Managing multi-jurisdictional cartel investigations

1. Assessing the risks and developing an antitrust strategy Managing multi-jurisdictional cartel investigations

2. Overview • The framework at European level • The framework at member state level • The conduct of cartel investigations • Managing multijurisdictional cartel investigations

3. The European framework • The prohibition : Article 101 TFEU / national competition laws • The sanctions at European level • The general framework: Administrative sanctions against companies • Fining guidelines provide some clarity … but do not always give you the full picture • Immunity and Leniency (Requirements / Markers / Level of reduction available) • Practical results: Fines are increasing • The sanctions at member state level • The basic approach is similar • But important differences do exist • Non-criminal fines / criminal sanctions for individuals • Other administrative sanctions against individuals • The enforcement authorities and their work • European Commission and 27 competition enforcement authorities • Powers are defined at European level (Regulation 1/2003) and member state level (local competition laws & codes of administrative and criminal procedure) • Follow on actions for damages occur at member state level

4. The conduct of cartel investigations • The starting point – always due to whistleblowers? • Dawn raids – it’s all about gathering information, right? • In depth investigation - Fight or flight: The possible race for leniency • Reply to a statement of objections and oral hearings – The heart of the defense … • Settlement discussions – More things to discuss than may be obvious • The decision - Don‘t hold your breath? • The appeal - Having a second bite at the apple?

5. Multijurisdictional investigations • Assess potential scope of investigations • Identify jurisdictions (potentially) involved in the investigation • Assess seriousness of infringement • Weigh quality of evidence already available to the authorities • Consider potential consequences of investigations • Calculate potential fines and other sanctions (for company and individuals) • Consider means of reducing sanctions (is immunity/leniency still available, what evidence does the company have etc.) • Consider threat of follow on litigation (damages & costs) • Develop an antitrust strategy • Fight or flight : Is leniency an option? • Consider likely action by other market participants • Identify priority jurisdictions • Allocate sufficient resources to implement the strategy

6. Assess scope of investigations • Identify jurisdictions affected by the relevant behaviour • What was the content of the suspected coordination? • Sales into which jurisdictions were possibly affected? • Can nexus be established by other means (meetings held locally, employees involved in suspected infringement located there etc.)? • Assess seriousness of infringement • Direct coordination of competitive activities (prices, customers / territories, quantities etc.) usually is a serious infringement while other forms (e.g. sharing sensitive information) must be carefully evaluated • The duration of the potential infringement may be relevant • Weigh quality of evidence already available to the authorities • What do they have? • What are they likely to get from others?

7. Calculate potential fines/other sanctions • For company: Usually percentage of affected sales with mark ups and reductions • For individuals: Various sanctions, depending on jurisdiction • None • Financial penalties (criminal or administrative fines) • Incarceration • Professional disqualification • Consider aggravating and mitigating factors • Various elements are relevant (e.g. repeat offender, ring leader / instigator, passive participant etc.) • Does the existence of compliance programs matter? • Does the size of the company / group of companies matter? • Distinguish maximum sanctions from likely sanctions, inter alia based on • which agencies are likely to pick up the matter, and • what are the agency‘s track record and aspirations? • Will it be possible to enforce likely sanctions against the company and/or executives?

8. Consider means of reducing sanctions • Consider for each jurisdiction in which sanctions may be imposed • Is immunity/leniency still available locally? • What are local requirements for leniency (esp. re added value)? • What evidence does the company already have? • What evidence can still be gathered? • Document retention issues • Executives retire …

9. Consider costs of cooperation • What are the costs of cooperating with the authority per jurisdiction? • outside local lawyers and economists • coordinating counsel • internal resources (legal department, diverted management attention) • What are the effects on follow on actions locally or in other jurisdictions? • What type of information will become publicly available? • Will fact of immunity / leniency application be made public? • Will leniency applications, corporate or individual statements be accessible to third parties? • Will responses to information requests and documents submitted to the authority be accessible to third parties? • When will such information become accessible to third parties? • Who will have access to such information? • Will immunity / leniency applicant be required to actively support third party litigants?

10. Consider likelihood of follow on actions • Today follow-on litigation is becoming the rule, rather than the exception (many other cases are settled out of court). • Some jurisdictions allow for punitive / treble damages that greatly increase the financial exposure of defendants. • Joint and several liability may further increase exposure of the individual defendant. • Discovery procedures increase the amount of information third parties have access to as well as the costs associated with such procedures. • Consider the overall civil litigation exposure associated with cooperating • In which jurisdictions are actions likely to be (successfully) brought? • Are actions usually settled or litigated (each has its own costs)? • Do immunity / leniency applicants enjoy privileges in follow-on actions? • Will immunity / leniency applicants bear special responsibilities in follow-on actions? • Remember: Civil litigation risks may far outweigh the exposure from government investigations!

11. Develop an antitrust strategy • Consider whether the company has a general strategy of dealing with antitrust issues that applies. • For each jurisdiction that is affected • Find out the available options : Fight or cooperate (seek immunity or leniency / plea agreement). • Assess the costs associated with each option (government investigation and civil litigation). • Assess the level of risk of actions by agency or other companies involved. • Consider your ability to effectively implement relevant option. • Merge results of country specific assessment in a global evaluation • What are the total costs / benefits? • Is it possible to adopt a mixed strategy? • Will you be able to effectively implement the global strategy (resources / cumulative and partly conflicting cooperation requirements)?

12. Develop an antitrust strategy (contd.) • Regardless of which option is chosen, the company will have to develop an implementation plan • You can’t do everything, everywhere at once. • Developments become complex quickly, you need to stay focused to remain in control • Identify priority jurisdictions, based on a number of factors, including • the financial risk exposure / potential level of fine and threat of incarceration of (senior) executives (including the availability of immunity / leniency), • the likelihood that agencies become active (enforcement track record), • the likelihood that other companies involved take action, • the risk of follow on actions in that jurisdiction or based on an investigation in that jurisdiction, and • the risk that any sanctions imposed on the company or its executives will be effectively enforced

13. Conclusion • Develop an antitrust strategy • Even in straightforward cases a complex assessment • Complexity increases with the number of jurisdictions involved • Identify priority jurisdictions, with a primary focus on • seriousness of exposure (level of fines / risk of incarceration) • ability to mitigate risk (immunity / leniency) • local enforcement track record • Plan implementation of your strategy carefully • Allocate sufficient resources to the team • Make everyone understand that this is a top priority matter • Remember the need for speed • BE THERE EARLY • MOVE QUICKLY

14. Assessing the risks and developing an antitrust strategy Managing multi-jurisdictional cartel investigations