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…]

Antitrust enforcement, or competition law as it is known elsewhere, is international in scope. Cartels (“the supreme evil of antitrust”) are the top priority of all the major enforcement agencies worldwide. While I occasionally comment on enforcement actions in other countries, I’ve always wondered what the leading practioneers in those countries thought. So, I asked them! And, the idea grew to post occasional comments on Cartel Capers from experienced cartel defense attorneys from around the globe. As you can see below, it is my good fortune to know some pretty accomplished international colleagues. Today, I am posting short bios, and soon (as soon as I can figure out the software) I will have a drop down tab as a home for their bios and their insights.

Disclaimer: We have all worked on and continue to work on major international cartel matters.   Ethics and good judgment limit us from commenting on cases we are working on and prevent us from disclosing non-pubic/sensitive information. The information posted is not intended to be legal advice. We are not offering legal opinions, just our personal insights on major cartel developments. But, let me introduce my friends. I am sure you will be anxious to read their take on important cartel practice and procedure developments in the jurisdictions where they practice.  Guest posts will begin appearing in the near future.

Brazil: Mauro Grinberg

Mauro Grinberg is a partner at Grinberg Cordovil. He is one of the leading competition lawyers in Brazil with an incredible range of experience. Mr. Grinberg is a former Commissioner of CADE, the Brazilian antitrust agency; Former Attorney of the National Treasury of Brazil; Founder, Former Head and presently member of the Board of IBRAC (the main Brazilian antitrust think tank); Member of IBA (Antitrust Committee) and of ABA (Section of Antitrust Law); and author of many articles and frequent speaker on antitrust issues.

Canada: James Musgrove

James Musgrove is the Co-Chair, Competition and Antitrust Practice of the Canadian law firm, McMillan. Mr. Musgrove is recognized as a leading competition lawyer by various organizations, including Chamber Global, GCR, Lexpert, Best Lawyers and Who’s Who Legal, amongst others. He is active in national and international antitrust organizations, is Past Chair of the Canadian Bar Association National Competition Law Section, and currently serves on Council of the American Bar Association Section on Antitrust Law.   In 2014 he won the GCR award for Behavioural Matter of the Year – Americas for his successful defence of MasterCard, and was recently named Advertising and Marketing Lawyer of the Year—Toronto—by Best Lawyers’.

China:  Jingwen Zhu

Jingwen Zhu leads DLA Piper’s Asia competition practice. She is experienced in advising Chinese and international clients on multi-jurisdictional merger notifications, antitrust investigations, private antitrust litigations, antitrust counseling and compliance. She also has experience in state owned monopolies, privatisation of infrastructure and subsequent sector regulation, especially in cases concerning essential facilities.

Ms. Zhu is qualified as a lawyer in the People’s Republic of China. Ms. Zhu speaks Chinese (Cantonese), Chinese (Mandarin), English and German.

European Union: Dr. Markus Röhrig

Markus Röhrig is a partner at the European law firm Hengeler Mueller. Hengeler Mueller is a partnership of lawyers with offices in Berlin, Düsseldorf, Frankfurt, Munich, Brussels and London.   Mr. Röhrig joined Hengeler Mueller in 2004 and has been a partner since 2009. He is based in the Brussels office.

Mr. Röhrig has received his legal education at the University of Cologne and Georgetown University. He is admitted to the German and the New York bars. Mr. Röhrig specialises in German and European competition law. Mr. Röhrig frequently advises clients with respect to European and German cartel investigations, behavioral issues (abuse of dominance) and merger control cases.   Recently, he has been involved in major international cartel cases that are being pursued by the European Commission, the US Department of Justice and the Japanese JFTC in the automotive and other sectors.

India:    Avinash B. Amarnath

Avinash Amarnath is an associate at ‘Vinod Dhall and TT&A’ in New Delhi, India. Prior to his current position, Mr. Amarnath was an associate at the competition team in Amarchand & Mangaldas & Suresh A Shroff & Co. He has advised clients across various sectors such as automobiles, financial services, pharmaceuticals, steel, private equity, petrochemicals and electronic lab equipment on Indian competition law. Mr. Amarnath has written numerous articles on the Competition Commission of India and competition law in India. Mr. Amarnath is a graduate of Kings College London with an LLM in Competition Law.

