developing and implementing an effective antitrust compliance program

8/9/2019 Developing and Implementing an Effective Antitrust Compliance Program

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Ch

Developing andImplementing an

Effective AntitrustCompliance Program

January 23, 2015Taipei, Taiwan

Chris [email protected]

Hypothetical Scenario

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Your company and a competitor will bid for a project atan upcoming customer auction. On the street, you runinto an employee of the competitor who wants to discussmutually beneficial strategies for bidding at the event.

What should you do?

a. Listen to what he says, but say nothing in return.

b. Put nothing in writing. Only discuss off the record.

c. Suggest that he contact your boss to discuss it.

d. Refuse to discuss the subject and leave if he insists.


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Antitrust Obligations

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Most countries have laws that prohibit:

Unfair or deceptive methods of competition.

Monopolies with respect to goods or services.

Corporate transactions that lessen competition.

Agreements that restrain trade in goods or services.

Common Violations

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Bid-Rigging: Agreement with competitors to

manipulate bidding, giving illusion of competition.

Price-Fixing: Agreement with competitors to charge

same prices, same rates, limit production, etc.

Price Signaling: Public statements about prices

intended to influence competitors pricing.

Customer Allocation: Agreement with competitors

to divide customers, markets, or territories.


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US Criminal Fines

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Many defendants also must pay restitution.

Most defendants also face multiple civil lawsuits.

US Prison Sentences

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68% of all US antitrust sentences against individualsinclude a prison sentence (not just a fine).


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US Prison Sentences

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In 2013, the president of one company received a5-year prison sentence for illegal price-fixing.

US Presence Not Required for US Liability

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Asian companies are often penalized in the US and

Asian individuals are often sent to prison in the US

for conduct that took place solely in Asia.

Foreign conduct may be subject to US law if it:

Involves US imports; or

Has a direct, substantial, reasonably foreseeableeffect on US commerce.


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Major China Penalties

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71 million

Liquor makersincludingWuliangyeYibin andKweichew

57 million

Six LCD manufacturersincludingInnoluxand

hunghwa Picture

Tubes

109 million

Six dairyproducersincludingDanone andMead Johnson

200 million

Auto partmanufacturers

including Yazaki andSumitomo

40 million

Audi

5 million

Chrysler

2012 20142013

Minimizing Penalties

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Amnesty: The first member of a cartel may avoid

prosecution if it admits fault and cooperates in the

prosecution of others. (True in US and Taiwan).

Leniency: The US Sentencing Commission issued

guidelines recommending lenient sentencing if a

company has an effect iveprogram that...

Serves to detectand preventcriminal conduct. Promotes o rganizat ional cul tureof ethical condu ct

and legal compl iance.


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Case Studies

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AU Optronics (2012)A US court found AUO guilty of one count of price-

fixing, fined it US$500 million and ordered it to

implement an effective ethics & compliance program.

Morgan Stanley (2013)

A US court sentenced a MS Managing Director to

prison for paying bribes in China, but authorities took

no action against MS, due to its strong ethics &

compliance programjust one rogue employee.

Benefits of Compliance

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Increase awareness of unacceptable conduct.

Prevent violations from occurring.

Detect and resolve problems early.

Potential amnesty or reduced penalties.

Greater employee, customer and investor loyalty,satisfaction and performance.


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How Does One Build a Compliance Program?

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US Sentencing Guidelines

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Minimum requirements for effective program:

1. Clear standards and procedures.

2. Board oversees program, supported by high-levelmanagement and sufficient resources.

3. Exclude employees known to commit violations.

4. Effective trainings and communication of standards.

5. Monitor/audit to detect violations & effectiveness.

6. Promote program through incentives and discipline.

7. Respond appropriately if violation detected.


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How Does One Build a Compliance Program?

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Phase I

Assessment,Commitment& Approval

Laying theFoundation

Rolling Outthe Program

Reporting,Responding& Refining

Assess Risks

Obtain Top-LevelCommitment

Board Resolution

Assign SuitableManagement

Establish ClearStandards &

Procedures

CommunicateStandards

Launch Trainings

Apply Incentives &Discipline

Internal ReportingSystem

Respond toConcerns

Monitor, Audit &Refine

Phase II Phase III Phase IV

Assess Your Antitrust Risks

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Evaluate annually as part of overall risk management.

