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 [email protected].

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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

Below is a guest post from Jarod Bona, of Bona Law PC.  Jarod and I met several years ago when we both worked at the same large law firm.  Jarod now has his own firm and I am with GeyerGorey LLP.  Jarod and I worked with Emtrain, a compliance training firm, to help create their antitrust compliance video, discussed more below.

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Why is Antitrust Compliance Counseling and Training So Important?
by Jarod Bona

If, like me, you have ever spoken to someone that faces criminal indictment by a federal grand jury following a Justice Department antitrust investigation, you know why antitrust compliance counseling and training is a big deal—you don’t need reasons; hearing the crackle of the voice is enough to understand.

You might think that an antitrust investigation or lawsuit may not happen to you or your company. Perhaps you think that your company is too small or that since you don’t sit in smoke-filled rooms with many of your competitors laughing about your customers—or whatever image from books or movies is in your head, antitrust isn’t something you need to worry about.

You might be wrong. Are the chances great that you will be prosecuted or sued under the antitrust laws? Since you are reading a blog about antitrust, they are greater than average, but even still, the odds are relatively low.

But even if the likelihood of an adverse antitrust event is low, the consequences may be so extreme that it is something you should think about. You don’t anticipate that your house is going to burn down, but you—hopefully—take some precautions and probably have some sort of fire protection as part of your homeowner’s insurance.

With antitrust, a little knowledge can go a long way.

If you have an antitrust issue, it is not likely to be a small issue. Indeed, it may start with a government investigation, but could progress into dozens of antitrust class actions against your company.

As you might know, there is a cottage industry of plaintiff attorneys that read SEC filings and watch for government antitrust investigations. When they see something that raises the possibility of an antitrust violation, they pounce. Attorneys all over the country file lawsuits in their home jurisdictions against the target company—which could be your company if you aren’t careful. I go into more detail about this “antitrust blizzard” here.

Antitrust issues can arise for big and small companies and even individuals—like real-estate investors. If you don’t think your company is susceptible to antitrust liability or indictment, I’d like you to read one of my early blog posts that explains how easily a per se antitrust violation can happen (here).

The Federal Trade Commission even went after an association of music teachers for potentially violating the antitrust laws.

What is tough about antitrust is that the laws are not always intuitive; it isn’t like a law that says “don’t steal.” In fact, in one instance, the antitrust laws encourage you to try to steal.

Sometimes the law isn’t even altogether clear. Of course, you are unlikely to face criminal indictment over complicated questions of whether a bundle of products sold by a company with market power violates the antitrust laws. Or whether your vertical pricing arrangements went beyond Colgate policy protections. But you could face criminal antitrust penalties for allocating markets and customers and that isn’t obvious to all sales people.

The bottom line is that if you run or help to manage a company—and especially if your company has a sales team—you need some knowledge of the antitrust laws. At the very least, you should understand what to train your team members to avoid. Antitrust training can be invaluable.
Offensive Use of Antitrust Laws

But it isn’t just about avoiding the downside—there is an upside too. If your competitors or suppliers or even customers are violating the antitrust laws, a little bit of knowledge will help you understand when an antitrust attorney might be able to help you. You might start by reviewing our article on ten ways to tell whether you have an antitrust claim.

If you suspect that someone you are dealing with might be engaging in anticompetitive conduct, you should work with an antitrust lawyer to investigate further and decide how to act.

Antitrust-Compliance Training

But where can you find antitrust-compliance training? Certainly, we at Bona Law can help you and your team understand the antitrust laws and can help you create a company antitrust policy.

But there is another excellent option for an antitrust compliance training course that you can add to your other compliance training: Emtrain.

I am excited to announce that I have teamed up with my friend Robert Connolly, who has an excellent blog called Cartel Capers, to work with Emtrain to create an antitrust compliance course.

As you might know, Emtrain offers a wide-variety of legal compliance training in topics ranging from workplace issues to insider trading to motivating your employees to (now) antitrust and competition issues. Bob Connolly and I are the designated antitrust experts for Emtrain and helped to create the course.

If you are interested in their antitrust (or any other) compliance training, you should contact them.

You can watch a sneak peek of their antitrust compliance video, with sample workplace scenes, here.

