Interplay of Public and Private Enforcement Cartel Sanctioning

Interplay of Public and Private Enforcement – Cartel Sanctioning and Deterrence – U. S. Legal System ICN CARTEL WORKING GROUP SG 1 CALL SERIES Mark Krotoski September 15, 2015 © 2015 Morgan, Lewis & Bockius LLP Morgan Lewis April 1, 201515

PUBLIC AND PRIVATE ENFORCEMENT OBJECTIVES

Primary Policy Objectives • Objectives – Promote competition – Protect consumers • Public and private anti-cartel enforcement objectives – Complementary – Reinforcing 3

Three Separate Levels of Enforcement • Federal Level / Antitrust Division – 1890 Sherman Act – Criminal enforcement – Interstate commerce impact • States – 1889 first state statutes – State Attorneys General • Private Enforcement – – “Private Attorneys General” Treble damages Attorneys’ fees to prevailing party Injunctive relief 4

Reinforcing Aspects • Parallel proceedings – In the U. S. , the criminal process normally precedes civil proceedings – Civil proceedings typically are stayed pending the criminal investigation • Criminal conviction may be used as prima facie evidence of the anticompetitive conduct in a subsequent civil action [15 U. S. C. § 16(a)] • Leniency – Remains a catalyst to discover many cases – Resulting in criminal and then civil enforcement – Continuing obligation to cooperate with the Antitrust Division and civil plaintiffs 5

Evolving Process • Felony offense – Antitrust Procedures Act of 1974 • Increased fines 2004 – Corporations – Fines: From $10 million to $100 million – Individuals – Fines: From $350, 000 to $1 million – Prison: From 3 years to 10 years 6

Evolving Process • Leniency – Considered "most effective investigative tool" – 1978 Program – 1993 Modifications – 1994 Individual leniency program • 2004 Amendment – Detrebling of damages if applicant cooperates with plaintiffs in their civil actions – Others remain liable for treble damages on a joint and several basis [Antitrust Criminal Penalty Enhancement and Reform Act of 2004 (ACPERA), Pub. L. No. 108 -237, Title 2, §§ 211 -214] 7

Evolving Process • State Claims – Initially, U. S. Supreme Court disallowed indirect purchaser claims under federal law (1977) – Later, U. S. Supreme Court held that state indirect purchaser claims were not preempted by federal law (1989) – About half of the states have laws allowing indirect purchasers to recover 8

Damages and Remedies • Criminal sentence does not give rise to a right of compensation but may facilitate it • Distinguish objectives – Deterrence – Punishment – Restitution / Compensation – Making victim “whole” 9

Restitution / Compensation • Criminal Restitution – Court authority to order restitution at criminal sentencing – Restitution normally resolved through civil actions with private plaintiffs – Criminal adjudication may facilitate private enforcement – Compensation occurs later as part of the civil process • Leniency Program – Restitution as a condition – “strong presumption in favor of requiring restitution in leniency situations” [DOJ FAQ 20] – Make “all reasonable efforts, to the satisfaction of the Antitrust Division, to pay restitution” [Model Conditional Leniency Letter ¶ 2(g)] • Civil Actions – Treble damages – Joint and severally liable 10

INTERPLAY BETWEEN FINES AND REMEDIES

Relationship Between Cartel Fines and Remedies • Criminal Fines – Crime Victims Fund – Assist all types of crime victims with access the medical, legal, financial and other services – Inability to pay may be a factor [USSG § § 8 C 2. 2] • Criminal case typically precedes civil case – Fine is determined independent of any compensation 12

Offsetting Considerations • Whether a competition agency should take into account compensation paid in imposing a fine? • Presumes knowledge of final compensation – Not common in U. S. system – Criminal case typically precedes civil enforcement • Compensation is not the only objective of criminal case 13

THANK YOU Mark L. Krotoski Silicon Valley, California tel. +1. 650. 843. 7212 fax. +1. 650. 843. 4001 mkrotoski@morganlewis. com This material is provided as a general informational service to clients and friends of Morgan, Lewis & Bockius LLP. It does not constitute, and should not be construed as, legal advice on any specific matter, nor does it create an attorney-client relationship. You should not act or refrain from acting on the basis of this information. This material may be considered Attorney Advertising in some states. Any prior results discussed in the material do not guarantee similar outcomes. Links provided from outside sources are subject to expiration or change. © 2015 Morgan, Lewis & Bockius LLP. All Rights Reserved. 14