handbook on multijurisdictional … on multijurisdictional competition law investigations united...

HANDBOOK ON MULTIJURISDICTIONAL COMPETITION LAW INVESTIGATIONS

United States

J. Clayton Everett, Jr. Sean P. Duffy

Daniel A. Schiffer David Brenneman

Introduction

The United States has a long history of antitrust enforcement, dating to the 19th century. Although early cases focused on conduct directed solely at U.S. markets, U.S. antitrust investigations are increasingly multi-jurisdictional, focusing on conduct affecting markets throughout the world.

Antitrust investigatory authority in the United States is divided among many different agencies at different levels of the government, with different, though often overlapping, competences and jurisdictional reaches. The Department of Justice (DOJ) is the only federal agency authorized to conduct criminal investigations and prosecutions.1 Several states also have statutes criminalizing antitrust violations. Criminal violations of state antitrust laws are investigated and prosecuted by state attorneys’ general, but state-law criminal antitrust investigations and prosecutions are rare.

Enforcement authorities in the United States have a number of tools available to gather evidence, including search warrants and subpoenas compelling the production of documents or witness testimony. They also rely on information provided by leniency applicants. And they can enlist the aid of enforcement authorities in other countries pursuant to various legal assistance treaties.

In addition to criminal penalties – fines and jail terms – the U.S. antitrust laws also allow injured parties to recover treble damages for any antitrust violations. Class actions seeking treble damages are commonly filed in the wake of government enforcement actions, relying in some cases on the collateral estoppel effect of an earlier criminal plea or judgment.

1. The Federal Trade Commission (FTC) has no authority to prosecute crimes; however, in response to “unfair methods of competition” that also violate the Sherman Act, it may bring an action under section 5 of the FTC Act, 15 U.S.C. § 45(a). See FTC v. Cement Inst., 333 U.S. 683, 694 (1948).

1

2 ABA Handbook on Competition Law Investigations

A. Legal Basis for Offense

The primary criminal statute enforced by the DOJ is Section 1 of the Sherman Act, which prohibits agreements that unreasonably restrain trade.2 Although the language of the statute does not make clear which antitrust violations should be treated as crimes, historically the DOJ’s policy has been to prosecute only those cases involving agreements that have been deemed per se illegal by the U.S. courts.3 Such per se violations include horizontal price-fixing, bid rigging, and territorial, volume or customer allocation.4

In addition to the Sherman Act, antitrust violations may be criminally prosecuted under the laws of forty-five states. The only five states that do not criminalize antitrust violations are (1) Connecticut, (2) Idaho, (3)

2. Section 1 of the Sherman Act states, “[e]very contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal.” 15 U.S.C. § 1. The Robinson-Patman Act, 15 U.S.C. § 13, which prohibits price discrimination in certain circumstances, also permits criminal penalties, but the criminal portions of that statute have not been enforced in decades. 3. See Thomas O. Barnett, Ass’t Att’y Gen., Antitrust Div., Criminal Enforcement of Antitrust Laws: The U.S. Model, Remarks before the Fordham Competition Law Institute’s Annual Conference on International Antitrust Law and Policy (Sept. 14, 2006), available at www.justice.gov/atr/public/speeches/218336.htm; R. Hewitt Pate, Ass’t Att’y Gen., Antitrust Div., Vigorous & Principled Antitrust Enforcement: Priorities and Goals, Remarks Before ABA Section of Antitrust Law Annual Meeting (Aug. 12, 2003), available at www.usdoj.gov/atr/public/speeches/201241.htm; Anne K. Bingaman, Ass’t Att’y Gen., & Gary R. Spratling, Dep’y Ass’t Att’y Gen., Antitrust Div., Joint Address Before the ABA Criminal Antitrust Law and Procedure Workshop (Feb. 23, 1995), available at www.usdoj.gov/atr/public/speches/0103.htm; James F. Rill, Ass’t Att’y Gen., Antitrust Div., Remarks Before ABA Section of Antitrust Law Spring Meeting (Apr. 12, 1991); John H. Shenefield, Ass’t Att’y Gen., Antitrust Div., Remarks Before Fed. Bar Ass’n, Cleveland Chapter (April 18, 1979), reprinted in [1969-1983 Transfer Binder] Trade Reg. Rep. (CCH) ¶ 50,394; Donald I. Baker, Ass’t Att’y Gen., Antitrust Div., Statement Before Antitrust Law Briefing Conf. (Feb. 28, 1977), reprinted in [1969-1983 Transfer Binder] Trade Reg. Rep. (CCH) ¶ 50,341. 4. See Barnett, supra note 3.

Competition Law Enforcement in the United States 3

Kansas, (4) North Dakota and (5) Washington. Criminal prosecutions for violations of state antitrust laws are rare in general, and multi-jurisdictional criminal investigations are even more unusual. Almost all criminal antitrust enforcement in the United States is done at the federal government level.

State antitrust laws typically mirror federal antitrust law substantively, with most having language similar to Section 1 of the Sherman Act. The antitrust laws of several states include provisions that require courts to interpret their respective state statutes consistently with federal antitrust law.5 Numerous states have enacted criminal statutes forbidding price discrimination and below-cost sales,6 in addition to anti-bid-rigging statutes.7

As a general matter, the U.S. antitrust authorities only have jurisdiction to prosecute conduct that has “direct, substantial and reasonably foreseeable effects” on U.S. domestic or import commerce.8 Conduct that affects only non-U.S. markets or produces only “indirect” effects on U.S. commerce is outside the scope of the U.S. antitrust laws.9 The U.S. courts have increasingly been forced to grapple with jurisdictional questions about the geographic reach of the U.S. antitrust laws in recent years.10 The law in the area continues to develop, but the DOJ has taken an increasingly aggressive approach to the assertion of jurisdiction over foreign conduct in recent years.

One issue that is clearly established in U.S. law is that the location of persons engaged in conduct affecting U.S. commerce is irrelevant to the jurisdictional analysis. Foreign citizens may be prosecuted for violating the U.S. antitrust laws, even if they never themselves entered the United States.