I’d like to share with the readers of the blog the latest working paper of mine titled “*To Pool or Not to Pool: A Closer Look at the Use of Sub-regressions in Antitrust Class Certification*,” available for download from SSRN at the link [here].
A central question regarding class certification is whether the conduct in question impacted all or nearly all class members. To answer this question, a methodology, known as sub-regressions, has been proposed and employed by economists in several recent class action cases. A key step of a typical sub-regression analysis, at a high level, is to divide the data into subgroups and then examine the impact question separately. In this article, I takes a close look at three areas of interest related to this methodology:

• First, I compare and contrast various related proposals in the law and economics literature and document the ongoing debate among commentators on the usefulness of the methodology.
• Second, I analyze courts’ recent class certification decisions in cases where this type of analysis was introduced. I argue that just like any other methodology, the probative value of sub-regression type analysis should be assessed together with the collection of other evidence. And this is exactly what the courts have done.
• Last, I discuss a number methodological issues with sub-regressions–many unacknowledged previously–and explain why a disciplined and rigorous implementation is crucial for its reliability. By understanding these issues, even at a high level, attorneys will be able to help ensure that their expert witnesses perform convincing sub-regression type analysis and understand the potential challenges to their work.

It is worth noting that while I focus on antitrust cases (cartel cases in particular) in this article, the discussions should be relevant to all other types of class action cases.

As always, I appreciate your thoughts and comments. You can reach me at [email protected] or connect with me on LinkedIn [here].

Ai Deng, PhD
Principal, Bates White Economic Consulting
Lecturer, Advanced Academic Program, Johns Hopkins University
direct: 2022161802 | fax: 2024087838
1300 Eye Street NW, Suite 600, Washington, DC 20005
[email protected]
BATESWHITE.COM

I am a little behind on reporting this but on February 27th, the American Antitrust Institute issued a report on American Cartel Enforcement in Our Global Era.  The press release is below:

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Today, the American Antitrust Institute (AAI) released the cartel chapter of its forthcoming Transition Report on Competition Policy to the 45th President of the United States. The chapter is entitled American Cartel Enforcement in Our Global Era. This release is part of a series of previews in which the AAI will make select chapters of the transition report available for download in advance of the report’s publication.

“The need for strict anti-cartel enforcement has always enjoyed bipartisan consensus in the antitrust community,” said AAI President Diana Moss, “and it’s clear we can do more to support this important mission.” The cartel chapter provides a detailed empirical analysis of cartel enforcement trends dating back to 1990 and makes a variety of policy recommendations that will help foster optimal deterrence, improve scholarly understanding of cartel behavior, and better protect consumers from what remains a growing threat. The Transition Report’s editor, AAI Associate General Counsel Randy Stutz, said, “This chapter is particularly valuable for putting U.S. cartel enforcement in a global perspective and shedding important light on the evolution of modern cartels, which continue to cause massive harm on an international scale.”

The cartel chapter makes a variety of recommendations to better deter cartel conduct by improving detection, prosecution, and punishment, including the following:

• The U.S. Sentencing Commission should revisit the assumption in its Organizational Guidelines that cartel overcharges are typically 10% of affected sales or, indeed, total market sales. The presumption should be raised to at least 20% for North American cartels and 30% for international cartels.
• Congress should raise the Sherman Act maximum corporate fine for criminal price fixing to $1 billion and the Sherman Act maximum fine for individuals to $10 million.
• Congress, or the Antitrust Division of its own accord, should institute whistleblower rewards in cartel cases akin to those made available in qui tam civil suits under the False Claims Act, and the administration should support legislation protecting cartel whistleblowers from retaliation from their employers for reporting wrongdoing.
• After securing criminal convictions, the Antitrust Division should routinely inquire about, and publicly report on, details concerning how cartels were able to collude and sustain their collusion. It should also consider requiring, in sentencing agreements, that defendants turn over simple post-conviction reports for five years on their production costs, sales, and prices in the affected market.
• The Division should receive a budget increase earmarked for its program to help educate foreign antitrust authorities in how to design effective leniency programs, impose appropriate monetary sanctions, implement criminal provisions in their antitrust laws, and improve their anti-cartel enforcement generally.

