Today’s guest post is by James Musgrove and Joshua Chad of the leading Canadian law firm, McMillan LLP

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Welcome Back to Canadian Cartel News. Following Volume 1’s primer on Canada’s anti-cartel legislation, Volume 3 provides an overview of the Canadian Competition Bureau’s Immunity and Leniency programs.[1]

Like many of its counterparts around the world, the Canadian Competition Bureau (the “Bureau”) has established immunity and leniency programs to encourage parties to admit their involvement in the commission of Competition Act offences and to cooperate in the subsequent prosecution of such offences. The Bureau has released an Immunity Program Bulletin as well as a Frequently Asked Questions document.  In regard to its Leniency Program, it has also released a Leniency Program Bulletin and a Frequently Asked Questions document.

The Immunity Program allows for immunity from criminal prosecutions to be granted to a party who has committed a Competition Act offence, on the condition that this party is the first person to report the matter to the Bureau and that the person assists the Bureau by providing information for use in prosecuting others that were involved in the same offence. To receive immunity, the applicant must either have disclosed an offence to the Bureau of which the Bureau was not previously aware, or the applicant must be the first to come forward to the Bureau before the Bureau has sufficient evidence to recommend that the matter be prosecuted. The successful applicant receives immunity from prosecutions for itself and its employees, officers and directors. Of note, the Bureau does not give any special treatment or consideration to a party because it has been granted immunity or favourable treatment in another jurisdiction. To be the successful Immunity applicant in Canada, the party must be the first to report the offence to the Bureau.

The Leniency Program offers favourable treatment to subsequent parties that come forward and cooperate with the Bureau in its prosecution of Competition Act offences. The first leniency applicant will typically receive a significantly reduced fine (typically a 50% reduction), as well as immunity for its employees, officers and directors. As well, if the Immunity applicant is unable to fulfill the requirements of the Immunity Program, the first Leniency Program applicant will be able to request immunity. Subsequent leniency applicants will receive lesser reductions in fines, and its personnel are not guaranteed full immunity, but the corporate penalties are less than they otherwise would have been had the party not come forward and cooperated. Moreover, a Leniency Program applicant may be able to receive a further reduction in its fine amount for its leniency-related offence if it also reports to the Bureau information concerning additional Competition Act offences that qualify for the Immunity Program (known as “Immunity Plus”).   [Read more…]

Today’s Guest post is from Markus Röhrig who is a partner at the European law firm Hengeler Mueller. He is admitted to the German and the New York bars. Mr. Röhrig specialises in German and European competition law.  He frequently advises clients with respect to European and German cartel investigations, behavioral issues (abuse of dominance) and merger control cases.

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When Regulation No. 1/2003 celebrated its tenth anniversary earlier this year, Vice President Almunia announced that the European Commission (EC) would launch an initiative to review how the enforcement system has performed and to explore further improvements. In July 2014, European Commission published a report which sets out a thorough analysis of the enforcement activities of the EC and the National Competition Agencies (NCAs) in the past ten years and a number of proposals to enhance antitrust enforcement in the EU in the years to come. The EC is currently engaged in discussions with stakeholders.

The EC’s objective is to create a genuinely common area for antitrust enforcement in Europe. In its report, the EC submits several proposals to achieve that goal. These include, first, enhancing procedural convergence. According the EC, some NCAs lack fundamental enforcement powers such as, e.g., the power to inspect the premises of private individuals or the ability to effectively collect electronic evidence. Second, the report finds that there is scope to harmonize and enhance the effectiveness of sanctions for antitrust infringements. Amongst other things, the report specifically mentions that all NCAs should be able to apply the concept of parental liability and economic succession, as established by the European courts, and that a uniform rule on the legal maximum of administrative fines for antitrust infringements would be desirable. The report also stresses that the achievements made in terms of leniency policy need to be secured. The third area which the report addresses is highly controversial in the EU, namely the role which sanctions on private individuals –especially criminal sanctions– should play in antitrust enforcement. The report points out, rightly I believe, that such sanctions can work as a disincentive for companies to seek leniency.   [Read more…]

Since I began practicing antitrust law a very long time ago I have observed two significant developments. First, antitrust law is called competition law in other places around the world and today there is increasingly robust global competition law enforcement.   The second development: economists now have more and larger parties at the ABA Antitrust Spring meeting.

