9/15/2014. What We Will Cover. US cartel penalties remain near all-time high. Global Antitrust Compliance and Risk Creating an Effective Program

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1 Global Antitrust Compliance and Risk Creating an Effective Program 13 th Annual SCCE Compliance & Ethics Institute Chicago, IL Timothy Bridgeford, Senior Compliance Counsel FCPA, Antitrust & Investigations, Tyco Douglas Tween, Partner, Baker & McKenzie Robert Connolly, Partner, GeyerGorey LLP What We Will Cover Overview of global legislation, cartel enforcement activity and trends. Learn about why the United States and the EU have given little guidance on and no credit for antitrust compliance programs Learn how to effectively promote antitrust compliance in your organization and build an effective program that supports the effective management and mitigation of risk 2 US cartel penalties remain near all-time high *as at 1 July Baker & McKenzie LLP 3 1

2 Companies: Cartel offences attract criminal fines of up to CDN$25 million (approx million). Individuals: Up to 14 years' imprisonment and/or a fine of up to CDN$25 million (approx million) on an individual director, officer or employee found guilty of conspiracy. Companies: Up to US$100 million (approx million), or alternatively twice the amount the conspirators gained from the illegal acts or twice the money lost by the victims of the crime. Corporations may also be sentenced to a term of probation of up to 5 years. Individuals: May be fined up to US$1 million (approx. 727,000) or twice the total gain or twice the total loss, and sentenced to a maximum of 10 years in prison on each count. Up to 12 years, fines up to 1000 Minimum Monthly Wage (US$315 million) and inability to contract with state agencies on any individual involved in bid rigging. Bid rigging is the only antitrust violations criminally sanction in Colombia. Up to 10 years' imprisonment and a fine of 1000 to 3000 times the individual's salary for cartels. The court may impose a sentence on individuals of between 2 to 5 years imprisonment and fine. Unlimited fines on individuals Up to 6 years' imprisonment or involved in anti-competitive conduct. fines. Up to 5 years' imprisonment and fines on any individual involved in bid-rigging. Other competition law violations could be prosecuted as fraud, which carries the same penalties. Up to 5 years' imprisonment and/or up to 4 million or 10% of the annual income on any individual involved in a cartel. Up to 5 years' imprisonment and unlimited fines on any individual who is found guilty of taking part in a cartel. Up to 4 years' imprisonment and a fine of up to 75,000 for anyone who played a personal and decisive role in anticompetitive behaviour. Up to 3 years' imprisonment on individuals who are involved in boycotts. A company officer found guilty of participating in a cartel is personally liable to the company for the payment of a fine of up to 10% of a company s turnover. Individuals fined up to 1 million depending on the type of the infringement or sentenced to up to 5 years' imprisonment. Fine of up to ZAR500,000 (approx. 45,940) and/or a maximum sentence of 10 years' imprisonment on individuals who engage in cartel conduct, commit procedural breaches or fail to comply with interim or final orders of the Competition Tribunal or the Competition Appeal Court. Up to 3 years imprisonment and/or a fine on any member of the management board of a company found guilty of breaching competition law. Up to 8 years' imprisonment or fines for cartel conduct. The persons signing the restrictive agreement can be jointly and severally liable to the company for damage caused by such action. Up to 3 years' imprisonment or fines of up to 332,000 on any individual found guilty of a serious breach of competition law. Up to 5 years, a monetary fine or prohibition from performing an occupation for a period of up to 5 years. Up to 3 years (5 years for severe violations) or fines of up to ILS2 million (approx. 400,000). Up to 10 years' imprisonment and a fine of AU$220,000 (approximately 140,000) per contravention for those who make, or give effect, to a cartel provision with the intention of dishonestly obtaining a benefit. Up to 7 years' imprisonment and fines of up to RUB500,000 (approx. 11,790) or fines equivalent to the amount of their salary for a period of up to 3 years and disqualification of up to 3 years. Up to 3 years' imprisonment on any individual guilty of a bid-rigging offence. Certain antitrust infringements may amount to fraud which can be punishable by up to 10 years' imprisonment. Unrelated to competition law, companies may be held liable for their employees criminal acts and fined up to EUR 1.8 mio. Up to 5 years' imprisonment for price-fixing and bid-rigging in public procurement or concession context Up to 5 years' imprisonment and/or a fine of up to JPY5 million (approx. 47,000) on any individual who is found guilty of taking part in a cartel. Up to 3 years' imprisonment and/or a fine of up to THB6 million (approx. 142,000) may be imposed on a managing partner or a person in charge of operations unless the offence at stake was committed without his/her knowledge or consent and/or reasonable measures were taken to prevent such offence. Civil penalty: fine of up to 250 million Indian Rupees (approx. 3.7 million). Criminal penalty: breaches of competition law can result in imprisonment for a period of up to three years. 9/15/2014 Prison days 2014 Baker & McKenzie LLP 4 Number of defendants sentenced to prison 2014 Baker & McKenzie LLP 5 Criminal sanctions for antitrust violations Denmark Norway Estonia Canada Germany United States Ireland Colombia Mexico Brazil United Kingdom France Italy Malta Czech Republic Slovak Republic Slovenia Greece Israel South Africa Australia Russian Federation Austria Hungary Thailand 2014 Baker & McKenzie LLP 6 AS OF: 27 January 2014 Japan India 2

