Trial Preparation: Not Just for Outside Counsel

1. Trial Preparation: Not Just for Outside Counsel April 18, 2007 ABA Antitrust Section Spring Meeting Corporate Counseling Committee NY662805

2. Corporate Counseling Committee • Committee Leadership • Mike Miller • Adam Biegel • Susan Boughs • Stephen Donovan • Allan Huss • Erika Lee • Paula Render • For more information see Corporate Counseling Committee’s webpage at www.abanet.org/antitrust

3. Panelists Aimee Imundo Senior Counsel – Competition Law & Compliance General Electric Washington, D.C.

4. Panelists Michael W. Boomgarden Antitrust Division U.S. Department of Justice Chicago, IL

5. Panelists Gerwin Van Gerven Linklaters Brussels, Belgium

6. Panelists K. Craig Wildfang Robins, Kaplan, Miller & Ciresi LLP Minneapolis, MN

7. Panelists Michael Miller Morrison & Foerster LLP New York, NY

8. Meeting Organizers Adam Biegel Alston & Bird LLP Atlanta, GA & Paula Render Bell, Boyd & Lloyd, LLP Chicago, IL

9. Agenda • Mock Trial Hypothetical (trial date – April 19, 2007) • Price-Fixing Conspiracies from Multiple Perspectives • The View from In-House – How Can the Problem Be Prevented? • The View from the Government – How Would the Matter Be Investigated? • The View from the Plaintiffs’ Bar – How Can Private Parties Pursue Remedies? • The View from Overseas – How Would the Matter Be Defended (Part I)? • The View from the Defense Bar – How Would the Matter Be Defended (Part II)? • Discussion

10. United States of America v. Petrol, Inc.

11. The Basic Fact Pattern • The Alleged Unlawful Agreement: • Four Big Players in the Petroleum Resin Industry: • Fuel Corporation (Japan) (FI) • Gas King (Germany) (GK) • Go Oil (Netherlands) (GO) • Petrol Inc. (US) (PI) • Over drinks and a football game at the November 2000 Meeting of the Petroleum Resin Association, the four biggest PR producers agreed: • Keep Production at Current Levels • Not Go After the Other’s Customers • Followed Any List Price Increase • FC would withdraw from Europe • GK, GO and PI would leave FC alone in Asia/Pacific • Keep the Agreement Secret • PI: it “would have to discuss any such agreement with management.”

12. The Unraveling • Oct ’03: GK Announced Acquisition by Heloflex • Oct-Nov ’03: GK Discovers the Conspiracy During Due Diligence • Nov ’03: GK Applies for DOJ/EC Leniency Program • Feb 2, ’04: DOJ/EC Simultaneous Searches of GO/PI/FC in US/EU • Feb 3, ’04: EC Announces Investigation and that Raids Took Place; GO/PI Disclose Grand Jury Subpoenas • Feb 4, ’04: GK Announces that It Is Aware of the Investigations, and Is Cooperating • Feb 6, ’04: Class Action Lawsuits Filed In: Phila., DC, NY, Houston, Dallas and SF (Damages Sought from 1997 to the Present) • Feb 4, ’05: DOJ Announces that: Go Agreed to Plead Guilty ($50 million fine), and that GK Had Been Admitted Into Amnesty Program • Civil Actions Stayed Pending Outcome of Criminal Case Against PI

13. Corporate Counseling Committee Aimee Imundo Senior Counsel, Competition Law & Compliance ABA Antitrust Section Spring Meeting April 18, 2007

14. Prevention - Philosophical • When are you 100% certain you have: • No active cartel participation? • Have detected all cartel activity? • You always know only what you know – no more • Individuals • Orphans No Excuses Adequate if There is a Miss

15. Prevention - Training • Stratify • Basic – all employees • Advanced – Target to population • By job responsibility • By management responsibility • Tailor to the Business? • Business model/market environment • Acquisitive? • Concentrated Market – Sec 2 • Buy/sell from competitors • Early Warning System • Enforcement, regulatory trends relating to this business, industry • Interplay with other laws if regulated industry • Interval • Annual? Same material or tailor? New employees?