Given the first development, Concurrences Journal, in partnership with the New York University School of Law, is holding its inaugural conference “Antitrust in Emerging and Developing Countries” on Friday, October 24, 2014. This one-day conference (8:30am to 6:30pm) features speakers from China, Brazil, Mexico, South Africa, among other jurisdictions. Keynote speakers include:

• Eleanor M. Fox, Professor at NYU
• Santiago Levy Algazi, Vice President for Sectors and Knowledge at the IADB
• Dennis Davis, Judge of the High Court of Cape Town
• William E. Kovacic, Professor at GW University
• Frank Fine, Executive Director, China Institute of International Antitrust and Investment
• Blanca G. Rodriguez, DG Comp
• Randolph W. Tritell, FTC

There is a detailed program and complete list of speakers on the program website.

The conference should provide interesting insights into similarities and differences among enforcement agencies around the globe. One panel I am particularly interested in is: Dominance and Abuse: What’s the Problem; What are the Remedies?   Hopefully the auto parts cases will be discussed.   The U.S. and other jurisdictions are bringing many cases against the auto parts manufacturers. These have been classic per se horizontal price-fixing/bid rigging cartel cases. But, India and China have just brought large auto parts cases as well. These appear to be quite different. There was no charge of horizontal collusion. Instead the cases involve “abuse of dominance” in the way auto parts manufacturers control distribution and pricing of parts for their product. The very headline “India Charges 14 Auto Makers with Abuse of Dominance” is a little puzzling to U.S. trained competition lawyers.  The fact that there are 14 automakers would seem to doom any “dominance” charges.  But, the companies were fined a whopping $420 million collectively. “The car companies charged arbitrary and high prices for their spare parts” through their monopolistic control, the Competition Commission of India said in a statement.  The car companies were also found to be “distorting fair competition” by using their dominant position to protect their market for repair services.  How were these decisions made? On what evidence? What were the economic theories regarding interbrand versus intrabrand?  Were these distinction recognized?   The “Antitrust in Emerging and Developing Countries” conference sounds like a good place ask these and other questions.

 

 

I was recently a speaker at both the Society of Corporate Compliance and Ethics conference in Chicago and the Ethics and Compliance Officer Association conference in Atlanta. I learned a lot from the members and my fellow panelists, Tim Bridgeford of Tyco and Doug Tween of Baker & McKenzie.  One theme of both panels, and the theme of this post, is the need for an effective antitrust ethics and compliance program. In the competition for compliance dollars, and C-suite attention, it is important to be able to effectively make the case for devoting resources to antitrust compliance.  And the case is compelling, even though the Antitrust Division does not credit a company for having a compliance program if a price-fixing violations occurs.

Antitrust compliance has been overshadowed somewhat by FCPA compliance. For example, we were the only panel on antitrust compliance at the conferences. There were many FCPA related programs. One reason for this disparity is that the Criminal Division has given extensive guidance on what constitutes an effective compliance program. The Antitrust Division by contrast, while stressing that antitrust compliance programs are essential, has declined to offer guidance.  Another key factor may be that in the FCPA world a company may avoid criminal prosecution if it had an effective compliance program, or may at least have the compliance program taken into account in its penalty if it is prosecuted. On the other hand, the Antitrust Division does not give credit for a preexisting antitrust compliance program.

The Antitrust Division, which rarely makes public comments about compliance programs, addressed the issue in two recent speeches. Brent Snyder, Deputy Assistant Attorney General for Criminal Enforcement gave a speech: Compliance is a Culture, Not Just a Policy.  Snyder referred to Chapter 8 of the United States Sentencing Guidelines as providing “guidance for minimal requirements of an effective compliance and ethics program. The Guidelines set out several common-sense principles that, when applied, increase the likelihood that a compliance program will be effective.”  Snyder also referred to competition compliance guidance given by the International Chamber of Commerce in The ICC Antitrust Compliance Toolkit.

A day later on September 10, 2014, Bill Baer, Assistant Attorney General for the Antitrust Division gave a speech: “Prosecuting Antitrust Crimes.” Baer reiterated the Division’s long held position that it is highly unlikely that a company can get credit for a failed compliance program: “The fact that the company participated in a cartel and did not detect it until after the investigation began, makes it difficult for the company to establish that the compliance program was effective.”

There is much more to both of these speeches as discussed in an earlier Cartel Capers post.  And, there is much better news north of the [American] border. Canada has announced draft guidelines on compliance programs that offer credit to a company for instituting a robust and compliance and ethics program—even if, in certain circumstances, there has been a breach. These important guidelines have been published for public comment and can be found here.

