confidence
– Not shared with anyone, including foreign authorities, without
applicant’s permission
51
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Leniency Benefits
• No criminal convictions for company, executives or
employees
• No criminal fine
• No prison
• De-treble civil damages
– Under ACPERA, single damages and no joint & several
liability
52
Race to Leniency Program
• “Only one corporate leniency per conspiracy”
– Race to be the “First-in-the-Door”
• “Time is of the essence”
– “On a number of occasions, the second company to
apply for leniency has been beaten by a prior applicant
by only a number of hours.”
Scott Hammond, Former Deputy Assistant Attorney General, Antitrust Division
53
Marker System
Leniency
A
On first report, DOJ no prior information concerning product/service
B
On first report, DOJ had prior information concerning product/service
54
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Marker System
Leniency
A
On first report, DOJ no prior information concerning product/service
B
On first report, DOJ had prior information concerning product/service
Initial Marker
• Holds first position
• No “leapfrogging” while marker in place
• Marker is “perfected” to qualify for conditional leniency
55
Marker Request
• Marker Request
– Report detection of criminal antitrust violation
– Disclose general nature of that conduct
– Identify industry, product or service involved
– Identify the client
– Unless anonymous marker request
• Limited Period
– 30 days
– Extensions “for an additional finite period”
– if “the applicant demonstrates it is making a good-faith effort to
complete its application in a timely manner”
• Letters
– Conditional
– Final
56
Six Conditions
• Leniency for corporation reporting illegal activity if six
conditions are met:
1.
2.
3.
4.
5.
6.
At the time the corporation comes forward to report the illegal
activity, the Division has not received information about the illegal
activity being reported from any other source;
The corporation, upon its discovery of the illegal activity being
reported, took prompt and effective action to terminate its part in the
activity;
The corporation reports the wrongdoing with candor and
completeness and provides full, continuing and complete
cooperation to the Division throughout the investigation;
The confession of wrongdoing is truly a corporate act, as opposed to
isolated confessions of individual executives or officials;
Where possible, the corporation makes restitution to injured parties;
The corporation did not coerce another party to participate in the
illegal activity and clearly was not the leader in, or originator of, the
activity.
57
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Leniency Revocation
• Before final, unconditional leniency letter, DOJ may revoke
conditional leniency if DOJ concludes that the applicant:
(1) is not eligible for leniency, or
(2) has not provided the cooperation required
58
Marker System
Leniency
A
On first report, DOJ no prior information concerning product/service
B
On first report, DOJ had prior information concerning product/service
Amnesty Plus
A+
B+
Plea discussion on different product/service (Conspiracy 1), reports
new violation which DOJ no prior information concerning
product/service (Conspiracy 2)
Plea discussion on different product/service (Conspiracy 1), reports
new violation which DOJ had prior information concerning
product/service (Conspiracy 2)
Amnesty Plus
• Company under investigation
(Conspiracy 1) reports participation in
separate cartel (Conspiracy 2)
Conspiracy 1
• Upon meeting conditions, company receives:
– Amnesty in the second investigation
(Conspiracy 2)
– Plus reduced fines in the first investigation
(Conspiracy 1)
Conspiracy 2
60
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Rolling Investigations
“Many [international cartel] investigations began as a result
of evidence uncovered during an investigation of a
completely separate industry. This track record of
successfully rolling one investigation into another has
led the Division to engage in ‘cartel profiling’ strategies to
ferret out additional offenses. The Division will target its
proactive efforts in industries where we suspect cartel
activity in adjacent markets or which involve one or more
common players from other cartels.” (March 2008)
Scott Hammond, Former Deputy Assistant Attorney General, Antitrust Division
http://www.justice.gov/atr/public/speeches/232716.htm
61
Amnesty Plus Chain Reaction
Capacitors
Optical
Disk Drives
CRT
TFT-LCD
SRAM
DRAM
•Micron
•Elpida
•Hitachi
•Hynix
•Infineon
•Mitsubishi
•NEC
•Samsung
•Toshiba
•Micron
•Cypress
•Etron
•Hitachi
•Hynix
•ISSI
•Mitsubishi
•NEC
•Samsung
•Sony
•Toshiba
•Samsung
•AU
Optronics
•Chi Mei
•Chunghwa
Picture
Tubes
•Epson
•HannStar
•Hitachi
•LG
•Mitsui
•NEC
•Sanyo
•Sharp
•Toshiba
•Chunghwa
Picture
Tubes
•Hitachi
•LG Electronics
•Matsushita
•Philips
•Samsung
•Toshiba
•Philips
•Hitachi
•LG
•Samsung
•Sony
•Toshiba
Lithium Ion
Battery
•Sony
•LG Chem
•Panasonic
•Hitachi
•Samsung
•Yuasa
•Toshiba
Amnesty Applicant
•Panasonic
•Sanyo
•Taiyo Yuden
•NEC
•KEMET
•Chemi-Con
•Hitachi
•Nichicon
•AVX
•Rubycon
•Elna
•Matsuo Electric
•Toshin Kogyo
•Vishay
Intertechnology
•Samsung
•ROHM
62
Auto Parts Investigation Many Products
• Wire Harness
• Antilock brake systems