16. Prevention – Monitor Enforcement Trends • Which are relevant to your business • Same industry • Same business model • Mini Audits • Go to the business • Does the training match the model; risks • What are the controls • Are there processes • Are they measured/monitored • Check files/other records • Contracts/JVs/Buy-sell with competitors • Does the business model carry new risks as a result of enforcement changes? • Are there aspects of the model/products that should be changed? • Is there adequate support for counseling on antitrust issues?

17. Prevention - Safeguards • Require Procedures and Measure Them • Procedures for documenting contacts with competitors • Procedures for appropriate legal/manager review and sign off on membership in trade associations • Requirements for collecting/handling competitive information • Measure whether the procedures are in place and robust • Measure whether employees 100% trained

18. Detection – New Acquisitions • Due diligence usually very limited • Employees (management?) may be concealing activity • A few risk factors – not definitive • Industry concentration • Parallel price changes • High level of trade association activity • Enforcement history in the industry • Increase chances of detection: • Put company resources on site • Visit often • Listen to rumors • Listen for interesting questions after training sessions

19. Antitrust Division Criminal Enforcement ProgramThe Prosecutor’s Perspective Michael W. Boomgarden Trial Attorney U.S. Department of Justice, Antitrust Division Midwest Field Office Direct Dial: (312) 353-6687 Michael.Boomgarden@usdoj.gov American Bar Association Antitrust Spring Meeting 2007

20. The Prosecutor’s Perspective: How far things have progressed by the time the subjects or targets learn of the investigation: Investigative techniques that may have been used What we may or may not know What we’re looking for: Additional evidence, or Cooperation

21. The Company’s Early Contacts with the Investigators & Prosecutors: • Dealing with the agent and/or the prosecutor • The flow of information from the Government • Argumentativeness may not be the best advocacy

22. The Decision Whether to Cooperate: The critical importance of understanding the Amnesty Program Dealing with “Markers” Deciding what to do if you’re not first in line

23. Fundamental Mistakes (at least the way one prosecutor sees it): • Failing to quickly assess and react • Permitting panic to cause bad decisions (obstruction & false statements) • Dawdling while more nimble-footed lawyers beat you to the punch • Failing to make a credible pitch for not being prosecuted (at the right time)

24. TRIAL PREPARATION: NOT JUST FOR OUTSIDE COUNSEL ABA Antitrust Section Spring Conference Corporate Counseling Committee April 18, 2007 K. Craig Wildfang Robins, Kaplan, Miller & Ciresi L.L.P.

25. Representing Victims of Cartels • How Can A Potential Cartel Victim Protect Itself From Cartel Activity? • How Can An Actual Cartel Victim Recover Huge Sums of Money It Paid As A Result Of Cartel Activity (and make the General Counsel’s Office a profit center)?

26. Detecting Cartel Activity • Analyze Your Client’s Purchases of Major Inputs, and Inputs Into Those Inputs • Are your client’s major inputs fungible, commodity-type products where one would expect price to be the focus of competition? • Are there few sellers of these inputs? • Do the sellers include European or Asian firms? • Do the sellers appear to focus competition on non-price aspects of the inputs?

27. Detecting Cartel Activity • Analyze Your Client’s Purchases of Major Inputs, and Inputs Into Those Inputs • Are there seller/buyer or trading relationships among the major sellers (i.e. does one seller sell or trade the input to other sellers, either for use in manufacturing processes or for re-sale)? • Does the input market have a history of collusion? • Do any of the major sellers have a history of collusion in other markets?

28. Detecting Cartel Activity • Analyze Your Client’s Purchases of Major Inputs, and Inputs Into Those Inputs • Have input prices exhibited any unusual price movements? • Has the price relationship between inputs to the inputs (e.g. crude oil) and the inputs themselves changed? • When your client seeks suppliers, do they get multiple bids? • Is there little seller/buyer switching over time?