Despite the Division’s position on compliance programs, there are compelling reasons why a company should have an antitrust/competition compliance program. We discussed some of these during our panels:   [Read more…]

Today’s post is from Mauro Grinberg who is a partner at Grinberg Cordovil in Brazil.   Mr. Grinberg is one of the leading competition lawyers in Brazil and is a former Commissioner of CADE, the Brazilian antitrust agency.

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Cartels and Leniency in Brazil

Cartels have obviously been violations of the Brazilian Law but, due to low and unfruitful enforcement, most of the Brazilian businesses were not very worried about it. Moreover, the economic policies until the mid and late 90s were to call the members of a certain market and talk to them altogether in order to make them lower the prices of certain goods. It happened with cars, tires, milk, coffee, etc. Now we can see that most cartels were sort of “sponsored” by the Government.

Of course this has changed and a landmark decision was issued in 1999 by the Brazilian antitrust agency, Conselho Administrativo de Defesa Econômica (CADE) against the three producers of sheet steel. The scenario was so blurred at that time that the three CCOs of the companies traveled together from São Paulo to Brasília where they held a meeting with the authority in order to communicate that they have raised their prices due to the inflation rate. They intended to have the blessing by the authority, as it had always happened and they had no means to know it would be different this time. And it was. An investigation was opened and they were accused of conducting a cartel and convicted in 1999. Needless to say, the companies went to Court against such conviction but there is not a definitive decision after 15 years.

Since then, things have changed dramatically and now it is clear for the big business that cartels are against the law; usually they know quite well the “do´s” and “don´t’s” list. The fact that in most of the markets there are foreign companies, used to the antitrust law in their countries of origin, helps a lot. Also, these companies are keen to implement compliance programs which not only are educational tools but also help to detect violations of the law.

From here we go to the leniency program, where these violations can be uncovered and reported (and in most cases are). In the past it would be difficult to imagine the existence of whistleblowers in Brazil, due to some behavioral traditions. Not anymore, maybe because of the foreign business culture which has been inoculated in our culture but also because of the growing consciousness of the illegality. Of course the incentives play an important role.

However, it is so far very clear to the observer that the vast majority of the leniency agreements happens in markets that bear the participation of foreign companies. Brazilian business is still skeptical about leniency. But this also may change because the authorities are now going after middle markets and trade associations (including those joining doctors, dentists, real estate agents, etc.) in which apparently compliance programs are not even thought of. Gas stations, mainly in small towns, are facing cartel accusations, often with evidence showing that no one was very worried about being caught.

It is to think that both compliance and leniency programs will soon be used by these groups. Meanwhile, however, there has not been a strong awareness of the illegality of competitors acting together. A lot more of advocacy is needed to get to such point; in the meantime, conflicts are arising and will arise facing these groups and their illegal methods.

A remark about the role of Courts is important here. In Brazil any decision or act by the Public Administration (including the antitrust authorities can be taken to and questioned by the Courts. The antitrust authority tried to argue that the Courts could only review procedural matters but was not successful. Although Courts recognized that this is a Constitutional guarantee for the parties, we must understand that the system in Brazil is very slow, mainly when dealing with antitrust law, which is rather new in Brazil. We can understand that Judges are pretty much used to arguments related to the due process of law but not so much when it comes to antitrust law. It is, we hope, a question of time.

Competition Policy International (CPI) recently published a collection of articles relating to the FTAIA and the Motorola Mobility case. I was pretty excited to have an article in the collection that included distinguished authors such as Professor Eleanor Fox. CPI is a subscription-based service, but this is the blurb introducing the issue:

In Motorola Mobility, the Seventh Circuit is readying to rehear a lawsuit that will (hopefully) clarify the extent of U.S. antitrust law’s reach outside of the United States. The issue concerns the Foreign Trade Antitrust Improvements Act, which was ostensibly passed to clarify the reach and limits of the Sherman Act for U.S. companies doing business abroad. However, given divergent court opinions, matters have become quite messy. This issue will bring you up to date on the history, the issues, and the significant ramifications at stake. As Eleanor Fox writes in her article, this situation raises the possibility that “U.S. law is in danger of creating a void in the reach of U.S. antitrust law to reprehend anticompetitive acts by foreigners abroad destined to raise the price of goods and services to U.S. consumers.”