• Heater Control Panels
• Antivibration rubber
• Speed Sensor Wire Assemblies
• Alternators
• Instrument Panel Clusters
• Air Flow Meters
• Anti-Vibration Rubber
• Starter Motors
• Speed Sensor Wire Assemblies
• Valve Timing Control Devices
• Inverters & Motor Generators
• Fuel Injection Systems
• Seat belts
• Throttle Bodies
• Air bags
• Ignition Coils
• Steering wheels
• Many others
• Starter motors
• Pinion-assist type electric powered
steering assemblies
63
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Five Outcomes
• First-In Leniency
– No criminal convictions for Company or Executives
– No criminal fines, no prison, de-treble civil damages
• Second or Later-In
– Criminal conviction, opportunity for significantly lower fines and penalties
– Amnesty plus opportunities; timing is essential
• General Cooperation
– Criminal conviction, lower fine and penalties depending on assistance and timing
• None of the Above
– No cooperation benefits; risk of trial, conviction and substantial penalties
• Penalty Plus
– In signing plea agreement, company fails to discover and report second offense
64
Practical Tips To Avoid
Enforcement Problems
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Dealing with Competitors
• Watch all competitor contacts
• Clearly, no agreements to fix prices, rig bids, allocate
customers or market, or boycott
• ALL competitor communications – even casual
encounters – create “risk circumstances”
• Any discussions of pricing, customers, capacity and
supply can invite review
– Circumstantial evidence of agreement
– Signaling
• Special Caution
– Trade associations
– Standard setting committees
67
Competitor Contacts
DON’T discuss:
• Prices or profit margins –
CAN discuss:
• Aggregated historical
yours or theirs
• Future price movements
• Changes in “competitive”
terms, such as credit
• “Comp” bids
• Plans regarding future
output or product offering
decisions
pricing
• Legislative, public
relations or lobbying
initiatives
• Non-confidential
technical issues relevant
to the industry
• Institutional advertising
68
Sharing Information with Competitors
• Recent guidance on sharing cyber threat
information among competitors
– Information Sharing Analysis Centers
(ISACs)
• “Some private entities may be hesitant to
share cyber threat information with each
other, especially competitors, because
they have been counseled that sharing of
information among competitors may
raise antitrust concerns.”
• “With proper safeguards in place, cyber
threat information sharing can occur
without posing competitive concerns.”
69
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Sharing Information with Competitors
• “[W]hen evaluating an exchange of
information the Agencies consider”:
– “the extent to which competitively
sensitive information likely would be
disclosed to competitors”
– “the nature and detail of the
information disclosed”
– “the context in which information is
shared”
– “it is less likely that the information sharing
arrangements will facilitate collusion on
competitively sensitive variables if
appropriate safeguards governing
information sharing are implemented to
prevent or minimize such disclosure.”
70
Trade Association Communication
Guidelines
• DO stick to agenda topics to
avoid discussing topics that are
problematic
• DO follow the same guidelines
during formal meetings and
informal conversations including
during breaks or lunch
• DO consider leaving the
meeting if participants appear to
be violating these guidelines
• DO seek legal guidance on any
questions
DO NOT share nonpublic,
competitively sensitive
information
• Current or future prices,
rates, or costs
• Customer-specific
information
• Employee compensation
• Proprietary business plans
or strategies
• Any other type of
information you would not
ordinarily disclose to a
competitor
DO NOT discuss taking joint
action
71
Standard Setting
• Discriminatory “Standards”
– Collusion surrounding model building code rejecting use of plastic
conduit
– Allied Tube vs. Indian Head, 486 U.S. 492 (1988)
• “Submarine” Patents
– CARB Gas
– Union Oil Co. of California (Unocal), F.T.C., Docket No. 9305 (July 7,
2004)
• Essential Patent Licensing
– “the patentee’s royalty must be premised on the value of the
patented feature, not any value added by the standard’s adoption of
the patented technology.”
– Ericsson, Inc. vs. D-Link Sys., Inc., 773 F.3d 1201, 1232 (Fed. Cir.
2014)
72
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In-House Lawyers Beware!
• Complaint alleged:
– In attending “'Arbitration Coalition' meetings to focus on developing and
adopting arbitration clauses, and on including class action bans in their
arbitration clauses,” the “members discussed the ‘need to control class action
litigation’”
– The defendants “established another group consisting solely of IN-HOUSE
COUNSEL employed by the Issuer Defendants and American Express” who
met in “secret” to “share information concerning their business practices and
strategies with respect to compulsory arbitration clauses“
• Allegations sufficient for antitrust injuries in fact:
– The Complaint alleged the cardholders were subjected to suppressed
competition and “deprived of any meaningful choice on a critical term and
condition of their general purpose card accounts.”