5. See, e.g., UTAH CODE. ANN. § 76-10-926. 6. See, e.g., COLO. REV. STAT. § 6-2-105, MONT. CODE ANN. § 30-14-207, OKLA. STAT. TIT. 15, § 598.3 and W. VA. CODE § 47-11A-2. 7. See, e.g., COLO. REV. STAT. § 6-2-106, GA. CODE ANN. § 16-10-22, IOWA

CODE § 553.14, MINN STAT. § 325D.53, MONT. CODE ANN. § 30-14-205, NEV. REV. STAT. § 598A.060, N.J. STAT. ANN. § 56:9-11, and UTAH CODE

ANN. § 76-10-920. 8. 15 U.S.C. § 6a. 9. See, e.g., United States v. LSL Biotechnologies, 379 F.3d 672 (9th Cir. 2004). 10. See, e.g., Empagran, SA v. F. Hoffmann-La Roche, Ltd., 542 U.S. 155 (2004).


Likewise, agreements reached in other countries may be prosecuted under U.S. antitrust laws as long as they produced effects on U.S. commerce.11

B. Penalties

Under the Sherman Act, as modified by the Antitrust Criminal Penalty Enhancement and Reform Act of 2004 (“ACPERA”) , the statutory maximum corporate fine for a Section 1 violation is $100 million.12 However, in seeking fines well above this amount, the DOJ relies on the “alternative fine statute” which provides for penalties equivalent to “twice the gross gain or twice the gross loss.”13 The alternative fine statute permits fines to be assessed based on the gains or losses accruing from the alleged conspiracy as a whole, not just the particular defendant’s gain or loss from the violation.14 This statute thus essentially imposes “joint and several” liability on all conspiracy members, making each participant in a conspiracy responsible for (double) the full gain or loss resulting from the violation. Following the Supreme Court’s decision in United States v. Booker,15 the DOJ is required to prove the alleged gain or loss to a jury beyond a reasonable doubt.

Although that is a difficult standard to meet given the inherent uncertainties associated with determining “gain or loss,” the jury in United States v. Hsuan Bin Chen, et al. concluded that the DOJ had met its burden of establishing a “gain” of $500 million in the alleged TFT-LCD conspiracy.16 That jury verdict provides a basis for the DOJ to seek a fine of $1 billion from AU Optronics. When negotiating plea agreements, the DOJ continues to pursue and succeed in obtaining corporate fines well in excess of the $100 million statutory maximum.

Following the jury verdict, AU Optronics and the two individual defendants found guilty by the jury unsuccessfully sought judgment of

11. See, e.g., In re TFT-LCD (Flat Panel) Antitrust Litig., 785 F. Supp 2d 835 (C.D. Cal. 2011). 12. 15 U.S.C. § 1. 13. 18 U.S.C.§ 3571(d). 14. Id. 15. 543 U.S. 220 (2005). 16. United States v. Hsuan Bin Chen, et al., 09-cr-00110 (N.D. Cal. Mar. 13, 2012).


acquittal or, in the alternative, a new trial.17 The defendants argued, among other things, that the jury’s finding of a $500 million “gain” from the alleged TFT-LCD conspiracy was unsupported by the evidence.18 The defendants contended the DOJ’s economic expert’s analysis was flawed because it allegedly failed to distinguish between TFT-LCD panels affected by the conspiracy and unaffected panels. The court rejected this argument, holding that the economic analysis estimated total overcharges in excess of $2 billion, far more than $500 million. Further, the court explained that the defendants failed to make a compelling argument why the jury’s reliance on the economic analysis was unreliable, or offer at trial any alternative assessment of the gains earned from the alleged conspiracy.

The fine range applicable to individuals under the United States Sentencing Guidelines (“Guidelines”) is between one and five percent of the volume of commerce done by him or his principal in goods or services that were affected by the conspiracy or a minimum of $20,000. ACPERA in 2004 increased the statutory maximum fine that can be imposed on an individual from $350,000 to $1 million, and more than tripled the maximum jail term from three to ten years.19

1. Corporations

The statutory maximums set the ceiling on fines, but courts in the United States generally follow the Guidelines in deciding what fine to impose in a particular case. The Guidelines are developed and promulgated by the U.S. Sentencing Commission.

For antitrust offenses, analysis under the Guidelines begins with the determination of a “base fine” which is calculated as 20 percent of the “volume of commerce” affected by the conspiracy.20 According to the Guidelines, “the volume of commerce attributable to an individual

17. United States v. AU Optronics Corp., et al., 09-cr-00110 (N.D. Cal. Jun. 5, 2012). 18. Id. (defendants also argued unsuccessfully that (1) the government failed to establish venue; (2) the government failed to prove both of the required exceptions under the Foreign Trade Antitrust Improvements Act of 1982; (3) on statutory and constitutional grounds, the government was required to allege and present its case under the rule of reason rather than as a per se violation of the Sherman Act; and (4) the evidence at trial was insufficient to sustain AUO’s conviction.) 19. Pub. L. No. 108-237, Title II, 118 Stat. 661 (2004). 20. U.S.S.G. § 2R1.1(d)(1).


participant in a conspiracy is the volume of commerce done by him or his principal in goods or services that were affected by the violation.”21 In other words, the volume of commerce of a corporate defendant is measured by the goods or services sold by the corporation during a time period in which DOJ alleges the violation occurred. The courts have interpreted volume of commerce broadly; however, the DOJ has the burden of proving what sales were affected.

Multiple counts will be “grouped” for the purposes of determining the base fine. Thus, a defendant convicted of, or that pleads guilty to, multiple antitrust violations will have the volume of commerce from all of the violations aggregated for the purposes of determining the base fine.22

The next step under the Guidelines is the determination of the company’s “culpability score” which establishes the applicable minimum and maximum “multiplier” to determine the company’s “fine range.”23 Each score begins with a base level of five points and may increase or decrease depending on a number of pre-defined factors regarding the composition and conduct of the company.24 For example, the culpability score can increase: if the company is very large; if a high-level employee participated in the conspiracy; or if the company is a recidivist or obstructed the investigation.25 Conversely, the culpability score can decrease if the corporation has a comprehensive antitrust compliance program and can provide the DOJ with evidence that it has been effective.26 As a practical matter, however, reductions for effective compliance programs are rare, since the Guidelines require that the company must have discovered the offense before external discovery was reasonably likely and promptly reported the violation to the authorities.27

Once the culpability score has been determined, the base fine (20 percent of the volume of commerce affected) is then multiplied by a corresponding minimum and maximum multiplier resulting in a “fine range.”28 A fine is then chosen from within the “fine range.” The fine is determined by the DOJ if the company has chosen to plead guilty and is

21. Id. 22. Id. at § 3D1.3(a) 23. Id. at § 8C2.6 24. Id. at § 8C2.5 25. Id. at § 8C2.5(c)-(e) 26. Id. at § 8C2.5(f). 27. Id. 28. Id. at § 8C2.6


cooperating or in the alternative by a court of law after an indictment has issued and a guilty verdict is returned.