Are others in the industry in trouble?

Interview Legal, Finance, Audit, Business leaders.

Agreements with competitors?

Joint ventures or joint purchasing?

Member of trade groups? Who? What? Why?

Conduct likely to decrease competition?

Legitimate business reasons for the conduct?

Employee motivations to commit violations?


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Consider Using a Risk Matrix

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Plot risks on the matrix.

Focus policies, resources and trainings accordingly.

Commitment and Approval

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Sr. Management & Board must be fully committed:

Recognize importance of ethics & compliance.

Sincerely desire to establish effective program.

Agree to devote necessary time & resources.

Willing to walk the walk, not just talk the talk.

Board Resolution: Our company is committed tocomplying with the law, takes ethics & complianceseriously, and resolves to implement a formalethics & compliance program.


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Assign Suitable Management

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When approving the program, the Board shouldappoint a Chief Ethics & Compliance Officer (CECO).

CECO must have direct access to Board and CEO;will report to Senior Management, Auditor and Board.

For SME, this person can have other functions, butCECO should be part of their job description.

Each remote location should have a person in chargeof ethics & compliance who reports to CECO.

Clear Standards & Procedures

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Code of Conduct:

Basic statement of expectations: honesty, integrity,respect for others, etc.

General statements on gifts, privacy, bribery, childlabor, environment, antitrust, etc.

State that it applies to all employees and violationsmay lead to discipline/termination.

Include preface by CEO.

Management should respect it and refer to it often.

Publish on Website, including translations.


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Clear Standards & Procedures

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Guidelines/Manuals: More detailed than Code of Conduct.

Clear rules of conduct in plain, simple language.

Address real situations that might arise, tailoredfor different employees and business units.

Should make sense from business perspective.

Distribute to all sites; translate as appropriate.

Often includes list of Dos and Do Nots.

Guidelines for Meeting Competitors

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DOmeet only for legitimate purpose.

DO

require a meeting agenda in advance.

DOstick to the agenda and keep a meeting record.

DOobject, and leave, if improper discussion.

DO NOT discuss prices, terms, volume, etc.

DO NOT agree upon market or customer allocation.

DO NOT discuss off the record.


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Guidelines for M&A

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DOlimit discussions to just the M&A team.

DOdiscuss only for purposes of potential M&A.

DOobtain all required government approvals.

DO NOT boast about market domination or lack ofcompetition due to acquisition.

DO NOT

coordinate business activities, sales, orpurchasing prior to closing.

DO NOT exchange non-public info such as prices,terms, costs, customers, etc., prior to closing.

Communicate Standards

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Treat program launch as marketing event.

CEO announcements in meetings, emails, etc.

Compliance awareness days, contests, prizes, etc.

Dedicated compliance page at company website.

Eye-catching posters stating real-life issues, company

policies, CECO contact details, website URL, etc.Ethics & compliance column in company newsletter.

Wallet cards, mugs, pens, memo pads, etc.


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TrainingsLogistics

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Require trainings for all, especially new employees.

Further training for high-risk (sales) or promotion.

CEO attends first training, records video messageto play at subsequent trainings.

Employees must sign in, so theres training record.

Not abstract laws or policies: train them to identifyconcerns in real situations and respond properly.

Purchase training materials, or develop in-house.

TrainingsMethodology

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Online, face-to-face, or combination.

Preferably learner-centered, performance-based.

Training, not teaching: small groups, interactive,quizzes, discussion, role-playing, etc.

Encourage them to provide questions, examples,discussion, suggestions, solutions, information.

Tap into their experiences: how can they apply this?

Pay attention, as they may indicate potential issues.


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Incentives (carrots)

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Include ethics/compliance in employee evaluations.

Ethics/compliance counts in recruiting/promotion.

Public or private recognition from CEO or CECO forperson or business group that shows leadership, etc.

Special parking space, bonus, etc., for good deeds.

BUT, rewards may be controversial, as some mayfeel acting ethically/legally is just doing your job.

And, incentive based on absence of incidents maymean rewarding for failure to report.

Discipline (sticks)

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for failure to attend training or violating policy.

Formal or informal warning & attend training.

Demotion or non-promotion & attend training.

Forfeit bonus, stock options, benefits, etc..