– The Supreme Court has noted one form of antitrust injury is “[c]oercive
activity that prevents its victims from making free choices between market
alternatives.”
Ross v. Bank of America, 524 F.3d 217, 223 (2d Cir. 2008) (quoting Associated Gen. Contractors
of Cal., Inc. v. Cal. State Council of Carpenters, 459 U.S. 519, 528 (1983))
73
What You Say & Write
• Keep in mind that a lawyer some day may be
reviewing all of your communications
• Remember: E-mails live FOREVER!
– Will your e-mail records become Exhibit No. 1?
• Stress the benefits of products and services, not
the negatives of the competition
74
What You Say & Write
• Watch “Rambo” language
– Flush these turkeys
– Cut off air supply
– Bury the new term
• Watch Control Buzz Words:
– “Control”
– “Dominate”
– “lock out”
– “raise barriers”
– “market share” when talking about product segments
75
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Role Of Compliance Programs
• Primary Objectives:
1. Prevention: Prevent conduct that could lead to significant criminal
and civil liability and damage to business reputation
2. Detection: Early detection of potential conduct allowing company
to correct and potentially apply for leniency protection
3. Mitigation: In the event of prosecution, may provide basis for
mitigating criminal fine and/or probation period
76
United States v. AU Optronics
Indictment
• Government alleged:
– World-wide conspiracy from 2001-2006 among
producers of liquid crystal flat panel displays (“LCDs”),
incorporated into televisions, laptops, computer
monitors, other devices
– Representatives of AUO, Samsung, LG, CPT, HannStar,
CPT and CMO met in person (“Crystal Meetings”) over
the course of 2001-2006 and took notes of their
conversations
– Discussed current and future pricing generally and
pricing of specific products to specific customers
77
United States v. AU Optronics
Evidence
• Documents describing meetings included references to:
– Current and future pricing, including pricing of specific products to
specific customers
– “understandings” and “consensus”
– Undertakings to act
– Discussions of secrecy and entering and leaving separately
– Destroying records of the meetings
• AUO Defense:
–
–
–
–
–
No agreement among co-conspirators
Lied to and misled competitors about following through on promises
Never charged the “agreed” cartel price
Price was always lower than the cartel price
FTAIA
78
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United States v. AU Optronics
Jury Conviction
• Jury found corporation and two lead executives guilty and found
cumulative gain to co-conspirators exceeded $500 million
– Found two lower level employees not guilty
– Hung jury with regard to a third, who subsequently was retried and
convicted
• Jury Trial Lessons:
– Difficult to recover from damning documents
– Credibility of cooperating witnesses from leniency applicant and plea
agreements was not undercut by innuendo of leniency in exchange for
their testimony
– Chart showing virtual lockstep in conspirators’ prices very powerful even
though AUO prices generally were lower and were declining over
conspiracy period
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United States v. AU Optronics
Sentencing
• Government request
– $1 billion fine for the corporate defendants
– 10 year prison terms + $500,000 fines for executives
– AUO requested a fine no greater than $285 million
• Court Sentence
– AUO to a $500 million fine (highest antitrust corporate fine)
– No fine for AUO America
– Executives: 3 year prison terms + $200,000 fines
• AUO also sentenced to three years of probation
– Required to “develop, adopt and implement an effective compliance and ethics
program”
– Hire, at its own expense, an independent monitor
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United States v. AU Optronics
More Recent Developments
• March 31, 2015, AUO’s Probation Officer sought revocation of AUO’s
probation
– “[T]he corporation has failed to implement an effective compliance and ethics program.
In that, the corporation has not hired a full-time Chief of Antitrust Compliance officer,
and has not devoted meaningful time or attention to overseeing the antitrust
compliance program.”
• If probation is revoked, AUO could face the full $1 billion fine
• Hearing set for May 29, 2015
– AUO and DOJ currently are negotiating resolution
• Takeaways:
– Must demonstrate remorse
– Take compliance program obligations serious
– Devote necessary time and resources to the program
– Cooperate with the monitor to ensure complete and favorable reports
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Topics Covered
• Recent enforcement developments
• Sherman Act enforcement issues
• Common enforcement steps directed at industries
under investigation
• Key antitrust litigation issues
• How does the Leniency Program work and how can
it help?
• Practical strategies to avoid enforcement problems
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Questions
Mark L. Krotoski
Silicon Valley, California
tel. +1.650.843.7212
fax. +1.650.843.4001
[email protected]
Kent Roger
San Francisco, California
tel. +1.415.442.1140
fax. +1.415.442.1001
[email protected]
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THANK
YOU
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