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Criminal Antitrust Practice

Learn about the statutory framework governing criminal antitrust practices and the government investigation techniques used, including grand jury investigations, witness immunity, leniency programs, pleas, sentencing guidelines, and multi-jurisdictional issues.

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Criminal Antitrust Practice

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  1. Criminal Antitrust Practice Donald C. Klawiter J. Clayton Everett, Jr. Jennifer M. Driscoll

  2. Statutory Framework • Section 1 of the Sherman Act • Contracts, combinations or conspiracies in restraint of trade a felony. • Other criminal antitrust statutes (Section 2, R-P Act) are not prosecuted.

  3. Statutory Framework • Only hard-core cartel activities prosecuted: • Price fixing • Market allocation • Customer allocation • Prosecutions by the Antitrust Division of the U.S. Department of Justice • Deputy Assistant Attorney General for Criminal Enforcement: Scott Hammond • National Criminal Enforcement Section • 7 Regional Offices (NY, SF, DA, PH, AT, CH, CL)

  4. Statutory Framework • Maximum corporate fines = • $100 million • Twice the gain • Twice the loss • Maximum individual fines and prison terms: • $1 million • 10 years

  5. Statutory Framework • Other countries with criminal antitrust statutes: • Canada • UK • Extradition

  6. Government Investigation Techniques • Grand Jury • Search Warrants • “Ambush” Interviews • Video and Audio Tapes

  7. Grand Jury Investigations • Grand Jury: investigates possible criminal violations of federal laws • Secret proceedings • Subpoenas for documents and witnesses may be issued • Return of indictment marks beginning of criminal antitrust litigation

  8. Witness Immunity • Fifth Amendment rights • Statutory Immunity—18 U.S.C. §6002 • Allows compelled testimony • “Use-Fruits” Immunity • Must be approved by court • Contractual immunity—”Queen for a day” • Use immunity • Usually only offered to individuals government has decided it is unlikely to prosecute

  9. Corporate Leniency Program • To date, the most effective tool for deterring cartel activity. • A company can qualify for leniency even if the Division has opened an investigation, provided that certain criteria are satisfied. • Principles of post-investigation leniency grants include • The importance of being first in and fully cooperative; • The significance of restitution to injured parties; and • The role of the Division in determining the fairness and propriety of leniency.

  10. Pleas and Sentencing • Sentencing Guidelines • No longer mandatory, but still provide framework • “Volume of Commerce Affected” • Culpability Score • Fine/Sentence Range • Cooperation Discounts

  11. Pleas and Sentencing • “Volume of Commerce Affected” • Defendant’s U.S. sales during period of conspiracy • 20% of VOC = base fine

  12. Pleas and Sentencing • Culpability Score • Size of organization and seniority of participants • Prior violations • Violations of court orders • Compliance program • Acceptance of responsibility/ cooperation • Determines length of sentence for individuals • Determines multiplier for corporations • Multipliers range from 1.0 to 4.0

  13. Pleas and Sentencing • Components of plea agreement: • Factual basis • Defendant’s cooperation obligations • Government’s agreement not to prosecute • “Carve outs” • Vary depending on (a) timing of plea (b) degree of cooperation

  14. Pleas and Sentencing • Types of Pleas • Type B: defendant must live with whatever punishment is imposed by court • Type C: plea agreement may be nullified if court does not accept agreed plea

  15. Pleas and Sentencing • Cooperation Discounts • Amnesty typically available to first cooperator • Second cooperator typically gets best fine discount and smallest number of “carve outs” • Subsequent cooperators tiered

  16. Pleas and Sentencing • Guilty plea is prima facie evidence of violation for subsequent civil cases. • Civil exposure = 3x damages + attorneys’ fees • Joint + several liability; no right of contribution • Importance of appropriately defining the scope of the conduct at issue

  17. Pleas and Sentencing • ACPERA (2004) • Single damages • No joint liability • Requires “cooperation” with plaintiffs

  18. Multi-Jurisdictional Issues • Each jurisdiction has different leniency requirements and will demand a separate application. • Discovery of documents and witnesses located outside US is difficult, but competition authorities do share information. • There is a risk that written statements to competition authorities abroad will be discoverable in US civil actions.

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