2. Individuals

Individuals who violate the antitrust laws are also subject to fines or prison terms calculated according to the Guidelines. Individuals may be prosecuted, fined and potentially incarcerated even if they resided outside the United States, are citizens of a foreign country, and committed no “overt acts” within the United States. A defendant’s “offense level” is used to calculate the range of potential prison terms pursuant to the sentencing table contained in Section 5A of the Guidelines. An individual defendant may also be sentenced to a fine equal to one to five percent of the affected “volume of commerce,” but not less than $20,000.

The “base offense” level for most antitrust violations is set at 12, while the base offense level for bid rigging is automatically increased by one level to 13.29 Once the “base offense” is determined, this number is increased by the “volume of commerce” that is attributable to the individual defendant. An increase of two levels is appropriate where the volume of commerce affected exceeds $1 million and can incrementally increase up to a maximum of sixteen levels where the volume of commerce exceeds $1.5 billion.30

After determining the applicable “volume of commerce” the next step is to determine whether the individual played an “aggravating role” justifying a higher offense level. This requires determining whether the individual was: (a) an organizer or leader of a criminal activity that involved five or more participants or was otherwise extensive; (b) in a managerial or supervisory position (but not an “organizer or leader”) and the criminal activity involved five or more participants or was otherwise extensive; or (c) an organizer, leader, manager, or supervisor and the criminal activity involved less than five people. 31 A defendant’s offense level may also be reduced by two, three, or four levels where the defendant was a minimal or minor participant in the criminal offense.

29. U.S.S.G. § 2R1.1(a), (b) 30. Id. at § 2R1.1(b)(2) 31. Id. at § 3B1.1


C. Plea Negotiations and Agreements

Plea negotiations and agreements are common in antitrust cases.32 In recent years, over 90 percent of the corporate defendants charged with antitrust offenses have entered into plea agreements with the DOJ in which they admitted guilt and cooperated with the investigation in exchange for an agreed upon sentence recommendation.33 While the Supreme Court has upheld the constitutionality of plea agreements,34 defendants have no constitutional right to a plea bargain.35

The burden of initiating plea negotiations typically rests with defendants. Defendants can engage in plea negotiations with DOJ staff before or after indictment. The Guidelines play a key role in determining the terms of a plea agreement. In addition to providing advisory parameters for sentencing based on the facts of a case, the Guidelines provide that plea agreements should be disclosed in open court, or, upon showing of good cause, in camera.36 The DOJ prefers disclosure in open court because it creates momentum in investigations and may spur other defendants to plead guilty.37 All plea agreements with the DOJ in antitrust cases must be approved by the Deputy Assistant Attorney General for Criminal Enforcement within the Antitrust Division before being finalized.38

32. See Scott D. Hammond, Dep’y Ass’t Att’y Gen., Antitrust Div., The U.S. Model of Negotiated Plea Agreements: A Good Deal with Benefits for All, Remarks Before OECD Competition Committee Working Party No. 3 (Oct. 17, 2006), available at http://www.justice.gov/atr/public/speeches/219332.htm. 33. Id. 34. See Brady v. United States, 397 U.S. 742, 751-52 (1970). 35. See, e.g., Weatherford v. Bursey, 429 U.S. 545, 561 (1977) (“there is no constitutional right to plea bargain; the prosecutor need not do so if he prefers to go to trial”). 36. U.S.S.G. § 6B1.1 - 1.4. 37. See Scott D. Hammond, Dep’y Ass’t Att’y Gen., Antitrust Div., The U.S. Model of Negotiated Plea Agreements: A Good Deal with Benefits for All, Remarks Before OECD Competition Committee Working Party No. 3 (Oct. 17, 2006), available at http://www.justice.gov/atr/public/speeches/219332.htm. 38. See U.S. DEP’T OF JUSTICE, ANTITRUST DIVISION MANUAL III: 128-30, (4th ed. December 2008), available at www.justice.gov/atr/public/divisionmanual/index.html. (hereafter “DIVISION MANUAL”).


Federal Rule of Criminal Procedure 11 governs the types of plea agreements available to antitrust defendants, and outlines the procedures for entering and accepting guilty pleas. Under Rule 11, there are three types of agreements: (1) “charge bargains” under Rule 11(c)(1)(A), in which the DOJ agrees not to pursue or to dismiss certain charges; (2) “nonbinding sentence recommendations” under Rule 11(c)(1)(B) (“B” “agreements”); and (3) “binding agreements” under Rule 11(c)(1)(C) (“C” agreements). Under “B” agreements, the DOJ recommends to the court a certain sentence or application of factors or provisions under the Guidelines.39 A defendant cannot withdraw a guilty plea under a “B” agreement, and the court is not bound to adopt the recommendation.40 Under “C” agreements, the parties mutually recommend a specific sentence that the court must accept or reject, but cannot change.41 If the court rejects the “C” agreement, the defendant may withdraw the guilty plea.42 The DOJ prefers “C” agreements because of the high degree of certainty to corporate and individual defendants who might otherwise be hesitant to plead guilty, provide cooperation, and submit to the jurisdiction of U.S. courts.43

Although courts almost always accept the recommended sentence contained in a “C” agreement,44 the Eighth Circuit recently affirmed a decision in which a district court suggested that it would reject a “C” agreement, and subsequently rejected a recommended sentence in a “B” agreement in favor of a significantly harsher sentence.45 In United States v. VandeBrake, the DOJ and an individual facing price fixing allegations in the ready-mix concrete industry initially entered into a “C” agreement under which the individual would be sentenced to 19 months in prison and fined $100,000, a sentence that was within, but near the low end of the, range provided under the Guidelines.46 After the district court judge suggested he would likely reject the “C” agreement, the parties altered the plea to a “B”

39. FED. R. CRIM P. 11(c)(1)(B). 40. Id. 41. FED. R. CRIM P. 11(c)(1)(C). 42. Id. 43. See Scott D. Hammond, Dep’y Ass’t Att’y Gen., Antitrust Div., The U.S. Model of Negotiated Plea Agreements: A Good Deal with Benefits for All, Remarks Before OECD Competition Committee Working Party No. 3 (Oct. 17, 2006), available at http://www.justice.gov/atr/public/speeches/219332.htm. 44. Id. 45. See United States v. VandeBrake, No. 11-1390 (8th Cir. April 27, 2012). 46. See United States v. VandeBrake, No. 11-1390 (8th Cir. April 27, 2012).


agreement with the same recommended sentence.47 The district court subsequently rejected the recommendation and sentenced the individual to 48 months imprisonment and a fine of $829,715.85.48 It remains to be seen whether other courts will reject “C” agreements or recommend similar upward departures from “B” agreements for antitrust defendants going forward.

