Litigation And Antitrust - Beyond National Barriers

Sunday, October 4, 2009 - 00:00

Editor: Please tell our readers about your practice areas.

Scullion: My practice includes multi-jurisdictional litigation involving cases here and parallel cases outside the U.S. Increasingly, that is the trend in commercial litigation. I am part of the International Practice Group that was formalized a few years ago in response to our realization that we had significant depth and breadth of talent and experience in multi-jurisdictional international litigation and arbitration, as well as cross-border transactions and restructurings. One of the resources that the Group provides is our International Practice Guide, an electronic book available on our website that offers practical and strategic guidance, including the areas of Michael's expertise, international competition and regulatory issues.

We prepare an annual International Trends Report that comments on the most significant trends in these multi-jurisdictional settings. We also do an annual conference that provides an opportunity to have a face-to-face interaction with our clients, particularly for in-house counsel. Certainly, the FCPA is something that is on everyone's mind.

Editor: What is the head count in your International Practice Group?

Scullion: It numbers in the dozens and continues to grow as we expand our international offices and add feet on the ground.

Editor: Law practice doesn't get any simpler.

Scullion: A large amount of my practice focuses on how U.S. courts deal with complicated issues, for example, choice of law. A contract may have a choice of law provision, but which issues are governed by that and which may be governed by other applicable law? Increasingly, we see parallel actions in multiple jurisdictions that are going on simultaneously. We see an Americanization, if you will, of litigation rules and practices, particularly with regard to collective or class actions in Europe. Different jurisdictions are trying different approaches and it raises complicated issues. Attorney-client privilege has become more complicated with the very different approach that the E.U. takes. This impacts litigation and also how our clients conduct themselves on a daily basis. Even if they have in-house counsel in each jurisdiction, how they maintain their privilege has become more complex for them.

Editor: Please comment on how this impacts your area, Michael.

Lazaroff: Most of my work is in antitrust law or competition law, which is increasingly international in nature. But, even my non-antitrust litigation work has involved international issues. For example, recently I have been working on a case that involved numerous submissions to the Second Circuit relating to the state of the law on a series of issues in a South American country. We also advise clients engaged in litigation in foreign countries where that litigation may have ramifications in the U.S. We help guide the litigation in a manner that would be effective in U.S. courts. We see more questions relating to differences in competition law regimes, especially investigations of price fixing or cartels.

Editor: What is the current state of play?

Lazaroff: One area where we have seen substantially increased activity is in the investigation and prosecution of international cartels. The Department of Justice has made this an area of highest priority. Department of Justice only pursues as criminal antitrust violations per se horizontal price-fixing agreements, where competitors at the same level of distribution conspire to fix prices, allocate markets or rig bids. In the early 1990s, DOJ imposed around $25-30 million in criminal fines for companies entering such agreements. By contrast, DOJ has already imposed over $1 billion in fines for criminal antitrust activity this year. In the early 1990s, DOJ investigated mainly domestic cartels. Now, many of the significant cartels investigated are international. In the early 1990s, there were few executives jailed for criminal antitrust violations. Now, the Department of Justice has imposed jail sentences of two, three or four years on numerous executives, including foreign executives who often have entered plea deals agreeing to jail time in the United States. The Department of Justice credits this increased enforcement to many factors, including a revised corporate leniency program, legislation allowing for larger penalties and increased international cooperation. The corporate leniency program grants full amnesty from punishment for the first company to come forward and provide information about a cartel. This amnesty extends also to all of the company's executives and employees who cooperate This program has provided the incentive that has helped uncover substantial cartel activity. Antitrust regulatory authorities in other jurisdictions have also instituted similar leniency programs and toughened the penalties for international cartel activity. For example, there has also been a substantial increase in the amount of fines imposed by the EU for cartel activity. While in the EU, the cartel offense is not a criminal violation, there have been substantial fines of hundreds of millions of dollars imposed by the EU. DOJ often coordinates its investigations with the EU and regulatory authorities in other jurisdictions.

Editor: Please give our readers some examples.