Visit the Transition Report section of the AAI website for a free download of the entire chapter and links to the AAI’s related work.

The AAI Presidential Transition Report makes policy recommendations based on the AAI’s mission of promoting competition that protects consumers, businesses, and society. The Report is one way the AAI serves the public through education, research, and advocacy on the benefits of competition and the use of antitrust enforcement as a vital component of national and international competition policy.

Contact:
Randy Stutz, Associate General Counsel, American Antitrust Institute
(202) 905-5420
[email protected]

Diana Moss, President, American Antitrust Institute
(202) 536-3408
[email protected]

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The issue of increasing fines for corporate defendants is hotly debated.  Some argue,  as does the AAI, that the current assumption in the Sentence Guidelines of a 10% overcharge from cartel agreements understates the economic harm from cartels, does not fully capture the illegal gains and is inadequate to deter cartels.  A contrary position put forth by many in the defense bar is that with enforcement agencies around the world lining up to prosecute cartels that are uncovered (and in some instances double counting commerce), coupled with follow on private treble damage litigation, the costs of pleading guilty and cooperating have become extreme; possibly resulting in less cartel enforcement.  One prediction I can safely make is that the United States Sentencing Commission will not be taking up the issue any time soon.  Antitrust sentencing guideline reform is not currently on the Sentencing Commission’s agenda.

The idea of an antitrust whistleblower provision is a sound one that has never quite gotten much traction.  The Antitrust Division is quite content to rely on the Corporate Leniency program as a case generator.  A whistleblower provision may complicate leniency applications and also encourage unsound complaints by whistleblowers looking to cash in on huge antitrust recoveries.  On the other hand, it has always struck me that there may be a more efficient, less costly way, of encouraging disclosures of cartel behavior.   All other things being equal, it would be better from an enforcement position to encourage a whistleblower to come forward than to give “amnesty” to an entire company and its qualifying executives.  Of course, one individual coming forward is not by itself going to make a case, but it can be a better start than giving leniency to a highly culpable company and its executives.

This is an area worth exploring:  Would a whistleblower provision supplement or damage the heretofore effective Corporate Leniency program?  A recent article by Canadian competition attorney Steve Szentesi, The Time has Come to Reward Competition Act Whistleblowers, is worth a read.

Thanks for reading.

I’d like to share with the readers of the blog a recent publication of mine titled “Cartel Detection and Monitoring: A Look Forward,” forthcoming in the Journal of Antitrust Enforcement.

As I have discussed in other places, data-based cartel detection tools have been employed by antitrust agencies for many years. (see my discussions here  and here.)  There is also a growing literature on the applications of such techniques. As an economic consultant, I have also seen and implemented such techniques in Section 1-related private litigation.

In this article, you will find an accessible discussion of important methodological considerations when designing dynamic empirical screens for cartel behavior. You will also find lessons and experiences I draw from research studies in central banking (early warning system for financial crisis in particular) and machine learning that are helpful in the design and use of empirical screens. For those of you who are interested in the academic research in this interesting area, you will find my suggested topics for future research.

With the link attached here, you have free access to this article (provided you don’t sell it for money. 🙂

As always, I appreciate your thoughts and comments. You can reach me at [email protected] or connect with me on LinkedIn here.

Ai Deng, PhD
Principal
direct: 2022161802 | fax: 2024087838
1300 Eye Street NW, Suite 600, Washington, DC 20005
[email protected]
BATESWHITE.COM

Every once in a while, I see a piece of antitrust news that makes me happy on a personal level. This happened when I read that Marc Siegel  just left the Antitrust Division after a distinguished career and is now a partner at Jones Day in their San Francisco office. Marc worked for 30 years at the Antitrust Division, moving up from trial lawyer to hold various senior leadership positions involving global and domestic criminal cartel enforcement and policy development. I got to know Marc well over the years, particularly when he moved to DC and became the Director of Criminal Enforcement in 2005.  Marc was always willing to help out where needed and as a result, he may hold the record for most titles for a Division attorney: Senior Counsel, Criminal Enforcement (2016); Chief, San Francisco Office (2014-2016); Acting Chief, New York Office (2013); Senior Counsel, Criminal Litigation, Washington, D.C. (2010-2012); Director, Criminal Enforcement, Washington, D.C. (2005-2010); Assistant Chief, San Francisco Office (2003-2004); and Trial Attorney, San Francisco Office (1986-2002).