D. Leniency Program

The DOJ has adopted both corporate and individual leniency, or amnesty, policies. The DOJ’s leniency program has accounted for over 90 percent of all criminal fines stemming from antitrust cartels prosecuted by the DOJ since 1999.

The first step in obtaining amnesty or leniency is to contact either the Deputy Assistant Attorney General for Criminal Enforcement within the Antitrust Division, one of the Division’s field offices, or the National Criminal Enforcement Section in Washington, DC.49 Because counsel will rarely have sufficient information about the antitrust violation initially, the Division will often give a leniency applicant a “marker” to hold its place at the front of the line for leniency while counsel gathers additional information to perfect the client’s leniency application.50

Prior to providing a leniency applicant with a marker, the Division requires counsel for the applicant to: (1) report that he or she has uncovered some information or evidence indicating that his or her client has engaged

47. Transcript of Status Conference, United States v. VandeBrake, No. CR 10- 4025-MWB (N.D. Iowa May 26, 2010). 48. See United States v. VandeBrake, No. 11-1390 (8th Cir. April 27, 2012); United States v. VandeBrake, 771 F. Supp. 2d 961, 100-03 (N.D. Iowa 2011) (holding that “overly lenient sentencing . . . for white collar, antitrust criminals found in the origins of the Sherman Act lingers today in the United States Sentencing Commission Guidelines”). 49. See Scott D. Hammond, Dep’y Ass’t Att’y Gen., Antitrust Div., Recent Developments Relating to the Antitrust Division’s Corporate Leniency Program, Remarks Before The Twenty-Third Annual National Institute on White Collar Crime (Mar. 5, 2009) , available at www.justice.gov/atr/public/speeches/244840.pdf 50. See Scott D. Hammond, Dep’y Ass’t Att’y Gen., Antitrust Div., Frequently Asked Questions Regarding the Antitrust Division’s leniency Program and Model Leniency Letters (Nov. 19, 2008), available at www.justice.gov/atr/public/criminal/239583.pdf.


in a criminal antitrust violation; (2) disclose the general nature of the conduct discovered; (3) identify the industry, product, or service involved in terms that are specific enough to allow the Division to determine whether leniency is still available and to protect the marker for the applicant; and (4) identify the client.51 Markers are commonly provided for a 30-day period, though the Division may alter the period depending on the scope of the internal investigation the leniency applicant would have to conduct to be able to perfect its application and whether the Division is already investigating the conduct that is the subject of the application.52

The potential rewards for being the first leniency applicant (i.e., the amnesty applicant) to report a cartel to the Division are significant. Leniency applicants receive immunity from prosecution for the reported antitrust violation and avoid potential criminal or administrative fines while cooperating employees avoid potential fines and prison sentences. In addition, a leniency applicant may qualify for de-trebling of damages if the applicant cooperates with plaintiffs in subsequent civil cases.53 The remaining defendants face both treble damages and joint and several liability. Finally, because the amnesty applicant is not a party to a guilty plea of final judgment of guilt, plaintiffs in subsequent civil cases cannot rely on Section 5(a) of the Clayton Act to establish a prima facie case against the applicant.

The DOJ relies heavily on the information it receives from amnesty applicants in prosecuting international cartel matters and has a great interest in maximizing the incentives for companies to come forward and report illegal behavior. As a result, it is also the DOJ’s policy to not disclose information received from amnesty applicants to foreign jurisdictions unless the applicant has either obtained leniency in that jurisdiction or agreed to the disclosure.54 In many cases, however, amnesty applicants agree to provide a waiver allowing the DOJ to coordinate and share information with foreign investigators and enforcement authorities.

1. Corporate Leniency

The DOJ grants corporations either “Type A” or “Type B” leniency. Corporations (as well as individuals) will receive a conditional leniency letter prior to the final grant of leniency memorializing the promises and 51. Id. at 3. 52. Id. at 4. 53. Id. at 18. 54. Id. at 27.


obligations set forth below that must be met before any final grant of leniency. If these obligations are met, the DOJ will issue a final leniency letter confirming that all conditions have been satisfied and that leniency has been granted.

“Type A” leniency is afforded to a corporation automatically if it comes forward before the DOJ has initiated an investigation of the conduct in question. A recipient of “Type A” leniency (commonly referred to as an “amnesty applicant”) will not be criminally prosecuted as long as the following five conditions are met:

• the DOJ has not received any information from another source about the illegal activity at the time the corporation comes forward;

• when the corporation discovers its involvement in the activity, it takes prompt and effective action to end its involvement;

• the corporation reports the activity completely and with candor and provides full, continuing, and complete cooperation during the investigation;

• the admission is a corporate act, rather than isolated confessions of individual employees;

• the corporation makes restitution, where possible; and (6) the corporation was not the leader or originator of the activity and did not coerce another party to participate in the illegal activity.55

Alternatively, “Type B” leniency is available to corporations in certain circumstances after the DOJ has opened an investigation. In order to qualify for “Type B” leniency, a corporation must meet the following seven conditions:

• the corporation must be first to come forward and to qualify for leniency;

• at the time the corporation comes forward, the DOJ does not have evidence against the company likely to result in a sustainable conviction;

• when the corporation discovered its involvement in the activity, it took prompt and effective action to end its involvement;

55. Id. at 4-5.


• the corporation reports the wrongdoing completely and with candor and provides full, continuing, and complete cooperation that advances the investigation;

• the admission is a corporate act, rather than isolated confessions of individual employees;

• the corporation makes restitution, where possible; and • the DOJ decides that it would be unfair to others to grant the

corporation leniency, considering the nature of the illegal activity, the confessing corporation’s role, and when it came forward.56

To date, the DOJ has only sought to revoke one applicant’s “conditional leniency.” The applicant, Stolt-Nielsen SA, sought an order barring DOJ from prosecuting it or its executives. In United States v. Stolt-Nielsen SA, the DOJ claimed that Stolt-Nielsen failed to take “prompt and effective action” to end its involvement in a conspiracy to fix prices for parcel shipping services.57 The DOJ sought to indict Stolt-Nielsen for its participation in the conspiracy after initially signing a conditional leniency contract with the company. Stolt-Nielsen succeeded in convincing the court, however, to dismiss the indictment and enforce the leniency contract. The court held that the leniency contract executed by the DOJ did not require Stolt-Nielsen to cease all of its contacts with competitors before seeking leniency.

