Global Competition Compliance: Pitfalls & Best Practices - Authority Practices in 5 Region, Slides of Competition Law and Policy

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Innovations & Strategies for Troubled Times INTERNATIONAL COMPETITION COMPLIANCE: GLOBAL PITFALLS AND BEST PRACTICES Docsity.com What We’ll Cover:  Why are international competition compliance programs important?  Recent practice of competition authorities in Canada, U.S.A., Brazil, Korea, of the European Commission and in Germany (fines, "dawn raids", etc.)  Important issues of international competition compliance (compliance officer; commitment of senior management; compliance network members; checklists, guidelines and instructions; diagnostics / antitrust due diligence)  Global pitfalls and best practices  Your questions 2 International Competition Compliance: Global Pitfalls and Best Practices Docsity.com 5 Recent Practice of Competition Authority in Canada (2):  Competition Act amendments – increased risk to parties • New per se cartel offence (beginning in March 2010) • Maximum cartel penalties increased to 14 years imprisonment and fines of CAD 25 million (up from 5 years and CAD 10 million) • Introduction of “AMPs” for abuse of dominance – maximum CAD 10 million for first offence (CAD 15 million for subsequent offences) • Increased penalties for obstruction and failure to comply with a search warrant or production order • Increased penalties for misleading advertising (14 years imprisonment, up from 5 years) • Bid-rigging offence expanded to include agreements to withdraw bids International Competition Compliance: Global Pitfalls and Best Practices Docsity.com 6 Recent Practice of Competition Authority in Canada (3):  Competition Act amendments – increased pricing flexibility • Price discrimination and predatory pricing provisions repealed • Price maintenance offence de-criminalized  Competition Bureau bulletins and guidelines recently released • Bulletin on corporate compliance programs • Draft bulletin on trade associations • Draft bulletin on sentencing and leniency in cartel cases • Draft updated enforcement guidelines on the abuse of dominance provisions International Competition Compliance: Global Pitfalls and Best Practices Docsity.com 7 Recent Practice of Competition Authorities in the U.S.A. (1): Urgent Need for Compliance Program  Criminalization/Jail Time • Corporations: USD 100 million per offense • Individuals: USD 1 million per offense. Up to 10 years in jail.  Private Treble (3x actual) Damages Action • Juries • Class Actions  U.S. Department of Justice Leniency Program International Competition Compliance: Global Pitfalls and Best Practices Docsity.com 10 Case Results: International Competition Compliance: Global Pitfalls and Best Practices Docsity.com Recent Practice of Competition Authority in Brazil (1):  Full priority to antitrust investigations in the last 5 years  Adoption of leniency / leniency-plus programs  Progressive increase in fines (legal limits of 1% - 30% of turnover)  Launching of criminal prosecutions (cooperation with prosecutors)  Increased cooperation with authorities from other countries  Extensive use of search warrants  Public campaigns / authority hotline 11 International Competition Compliance: Global Pitfalls and Best Practices Docsity.com 12 Recent Practice of Competition Authority in Brazil (2):  Specific developments • Investigation of most international cartels with effects in Brazil • 93 search warrants (“dawn raids”) executed in 2008 • Over 100 individuals currently facing criminal prosecution • Imposition of prison terms (up to the 5-year limit) • Fines raised to 15% - 20% of turnover (+ USD 80 million / 1 million) • Simultaneous dawn raids with US DOJ / EC • Coordinated leniency and investigations with other countries International Competition Compliance: Global Pitfalls and Best Practices Docsity.com 15 Recent Practice of Competition Authority in Korea (3):  Wide Range of Industries • Government procurement (military gasoline) • Consumer products (sugar, detergent, flour, gasoline) • Industrial products (polypropylene, CRT glass) • Financial services (insurance, bank fees) • Other services (air cargo)  Increased International Cooperation • Formal and informal information sharing with US, EU and other countries • Examples : Air cargo transportation, LCD, CRT glass, copy paper • KFTC established a new division to investigate international cartels International Competition Compliance: Global Pitfalls and Best Practices Docsity.com 16 Recent Practice of the European Commission (1):  Total amount of fines imposed (2005-2008) International Competition Compliance: Global Pitfalls and Best Practices Year 2005 2006 2007 2008 Amount in € million 683 1,846 3,338 2,271 Docsity.com 17 Recent Practice of the European Commission (2):  Highest fines • for one cartel – € 1,383,896,000 (car glass, 2008) – € 992,312,200 (elevators and escalators, 2007) • on one company – € 896,000,000 (Saint Gobain, car glass, 2008) – € 479,669,850 (Thyssen Krupp, elevators and escalators, 2007)  No prison sentences  Private damages claims upcoming International Competition Compliance: Global Pitfalls and Best Practices Docsity.com 20 Recent Practice of Competition Authorities in Germany (1):  Most recent fines: • € 250 million for 11 liquefied gas suppliers (2007 / 2008 / 2009) – December 2007 and February 2008: € 209 million for 9 companies – April 2009: € 41.4 million for further 2 companies • € 216 million for 2 advertising time-marketing companies (2007) • € 165 million for 6 manufacturers of clay roof tiles (2008)  Highest fine for one company (since 2007): € 120 million (Pro7Sat.1)  Basically no prison sentences (exception: bid-rigging) International