Marc was one of the most respected and well-liked attorneys in the Division. He has a wide range of experience and sharp legal mind that was an asset you could tap on almost any issue. Marc oversaw many of the Division’s most significant matters such as municipal bonds and auto parts (while I was at the Division).  More recently, as Chief of the San Francisco Field Office he has been overseeing the international capacitors matter and the many local real estate auction collusion investigation and trials. In my experience, and as was told to me by many other Antitrust Division staff, Marc’s finest quality is that he was always available to talk things out when the stress was at danger level. Marc could not solve every problem but he could convince you not to kill yourself (or someone else) over one. Marc also made many personal sacrifices for the Division, leaving his hometown of San Francisco to spend significant time in Washington D.C., New York City and much other travel.  I hope he finds travel on the Jones Day expense account somewhat more tolerable than on the government per diem.  Marc–Good luck at Jones Day!

 

 

The Antitrust Section of Law of the American Bar Association prepared an Presidential Transition Report for the new administration.  The 62 page report covers a broad range of antitrust matters: the current state of antitrust and consumer protection enforcement; cartel, civil, merger, and consumer protection enforcement; important doctrinal questions facing the Agencies and courts today; competition issues that will be facing two key industrial sectors: healthcare and financial services; and the last section of the Report discusses challenges as competition enforcement regimes proliferate and continue to evolve throughout the world.

The Section on cartel enforcement is largely laudatory :

Over the past two decades, the Division has transformed cartel enforcement for the better. The Division’s enforcement efforts have had unparalleled success, an accomplishment that has had dramatic global implications. Today, more than 120 countries have cartel enforcement regimes; bid-rigging, market allocation and price-fixing are now criminal offenses in more than 20 of these jurisdictions.

Several recommendations are made:

• Transparency: “Practical guidance in the form of a “case study” addressing requirements or expectations for securing first-in conditional leniency (e.g., timing, document productions, proffers, and employee interviews) and unconditional leniency (e.g., full or partial restitution) would further the bar’s and the business community’s understanding of the Leniency Programs and what applicants should expect when seeking conditional and, ultimately, unconditional leniency. The Section encourages the Division to continue its efforts to increase transparency and provide information about its operations.”
• Fines: “The Section encourages the Division to reexamine the fundamental building blocks of the sentencing process, including, most importantly, the volume of commerce (VOC) determinations in domestic and international cartel cases.”
• Criminal prosecution of individuals: “The Section encourages the Division to provide clear and transparent guidance as to how the Yates Memo will affect Division enforcement and prosecution efforts. Specifically, further guidance is needed on the definition and identification of the “highest ranking, most culpable employee,” and how and when the Division will negotiate “carve-in” and “carve-out” determinations.”
• Compliance programs: “The Section encourages the Division to expand its review of compliance programs in place prior to the occurrence of the misconduct, and to consider providing appropriate credit for robust compliance programs.”

These recommendations are basically refinements on current Division practices.  There is one recommendation, however, that could be transformational in the area of international cartel enforcement.  The report states: “[I]n the wake of recent federal appellate decisions opining that the Federal Trade and Antitrust Improvements Act (FTAIA) is a substantive element of a Sherman Act claim, the Section recommends that the Agencies clarify that the FTAIA places a jurisdictional limit on Sherman Act enforcement.”  Whether the FTAIA is jurisdictional or substantive is a big deal.  A federal court cannot hear a matter unless it has subject matter jurisdiction so if the FTAIA is jurisdictional in nature, a plaintiff or the DOJ would bear the burden of showing in the initial filing that the FTAIA is satisfied.  This would place little burden on the DOJ because it conducts grand jury investigations before filing any criminal charges.  Civil plaintiff, however, would have to meet this burden without the benefit of discovery.  The Report argues: “Parties should not be forced to engage in discovery and merits defense of claims where it can be determined at the outset that the impugned conduct lacks the defined material nexus with U.S. economic interests specified in the FTAIA.” Report at 59.

