If you get lost, sometimes you must go back and start again from the beginning. I’ve been a bit lost on whether the Sherman Act is unconstitutional as a criminal statute. It is well accepted that per se violations of the Sherman Act can be prosecuted criminally.  An individual can be sentenced to up to ten years in prison.  But, is the accepted learning on this issue wrong?  I think I’ve found my way to the Sherman Act being unconstitutional as a criminal statute.[1]

Forget everything you know about Supreme Court jurisprudence involving the criminal application of the Sherman Act (that was easy for me).  Take a look at the statute:

Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal.

Can you advise your client what exactly is declared to be illegal?  And watch his face show even more alarm when you explain that whatever it is that he can’t do, if he does do it, the penalty is up to 10 years in prison.[2]   The Sherman Act is void for vagueness.  Justice Sutherland explained the void for vagueness doctrine in Connally v. General Construction Co, 269 U.S. 385, 391 (1926):

The terms of a penal statute…must be sufficiently explicit to inform those who are subject to it what conduct on their part will render them liable to its penalties….and a statue which either forbids or requires the doing of an act so vague that men of common intelligence must necessarily guess at its meaning and differ as to its application violates the first essential of due process of law.

The Sherman Act does not sufficiently inform business people (including foreigners) what conduct can land them in jail or on a Red Notice.  This must be true because even the Supreme Court has said the Sherman Act cannot possibly mean what it says because every contract is in restraint of trade, and every contract cannot be illegal.  Thus, the first Supreme Court triage on the Sherman Act was that only “unreasonable restraints” of trade were prohibited.[3]  But, that doesn’t clear things up too much—What is an unreasonable restraint of trade?  Under the Rule of Reason, a restraint is unlawful only, if after an inquiry to balance the pro-competitive benefits of the agreement versus its anticompetitive effects, the agreement is found to unreasonably restrain trade.  But can you find someone guilty of a crime after weighing the pro-competitive and anticompetitive effects of the agreement?  That doesn’t seem like the notice required by due process either.  Further Supreme Court surgery on the Sherman Act separated out per se violations–restraints of trade that are so highly unlikely to have any redeeming competitive benefits, that the restraints (price-fixing, bid rigging and customer/market allocation) are per se illegal.  As a result, juries are charged in a criminal antitrust case that they do not need to find that the restraint was unreasonable, but simply that the defendant(s) entered into an agreement to fix prices, which, by judicial fiat, is per se unreasonable.

Does the per se rule solve the void for vagueness problem?  The conventional wisdom is that it has.  But changed circumstances sometimes compel a “fresh look” at accepted wisdom.  It is time for that fresh look.  The changed circumstance that comes to mind is that the Sherman Act is no longer a misdemeanor.  It is not a “gentlemen’s crime” meriting a slap on the wrist with a mild scolding from the judge.[4]  The Sherman Act, as a criminal statute, provides for an individual to be sentenced to up to 10 years in jail.  And the ten years is not just theoretical; the Antitrust Division sought a 10-year prison sentence for the CEO of AU Optronics after his conviction.  While the ten-year sentence was not achieved, the record prison sentence for a criminal antitrust violation is now 5 years. [5]

I am not a constitutional scholar, but I do have a blog so I’ll opine what I think is wrong with the Sherman Act as a criminal statute.[6]  First, the Supreme Court cannot save a criminal statute by grafting on elements such as condemning only “unreasonable” restraints of trade, and further holding that only certain types of agreements are per se unreasonable.  But even if the Supreme Court could address the void for vagueness doctrine by holding that only certain restraints are per se illegal, this violates another constitutional tenet; the Supreme Court takes away the issue from the jury with an unrebuttable presumption.  Charles D. Heller has written on this subject and argued that the current practice of instructing the jury that price-fixing is per se illegal, i.e., presumptively unreasonable, is unconstitutional.  The jury should be the fact-finder of whether a restraint is unreasonable.[7]  Finally, the definition of a per se offense is that the restraint (price-fixing for e.g.) is so highly likely to be anticompetitive that there is no inquiry as to whether the actual restraint the defendant is charged with was anticompetitive.  This may be fine for a civil case, but in a criminal case the defendant must be allowed to argue that the charged restraint was the exception to the rule.  Instead, in a criminal case the jury may be charged:

It is not a defense that the parties may have acted with good motives, or may have thought that what they were doing was legal, or that the conspiracy may have had some good results.