29. Your Client Has Been A Cartel Victim, Now What? • Litigating the Claims of a Cartel Victim • Strategic and Tactical Issues • How to Maximize Recovery

30. Litigate or Not? • Considerations re: whether to commence litigation • Relationship(s) with sellers • Risk of retaliation – usually a non-issue • Availability of alternative suppliers • Is a pre-filing settlement possible? • If so, will the recovery be better if litigation is commenced pre-settlement?

31. Decision to Litigate: Alternatives • Class Representative • Absent Class Member • Individual Action Early • Opt-Out Later

32. Being a Class Representative • Pro • Assures someone pursues claims • Greater control of outcome, especially settlement • If injunctive relief is important, only Class has leverage to obtain it • Usually fees & costs are advanced by Class counsel • Sometimes courts award special compensation to class representatives • Con • Litigation burdens, discovery, etc. • Fiduciary obligation to the Class (including competitors) • Risks to supplier relationships

33. Being An Absent Class member • Pro • No cost, risk, hassles, etc. • Found money • No risks to supplier relationships • Con • No control over outcome • Sometimes have to make opt-out decision before value of claim is known • Can get “stuck” in class with no real options

34. Early Individual Action • Pro • Greater control over outcome, especially settlement • Ability to “free-ride” - to an extent – on efforts of the Class • No fiduciary duties to competitors • Con • Costs & fees • Litigation burdens • Risks to supplier relationships • Case law not clear on effects of individual action on status as an opt-out • If injunctive relief is important, little leverage for individual plaintiffs

35. Opt-Out • Pro • Delays decision until more is known re: value of claim • Free-riding • Greatest amount of flexibility in settling • Con • Costs & fees • Litigation burdens • Risks to supplier relationships • Sometimes settlement options are constrained by Class settlement (e.g. MFN clauses) • Sometimes courts award fees to Class counsel from opt-out settlements • If injunctive relief is important, little leverage for opt-out plaintiffs

36. Other Considerations Re: Class, Individual Claim, Opt-Out • Size of your clients’ claim – unless substantial, uneconomic to litigate separately • Although increasingly counsel for opt-outs cooperate to achieve litigation economies • Timing of recovery – typically, Class members don’t get anything until case is completely concluded, whereas Individual and Opt-Out plaintiffs can settle seriatim with defendants and get some money quickly; Class’ delay can be years

37. Active Litigation • Must assume the need to try the case to maximize recovery • Must convince client, Court and adversaries that you will try the case • Need to build credibility with the Court • Don’t assert frivolous arguments • Need to build momentum with the Court • Don’t bring loser motions • Focus on experts, that’s where the money is!

38. Settlement Considerations • Defendants – Joint & Several Liability / No Right of Contribution • Defendants – Judgment Sharing Agreement? • In this hypothetical case, unlikely given disparity in defendant circumstances • Plaintiffs – Will Offer Cheap, Early Out To First Defendant • Then ratchet up settlement terms

39. Manufacturer’s Market Share of the Global Market for Petroleum Resins CONSPIRACY PERIOD Sept. 8, 2003 Nov. 4, 2000 45 40 40 40 39 39 39 40 36 36 35 35 35 31 31 30 30 30 30 29 29 28 30 27 26 25 24 23 25 21 % 19 19 19 19 18 20 15 12 10 10 9 9 8 8 8 8 10 7 3 3 3 3 5 2 2 2 2 2 2 0 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 GERMANY (Gas King) NETHERLANDS (Go Oil) JAPAN (Fuel Corp.) U.S. (Petrol Inc.) REST OF THE WORLD

40. 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 GERMANY (Gas King) NETHERLANDS (Go Oil) JAPAN (Fuel Corp.) U.S. (Petrol Inc.) REST OF THE WORLD Manufacturer’s Market Share of the Global Market for Petroleum Resins CONSPIRACY PERIOD Sept. 8, 2003 Nov. 4, 2000