The FTAIA could be a topic of hot debate within the new administration.  The Report states the legal argument for why the FTAIA should be a jurisdictional requirement for a Sherman Act violation. (See, e.g., Abbott B. Lipsky, Jr. & Kory Wilmot, The Foreign Trade Antitrust Improvements Act: Did Arbaugh Erase Decades of Consensus Building?, ANTITRUST SOURCE at 7-9 (2013).  But, all recent Circuit Courts of Appeals decisions that have considered the issue have held that the FTAIA establishes a substantive element of an antitrust claim.  The Antitrust Division, in its recently released Antitrust Guidelines for International Enforcement and Cooperation stated the that:

The federal courts of appeals have expressed differing views as to whether the FTAIA goes to a claim’s merits or a court’s subject-matter jurisdiction….This difference will not affect the Agencies’ decisions about whether to proceed with an investigation or an enforcement action because the Agencies will not proceed when the FTAIA precludes the claim on the merits or strips the court of jurisdiction. International Guidelines at page 18, footnote 82.  The footnote cites all the major cases on the issue.

As mentioned, the Antitrust Division does not file a case until is has satisfied itself through the grand jury investigation that the facts establish both a jurisdictional and substantive basis for the charge.  This issue will continued to be litigated in civil cases but the position the Antitrust Division takes, if it takes one at all through amicus briefs, will be important.

More to come on this issue.  Thanks for reading.

In the final hours of the Obama administration, the Antitrust Division issued two new guidance documents that relate to criminal antitrust enforcement.  In a Friday, January 13, 2017 press release the Division announced:

The Department of Justice and the Federal Trade Commission (FTC) issued today revised Antitrust Guidelines for International Enforcement and Cooperation. These guidelines update the 1995 Antitrust Enforcement Guidelines for International Operations and provide guidance to businesses engaged in international activities on questions that concern the agencies’ international enforcement policy as well as the agencies’ related investigative tools and cooperation with foreign authorities.

The new guidelines can be found here.

Then on January 17, 2017, the Antitrust Division issued an update to the Frequently Asked Questions About the Antitrust Division’s Leniency Program  and Model Leniency Letters.  The original FAQ was published on January November 19, 2008.  The updated FAQ can be found here.  The introduction to the FAQ states:

Elizabeth Prewitt, Robert Bell and Dina Hoffer, of Hughes Hubbard and Reed, published an article in Law 360 on January 19, 2017 titled “DOJ Narrows Paths to Immunity for Antitrust Crimes.”  The article notes the changes from the previous FAQ’s and discusses some of the implications of the new FAQ’s.  As the article notes, the FAQ’s should be reviewed carefully by anyone considering applying for a leniency marker.  The article itself is behind a firewall but here are a few key points by the HHR team:

• “the division has also removed the provision allowing counsel to secure a short-term anonymous marker without identifying his or her client.”
• “The revised FAQ’s also explicitly noted that former directors, officers or employees are only eligible for protection under a corporate conditional leniency letter ‘when these specific former directors, officers or employees provide substantial, noncumulative cooperation against remains potential targets, or when their cooperation is necessary for the leniency applicant to make a confession of criminal antitrust activity suffocate to be reliable for conditional leniency.'”
• “The revised FAQ’s also warn that corporate applicants ‘should not expect to use the Leniency Program to avoid accountability for non antitrust crimes.’”
• “The revised FAQ’s also formalize the Antitrust Division’s ‘penalty plus’ policy, which…seeks enhances sentences where a company pleads guilty to one antitrust offense under the leniency program but fails to report a second antitrust crime it was also involved in.”

Elizabeth Prewitt is partner in the New York office of Hughes Hubbard and Reed.  She spent 16 years in the Antitrust Division’s New York Field Office and was Assistant Chief when she left in 2014.  Robert Bell is a partner in the firm’s Washington, D.C. office and Dina Hoffer is an associate in the firm’s New York office.

More to come on both these new documents.  I’m escapably curious to see if the new administration embraces the new Guidelines of International Operations. These guidelines  tend to deal more with the Division’s interpretation of case law and set forth policy on important questions such as the application of the FTAIA.