Summary

In my article (here) I make the following points:

• The FTAIA ought to be repealed. The FTAIA was passed in 1982 primarily to provide immunity to U.S. exporters to engage in anticompetitive conduct as long as it was directed at foreign markets. The world has changed since 1982 and such immunity is now obnoxious.
• The comity concerns of foreign nations who have filed amicus briefs arguing that Sherman Act jurisdiction should not extend to overseas sales of components are not frivolous. Many, perhaps most, products purchased by U.S. consumers contain components that were made, purchased and assembled overseas.
• The court should find that the FTAIA requirements of “direct, substantial and reasonably foreseeable effect” on U.S commerce were met on the facts in Motorola Mobility.  This would allow the Antitrust Division to prosecute foreign component cartels as it did in the LCD panel matter. The executive branch has a strong incentive to weigh the comity concerns of foreign nations before proceeding.  The Antitrust Division has “skin in the game” of fostering international cooperation, and in fact no foreign government has objected to the Division’s criminal prosecution of both foreign companies and foreign executives in the LCD panel investigation.
• The direct purchaser rule of Illinois Brick and related cases, however, should apply to civil damage actions brought by U.S consumers. If a company, or consumer, has elected to make purchases overseas to take advantage of various favorable circumstances and/or laws, it is not unreasonable to require that they pursue damage actions in the jurisdiction where they elected to make the purchase.

[Read more…]

Today’s post by James Musgrove, Jun Chao Meng and Joshua Chad of McMillan LLP. is about an important development in Canada in the treatment of corporate compliance programs.

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On Thursday, September 18, the Canadian Competition Bureau (Bureau) released a Draft Updated Corporate Compliance Bulletin. The Bureau’s Corporate Compliance Bulletin was first released in 1997 and was most recently updated in 2010. The new Draft Bulletin is available for public consultation until November 17, 2014.

While the Draft Bulletin contains a number of updates, the most significant change is the creation of an incentive program that offers reduced fines for leniency program participants who have credible and effective corporate compliance programs. In both the Draft Bulletin and in remarks by the Commissioner of Competition (Commissioner) on September 18, the Bureau made clear that the mere pre-existence of a program will not automatically garner a company favourable treatment. However, the Bureau proposes that where a company has a credible and effective corporate compliance program the Bureau will recommend to the Court and to the Public Prosecution of Canada (PPSC) that the company receive a reduced fine in connection with an application under the Bureau’s Leniency Program. This proposed approach would make the Bureau one of the few worldwide competition authorities to reward companies for having effective compliance programs, even when those programs have failed.   [Read more…]

Today’s guest post is by Avinash Amarnath, who is with the Indian law firm Vinod Dhall and TT&A.  [Mr. Vinod Dhall was a member and acting  chair of the Competition Commission of India from 2003-2008.]  Avinash writes often on competition law developments in India and we are fortunate that he will be a guest contributor.

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Introduction to Indian cartel law

Let me start by saying what a pleasure it is to be writing for readers of Cartel Capers and thank Bob for making me a part of this wonderful initiative. Given that competition law in India is relatively new, I thought it might be useful to give a brief overview of Indian cartel law in my first post.

To further its policy on liberalisation, privatisation and globalisation of its economy, India enacted its modern competition law (known formally as the Competition Act, 2002) in 2002. The provisions on cartels, vertical agreements and abuse of dominance came into force in May 2009. The agency vested with the enforcement of the competition law is the Competition Commission of India (CCI) with an appellate tribunal (COMPAT) to hear appeals from decisions of the CCI.

While India’s cartel law is inspired by the law in more evolved jurisdictions such as the European Union (EU) and the United States (US), the Indian cartel law is not a word for word copy from either of these laws and is a unique hybrid of the EU and US law. The Indian law on anti-competitive agreements is structured in a three-fold manner. First, Section 3(1) contains a general prohibition on all agreements that cause/likely to cause an appreciable adverse effect on competition (AAEC) in India. Second, Section 3(3) of the Indian statute declares that horizontal agreements between competitors in the nature of price-fixing, limitation of output, market sharing or bid rigging will be presumed to cause an AAEC. However, as clarified by the CCI in several of its decisions, parties can rebut this presumption if they are able to show that certain pro-competitive efficiencies outweigh the anti-competitive effects. This is similar to the ‘restriction by object’ approach adopted in the EU for cartels of the most pernicious kind. Section 3(3) also covers decisions of trade associations and has an exemption for efficiency enhancing joint ventures. Third, under Section 3(4), vertical agreements will be assessed on a ‘rule of reason’ approach to ascertain whether they cause or are likely to cause an AAEC in India.

