Best Practices in Competition Compliance: A Global Perspective

Aryeh Friedman, Vice President, Associate General Counsel & Chief Privacy Officer, Dun and BradstreetGary Zanfagna, Chief Antitrust Counsel and Associate General Counsel, Honeywell InternationalJacques Buhart, Partner, McDermott Will & Emery, Brussels, ParisLeon Liu, Partner, Partner, MWE China Law Offices

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Agenda

• Regional enforcement• Can compliance programs be effective?• Cultural attitudes• What are the main danger areas?• The contents of a compliance program• Criminal law issues• The international element

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• Antitrust violations can subject both individuals and corporations to criminal penalties:– Individuals: Up to 10 years in

jail and $1,000,000 per offense– Corporations: Up to $100

million fine per offense (and potentially even more)

Regional enforcement – United States

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• Heightened Antitrust Enforcement

• Larger fines sought against corporations– In FY 2014, the

Antitrust Division received $1.3 billion in criminal fines

Regional enforcement – United States

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• Individuals going to jail for longer periods of time– The average jail sentence has tripled

during the past two decades

• DOJ tries to require “binding” sentence recommendations, which require the judge to impose a prison sentence

Regional enforcement – United States

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• Substantial fines – In the EU, fines can be up to 10% of annual worldwide turnover – Examples of recent fines

• Non-compliant agreements are unenforceable• Civil injunctions• EU directive 2014, but issue of admissibility of claims remains

national• Private damages actions

– No treble damages under EU and national law– EU cases can trigger a private lawsuit in US courts for treble damages– Private damages actions are rapidly increasing in national courts in the EU, but

problem of discovery

€ 705 million – Philips – TV and Computer Monitor Screens cartel (2012)€ 715 million – St Gobain - Car glass cartel (2008)

€ 1.06 billion – Intel (abuse) (2008)

€ 1.396 billion – Microsoft (abuse) (2004/2007)

Privileged & Confidential

Regional enforcement – EU

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Risks of Non-Compliance: Individuals

• Criminal exposure – No criminal sanctions under EU law– Imprisonment/fines under national law in certain EU Member States

• In the UK, 3 executives sentenced to between 2.5 and 3 years imprisonment, reduced on appeal to between 20 months and 2.5 years– Marine Hoses cartel

• Extradition– Individuals can be extradited from EU to face criminal antitrust charges

in the US• Romano Pisciotti – Marine Hoses cartel (2014)• Ian Norris – Graphite Electrodes cartel (2010)

Privileged & Confidential

Regional enforcement – EU

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• Infant Formula (May 2013)– The NDRC launched investigations against infant formula producers milk companies for

alleged vertical price maintenance; in August, the NDRC imposed penalties on six of these companies for their alleged price maintenance conduct, with a total fine of RMB 668.73 million (approx. USD 109.2 million)

• LCD Panel Cartel: Horizontal price fixing (January, 2013)– The NDRC imposed total fines of approx. USD 56 million on six companies, and

confiscated illegal gains for alleged price fixing; the fines were imposed under the Price Law because the alleged conduct predated the AML

• Luxury Liquor: Vertical resale price maintenance (February, 2013)– The NDRC imposed RMB 449 million fines (approx. USD 73.4 million): RMB 247 million

on Moutai, and RMB 202 million on Wuliangye for allegedly imposing penalties upon distributors for selling below minimum prices

• Gold Jewelry Dealers: Horizontal price fixing (August, 2013)– The NDRC imposed fines of over RMB 10 million (approx. USD 1.6 million) on five gold

jewelry retailers and their trade association for participating in an alleged price fixing cartel

Regional enforcement – China

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Can compliance programs be effective?

• Can we extrapolate from our compliance risk assessments (e.g. for anticorruption) to the antitrust field?– What factors should be considered in such

extrapolation?• Higher risk lines of business• Higher risk countries• Company specific risks• This should be done annually and internal reviews on practices

and controls conducted based on the risk-based assessments.