This seems like a very odd jury instruction for a crime that carries a ten-year maximum prison sentence, especially when one considers that many of the defendants in criminal antitrust indictments are foreigners.[8]

In short, the Sherman Act is void for vagueness.  But, if the Act does pass the void for vagueness hurdle by grafting on the per se rule, juries should decide whether the restraint in question is unreasonable, and that inquiry should not be contained by a presumption the restraint was per se unreasonable if it was price-fixing, bid rigging or market allocation.  If these standards were applied, however, the Sherman Act would be unworkable.  If juries decided, in an after the fact deliberation, whether a restraint was unreasonable, the void for vagueness doctrine would trump a conviction.  Sad.  Very sad.

My solution to the problem, if there really is a problem, will come as soon as I figure it out—but no later than next week– in Part II.

Thanks for reading.  Comments would be much appreciated, but maybe hold your fire until after Part II?

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[1]  I am not the first to reach this conclusion.  The work of several other authors who find likewise is mentioned in the post.

[2]   Maybe this language that is in Sherman Act indictments will clear things up: “For the purpose of forming and carrying out the charged combination and conspiracy, the defendant and his co-conspirators did those things that they combined and conspired to do.”  To be fair, the indictments then “bullet point” a list of acts the defendant(s) engaged in to carry out the conspiracy.

[3]   Standard Oil Co. of New Jersey v. United States, 221 U.S. 1 (1911).

[4]   I was a brand new Antitrust Division attorney in one trial where we obtained convictions not too long after Sherman Act had been made a felony.  At sentencing, the first convicted defendant got a wicked tongue lashing, but the judge said that, due to his youth and relative inexperience, he would not be sentenced to prison.  The next defendant—ditto on the tongue lashing—but the judge found he should not be sentenced to prison because he was elderly and now retired.

[5]  Frank Peake was sentenced to 5 years in prison for his participation in a conspiracy to fix the prices on cargo shipped by water between the United States and Puerto Rico.  See,  https://www.justice.gov/opa/pr/former-sea-star-line-president-sentenced-serve-five-years-prison-role-price-fixing-conspiracy.  Foreign executives are frequent defendants in criminal antitrust cases and may be put on a Red Notice with dire consequences simply by being indicted.

[6]   For a more scholarly article that takes a look at the void for vagueness doctrine and its implications for the Sherman Act, see Sherman Act and Avoiding Void-for Vagueness, Matthew G. Sipe, posted May 16, 2017, available at, https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2968933&download=yes.

[7]  See Charles D. Weller, The End of Criminal Antitrust Per se Conclusive Presumptions, 58 ANTITRUST BULL. 665 (2013).

[8]   Some strict liability crimes (i.e., statutory rape) can have no intent element but the Sherman Act is not a strict liability crime.

In case you’ve forgotten, on June 8, 2017  the Senate Judiciary Committee voted overwhelmingly in favor of the nomination of Makan Delrahim, President Donald Trump’s pick to be the Assistant Attorney General in charge of the Antitrust Division of the USDOJ.   The committee approved Mr. Delrahim’s nomination by a vote of 19-1. Once approved by the committee, the nomination should go before the full Senate.  But, Mr. Delrahim still has not been brought up for a confirmation vote in the Senate.  Sad.

This is a very unfortunate situation for the nations’ top competition law enforcement body.   The work of the Division goes on as staffs continue investigations and time sensitive decisions are still made. But, it is an added stress and drain on morale to lack leadership; especially when the leadership will likely be enthusiastically received by at least most staff members.  And, not just Mr. Delrahim awaits getting on board; the new Assistant Attorney General will bring in his team to fill out the “front office.”

The delay in confirming Mr. Delrahim has been lamented in two recent articles.  In a June 25, 2017 opinion article in The Hill, DC attorney David Balto wrote:

Delrahim is not controversial and is regarded by both Republicans and Democrats to be perfect for the job. He has a strong reputation as a pragmatist with real world experience to guide the tough enforcement decisions the division faces. Time to get Trump’s new Antitrust Cop on the Beat

Another article referred to the fact that until Mr. Delrahim is appointed and able to fill out his staff, the direction and priorities of the Antitrust Division under Trump are not known.  In a June 30, 2017 BNA Law article Liz Crampton notes:

The long-term agenda of the Justice Department remains unknown as Makan Delrahim, nominee to lead the division, is still awaiting Senate confirmation three months after President Donald Trump named him.   Justice Dept. Antitrust Division Treads Lightly Absent Leader  

Mr. Delrahim can provide the kind of guidance the business community counts on, but is currently lacking.