41. 130 120 110 100 90 3/1/2000 6/1/2000 9/1/2000 3/1/2001 6/1/2001 9/1/2001 3/1/2002 6/1/2002 9/1/2002 3/1/2003 6/1/2003 9/1/2003 3/1/2004 6/1/2005 9/1/2005 3/1/2006 6/1/2006 9/1/2006 3/1/1997 6/1/1997 9/1/1997 3/1/1998 6/1/1998 9/1/1998 3/1/1999 6/1/1999 9/1/1999 6/1/2004 9/1/2004 3/1/2005 12/1/2000 12/1/2001 12/1/2002 12/1/2003 12/1/2005 12/1/1996 12/1/1997 12/1/1998 12/1/1999 12/1/2004 Petroleum Resins Price Index CONSPIRACY PERIOD Sept. 8, 2003 Nov. 4, 2000

42. 130 4% 3% 120 -3% 2% 3% 4% -5% -3% 2% 2% 5% 110 -2% 4% 2% 3% -3% 2% -2% -4% 4% Rescinded 4% -2% 100 -2% -4% 90 3/1/2000 6/1/2000 9/1/2000 3/1/2001 6/1/2001 9/1/2001 3/1/2002 6/1/2002 9/1/2002 3/1/2003 6/1/2003 9/1/2003 3/1/2004 6/1/2005 9/1/2005 3/1/2006 6/1/2006 9/1/2006 3/1/1997 6/1/1997 9/1/1997 3/1/1998 6/1/1998 9/1/1998 3/1/1999 6/1/1999 9/1/1999 6/1/2004 9/1/2004 3/1/2005 12/1/2000 12/1/2001 12/1/2002 12/1/2003 12/1/2005 12/1/1996 12/1/1997 12/1/1998 12/1/1999 12/1/2004 Petroleum Resins Price Index CONSPIRACY PERIOD Sept. 8, 2003 Nov. 4, 2000

43. ABA Antitrust Section Spring Meeting Gerwin Van Gerven 18 April 2007

44. What should you do on Day 1? • Be prepared • Arrange support during the dawn raid • Avoid the destruction of evidence • Know how to deal with communications • External/Internal

45. What should you do when the raids are over? • Review the documents taken away • Organize and carry out an internal investigation • Understand/explain the alternative courses of action • Make the decision

46. Going for cooperation • Importance of timing • Where to go in? • Coordination between jurisdictions • and … possible conflicts • What does cooperation imply?

47. The View from the Defense Bar – How Would the Matter Be Defended (Part II)? (And How Does that Relate to the In-House Lawyer’s Perspective?) Michael Miller Morrison & Foerster LLP New York, NY

48. First, Some Basics

49. What’s an Agreement? • Section 1 applies to concerted action only, not unilateral action – it takes two (or more) to violate Section 1 • There is often a fine line between unilateral and concerted action • Need to find the existence of a “contract, combination … or conspiracy” In other words, a “meeting of the minds” on the business conduct in question • Doesn’t matter if agreement is coerced, or results from duress • “Agreement” Does Not Mean “Signed Contract” • Informal agreements count too, written or unwritten, legally binding or not, reached in an office or reached on the golf course • Understandings can be tacit, and arise without verbal communication – “[a] knowing wink can mean more than words.” • But: • Parallel conduct – even “conscious parallelism” – is NOT enough to establish the existence of the requisite concerted action

50. Proving the Agreement: Direct Evidence • Obviously, can prove the existence of an agreement through direct evidence • Question: “Who would leave behind direct evidence of an illegal conspiracy? • Answer: You would be surprised • International amnesty programs encourage the creation of direct evidence – including video and audio tapes – of conspiracies • Antitrust violators often give in to the apparently irresistible urge to name their conspiracy: The Club, the Group, etc.; or refer to “responsible” pricing, “truces” and the like • While it is less common in the current legal environment, foreign business people sometimes do not realize that what they were doing was illegal, or never thought it could be prosecuted in the US