 

 

 

Yesterday I had the good fortune to attend the 8^th Annual Georgetown University Law Center Global Antitrust Enforcement Symposium. I was invited to attend by Bates White, a leading economic consulting firm. Bates White is a sponsor of the program. The agenda covered all areas of antitrust enforcement including merger enforcement, abuse of dominance and IP and high-tech issues. But in keeping with the theme of this blog, I’d like to comment on the star of the program—Cartel Enforcement—”the supreme evil of antitrust.”

Bill Baer, Assistant Attorney General for the Antitrust Division was the keynote speaker. Baer focused his remarks completely on cartel enforcement. A copy of his speech is available here.

Compliance was in the air. Both Baer, and another Antitrust Division leader, Brent Snyder, Deputy Assistant Attorney General for Criminal Enforcement, emphasized the need for corporations to have strong and effective compliance programs. Baer pointed out that the average jail term for an individual convicted of price fixing or bid rigging is now at 25 months.   And, courts have fined corporations as much as $1.4 billion in a single year. Baer emphasized, “effective compliance programs minimize the chance that companies will conspire to fix prices. And they maximize the chance for a company guilty of price fixing to find out about the conspiracy early enough to qualify for corporate leniency or otherwise cooperate with our investigation.”   [Read more…]

I’m pleased to announce my role as an Antitrust Ambassador for Emtrain — a leading provider of modern ethics & compliance training. I will be partnering with my friend Jared Bona, The Antitrust Attorney, to create an engaging antitrust compliance program for Emtrain.

Jarod and I are joining a distinguished team of experienced practitioners, including Mike Koehler (FCPA), Sally March (Corporate Compliance & Ethics), Chris MacDonald (Business Ethics), and Timothy Crudo (Governance and Insider Trading).

Here’s a recent thought leadership clip I created with the Emtrain team in San Francisco. Click here to watch the video and please let me know what you think.

Speaking to a camera was much different than speaking to a jury, and in some ways more difficult.  Fortunately, with the benefit of multiple takes, I was able to avoid reversible error.

Also, by happy coincidence, I am a speaking at the SCCE Compliance Conference in Chicago on September 15, 2015 on a panel titled “Global Antitrust Compliance and Risk—Creating an Effective Program.”

Emtrain has an information booth at the conference and I’ll be there hoping to talk some competition law (or football) to any willing partners. If you are at the conference, please stop by and say hello at booth #96.  I’m looking forward to meeting you.

The 2014 Compliance & Ethics Institute conference is at the Hyatt Regency Chicago, September 14-17, 2014.

 

In Dahl v. Bain Capital Partners, LLC., former shareholders of companies purchased through leveraged buyouts alleged a per se violation on the part of Carlyle Group, Goldman Sachs, Blackstone and others by conspiring to fix the prices paid in leveraged buyouts. The defendants were accused of conspiring to suppress takeover prices by establishing “club rules” which kept the firms from outbidding each other once buyouts were made public. 937 F. Supp. 2d 119, 124 (D. Mass. 2013)(“Plaintiffs contend that defendants understood that, by working together, they could suppress competition and avoid another price escalation.”).  The Carlyle Group was the last defendant to settle this class action–for a reported $115 million.   In August, Blackstone Group LP, KKR & Co LP and TPG Capital LP disclosed in a court filing they agreed to pay $325 million to settle the lawsuit. Prior to that, Silver Lake Partners LP settled with the plaintiffs for $29.5 million. Goldman Sachs and Bain Capital Partners LLC settled for $67 million and $54 million, respectively (here).  The firms faced up to $36 billion in liabilities if potential damages were trebled under the Sherman Act.

The case helps re-learn some lessons about cooperation among buyers: it can be a per se violation; legitimate joint ventures can easily slide into buyer collusion, experienced antitrust counseling pays, and private plaintiffs negotiate much like the DOJ.   [Read more…]

Last week, China’s National Development and Reform Commission (NDRC) imposed its first fines in the worldwide auto parts investigation. Eight Japanese auto parts companies and four Japanese bearing makers were fined a cumulative total of just over $200 million. In a related development, Batman and Robin announced that they have directed Alfred to determine whether the Batmobile contains any of the price-rigged parts.