3 The long arm of US cartel enforcement Of the $7.8 billion in criminal antitrust fines imposed by the Division between FY 1997 and the end of FY 2012, approximately 97 percent imposed re international cartels 65 foreign defendants from France, Germany, Japan, South Korea, Taiwan, the Netherlands, Norway, Sweden, Switzerland and the United Kingdom have served, or have been sentenced to serve, prison sentences in the United States as a result of the Division s cartel investigations 2014 Baker & McKenzie LLP 7 US Cartel Statistics Ten Highest Fines by Company Defendant (FY) Product Fine ($ Millions) Geographic Scope Country AU Optronics Corporation of Taiwan (2012) Liquid Crystal Display (LCD) Panels $500 International Taiwan F. Hoffmann-La Roche, Ltd. (1999) Vitamins $500 International Switzerland Yazaki Corporation (2012) Automobile Parts $470 International Japan Bridgestone Corporation (2014) Anti-vibration rubber products for $425 International Japan automobiles LG Display Co., Ltd LG Display America (2009) Société Air France and Koninklijke Luchtvaart Maatschappij, N.V. (2008) Korean Air Lines Co., Ltd. (2007) British Airways PLC (2007) Liquid Crystal Display (LCD) Panels Air Transportation (Cargo) Air Transportation (Cargo & Passenger) Air Transportation (Cargo & Passenger) $400 International Korea $350 International France (Société- Air France) The Netherlands (KLM) $300 International Korea $300 International UK Samsung Electronics Company, Ltd. Samsung Semiconductor, Inc. (2006) DRAM $300 International Korea BASF AG (1999) Vitamins $225 International Germany 2014 Baker & McKenzie LLP 8 Extradition Risk Successful extradition of Italian citizen from Germany (Marine Hose) US$50,000 fine and 24 months in prison Implications of extradition? Shows DoJ s continued focus on people/conduct outside US where US commerce affected Beware of safe havens 2014 Baker & McKenzie LLP 9 3

4 Cartels: EU Cartels 2014 highlights High Voltage Power Cables ( 302m) Bearings ( 953m) Power Exchanges ( 5.9m) Cartels 2013 highlights Euro and dy Yen Interest t Rate Derivatives ( 1.7 billion): UBS avoided 2.5 billion fine Automotive Wire Harnesses ( 141m) Telefonica / Portugal Telecom ( 79m) 2014 Baker & McKenzie LLP 10 EU cartels some trends Global cartel investigations - autoparts and benchmarking Legitimate trade associations discussion strayed off course Expanding category of cartel conduct: Financial benchmarks Price signalling Pay for Delay in pharma sector 2014 Baker & McKenzie LLP 11 Dawn raids worldwide EU Commission Norway Iceland Canada Russia United States of America Mexico Turkey Egypt Pakistan India China Japan South Korea Vietnam Denmark Netherlands Sweden Belgium Finland Brazil Malaysia Bangladesh Singapore Thailand United Estonia Kingdom Latvia Chile Germany Poland Hungary Lithuania Czech Republic Argentina Slovakia France Romania Bulgaria Spain Italy Austria Greece Switzerland Slovenia South Africa 0 dawn raids per year 6-10 dawn raids per year dawn raids per year Significant investigatory powers Australia 1-5 dawn raids per year dawn raids per year 30 + dawn raids per year New Zealand Dawn raid powers, no publicly available figures 2014 Baker & McKenzie LLP Source: Global Competition Review : Rating Enforcement / Baker&McKenzie 4