Here’s hoping something as non-controversial but important as Mr. Delrahim’s confirmation vote can dodge through the dysfunction in DC and get taken care of very soon.

Thanks for reading.

I have written often about the need to reform the Sentencing Guideline for antitrust violations.  U.S.S.G. 2R1.1. (here)(here)(here).  My major beef is that the antitrust guideline measures culpability primarily by the volume of commerce subject to the agreement, to the exclusion of many other very relevant factors.  The cartel boss who engages the firm in the illegal conduct is tagged with the same volume of commerce as the employee who is assigned the task of going to cartel meetings to work out the details.

Sally Q. Yates served in the Justice Department from 1989 to 2017 as an assistant U.S. attorney, U.S. attorney, deputy attorney general and, briefly this year, as acting attorney general.  Ms. Yates described the problem with overweighting a quantifiable factor better than I ever have, though in a slightly different context:

“But there’s a big difference between a cartel boss and a low-level courier. As the Sentencing Commission found, part of the problem with harsh mandatory-minimum laws passed a generation ago is that they use the weight of the drugs involved in the offense as a proxy for seriousness of the crime — to the exclusion of virtually all other considerations, including the dangerousness of the offender.”

Sally Yates, Making America Scared Won’t Make us Safer.  Washington Post, June 23, 2017

For the record, the issue of mandatory minimums is a far more serious issue than the problem of sentencing individual criminal antitrust offenders.  While I hope for antitrust sentencing reform, it is not really a “need.” The antitrust sentencing guidelines are so divorced from actual culpability that virtually no individual–even a cartel boss–is sentenced to a guideline range term of imprisonment.

Thanks for reading.

 

Here is a link to a brief filed by a number of professors asking the Supreme Court to clarify the standard to be applied by districts courts to a defendant’s motion for summary judgment in a Section One antitrust case,  evergreen – petition for certiorari – amicus brief – filed copy – 4.21.17 – evergreen partnering group v. pactiv corp.  The petition notes:

“[C]ircuit courts are mired in an abiding difference of opinion concerning the appropriate interpretation of the summary judgment paradigm in cases brought under Section 1 of the Sherman Act as applied to circumstantial evidence.”

The professors are going to bat for plaintiff Evergreen, which had its group boycott claimed dismissed on summary judgment. The amicus brief argues that the First Circuit incorrectly applied the Matsushita standard that requires the plaintiff to produce evidence that “tends to exclude the possibility of independent conduct.” The brief goes on to argue say this strict standard should only be applied where the defendants’ conduct is arguably pro-competitive (like the price cutting in Matsushita). In this case, the brief argues, the correct standard, is found in Eastman Kodak Industry Co. v. Image Technical Services Inc.,: whether the plaintiff has produced evidence that the defendants’ conduct is unreasonable.

From the brief:

The Second, Third, Fifth, Sixth, Seventh, Ninth, and Tenth Circuits “have narrowed the application of Matsushita’s “tends to exclude the possibility of independent conduct” test to situations where the plaintiff ’s theory: (1) is implausible; and (2) challenges pro-competitive conduct….The First, Fourth, Eighth, and Eleventh Circuits, however, do not interpret Kodak as a limitation on Matsushita’s “tends to exclude” test. These courts universally apply the test to all motions seeking entry of summary judgment on a conspiracy claim under Section 1, regardless of whether plaintiff’s theory makes economic sense or there is little or no risk of chilling pro-competitive behavior.”

The brief notes that Judge Posner has been critical of the Matsushita “tends to exclude the possibility of independent conduct” standard for requiring the plaintiffs to disprove the defendants’ case with a “sweeping negative.” Richard Posner, Antitrust Law, 100 (2d ed. 2001).  The brief also quotes a Judge Posner opinion:

“That would imply that the plaintiff in an antitrust case must prove a violation of the antitrust laws not by a preponderance of the evidence, not even by proof beyond a reasonable doubt (as indeed is required in criminal antitrust cases), but to a 100 percent certainty, since any lesser degree of certitude would leave a possibility that the defendant was innocent.”