It appears that horizontal agreements not falling under the specific categories listed in Section 3(3) such as standardization agreements and R&D agreements will be assessed on a ‘rule of reason’ approach under the general prohibition under Section 3(1). The CCI in a recent decision (Ramakant Kini v. Hiranandani Hospital) clarified that there could be agreements that did not fall under Section 3(3) or Section 3(4) and such agreements could still be caught by the general prohibition under Section 3(1).

A peculiar feature of the Indian competition law is that the factors to be taken into account while conducting the competition analysis (i.e., the test of AAEC) are specifically mentioned in the statute.

The definition of the term ‘agreement’ under the Indian statute is wide and includes even a mere understanding or action in concert. Whether this covers the concept of a ‘concerted practice’ as defined in the EU is still unclear. The CCI and the COMPAT have clarified that a finding of an agreement can be based on circumstantial evidence alone and that the evidentiary standard of proof for finding an agreement is a preponderance of probabilities. They have further clarified (in line with position in the US and EU) that mere price parallelism is insufficient to constitute evidence of an agreement and some “plus factors” have to be shown to prove an agreement.

Although the CCI has a “whistleblower”/”leniency” program for cartels, there have been very few leniency applications primarily due to lack of awareness about the program. Most cartel decisions of the CCI have arisen out of complaints by customers/other affected parties or initiation of investigations by the CCI of its own motion.

As far as procedure is concerned, at present, the Director-General’s office (the investigative wing of the CCI) is empowered to conduct dawn raids with the approval of a magistrate. A proposed amendment to the statute seeks to vest this power of approval with the Chairperson of the CCI.

Penalties for cartels under the statute can be up to 10% of the company’s turnover or up to 3 times its profits. Percentages in cartel cases are generally high. In the Cement cartel decision, the CCI imposed a fine of twice the profits of the companies. In a rather contentious recent decision, the COMPAT held that penalties can be imposed only up to 10% of the ‘relevant turnover’ i.e, the turnover arising from the products/services which were affected by the cartel. However, since then the COMPAT itself seems to have receded from this position. There are provisions in the statute for imposing fines on individuals within the company who were responsible for the cartel and these have been used against the members of a chemist and druggist association in a recent case. However, the Indian statute does not provide for criminal sanctions against individuals.

I’ve tried my best to capture all relevant aspects of the cartel law in India in this post. There may be some omissions of course and I’m happy to try to answer any questions that readers may have.   [email protected].

 

Today’s guest post is by James Musgrove and Joshua Chad.  Jim is Co-Chair, Competition and Antitrust practice at McMillan LLP, a leading Canadian law firm.  Jim and Joshua are well versed in international cartel matters and will be keeping us up to date on key developments in Canada.

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We are delighted to contribute to the “Reports from Around the World” section of the Cartel Capers Blog. We look forward to providing readers with regular updates on Canadian cartel developments.

Our first couple of posts will provide a general introduction to Canadian cartel legislation, its enforcement and related private actions. Thereafter, we expect to delve into specific points of interest and new developments as they arise. But, first things first.

Canada’s anti-cartel laws, which predate those of the Sherman Act by a year, are found in the federal Competition Act. The Act is administered by the Canadian Competition Bureau (Bureau), headed by the Commissioner of Competition (Commissioner). For criminal investigations, the Competition Bureau receives support from the Public Prosecution Service of Canada (PPSC), which is responsible for conducting criminal prosecutions under the Act, including the final decision to lay charges – or not. In practice, the Director of Public Prosecutions (DPP), the head of the PPSC, will only initiate cartel prosecutions based on advice received from the Commissioner, and the two organizations work very closely together. Nevertheless, the PPSC has the final choice as to whether charges are laid – and on how they are resolved.

Section 45(1) of the Act is the central criminal provision that prohibits cartel conduct in Canada. This section makes it an offence for any person, with a competitor of that person with respect to a product, to conspire, agree or arrange to do any of the following:

1. fix, maintain, increase or control the price for the supply of the product;
2. allocate sales, territories, customers or markets for the production or supply of the product; or
3. fix, maintain, control, prevent, lessen or eliminate the production or supply of the product.

This is a change from the Canadian law as it stood a few years ago. Until 2010, Canadian cartel law required proof of “undue” effects. Now, subject to the defense noted below, the specific prohibited agreements between competitors are per se offenses.

A person who agrees with a competitor on any of the above matters is guilty of an indictable offence and liable to imprisonment for a term not exceeding 14 years or to a fine not exceeding $25 million (CDN) or to both. In addition, the conduct gives rise to civil liability – in practice enforced by class actions – and may disqualify those convicted from bidding on government contracts.