Partially in response to this decision, the DOJ clarified the standards it will apply in determining whether a corporation took “prompt and effective action” to end its involvement in anticompetitive conduct. The managers or executives involved in the anticompetitive activity must not lead the company’s internal investigation or formulate the company’s response to the discovery of such activity.58 Additionally, the DOJ has substantial discretion to determine whether the company and its high-level management did all that could reasonably be expected of them to terminate the company’s involvement in the illegal activity.

When a “significant lapse in time” occurs between the date the applicant was required to take prompt and effective action to terminate its participation in the illegal activity and the date the applicant reported the activity to the DOJ, “the DOJ reserves the right to grant conditional 56. Id. at 5. 57. Stolt-Nielsen, No. 06-cr-466 (E.D. Pa. Nov. 29, 2007); see also Global Competition Review, May 1, 2008, at 13, available at: http://www.justice.gov/atr/public/speeches/234840.pdf 58. Scott D. Hammond, supra note 30, at 14.


leniency only up to the date the applicant represents it terminated participation in the conspiracy.59 The guidelines further state that conditional leniency will be revoked if the applicant was not actually eligible for leniency or the applicant did not meet its cooperation requirements, and also requires the applicant to agree not to seek judicial review of a decision to revoke conditional leniency unless the applicant is actually charged by indictment or information.60

2. Amnesty Plus

When a corporation decides to cooperate and negotiate a plea agreement in an existing investigation, it may seek more lenient treatment from the DOJ by disclosing the existence of a second, unrelated, conspiracy.61 If the cooperating company chooses to self report and cooperate in the second matter, it will receive what the DOJ refers to as “Amnesty Plus.” As a result, the cooperating company will receive amnesty from prosecution and will not be subject to a fine for the second offence and none of its officers, directors, or employees who cooperate with the DOJ will be prosecuted in connection with that offense.62 In addition, the corporation will receive more lenient treatment (e.g., a lower fine and/or fewer executives subject to prosecution) in relation to the first offense.

3. Individual Leniency

The DOJ also encourages individuals who have violated the antitrust laws to come forward and assist them with their investigation of such conduct in exchange for leniency. The DOJ will grant leniency to individuals who “approach the Antitrust Division on [his or her] own behalf, not part of a corporate proffer or confession.”63 As a result, individuals who are facing possible jail sentences for antitrust violations are often in a race with their employer and its competitors to be the first to report illegal behavior to the DOJ. The DOJ does not receive nearly as many individual leniency applicants as it does corporate; however. [T]he

59. Id. at 13. 60. Id. at 24-25. 61. Id. at 8-9. 62. Id. 63. Department of Justice, Leniency Policy for Individuals, available at: www.justice.gov/atr/public/guidelines/ 0092.pdf


real value and measure of the Individual Leniency policy is not in the number of individual applications [the DOJ] receive[s], but in the number of corporate applications it generates.”64

In order to avoid prosecution, an individual must meet three criteria: (1) at the time the individual contacts the DOJ, it has not received information about the illegal activity from anyone else; (2) the individual is completely candid in reporting the wrongdoing and provides full, continuing and complete cooperation throughout the DOJ’s investigation; and (3) the individual did not coerce another party to participate in the illegal activity, and clearly was neither the leader not the originator of the activity.65

4. Cooperation Obligations

Cooperation obligations are outlined in a conditional leniency letter, which the DOJ sends to both corporate and individual applicants. The conditional leniency letter typically requires the applicant to produce documents and provide witness testimony, including documents and testimony that would otherwise be unavailable to the DOJ because of jurisdictional limitations (e.g., documents located in other countries). The letter outlines specific terms governing the provision of documents and witness testimony including which documents must be produced, how they are to be produced, and in what form, etc.66 To the extent applicable, the letter will also set forth terms that govern witness availability for interviews in the United States. The DOJ will not issue a final leniency letter until after an applicant has satisfied its obligations in the conditional leniency letter.

5. Recent Enforcement Activity

The prosecution of international cartels has been one of the DOJ’s highest priorities since the mid 1990s.67 In fact, more than 90 percent of the

64. Scott D. Hammond, Dir. of Crim. Enforcement, Antitrust Div., Cornerstones of an Effective Leniency Program, Remarks before the ICN Workshop on Leniency Programs (Nov. 23, 2004), available at: http://www.justice.gov/atr/public/speeches/206611.pdf. 65. Leniency Policy for Individuals, supra Note 60. 66. See Model Conditional Leniency Letter, available at: www.justice.gov/atr/public/criminal/239524.pdf. 67. See Thomas O. Barnett, Ass’t Att’y Gen., Antitrust Div., Seven Steps to Better Cartel Enforcement, Presentation to the European University


nearly $6 billion in criminal fines collected by the DOJ in the last two decades is the result of international cartel prosecution.68 In addition to sizable fines from foreign companies, the DOJ has also obtained jail sentences for foreign individuals from countries including Sweden, Germany, Japan, Belgium, Switzerland, the United Kingdom, Luxembourg, Norway, Korea, and Liechtenstein.69

The DOJ has prosecuted price-fixing and/or bid-rigging cartels in a wide variety of industries, including: vitamins, textiles, construction, food, feed additives, chemicals, graphite electrodes, fine arts auctions, ocean tanker shipping, marine construction and transportation, rubber chemicals, synthetic rubbers, dynamic random access memory chips, and air transportation. A few of the DOJ’s most recent success stories include the following:

Auto Parts: As of May 2012, the DOJ has charged three companies with agreeing to fix prices and rig bids of automobile parts sold worldwide. Furukawa Electric Company Ltd., Yazaki Corporation, and DENSO Corporation have agreed to pay nearly $750 million in fines. In addition, the DOJ has brought charges against eight individuals. Two of the individuals charged have agreed to serve two years in prison – the longest prison term ever imposed on a foreign national voluntarily submitting to U.S. jurisdiction for an antitrust violation. Additional companies and executives are believed to be under investigation. The Antitrust Division has called the Auto Parts investigation its largest of all time.