In re Brand Name Prescription Drugs Antitrust Litig., 186 F.3d 781, 787 (7th Cir. 1999) (Posner, C.J.).

The brief concludes:

“In sum, the decision below illustrates and intensifies confusion among the lower courts about the Matsushita standard for Section 1 antitrust claims at summary judgment. The question is critical; private enforcement is essential to maintaining the correct balance between under and over deterrence to foster healthy competition. But when it comes to Matsushita, inconsistency in its application is now the rule, rather than the exception. For these reasons, the Court should clarify the standard, resolve the circuit split, and emphasize that the correct interplay between Matsushita and Kodak properly limits the “tends to exclude” summary judgment standard to cases where the alleged conspiracy is economically irrational and the conduct is pro-competitive.”

Whichever side of the “v.” you are on [plaintiff or defendant] the brief is a useful read for the discussion of the differences among the circuits on the proper standard for summary judgment.

Evergreen is represented by Richard Wolfram  who earlier had filed a petition for certiorari with Supreme Court. A copy of the petition can be found here.

Thanks for reading.

 

The confirmation hearing for Makan Delrahim to head the Antitrust Division of the United States Department of Justice is set for tomorrow, April 26. Some background on Mr. Delrahim and the upcoming confirmation hearing can be found here. Mr. Delrahim has garnered praise and respect from both sides of the aisle so his confirmation should be relatively non-controversial. Mr. Delrahim knows his way around the Antitrust Division and he will also no doubt get sound advice from experienced practitioners he’ll bring on board, as well as the career antitrust attorneys in the Division. But, what’s the use of having a blog if you can’t offer some unsolicited advice, so here goes.

• Suggestion 1:                        OPEN TWO NEW FIELD OFFICES

One of the big surprises of the Obama antitrust administration was the closing of four of the Antitrust Division’s seven field offices. The offices that were whacked were Atlanta, Cleveland, Dallas and Philadelphia. Each of these offices contributed significantly to international cartel enforcement, but also gave the Division a regional presence that facilitated leads and prosecutions on regional and local conspiracies. It may not be fiscally feasible to reopen all of the closed field offices, but certainly a renewed presence in the South and Southwest should be considered. I’ve written more about the benefits behind this proposal in a previous blog post (here).

A related suggestion is for the Antitrust Division to recommit to having attorneys serve short-term details in select US Attorney’s offices. The Division has a long history of these details, which allow for an expanded antitrust presence while also giving the opportunity to promising attorneys to develop trial skills.

• Suggestion Two:      Offer Whistleblower Incentives

The Antitrust Division has long been opposed to any kind of whistleblower incentives for reporting suspected cartel activity. The primary reasons seem to be two-fold: 1) financial incentives would undermine the credibility of whistleblowers; and 2) the Antitrust Division may be inundated with unmeritorious claims.

I’ve written before why some sort of whistleblower incentive/protection should be offered (here). It is a subject that I’m seriously interested in and I’m currently working on an article I hope to publish in support of a cartel whistleblower incentive. It is a timely issue as there is concern that the Corporate Leniency Program may be running out of steam as the disincentives to self-reporting may be increasing. Also of interest, whistleblowers in the UK are just now being offered up to £100,000, as the CMA launched its first-ever advertising campaign to crack down on cartels (here).

• Suggestion Three:   Corporate Leniency Roundtable

It would be a good idea for the Antitrust Division to facilitate a roundtable on the Corporate Leniency Program to solicit feedback from the plaintiff and defense lawyers in cartel practice. Off-the-record, confidential discussions between enforcement agencies and ABA Antitrust Section committees are common and often helpful.

As mentioned, there is considerable “noise” in the defense bar that the consequences of seeking leniency (the length and difficulty of the leniency proffers, the long-term disruptions to business, the follow on civil lawsuits; prosecutions by multiple jurisdictions) are contributing to a decrease in leniency applications. These observations may be rejected by the Division as nothing more than “working the ref” for the next leniency call, but an open discussion of this long-established program may be valuable. Likewise, the plaintiff bar may have some suggestions worth considering on the administration of the Corporate Leniency Program. A discussion can’t hurt—and its budget friendly, i.e. –free.