Lazaroff: In 2006, DOJ and the EU coordinated raids on the offices of various airlines in both Europe and the United States. There was coordination in the staging and timing of the raids. This investigation has so far resulted in the imposition of more than $1.6 billion on numerous international companies. At least four executives including foreign nationals have plead guilty and agreed to serve time in jail. The EC has issued a statement of objections against 25 companies. The Australian Competition and Consumer Commission has imposed fines of tens of millions of dollars on numerous companies. There have been a number of class action lawsuits filed in the United States seeking damages for these alleged price-fixing agreements.

Another example would be the investigation into a cartel in the Marine Hose industry. In May 2007, there was an international industry meeting in the United States. DOJ had reason to believe that there was actually a cartel meeting occurring and arrested eight international executives. Simultaneously, there were search warrants executed at different locations in the United States, the United Kingdom and elsewhere in Europe. The EC has announced fines of over $170 million. DOJ and the Korea Fair Trade Commission have also imposed fines on the participants in the cartel. Nine executives including foreign executives have pled guilty in the United States and agreed to serve time in jail. Some of the English executives will serve their time in a jail in the United Kingdom. In one plea deal, DOJ brought charges both for being involved in cartel activity as well as for violating the FCPA.

These cases highlight the increased cooperation of DOJ with foreign regulatory authorities. They also highlight the extensive nature of the exposure for multinational companies that may have been involved in cartel activity.

Editor: Are these cases the result of someone trying to be the first to blow the whistle to escape punishment?

Lazaroff: Yes. In both cases, as well as in most of the recent large investigations, one company came forward and cooperated with the authorities and obtained amnesty for itself and its executives. This highlights the importance from a practical perspective of companies having compliance and training programs not just to avoid wrongdoing in the first place, but also to help uncover whatever activity may exist. A company can obtain full amnesty for itself and its executives if it is the first to provide information to the authorities, and it can still reach a better settlement if it is not the first one to approach the authorities. The incentives for reporting cartel activity are very high. A good compliance program will help alert executives and employees to the competition laws in the relevant jurisdictions to help avoid exposure and will help companies detect wrongdoing if any has occurred.

Editor: Is this analogous to the Foreign Corrupt Practices Act problem?

Lazaroff: It is similar, although it is not clear to what extent an antitrust compliance program would allow a company to avoid or lessen liability simply because there was a program. But the greater value is certainly in deterring and detecting illegal activity. I would point out that when a company is undergoing an investigation for cartel activity, say in the EU, more often than not it is under investigation simultaneously in the U.S and other jurisdictions. That company may be first in Europe to get amnesty, but another participant in the cartel may be first in the U.S. or Japan or elsewhere.

Editor: At the criminal level?

Lazaroff: In the United States, cartel activity is pursued as a criminal offense. In many other jurisdictions, it is only a civil offense. The Department of Justice has taken the position that the only effective way to deter cartel activity is by making sure the executives involved go to jail. Obviously, if you're a foreign national, there are issues of extradition. Notwithstanding this fact, DOJ has become increasingly successful in obtaining plea agreements with foreign executives agreeing to serve time in jail. In many other jurisdictions, including the EU, cartel activity is not a criminal offense, so there is no exposure to the individual executives. The fact that there are simultaneous civil and criminal investigations in different jurisdictions highlights some of the coordination issues Jennifer was talking about, including privilege issues. For example, if you are coordinating an investigation that's simultaneously happening in Europe, Japan, the United States and Australia, there are different privilege and discovery rules in each jurisdiction. One needs to be conscious of these rules from the initial stages of the investigation when you are talking to in-house counsel or outside counsel. Other issues arise such as if documents are taken by the EC in a dawn raid, are they discoverable or will they be shared with the authorities in the United States? Or, as often happens immediately after there's some public disclosure of the investigation, within 24-72 hours there is a series of class actions filed throughout the United States. Plaintiffs will attempt to get discovery of documents from the EU. Are these documents discoverable in the United States ?

Editor: Closing thoughts?

Scullion: International litigation is not a separate area anymore. There was a time when it was thought of as disputing where the line in the ocean is, where treaties are at play, but that's not what we're talking about anymore. Because our clients are involved in a global economy, they are involved in international litigation by definition.

Lazaroff: The bottom line for multinational companies is they must be aware of the competition laws in every jurisdiction in which they do business. They have to undertake to inform and educate their employees and executives on the ground about what they can and cannot do. Companies need to be vigilant to uncover and deter any wrongdoing, and they need to realize that there is going to be increased enforcement in these areas in the upcoming years.

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