Institute’s 11th Annual Competition Law & Policy Workshop (June 2, 2006) (“anti-cartel enforcement [is] the highest priority in our antitrust hierarchy”), available at www.usdoj.gov/atr/public/speeches/216453.htm; Scott D. Hammond, Dep’y Ass’t Att’y Gen., Antitrust Div., An Update of the Antitrust Div.’s Criminal Enforcement Program, Remarks Before ABA Section of Antitrust Law Cartel Enforcement Roundtable (Nov. 16, 2005) (highlighting Antitrust Division’s “particular emphasis on combating international cartels that target U.S. markets because of the breadth and magnitude of the harm that they inflict on American Businesses and consumers”), available at www.usdoj.gov/atr/public/speeches/213247.htm. 68. Scott D. Hammond, Dep’y Ass’t Att’y Gen., Antitrust Div. The Evolution of Criminal Antitrust Enforcement of the Last Two Decades, Remarks to the ABA Criminal Justice Section and the ABA Center for Continuing Legal Education (Feb. 25, 2010), available at www.justice.gov/atr/public/ speeches/255515.htm. 69. Id.

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Real Estate Foreclosure Auctions: As of May 2012, the DOJ has charged thirty-eight individuals and one real estate investment company in connection with its investigation of bid-rigging and fraud at real estate auctions nationwide. To date, individuals have pled guilty and agreed to serve prison time for conspiracies in multiple states. Most recently, in April 2012, an Alabama real estate investor pled guilty and agreed to serve a year in prison for his role in a conspiracy in southern Alabama. Additional individuals are believed to be under investigation.

Municipal Bonds: As of May 2012, the DOJ has obtained $745 million in restitution, penalties, and disgorgement to Federal and State agencies in connection with its investigation into bid-rigging in the municipal bonds derivatives market. UBS AG, Wachovia Bank, N.A., J.P. Morgan Chase & Co., GE Funding Capital Market Services, Inc., and Bank of America all reached agreements with the DOJ. CDR Financial Products, the only company actually charged in the investigation, pled guilty shortly before trial. Additionally, eighteen executives have been charged, with 13 pleading guilty.

Cathode Ray Tubes: As of May 2012, Samsung SDI Co. has pled guilty and agreed to pay a $32 million for conspiring to fix prices of CRTs. Additionally, the DOJ has indicted six executives, including the former chairman and CEO of Chunghwa Picture Tubes, for their roles in the CRT conspiracy.

Thin Film Transistor-Liquid Crystal Displays: As of May 2012, the DOJ has charged eight companies with agreeing to fix prices of TFT-LCD panels sold worldwide. LG Display Co., Ltd; CHI MEI Optoelectronics Corporation; Sharp Corporation; Chunghwa Picture Tubes, Ltd.; Hitachi Displays Ltd.; Hannstar Display Corporation; and Epson Imaging Devices Corporation pled guilty and have received criminal fines exceeding $890 million. AU Optronics Corporation (and its U.S. subsidiary) was found guilty after a full trial in March 2012, and is still awaiting sentencing. The jury’s verdict would allow a fine of up to $1 billion to be imposed. Additionally, 22 executives from the eight companies have been charged to date in the Division’s ongoing investigation. Ten pled guilty and received prison sentences and two AU Optronics executives were found guilty after a full trial and await sentencing.

Freight Forwarding: As of May 2012, thirteen international freight forwarders have pled guilty for conspiring to impose certain fees on international freight forwarding services for cargo freight destined for air shipment to the United States during various periods between 2002 and 2007. Vantec Corp., Nissin Corp., Nishi-Nippon Railroad Co. Ltd., Nippon Express Co. Ltd., Kintetsu World Express Inc., Hankyu Hanshin Express


Co. Ltd., MOL Logistics, EGL Inc., Kühne + Nagel International AG; Geologistics International Management Limited; Panalpina World Transport Ltd.; Schenker AG; and BAX Global Inc. agreed to pay fines totaling nearly $100 million

Air Cargo: As of May 2012, twenty-two airlines have pled guilty and agreed to pay over $1.8 billion collectively for fixing prices of fuel surcharges in the international air cargo industry. Additionally, DOJ has charged twenty-one executives in relation to this investigation. Six executives have pled guilty and agreed to serve prison time

DRAM: In 2005 and 2006, Samsung, Hynix, Infineon and Elpida pled guilty to fixing the price of dynamic random access memory (DRAM) sold to computer manufacturers, and agreed to pay fines totaling $732 million. Additionally, eighteen individuals were charged, with the vast majority pleading guilty and receiving jail sentences. In the lone case to go to trial, a Hynix executive, Gary Swanson, was freed after the court entered a mistrial. The DOJ declined to re-try Swanson.

Rubber Chemicals: In 2005, Crompton Corporation and Bayer AG paid fines totaling $416 million for participating in a conspiracy to fix prices in the rubber chemicals industry. Four individuals, including two German nationals, pled guilty and were sentenced to pay a total of $300,000 and to serve a combined 510 days in jail. Two former top Bayer AG executives were indicted in August 2005 for their participation in the conspiracy and they remain international fugitives.

E. Enforcement Structure/Governmental Agencies

The Assistant Attorney General (AAG) of the DOJ’s Antitrust Division (“Antitrust Division”) is in charge of all federal criminal antitrust enforcement. Management of criminal antitrust prosecutions is delegated to the Deputy Assistant Attorney General (DAAG) for Criminal Enforcement and the Director of Criminal Enforcement (DCE). The AAG, along with the DAAG and the DCE, propose policy and oversee actions taken by the DOJ’s prosecutors.

The National Criminal Enforcement Section of the Antitrust Division is headquartered in Washington, D.C., and there are seven regional field offices located in Atlanta, Georgia; Chicago, Illinois; Cleveland, Ohio; Dallas, Texas; New York, NY; Philadelphia, PA; and San Francisco, CA. The regional offices in Atlanta, Cleveland, Dallas and Philadelphia are scheduled to be shut down in 2012, with operations consolidated in Chicago, New York and San Francisco.


Antitrust Division attorneys often work with agents from the Federal Bureau of Investigation (FBI) and other federal agencies in relation to criminal matters, and also coordinate with the U.S. Attorneys’ offices. The Justice Department’s Office of International Affairs coordinates with foreign authorities when investigating international cartels, particularly when requesting documents and testimony from abroad.