• Suggestion Four:     Sentencing Guideline Reform

I have long been advocating reform of the antitrust sentencing guidelines for individuals. I’ve written quite a few times on the subject (here)(here)(here) and have had the opportunity to speak on the subject on several panels. My main beef is that the volume of commerce is the main vehicle for calculating an individual sentencing guideline range and the volume of commerce calculation rules are the same for the most and least culpable individual in a cartel. My concerns haven’t exactly lit a fire for guidelines reform; possibly because the guidelines are understood to be irrational and the Antitrust Division and the courts almost always depart from the recommended guideline range when negotiating or imposing a sentence.

PS.  I want to thank my friend Allen Grunes, Konkurrenz Group for the catchy title, Makan Antitrust Great Again.  We are both alumnus of the Antitrust Division, however, and feel the Division has already been great–but improvement is always possible.

Thanks for reading

Makan Delrahim has been nominated to head  the US Department of Justice’s Antitrust Division.  While awaiting Senate confirmation, Andrew C. Finch, a former DOJ attorney and current Paul Weiss partner, will rejoin the Division and serve as Acting Assistant Attorney General for Antitrust.

In a March 29, 2017 press release, the Antitrust Division announced its annual newsletter recapping highlights from the previous year’s efforts. The entire Spring 2017 Update update covers all of the Divion’s activities, including civil and criminal enforcement, international cooperation and competition advocacy.   This excerpt demonstrates how the civil enforcement program can sometimes lead to a criminal investigation and charges:

CIVIL INVESTIGATIONS UNCOVER EVIDENCE OF CRIMINAL CONDUCT

The Division recently investigated the proposed merger of Thai Union Group P.C.L., owner of Tri-Union Seafoods LLC, d/b/a Chicken of the Sea International (Chicken of the Sea) and Bumble Bee Foods LLC (Bumble Bee), which was publicly announced in mid-2015. As civil attorneys reviewed information and party materials produced in the ordinary course of business, they discovered materials that appeared to raise criminal concerns. Recognizing the potential criminal implications of the materials, they reached out to their criminal counterparts in the Division.

As a result of the civil attorneys’ keen eyes, the Division opened a criminal investigation into collusion in the packaged seafood industry. To date, the criminal investigation has resulted in guilty pleas from two senior vice presidents of leading packaged seafood companies for conspiring to fix the price of packaged seafood, such as canned tuna. The Division’s criminal investigation is ongoing. The merger, however, was abandoned.

Pre-merger due diligence should include many items, but competition troubleshooting should definitely be on the agenda.

Thanks for reading.

Defending the Foreign “Fugitive” Against the Fugitive Disentitlement Doctrine

[This is Part 2 of a multi-part article on ways a foreign fugitive may be able to get some issues heard by a US federal court without surrender/arrest in the United States in order to  personally appear in court. Part 1 can be found here:

Robert E. Connolly[1]

Masayuki Atsumi[2]

 A foreign defendant who presents any matter before a court such as a motion to dismiss the indictment for lack of jurisdiction, statute of limitations expiration or any other legal defect, will have to overcome the court’s inclination to apply the fugitive disentitlement doctrine. The government will almost certainly assure the court that there is no need to decide the issues because the fugitive is disrespecting the court by his absence. Defense counsel must persuade the court that a foreign fugitive defendant is in a very different situation than an individual who has been convicted and fled. The court will need to be educated about all the penalties a mere indictment brings, especially the serious penalty of the defendant being put on a Red Notice without ever having been convicted.

The defense should first argue that a foreign located defendant is not a fugitive because he did not flee. This, however, is not likely to be a winning argument. As one judge stated: “[t]he Court cannot be bound by the semantics that limited fugitive status to fleeing or failing to return when dealing with an international criminal defendant who allegedly violated United States law from abroad.”[3]  Nonetheless, arguing that a foreign defendant is not a fugitive (assuming he did not flee the United States upon or in anticipation of indictment) is the first step in distinguishing the foreign defendant from the convicted defendant who flees but seeks an appeal.

Avoiding application of the fugitive disentitlement doctrine will require convincing the court to assess the rationales behind the doctrine [Mutuality, Respect for the Court, Discouraging Flight and Prejudice] with the circumstances of the foreign-based defendant in mind. The defendant can emphasize that due process is a mirage if the foreign defendant must first accept the penalty of an indefinite stay in the United States to gain access to the court. Experiences like those of fugitives who have been detained on a Red Notice, or lost careers because of their inability to travel, can show how serious punishment is inflicted by the indictment itself.