OK, maybe that is a little far-fetched, but the point is that cartel enforcement has clearly become a worldwide event. With China pulling up a seat at the table, the risks have never been higher for would be cartelists. “This sends a warning to companies engaging in global price-fixing that they should beware of China,” said Chen Danzhou, a lecturer specializing in anti-monopoly law at the University of International Business and Economics in Beijing. “The government is getting more aggressive as it tries to make a structural adjustment to the market.” (Bloomberg)   China had also recently fined 6 companies from South Korea and Taiwan $56 million for participation in the LCD panel cartel.

The Antitrust Division coordinated the auto parts investigation with the Japanese Fair Trade Commission, the European Commission, Canadian Competition Bureau, Korean Fair Trade Commission, Mexican Federal Economic Competition Commission and Australian Competition and Consumer Commission. What this usually means, at a minimum, is that the agencies coordinate timing of search warrants, dawn raids, inspections or wherever term is used to pay an unscheduled visit on businesses (and in some cases executives’ homes) to seize paper and electronic documents. The coordination minimizes the ability of subjects to clean house before the guests arrive. China did not participate it the auto parts coordination kickoff, but followed on as other nations brought cases.   But, China is thought to have cooperated with the DOJ, European Union Japanese, Korean and Taiwan Fair Trade Commission, (JFTC, KFTC, TFTC, respectively) in launching the recent investigation of the global capacitors industry. [Read more…]

In its first Munibonds trial in 2012, the Antitrust Division convicted three former General Electric executives for rigging bids to suppress interest rates paid to municipalities on funds they raised through bonds and then invested in guaranteed investment contracts until such time as the funds were needed.  The indictment charged that the interest rates were rigged on investment agreements ranging “from as short as one month to as long as thirty years.” The three defendants were in jail when the Second Circuit reversed their conviction in a split vote (2-1) on November 26 on statute of limitations grounds. An opinion followed: United States v. Grimm, 738 F.3d 498 (2d Cir 2013).  The Antitrust Division sought an en banc hearing, which was denied last Friday in an 8-4 vote.

The case raised the statute of limitations issue because the Antitrust Division was relying on what is often called the “payments theory.” In a road construction case, for example, the bid may be rigged on Day 1 but the indictment returned outside the Sherman Act statute of limitations of five years.  The payments on the rigged contract, however, are considered overt acts in furtherance of the conspiracy because the object of the conspiracy is to be paid at the rigged, inflated price. Therefore the statute does not begin to run until the winning conspirator has received its last payment on the rigged contract.  Six circuits have endorsed the payments theory and held that conspiracies did not end when the rigged contract was obtained but continued as long as a conspirator made or received a contractual payment. United States v. Anderson, 326 F.3d 1319, 1328 (11th Cir. 2003); United States v. Evans & Assocs. Constr. Co., 839 F.2d 656, 661 (10th Cir. 1988); United States v. N. Improvement Co., 814 F.2d 540, 542 (8th Cir. 1987); United States v. A-A-A Elec. Co., Inc., 788 F.2d 242, 245 (4th Cir. 1986); United States v. Girard, 744 F.2d 1170, 1172-74 (5th Cir. 1984); United States v. Walker, 653 F.2d 1343, 1346-49 (9th Cir. 1981).

The government relied on the payments theory in Grimm. The applicable statutes of limitations were: five years for general fraud, and six years for conspiracy to defraud the United States by violating the internal revenue laws. The overt acts in question were the payments made by GE to the municipalities at suppressed interest rates. Each time such a payment was made the statute of limitations restarted. The government argued that this case fell within the payment theory as set forth in the Second Circuit in United States v. Salmonese, 352 F. 3d 608 (2d Cir. 2003). In Salmonese the Court held that a conspirator’s receipt of anticipated profits from the sale of stripped warrants constituted an “overt act in furtherance of an economically-motivated conspiracy.” 352 F.3d at 616. The Court, in accord with other circuits stated, “where a conspiracy’s purpose is economic enrichment, the jointly undertaken scheme continues through the conspirators’ receipt of ‘their anticipated economic benefits.’” Id. at 615. [Read more…]