The DOJ has exclusive jurisdiction to prosecute criminal violations of the federal antitrust laws. For the federal antitrust laws to be implicated, the violation must involve “interstate” or “foreign” “commerce.” Violations involving activity occurring wholly within a single state are beyond the reach of the federal antitrust laws. Because of the expansive definition of “interstate commerce” adopted by the U.S. courts, however, this jurisdictional limitation is narrow in practice.70

State Attorneys General retain the authority to prosecute violations of their respective state’s antitrust laws. The antitrust laws of a few states are limited to purely “intrastate” violations, but most state antitrust laws also apply to conduct that extends beyond a single state’s borders. All states require the conduct to affect the commerce of the state for that state’s laws to apply. Legally, it would be possible and permissible for the same conduct to be investigated and prosecuted by the DOJ and the Attorneys General of several different states in cases involving conduct affecting the commerce of multiple states. In practice, however, multiple or concurrent U.S. prosecutions for antitrust violations are exceedingly rare.

Although there is no Constitutional bar to state and federal prosecution for the same criminal act,71 the DOJ’s policy states that no federal prosecution may be initiated or continued following a state prosecution based on substantially the same act or acts in the absence of a compelling federal interest.72 The DOJ’s policy precludes the initiation or continuation

70. See, e.g., Wickard v. Filburn, 317 U.S. 111 (1942). 71. See Bartkus v. Ill., 350 U.S. 121 (1959) (holding that the Double Jeopardy Clause does not bar a state from proceeding criminally against the same criminal act previously prosecuted under federal law); Abbate v. United States, 359 U.S. 187 (1959) (holding that the Double Jeopardy Clause does not bar federal prosecutor from proceeding criminally against the same act previously prosecuted under state law). 72. See DIVISION MANUAL III:117, available at www.justice.gov/atr/public/divisionmanual/index.html (“[S]ince 1959, the Department of Justice has followed the policy of not initiating or continuing a federal prosecution based on substantially the same act or acts unless there is a compelling federal interest supporting the dual prosecution.”). The


of a federal prosecution after a prior state prosecution based on substantially the same acts unless three prerequisites are met:

[F]irst, the matter must involve a substantial federal interest; second, the prior prosecution must have left that interest demonstrably unvindicated; and third, applying the same test that is applicable to all federal prosecutions, the government must believe that the defendant’s conduct constitutes a federal offense.73

Several states, including Florida, Maryland, Michigan, and Missouri, have adopted similar policies prohibiting their Attorneys General from taking criminal action against an individual or corporation that has been named as a defendant in an information or indictment alleging federal antitrust violations involving the same subject matter. States are free, however, to bring claims for civil damages arising from conduct that is subject to federal prosecution on behalf of the state or its citizens.

In an effort to increase federal and state cooperation in criminal antitrust prosecution, the DOJ and the state Attorneys General started a program in 1984 designed to allow state and DOJ prosecutors to work together on cases. This program enables state Attorneys General to assist in the prosecution of federal criminal antitrust prosecutions.74 It is also common for the state Attorneys General and the DOJ’s prosecutors to refer cases to one another depending on the amount of interstate commerce involved, the product involved, and the respective prosecuting authority’s experience with similar investigations.75

DOJ’s policy was adopted after the Supreme Court’s decisions in Rinaldi v. United States, 434 U.S. 22 (1977) and Petite v. United States, 361 U.S. 529 (1960). 73. U.S. Dep’t of Justice, U.S. Attorneys’ Manual § 9-11.151 (June 2000) [hereinafter U.S. Attorney’s Manual]. 74. DIVISION MANUAL VII: 27, available at www.justice.gov/atr/public/divisionmanual/index.html. 75. See U.S. DEP’T OF JUSTICE PROTOCOL FOR INCREASED STATES PROSECUTION

OF CRIMINAL ANTITRUST OFFENSES (1996), reprinted in 70 Antitrust & Trade Reg. Rep. (BNA) No. 362 (Mar. 28, 1996) (announcing that the DOJ will transfer a matter where the offense has a “particularly local impact” and the state attorney general has the legal authority, the staff , and the willingness to prosecute the matter.)


F. Evidence Gathering

Attorneys at the Division must receive approval from the Director of Criminal Enforcement before opening a criminal investigation. Prior to opening a preliminary inquiry or grand jury investigation, the DOJ relies solely on public information, information received through other investigations or information received from informants. Once a formal investigation is opened, the DOJ has various tools at its disposal to compel the production of evidence: (1) grand jury subpoenas for documents and/or testimony; (2) search warrants; and (3) wire taps. The DOJ also relies on information provided voluntarily by cooperating companies and individuals, targets of the investigation, competitors and customers in developing antitrust cases.

The DOJ is able to gather evidence directly only within the borders of the United States. To gather evidence located in other countries, the DOJ must rely on cooperation of foreign enforcement authorities pursuant to the various Mutual Legal Assistance Treaties negotiated by the United States or the voluntary cooperation of companies and individuals. It is not uncommon for the DOJ to require production of information and documents located in other countries as a condition for admission into its leniency program or in exchange for a lower fine or sentence.

1. Grand Jury Subpoenas

One of the DOJ’s key investigatory tools is the grand jury subpoena, which can be used to gather documents or compel testimony. Subpoenas are issued by grand juries convened to consider possible indictments for criminal conduct. They may be enforced through the U.S. courts. Failure to comply with a grand jury subpoena may lead to contempt proceedings.

Grand jury subpoenas are often drafted early in an investigation when the investigating attorneys have limited knowledge of the relevant industry and/or antitrust violations. As a result, subpoenas may be overly broad and seek documents that are irrelevant to the investigation. The DOJ’s Grand Jury Manual acknowledges that “[i]nvariably, counsel for the subpoena recipient will call the Government counsel contact noted on the subpoena to discuss subpoena compliance” and possibly negotiate the terms of the subpoena.76 The Grand Jury Manual also suggests using stipulations,

76. U.S. Dep’t of Justice Grand Jury Manual, Section IV.E.2., available at http://www.justice.gov/atr/ public/guidelines/4371.htm.


affidavits and admissions in lieu of burdensome document productions when possible.77

Federal Rule of Criminal Procedure 17(e)(1) allows for grand jury subpoenas to be issued anywhere in the United States and also may be served on U.S. citizens residing in foreign countries.78 Grand jury subpoenas expire either at the end of the term of the grand jury or when the grand jury is otherwise discharged.

The DOJ works closely with the FBI to conduct witness interviews, electronic surveillance and also to execute search warrants.79 It is common practice for Antitrust Division attorneys to attempt to interview individuals at their homes or places of business at the same time the initial round of grand jury subpoenas is served. It is also common for the DOJ to interview witnesses rather than subpoena them to appear before the grand jury.