Here is a closer look at the four underpinnings of the fugitive disentitlement doctrine as applied to a foreign fugitive:

Mutuality

At first glance, if a defendant files a motion to dismiss, or seeks to set conditions of bail, or some other pretrial issue without first coming to the United States and being arrested, it looks as if the defendant has not risked anything. He simply stays abroad if he loses. But, a foreign fugitive does have something to lose if a motion to dismiss an indictment is heard and lost. A foreign fugitive facing extradition can credibly argue that extradition should be denied because the fugitive disentitlement doctrine, as applied to him, affords no due process. The defendant is forced to endure a unique hardship [indefinite life in a foreign land] simply to get access to court. A foreign jurisdiction maybe sympathetic to the argument that it is not fair to extradite an individual to the Untied States if that individual is not permitted to even challenge the legality of the charges against him from outside the U.S. It is arguably a denial of due process if a foreign defendant must leave his country for an indefinite period of time, face possible imprisonment in the United States if denied bail, and leave his job/income and lose contact with his family merely to be allowed to argue that the United States has exceeded its legal authority in bringing the charges. The Seventh Circuit made this point in In re Hijazi,[4] where a Lebanese citizen living in Kuwait moved, through counsel, to dismiss his indictment raising what the Seventh Circuit deemed to be significant legal issues about the extraterritorial application of U.S. laws. The district court refused to rule on the motions until Hijazi appeared in person. The Seventh Circuit held that “under the unusual circumstances of this case, the district court had a duty to rule on Hijazi’s motions to dismiss.”[5] The Seventh Circuit found mutuality in that Hijazi faced serious travel and negative employment consequences if his indictment was upheld stating “A federal court decision upholding the indictment,,,may make those governments more likely to exercise that discretion [to extradite] and less confident in resisting diplomatic pressure from the United States if they are no longer able to protest that the indictment is legally flawed as a matter of U.S. law.”[6] Giving a foreign fugitive defendant some access to a U.S. court will strengthen the government’s hand when trying to extradite that individual.

The defendant can also turn the “mutuality” argument on its head. An important and developing issue in antitrust cases, in fact, in many white-collar crime cases, is the extraterritorial application U.S. law. Currently, the government can adopt the broadest arguable jurisdiction knowing how unlikely it interpretation is to be challenged in court. In that sense, it is the government that lacks mutuality; it can indict with a reasonable assurance—[but certainly not a guarantee]—that the defendant will not be able/willing to pay the stiff price of appearing in the U.S. to challenge the indictment. The foreign defendant has to accept a stiff sentence—indefinite detention in the United States—in order to avail himself of any due process.

There are no hard numbers available to say how many foreign defendants have been indicted and remain fugitives—some for decades or until death. Virtually every international cartel case involves foreign citizens being indicted (some under seal) and remaining fugitives. In one unusual case, AU Optronics, six foreign-based defendants surrendered to the United States and went to trial. Three of the six were acquitted. But, the unusual factor in this case was that the company itself also went to trial and stood by its indicted employees. The individual defendants did not have to bear the cost of being unemployed, living in a foreign land and bearing all of the consequences of an “away” trial.

Disrespecting the Judicial Process

It should be clear that the failure of a foreign defendant to come to the United States and be arrested so he can appear before the court is not out of any disrespect, but rather a hope to avoid “punishment” before trial. There is an ocean of difference between a defendant who has gone to trial, lost, and fled, but wants his appeal decided. If the foreign-based defendant is flouting the justice system, surely it is the mildest of “flouts.”

Discouraging Flights From Justice

With the foreign-based defendant, there are no flights from justice. It is true, however, that a decision to allow a foreign-based defendant to challenge his indictment while safely out of range may encourage others to do the same. But the possibility/probability of defending a decision in court can only sharpen a prosecutor’s analysis of the issues when deciding whether to indict. It is not sound administration of justice if the prosecution’s theories are rarely subject to judicial scrutiny. Litigating issues before a court provides an opportunity to test the limits of prosecutorial extraterritorial application of the laws and other issues that might arise pretrial.

            Avoiding Prejudice to the Other Side

Finally, the government does suffer some prejudice if a foreign fugitive is allowed to stay out of harm’s way while challenging the sufficiency of the indictment. This may encourage defendants to attack the government’s exercise of power before seeking a plea agreement. It may also cause some delay in the investigation. But, this prejudice is minimal compared to the prejudice suffered by a foreign defendant on a Red Notice.  As noted below, the degree of prejudice can change dramatically, however, based on the relief the defendant is seeking.