5 The U.S. and EU Position on Compliance Programs Amnesty or Leniency is the big carrot will not also give credit for a compliance program Cartel violation = a failed compliance program If your company had an effective compliance program, your company would have gotten the leniency Little to no official guidance on antitrust corporate compliance programs 13 FCPA, UK Bribery Act FCPA Significant guidance from the DOJ and SEC in 2012 Significant credit for self disclosing and having an effective compliance program under the FCPA Liberal use of NPA and DPA s for companies Fines can be enormous UK Bribery Act Significant guidance from the SFO and the Ministry of Justice Adequate compliance program is a defense Appear to be going to DPA model 14 Antitrust Compliance Program Necessary? ABSOLUTELY!! To comply with the law Builds stakeholder confidence Build company reputation for compliance Prevent disastrous violation from occurring Potential enormous criminal/civil fines in multiple jurisdictions Employee jail time Customer class action lawsuits Shareholder class action lawsuits Potential debarment from government contracts Enormous brand/company reputational damage Increase chance of detection and qualifying for leniency Cost of failure heavily outweighs the cost of compliance 15 5

6 Highlights of Effective Overall Compliance Program High Level Commitment or Tone at the Top Code of Conduct Oversight & Autonomy by Compliance Staff Adequate Global Compliance Resources Specific Policies and Procedures Comprehensive Internal Audits Rotational and Proactive Robust Internal Controls Risk Assessment Hotline Internal Investigations Enforcement and Discipline Third Party Management M&A Due Diligence Integration of Newly Acquired Entities into Your Compliance Program Effective compliance programs must be tailored to the company s specific business and risks and be dynamic to evolve with the business and its risks. 16 Key Components of Effective Antitrust Compliance Programs Be sure to win tone from the top and senior management commitment specifically on competition matters Be certain competition compliance is specifically addressed in the code of conduct Drafting a policy Risk assessment Tailored trainings Auditing and testing Mergers and acquisitions Internal reporting and investigations 17 Business and Industry Risk Assessment Proper regulatory risk assessment - Know your company, industry, and jurisdiction(s) How much cartel risk do you have? Commodity product? Number of players in your industry? Opportunity? (Conferences, Trade Associations, etc) Very Important to get a handle on your trade associations! Due Diligence Risk Analysis Bids/Tenders? Non- cartel risk? Monopolization risks? Market power very much a jurisdictional risk Vertical price/nonprice restraints risk? 18 6

7 Tailored Trainings Tailor your trainings to your company s specific antitrust risks How do you make antitrust training understandable and entertaining? Don t forget the backroom or office people Administrative assistants and T&E processors Don t forget about your purchasing people don t let your company become a victim 19 Auditing, Monitoring, and Testing With no evidence, is this really feasible to uncover a clandestine cartel? Where do you look? Incredibly expensive Data privacy implications Possible options: Proactive review using keyword hits T&E audits Antitrust employee questionnaires or surveys Full blown proactive audits of risky businesses 20 Mergers and Acquisitions Is your business properly trained for initial discussions? Does your M&A team and business have appropriate safeguards to firewall information during due diligence? Is the M&A team and business properly informed of dangers of gun jumping? 21 7

8 Internal Reporting and Investigations You have a cartel allegation, what do you do? Have your break the glass plan ready Speed will be of the essence in a race for amnesty Don t want to be caught flat footed Is amnesty always the correct decision when available? 22 8