May 19, 2005
On 19 May 2005, Gibson, Dunn & Crutcher LLP ("Gibson Dunn") hosted at its London Office a groundbreaking seminar on the criminal aspects of cartel investigations in the UK.
The keynote speakers were Simon Williams, Director of cartel investigations at the OFT and Gary Spratling, formerly Deputy Assistant Attorney General in the Antitrust Division of the Department of Justice and now Co-Chair of Gibson Dunn’s antitrust practice. In addition, several of Gibson Dunn’s partners in Europe spoke about their experiences, together with Peter Binning and David Corker, principals in the UK white collar crime specialists, Corker Binning.
The seminar focused on the risks and consequences for UK companies attendant on directors and other employees facing criminal liability for cartel offences in the UK and U.S. (the latter in the light of the easing of relevant UK-U.S. extradition rules), and on how these risks can be minimised.
Individuals facing the possibility of investigation in the UK will be under intense pressure to take advantage of immunity and leniency programs offered by the competition authorities to avoid not only the risk of jail and criminal fines but also, as an alternative pursued by the regulators, disqualification as company directors for up to 15 years (and therefore potential loss of livelihood). Moreover, in relevant cases, such as the Norris/Morgan Crucible case currently passing through the UK courts, extradition to the U.S. is now a very real threat, so applications by UK citizens for leniency in the U.S. are likely to increase dramatically. James Ashe-Taylor (an Antitrust Partner in Gibson Dunn’s London Office) introduced the seminar by outlining the nature and extent of these risks. In his keynote speech, Gary Spratling stressed the revolutionary effect that the adoption of leniency programs throughout the world has had on cartel enforcement. As the threat of the penalties for cartel infringements becomes better known in the UK business community, it is likely (as U.S. and, more recently, Dutch experience has shown) that there will be a "race to the regulator" and many more cartels will be uncovered as a result of leniency applications to the OFT. Mr. Spratling also emphasised the international dimension of U.S. cartel enforcement and the fact that prosecutions by the U.S. Justice Department of non-U.S. citizens for cartel offences have increased by more than tenfold over the last decade. Following the changes in UK-U.S extradition procedures as a result of the UK Extradition Act 2003 in force since January this year, many more successful U.S. prosecutions of UK offenders can be expected.
Simon Williams summarised the OFT’s current approach to the conduct of antitrust investigations and the great care that is being taken to ensure that every case is treated as potentially criminal in nature, which in practice means that the collection and processing of evidence must be carried out to the standards required in criminal investigations. Mr. Williams said that the operation of the OFT’s leniency program was in the process of being refined with the help of the UK antitrust bar and that the OFT would be hosting a seminar on 1 June at which this topic would be discussed further. Mr Williams also commented on the OFT’s current policy on the issuance of no-action letters and on how the OFT would be likely to interpret the "coercer" exception to the leniency program. As has previously been reported in the press, Mr. Williams confirmed that the OFT was currently conducting a wide-ranging investigation of the UK construction industry. He reminded the audience that a similar recent investigation in the Netherlands had resulted in a total of 344 companies paying fines of over Euro 100 million and that the Dutch authorities were still in the process of dealing with the more than 500 separate leniency applications that the investigation had spawned.
David Corker and Peter Binning drew attention to a number of issues that will be of concern to those acting for individuals accused of committing the cartel offence. David Corker pointed out that, unlike the situation in the U.S., in order to bring a successful prosecution the UK authorities must show that the defendant acted dishonestly and that this may be surprisingly difficult to do given that the UK has no prior history of regarding cartelist behaviour as criminal in nature. He also drew attention to the likelihood that defence counsel would need a greater degree of assurance than that currently proposed by the OFT that immunity would be available before they would feel comfortable advising their clients to come forward to make incriminating statements. Peter Binning drew attention to the international ramifications of cartel investigations. In particular, he noted the wide scope of the recently revised UK-U.S. extradition arrangements now in force as a result of the Extradition Act 2003 in spite of the fact that the new U.S.-UK Treaty on Extradition has yet to be ratified by the U.S. Senate. The U.S. Government is now able to apply for the extradition of a person from the UK without presenting any evidence indicating their guilt. Significantly, the arrangements are retrospective with no time limit, so offences allegedly committed several years before the entry into force of the Extradition Act are also covered. Mr Binning noted that the risks facing individuals involved in transatlantic cartels are now so extensive that it has become vital for any company involved in a possible cartel infringement to establish the extent of the liability as quickly as possible, working in close cooperation with the lawyers representing the implicated individuals. U.S. experience shows that this cooperation is vital to obtain the best result both for the company and the individual.
Mike Denger (Co-Chair of Gibson Dunn’s antitrust practice in Washington D.C.) reminded the audience that, in addition to criminal penalties, the financial risks of follow-on civil litigation in the U.S. could be very significant, providing another powerful reason why companies need to ensure that they have done everything possible to pre-empt cartel law infringements through a rigorous system of training and auditing. David Wood (an Antitrust Partner in Gibson Dunn’s Brussels Office) explained the antitrust hazards associated with any contacts with competitor companies and the need to manage very carefully any participation in trade association activities. Mr Wood also highlighted the role of emails in antitrust investigations and some of the do’s and don’ts for those facing dawn raids by the competition authorities.
Finally, the seminar heard some observations from France and Germany. Nicolas Baverez (an Antitrust Partner in Gibson Dunn’s Paris Office) explained that while there were no specific criminal penalties for cartel offences under French law, the French Competition Council did have wide powers to refer certain aspects of competition proceedings to the criminal tribunal in relevant cases. As far as antitrust investigations were concerned, Mr Baverez recalled that the legal privilege attaching to attorney-client communications was not as extensive as in other European jurisdictions and that there was no privilege attaching to communications with in-house counsel under French law. Mr Baverez made the general observation that, while there has been rapid convergence between the different EU Member States in the fields of economic and antitrust law, criminal laws remained national and specific and criminal justice procedures were still very different. Michael Walther (an Antitrust Partner in Gibson Dunn’s Munich Office) noted that while there were no criminal provisions under German competition law (with the limited exception of certain provisions relating to public procurement), the German authorities were making it much easier for litigants to seek damages in the German courts for antitrust infringements by making the decisions of antitrust authorities in other Member States binding on the German courts. In addition, the well-resourced German antitrust authorities have stepped up their enforcement activities dramatically with over 140 dawn raids taking place in Germany over the past 3 years with heavy fines (up to three times the level of illegal profit made) being imposed on companies in the power cable and cement sectors (among others).
Overall, the seminar identified a number of key issues connected with the implementation of the new UK cartel offence which should be addressed by companies and a number of procedural questions that the regulators have yet to resolve fully themselves.
© 2005 Gibson, Dunn & Crutcher LLP