Case-by-Case Analysis Required

To be sure, there will be limits, and rightly so, to the ability of a defendant to contest the charges without appearing in the United States. The balancing of factors will clearly change if the defendant seeks discovery that goes to guilt or innocence. The government will protest having to preview its case while the defendant stays safely out of range while considering whether he wants to engage in combat by trial. Discovery of guilt or innocence evidence may prejudice the government in other ways, especially if there are subjects remaining in the investigation. But, instead of activating the fugitive disentitlement shield to fend off all challenges to any legal defects in the indictment, each situation should be examined closely to determine if the rationales for the doctrine apply to the defendant and the issue presently before the court.

Part Three will examine some cases and situations that relate to the issues discussed above. .

[1] Robert Connolly was a career prosecutor with the Antitrust Division and retired as Chief of the Philadelphia Field Office. He is now with GeyerGorey LLP. Mr. Connolly led many international cartels investigations/prosecutions including graphite electrodes. His office led the extradition, trial and conviction of a British national for obstruction of justice. His blog Cartel Capers, has been cited by the Seventh Circuit and was named an ABA Top 100 Blawg. www.cartelcaper.com.

[2] Masayuki Atsumi is a competition lawyer with a broad range of cartel experience. He is admitted to practice both in the United States and Japan. He is currently with Mori Hamada & Matsumoto in Tokyo. He has worked at the Japan Fair Trade Commission (JFTC) from 2006-2008. His profile can be found at http://www.mhmjapan.com/ja/people/staff/11218.html.

[3] United States v. Hayes, 118 F. Supp. 3d 620, 626 (S.D.N.Y. 2015).

[4] In re Hijazi, 589 F. 3d 401 (7^th Cir. 2009).

[5] Id. at 403.

[6] Id. at 412-13.

Defending the Foreign “Fugitive” Against the Fugitive Disentitlement Doctrine

Robert E. Connolly[1]

Masayuki Atsumi[2]

The fugitive disentitlement doctrine is an equitable doctrine under which a court has the discretion to decline to consider a petition of a defendant if that defendant does not submit the jurisdiction of the court. “The paradigmatic object of the doctrine is the convicted criminal who flees while his appeals is pending….”[3] Today, however, the fugitive disentitlement doctrine has been applied beyond its intended application to bar a foreign citizen indicted by an Antitrust Division grand jury from raising any matters with the court unless he first appears personally before the court. It may be surprising to learn that a person who has never set foot in the United States may be considered a “fugitive.” If a grand jury in Detroit indicts a Japanese executive while he is having breakfast in Tokyo, he has become a “fugitive” if he does not surrender in the United States.

If a foreign defendant attempts to attack the validity of an indictment while remaining outside the jurisdiction of the United States, the government will typically raise the fugitive disentitlement doctrine and request that the court not consider the merits of the defendant’s request.   But, if the defendant attempts to appear in court, he will be arrested upon entry into the United States, if not while in transit. This may seem unremarkable, because a domestic defendant will also be arrested upon indictment. The foreign defendant, however, faces extreme risks if he appears to have his defense heard. Once arrested, the foreign defendant may be unable to leave the United States until his case has reached final adjudication—perhaps years away. The cost of access to the courtroom to seek to dismiss an indictment for legal defects such as statute of limitations or lack of jurisdiction or other procedural matters is quite high for the foreign defendant—potentially years away from a job, home, family, health care providers and many other hardships of an indefinite stay in a foreign land. These are unique disadvantages not faced by a domestic defendants. [Read more…]

Below is a guest post by Avinash Amarnath, an attorney with the competition team at
Vinod Dhall and TT&A, New Delhi, India.  Mr. Amarnath can be reached at avinash.aba@gmail.com.

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Supreme Court of India issues first substantive ruling on Competition Act

The Supreme Court of India (Supreme Court) has recently issued its first substantive ruling on the provisions of the Indian Competition Act, 2002 (Competition Act) in Competition Commission of India v. Coordination Committee of Artists and Technicians of West Bengal Film and Television and Ors. This judgment is important as it constitutes binding precedent which the Competition Commission of India (CCI) and the Competition Appellate Tribunal (COMPAT) will have to follow in future cases.