Section 45(4) provides a defence where it can be demonstrated that the otherwise illegal agreement with a competitor was “ancillary” to a broader arrangement between the parties which is directly related to, and reasonably necessary for giving effect to, the objective of the broader or separate agreement or arrangement.

In addition to the criminal prohibition, the Act also contains a civil competitor agreement provision in Section 90.1. This targets agreements between competitors beyond the three specifically prohibited cartel matters. This section, known as the civil reviewable practices provision, allows the Bureau to seek prohibition orders that force parties to stop engaging in what the Competition Tribunal (the administrative body in charge of adjudicating non-criminal matters under the Act) determines to be agreements which injure competition. On application by the Commissioner, the Tribunal can prohibit a person from doing anything under an agreement or arrangement or require any person, with the consent of that person and the Commissioner, to take any other action. To make such orders, the Tribunal must find that the agreement or arrangement between two or more competitors prevents, lessens, or is likely to prevent or lessen, competition substantially in a market.

That is the quick primer on Canada’s new anti-cartel legislation. Please return in two weeks – or so – for our overview of the Competition Bureau’s Immunity and Leniency programs.

Until next time,
James Musgrove & Joshua Chad
McMillan LLP

The Antitrust Division, through a federal grand jury, indicted seven Japanese executives for conspiring to fix prices in the long running auto parts investigation. There were two separate indictments. One charged executives from Mitsubishi Electric Corp. with conspiring to fix the prices of starter motors, alternators and ignition coils from at least 2000 through 2010. In the second indictment, four executives from Hitachi Automotive Systems were charged with conspiring to fix prices of multiple auto parts including starter motors, fuel injection systems, and ignition coils.

Atsushi Ueda, Minoru Kurisaki, and Hideyuki Saito of Mitsubishi Electric Corp. were charged with conspiring to fix the prices of certain automotive products sold to Ford Motor Company, General Motors LLC, Chrysler Group LLC, Fuji Heavy Industries Ltd., Nissan Motor Company Ltd., and Honda Motor Company Ltd. in the United States and elsewhere. This indictment also charged Kurisaki and Saito with knowingly conspiring to obstruct justice by destroying documents and corruptly persuading, and attempting to persuade others, to destroy documents. Saito was charged in an additional count with knowingly and corruptly persuading, and attempting to persuade, executives to destroy documents and delete electronic data that may contain evidence of antitrust crimes.

The second indictment charged Takashi Toyokuni, Ken Funasaki, Kazunobu Tsunekawa and Tomiya Itakura of Hitachi Automotive Systems Ltd. with conspiring to fix the prices of at least nine automotive parts sold to various automobile manufacturers such as, Ford Motor Co., General Motors LLC, Nissan Motor Co. Ltd., Toyota Motor Corp., and Honda Motor Co. Ltd., in the United States and elsewhere.

In the auto parts investigation 28 companies, mostly Japanese, have been fined more than $2.4 billion. In addition, 43 individuals have been charged. Twenty-six individuals have pleaded guilty and have been sentenced to prison terms ranging from a year and a day to two years.  Both Mitsubishi Electric and Hitachi Automotive pleaded guilty in November 2013 to criminal price-fixing charges, and were fined $190 million and $195 million, respectively. As discussed below, the indicted executives were “carve-outs” from the corporate plea agreement and subject to prosecution.  Many if not all of the corporate plea agreements have likely included carve-outs, so there may be additional indictments against individuals as the auto parts investigation moves through its final phase.

Carve-Outs

Corporate plea agreements between the Antitrust Division and corporate defendants typically deal with individual executives as well. The corporation would like to receive non-prosecution protection for as many executives as it can in return for their cooperation with the government. But, the Antitrust Division seeks to hold individuals accountable and will demand that certain individuals be “carved out.”  Carve-outs are not covered by the plea agreement and are subject to prosecution. Of these carve-outs, some reach a separate plea agreement of their own with the Division and agree to plead guilty, serve some jail sentence and cooperate in the investigation. Twenty-six individuals have done so in the auto parts matter. Other “carve-outs” who don’t reach plea agreements are identified in the corporate plea agreement in an Appendix that is filed under seal. These individuals are subject to prosecution. The individuals indicted yesterday were carve-outs from the corporate plea agreements reached last year between the Antitrust Division and Mitsubishi Electric and Hitachi. Not all carve-outs are ultimately indicted, but it is current DOJ policy to name only those likely to be indicted as carve-outs in the filing placed under seal. A carved-out individual may also be indicted under seal. [Read more…]