Competition Compliance: Global Pitfalls and Best Practices Docsity.com 21 Recent Practice of Competition Authorities in Germany (2):  Legal Framework • Notice no. 9/2006 of the German Federal Cartel Office (FCO) on immunity from and reduction of fines in cartel cases – Leniency Program – of 7 March 2006 • Notice no. 38/2006 on the imposition of fines under Section 81 (4) sentence 2 of the German Act against Restraints of Competition (ARC) against undertakings and associations of undertakings of 15 September 2006  Practice of the FCO and state competition authorities regarding compliance programs: • Not explicitly mentioned in those notices • Not explicitly taken into account in decisions in the past International Competition Compliance: Global Pitfalls and Best Practices Docsity.com 22 Recent Practice of Competition Authorities in Germany (3):  Why establish a compliance program? • Prevent future breaches of national rules, especially in view of increasing fines and claims for damages • Improve chances to obtain leniency (after internal revelation of breaches of national rules) • Compliance programs are taken into account in an examination of a breach of "obligatory supervision" requirements applicable to natural persons (particularly managing directors) (§ 130 GWB) International Competition Compliance: Global Pitfalls and Best Practices Docsity.com 25 International Competition Compliance: Global Pitfalls and Best Practices United States EU  Resale Price Maintenance - Colgate exception - “MAP” programs - U.S. Supreme Court “Rules of Reason” - But states want to overturn S.Ct.  Merger Control - DOJ and FTC - Attorney-General - CFIUS  Resale Price Maintenance - No exception for independent dealers  Merger Control - DG Comp, Brussels - Member State systems - European “CFIUS”? United States – EU Comparison Overview (2): Docsity.com 26 General issues in establishing an international compliance program (1):  Goal to create structural environment for detection and prevention of, and reaction to, potentially anticompetitive practices, minimizing risks to the company as a whole  Not enough to adopt program only in some jurisdictions • Risks can come from anywhere; trend of increasingly more active enforcement around the globe  How uniform can / should an international program be? • Issues of cost, manageability, legal certainty, business flexibility International Competition Compliance: Global Pitfalls and Best Practices Docsity.com 27 General issues in establishing an international compliance program (2):  Main principles and rules apply across borders, but beware of cookie- cutter solutions  National law, practices and idiosyncrasies demand local attention  Clear commitment from senior local management indispensible • Importance of also showing support from headquarters  Hot lines: language, cultural, time zone issues International Competition Compliance: Global Pitfalls and Best Practices Docsity.com 30 Compliance Network Members around the World (2):  Simultaneous dawn raids in multiple jurisdictions are increasing.  Information gathering and analysis should be conducted to cover all relevant jurisdictions.  Strategy for all relevant jurisdictions should be coordinated and consistent. International Competition Compliance: Global Pitfalls and Best Practices Docsity.com 31 Compliance Network Members around the World (3):  Internal networks of compliance officers and reporting system should be in place and ready to react.  External advisors should be lined up and clear instructions must be given in advance. International Competition Compliance: Global Pitfalls and Best Practices Docsity.com 32 Checklists / Guidelines / Instructions (1):  Establishment of a "compliance structure" To be able to react upon unannounced visits by investigating authorities, it is important to establish in advance an appropriate structure. This includes: – Compliance officer (or other responsible) for every subsidiary of the company – Compliance team for every subsidiary of the company – One person responsible for the coordination of all compliance activities of the whole group – Consistent strategy for all subsidiaries of the group (in different national legal systems), including the creation of checklists and instructions for the compliance team and the employees (e.g. receptionists) International Competition Compliance: Global Pitfalls and Best Practices Docsity.com 35 Diagnostics / Antitrust Due Diligence (2):  Determining scope of review • What is the purpose of the review? – The result of a specific concern? – Part of transaction-specific due diligence? • Which business segments will be covered? – Divided on a product and geographic level International Competition Compliance: Global Pitfalls and Best Practices Docsity.com 36 Diagnostics / Antitrust Due Diligence (3):  Identifying problem areas • Areas with past infringements • Major contracts with suppliers/customers (especially those with exclusivity, non- compete clauses, etc.) • Markets where company has high market shares • Acquisitions – In due diligence of target, identify trade association participation, pricing strategies, etc. – Transactions without merger control – possible ex post review? International Competition Compliance: Global Pitfalls and Best Practices Docsity.com 37 Diagnostics / Antitrust Due Diligence (4):  Conduct review • Review agreements and practices (including trade association activities) • Interview employees in areas of concern • Check market shares  Corrective measures • Revise agreements, policies and business practices • Make merger filings • Decide on immunity/leniency applications  Issues to be aware of – maintaining privilege International Competition Compliance: Global Pitfalls and Best Practices Docsity.com