The judgment arose out of an appeal filed by the CCI against an order of the COMPAT setting aside a CCI finding of cartelization. The brief facts of the case were that the Coordination Committee of Artists and Technicians of West Bengal Film and Television (Coordination Committee) and the East India Motion Pictures Association (EIMPA) (two associations representing the film and TV industry in the state of West Bengal) had issued letters and boycott threats to two Bengali language TV channels demanding that they stop broadcasting a dubbed version of a Hindi language TV serial. The reason for issuing these letters and threats was stated to be that broadcasting of dubbed content adversely affected producers, artists and technicians of the Bengali language. The Supreme Court’s judgment only deals with the Coordination Committee as only the Coordination Committee appealed the CCI’s decision.

The Supreme Court framed two issues for consideration: a) what would be the relevant market in the instant case; and b) whether the actions of the Coordination Committee were covered by Section 3 of the Competition Act dealing with anti-competitive agreements.

On the first issue, the CCI had delineated a broad market for ‘film and TV industry in West Bengal’. The COMPAT had disagreed with this broad delineation as the allegation pertained only to dubbed serials on TV and had no relation whatsoever to production, distribution etc. of films or other material on TV channels. The Supreme Court found that the view taken by the COMPAT was myopic and the effect of the conduct of the Coordination Committee was not limited to broadcast of TV serials. Further, while commenting on the scheme of the Act, the Supreme Court made certain important observations on the concept of relevant market. The Supreme Court observed that the term ‘market’ used in Section 19(3) of the Competition Act (which lists out the factors that the CCI should consider while assessing whether an agreement under Section 3 causes an appreciable adverse effect on competition in India) should be construed as referring to the ‘relevant market.’  Further, the Supreme Court recognised that the relevant market is an economic concept and in defining the relevant market, the CCI should look at the evidence that is available and relevant to the case at hand. The Supreme Court also recognised that the CCI may conduct its assessment on the basis of alternative market definitions and where the CCI found no competition concerns, the question of the most appropriate market definition can be left open. While these principles are well accepted in competition law and have usually been adopted by the CCI in previous cases, their recognition by the highest court of the land gives them the force of law. Furthermore, at first blush, the Supreme Court’s observation on Section 19(3) appears to impose an unreasonable burden on the CCI to define the relevant market in every case relating to anti-competitive agreements including straightforward cartel cases where the need for a detailed substantive competition analysis does not arise. However, in my view, the judgment when read in context and holistically, does not appear to impose such a burden on the CCI. The primary reason for discussion on the relevant market in this case was to determine whether the conduct of the Coordination Committee arose from a horizontal agreement. The Coordination Committee had argued that its conduct could not be considered as arising from a horizontal agreement since its members consisted of producers, artists and technicians all of whom fell at different levels of the film and TV industry. In this context, it is foreseeable that in some cases where this is not very straightforward, the CCI may need to broadly discuss the market in which the parties accused of cartelization operate to determine if the arrangement among them constitutes a horizontal agreement.

On the second issue, the Coordination Committee had argued that it’s actions fell outside the scope of Section 3 of the Competition Act as it was not an ‘enterprise’ (the Indian law equivalent of the EU concept of ‘undertaking’) and it was only acting as a trade union to protect the interests of its members. The Supreme Court observed that the concept of ‘enterprise’ under the Competition Act was a functional one and any entity carrying on economic activity (i.e. “any activity, whether or not profit making, that involved economic trade”) would constitute an ‘enterprise’ while carrying out such activity. In the present case, the Supreme Court found that while a trade union carrying out its functions in the form of collective bargaining for its members cannot be considered to be ‘economic activity,’ the Coordination Committee was in fact an association of enterprises espousing the economic interests of its members who were engaged in the production, distribution and exhibition of films and TV serials. Therefore, it’s conduct was covered under Section 3 of the Competition Act. In finding so, the Supreme Court has usefully adopted two well recognized principles of EU competition law i.e. the interpretation of ‘undertaking’ as a functional concept and the recognition of a ‘collective bargaining’ exemption from the application of competition law.

On the above basis, the Supreme Court set aside the COMPAT’s order and affirmed the original findings of the CCI.

The full judgment of the Supreme Court can be accessed here: http://supremecourtofindia.nic.in/FileServer/2017-03-11_1489223714.pdf