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Can compliance programs be effective?

• What evidence do we have that compliance programs actually reduce the likelihood of participation in a cartel?

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Can compliance programs be effective?

• What lessons can be learned from companies that had a compliance program, and still got caught?– Compliance program needs to be supported by

top management– Monitoring of enforcement of compliance

program– Sanctions for breach of compliance programs

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Can compliance programs be effective?

• How does one ensure that compliance program do not encourage corporate officials to be even more secretive? – Regular monitoring of e-mails

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Can compliance programs be effective?

• Can it ever be appropriate or advisable for a corporation not to have a compliance program?

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Cultural attitudes

• How does one deal with long-standing ingrained cultural attitudes?– Europe before the 1950s?– Attitudes to market intelligence in the Far East?– What is the current trend in China?– Compliance training?

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Cultural attitudes

• Is the US the only country where people really believe that cartels are "wrong"? – The extra territorial reach of US laws and its

related criminal sanctions

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Cultural attitudes

• How do Chinese people see their SOE companies?

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Cultural attitudes

• Inside the corporation, is the root of the problem the attitude of management (head in the sands), or the attitude of sales staff?

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Cultural attitudes

• Are sales performance reviews an element that drive people to engage in cartels?– Lessons from the car parts cartel international

investigations

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What are the main danger areas?

• Meetings of trade associations?• Dealing with competitors?• Dealing with customers or suppliers?• Invitations to submit bids?• Unilateral conduct such as– Pricing decisions– Preferential treatment of your own products to others, by

firms viewed as possessing significant market power. • Others?

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The contents of a compliance program

• How should compliance programs be structured?– Teach-in on the legal rules?– Practical examples from cartel cases similar to the

company industry and structure– Continual preaching of the "Do's" and "Don'ts"– Obligatory on-line training at regular intervals

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The contents of a compliance program

• What makes up an effective compliance program?– What are most essential elements?– How often should compliance training be given, and

required to be followed?– Should special training be organized for newly acquired

entities?– Should the Chief Executive play an active role in

compliance training? To what extent?– Can there ever be too much effective antitrust training?

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The contents of a compliance program

• Should compliance programs have a hotline so that dubious conduct can be reported?– Is it good for staff morale to know that their

colleagues may be spying on them?– Are there any issues under the law of privacy?– Internal leniency program

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Criminal law issues

• How should a corporation manage the situation where the company is accused of a cartel offence, and individual members of its staff are also under investigation?– Presentation order– Immediate preliminary investigation– Cooperate or not?– Filing marker– Focus on US investigation– The role of outside counsel

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Criminal law issues

• Are the individual’s interests not necessarily the same as those of the corporation?– When to hire outside counsel for individuals

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The international element

• What additional considerations enter into play in the organization of compliance on an international scale?

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The international element

• Does compliance vary by jurisdiction? – Or should compliance vary by jurisdiction? – Where is the fine line? – Is there any effective “jurisdictional defense”?

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The international element

• How does a global corporation deal with global compliance?

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The international element

• Tracking Global Legal Changes– Compliance programs have• Tools that track proposed and enacted legal changes• Have a process whereby those changes are reviewed

and those needing to know about the changes for purposes of changing business practices, or policies and procedures are notified of the changes and required actions • There is a process for implementing those changes and

monitoring compliance with those changes

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The international element

• How does a company operate in Protectionist/Highly Political Legal Environments– Operating in market where national laws prefer

local businesses to foreign businesses and the interaction with trade laws

– Selective competition law enforcement where foreign companies are, or are perceived to be, at a higher risk for enforcement actions

Thank you!

Aryeh Friedman, Vice President, Associate General Counsel & Chief Privacy Officer, Dun and BradstreetGary Zanfagna, Chief Antitrust Counsel and Associate General Counsel, Honeywell InternationalJacques Buhart, Partner, McDermott Will & Emery, Brussels, ParisLeon Liu, Partner, Partner, MWE China Law Offices