Dismissal with or without notice.

BUT, mustannounce clearly to all in advance.

And, mustapply evenly to all, regardless of seniority.

And, evaluate if acted in GF, or approved by superior.


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Internal Reporting System

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Open door approach is simple, but may not work,especially if manager is part of the problem.

Suggestion box? (Physical or online.)

Telephone hotline? (Internal or outsourced.)

Factors: anonymous, confidential, non-retribution,two-way communications, possible follow-up, trainedinterviewer, available to 3d parties, etc.

Global issues: translation & data privacy laws.

In any event, must promote/publicize it to employees.

Respond to Concerns

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Promptly investigate potential violation. Whistleblowerconfidentiality and non-retaliation must be guaranteed.

CECO may interview staff and/or request documents.May require legal assessment v. forensic investigation.

Outside counsel may assist w. investigation/strategy.

CECO reports regularly to Sr. Management and Board.

Potential issues: who to interview, how to interview,formulating legal defense, whether to report to govt.,whether to discipline, how to document investigation,preserving confidentiality/legal privilege, etc.


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Monitor, Audit & Refine

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Periodically assess effectiveness of program and if itsbeing applied consistently and adequately.

Track attendance rates at trainings and employeeawareness of laws & procedures.

Are mandatory controls being followed? (e.g., Mustobtain prior consent and keep records for meetings.)

Have auditors or others raised antitrust concerns?

Test reporting mechanisms and response received.

Develop/implement improvement plan as needed.

Hypothetical Scenario

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Your company and a competitor will bid for a project atan upcoming customer auction. On the street, you runinto an employee of the competitor who wants to discussmutually beneficial strategies for bidding at the event.

What should you do?

a. Listen to what he says, but say nothing in return.

b. Put nothing in writing. Only discuss off the record.

c. Suggest that he contact your boss to discuss it.

d. Refuse to discuss the subject and leave if he insists.


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The Goal

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Establish an effective compliance

program that serves to detect and

prevent criminal conduct and

promotes an organizational culture of

ethical conduct and legal compliance.

Thank You

Chris Neumeyer

[email protected]

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Christopher M. NeumeyerAsia Law Foreign Legal Affairs Law Firm

17F, Suite B, No. 167

Dunhua North Road

Taipei 10549, Taiwan

Phone: +886-2-2717-1999

Website:www.asialaw.biz

E-mail:[email protected]

Chris Neumeyer is Managing Partner of Asia Law, an international law firm based in Taipei.

He has represented global companies in Taiwan since 2000, including as counsel with Texas

Instruments and Legal Director at Lite-On Technology Corporation, where he was employedfor almost seven years.

Before that, he worked as a trial lawyer in California since 1991, handling all phases of

litigation, from pleadings and discovery through trials and appeal.

Chris has extensive experience negotiating and drafting patent licensing and other complex

agreements; leading mergers, acquisitions and investments; resolving cross-border disputes

and litigation; and assisting with the development, manufacturing, sales, distribution and

licensing of diverse products and intellectual property.

He has resolved over 100 patent licensing disputes, led more than $600 million in corporate

transactions, and negotiated countless commercial and corporate agreements with top-tier

companies such as Apple, Dell, Hewlett-Packard, Intel, Nokia and Samsung.

Chris has defended Taiwan companies, as counsel of record, in multiple US antitrust lawsuits,

including drafting motions, defending depositions and providing strategic advice with

respect to litigation and compliance.

He also delivers corporate trainings to participants from diverse industries on subjects

including negotiation skills, contract drafting, patent licensing and regulatory compliance.Past training sessions were located in the US, Taiwan, Thailand, Singapore, China and Dubai.

Please write [email protected] you have any questions or require assistance.
http://localhost/var/AppData/Local/Microsoft/Windows/Temporary%20Internet%20Files/Content.Outlook/www.asialaw.bizhttp://localhost/var/AppData/Local/Microsoft/Windows/Temporary%20Internet%20Files/Content.Outlook/www.asialaw.bizhttp://localhost/var/AppData/Local/Microsoft/Windows/Temporary%20Internet%20Files/Content.Outlook/www.asialaw.bizmailto:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]://localhost/var/AppData/Local/Microsoft/Windows/Temporary%20Internet%20Files/Content.Outlook/www.asialaw.biz

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