The recipient of a grand jury subpoena may file a motion to quash the subpoena and argue that compliance would be unduly burdensome. Other grounds for a motion to quash include that the subpoena violates constitutional guarantees of due process. Motions to quash a subpoena can also be based on lack of authority to bring an investigation, improper procedural process and improper purpose. Most of these challenges, however, are unsuccessful.

From a practical standpoint, corporate defendants who receive grand jury subpoenas are likely to cooperate with the DOJ’s investigation and will often seek to limit the duration and scope of a document request. The DOJ is often persuaded by the arguments presented by corporate defendants that production of certain documents would be burdensome and, depending on the level of cooperation it receives, may agree to exclude certain categories of documents altogether.

77. Id. 78. See 28 U.S.C. § 1783; see also FED. R. CRIM. P. 17(e)(2); United States v. Danenza, 528 F.2d 390 (2d Cir. 1975) (holding that U.S. courts are authorized to issue subpoenas to U.S. citizens located in foreign countries); Klesch & Co. v. Liberty Media Corp., 217 F.R.D. 517, 524 (S.D.N.Y. June 17, 2003) (same). 79. See U.S. Dep’t of Justice, Antitrust Div. Manual [hereinafter Antitrust Div. Manual], III:7-11 (3d ed. 1998) (revised 2001); see also U.S. Dep’t of Justice, Antitrust Div. Grand Jury Practice Manual I:52-53 (1991).


2. Search Warrants

The DOJ uses search warrants to obtain documents before, during and after the issuance of grand jury subpoenas. A search warrant entitles the authorities to search the files or premises of a company or individual for evidence that may be used in a criminal prosecution. Search warrants allow searches similar to the “dawn raids” utilized as an investigatory tool in other jurisdictions.80 While a subpoena requires production of documents by the company or individual served, a search warrant allows prosecutors to seize the materials covered by the search warrant immediately.

Federal Rule of Criminal Procedure 41 governs the issuance and execution of search warrants.81 A federal magistrate judge must find that “probable cause” exists to believe that a crime has been committed and that the property to be seized constitutes evidence of the commission of a criminal offense. In order to be valid, the search must be limited to specific documents or objects belonging to the corporation or individual under investigation.

A party who is subject to a search warrant can file a motion pursuant to Federal Rule of Criminal Procedure 41(g) seeking the return of the property seized and may also contest the basis for the search or execution of the warrant under Rule 41(h). A motion to suppress evidence obtained illegally also may be filed with the trial court after the return of an indictment by the grand jury.

3. Wiretaps

The DOJ has also relied upon the use of wiretaps as in international cartel investigations. A wiretap allows the DOJ to monitor and tape calls and other communications. Wiretaps can only be put in place if ordered by a federal judge. Prior to the enactment of the USA Patriot Improvement and

80. The DOJ will regularly coordinate dawn raids and other searches with foreign competition authorities, including the European Union and the U.K. Office of Fair Trading, during which government enforcers will enter a place of business and inspect non-privileged records relating to the business in question and also seek information from members of the staff. The materials and information gathered by foreign competition authorities during a dawn raid may be shared with the DOJ as part of an ongoing commitment to detect, prosecute and deter cartel activity on a global scale. 81. Fed. R. Crim Pro. 41.


Reauthorization Act of 2005 (“Patriot Act”),82 the DOJ was able to eavesdrop on conversations only in situations where one of the participants in a conversation explicitly consented to the wiretap.83 Under the Patriot Act, the DOJ can institute a wiretap without the consent (or knowledge) of any participant if a federal judge agrees that there is probable cause to believe a particular device is being used to communicate in furtherance of illegal cartel activity. The DOJ also has the use of evidence of findings from other jurisdictions/agencies, including cooperation with other governmental agencies.

One of the most effective Use Of Evidence Or Findings From Other Jurisdictions /Agencies; Cooperation With Other Governmental Agencies

One of the most effective methods of cooperation with foreign law enforcement authorities utilized by the DOJ is coordinated searches and drop-in witness interviews. The DOJ along with foreign law enforcement authorities, including the EC Directorate-General for competition, the Canadian Competition Bureau, the Japanese Fair Trade Commission, and the Korean Fair Trade Commission work together to launch simultaneous investigations and will share their findings with one another. Since 1999, several foreign nations, including Brazil, Israel, Japan, Mexico, Australia, Canada, the European Union, and Germany have adopted legislation that has fostered cooperation with the DOJ with respect to cartel investigation and prosecution and facilitated the process of obtaining information located in foreign jurisdictions.

Notwithstanding the existence of bilateral agreements and increased coordination between antitrust enforcers in the U.S. and abroad, there are important restrictions on information that may be shared by the Department of Justice and other antitrust enforcement agencies. For example, while the bilateral agreement between the U.S. and the European Community provides that each party to the agreement agrees to “provide the other Party with any significant information that comes to the attention of its competition authorities about anticompetitive activities that its competition authorities believe is relevant to, or may warrant, enforcement activity by

82. See Pub. L. 109-177, Title I, §113(f), 120 Stat. 192, 210 (2006) (codified as amended at 18 U.S.C. § 2516(r)). 83. See Scott D. Hammond, Dir. Criminal Enforcement, Antitrust Div., The Fly on the Wall Has Been Bugged: Catching an International Cartel in the Act, Remarks Before the Int’l Law Congress 2001 (May 15, 2001) (recounting video and electronic surveillance used to apprehend lysine cartel), available at www.usdoj.gov/atr/public/speeches/8280.htm.


the other Party’s competition authority,”84 the agreement goes on to limit the information the Parties are required to disclose by stating that the parties need not disclose information if such disclosure is contrary to the domestic law of the party possessing the information or incompatible with important interests of the party possessing the information.85 Information gathered through grand jury proceedings or a subpoena is protected from disclosure by Federal Rule of Criminal Procedure 6(e).86 Furthermore, the Division has expressed concern that the sharing of confidential information provided by leniency applicants could discourage parties from self-reporting violations and might decline to share information on that basis.87

Since 1999, several foreign nations, including Brazil, Israel, Japan, Mexico, Australia, Canada, the European Union, and Germany have adopted legislation that has fostered cooperation with the DOJ with respect to cartel investigation and prosecution and facilitated the process of obtaining information located in foreign jurisdictions.

4. International Cooperation

The DOJ also works closely with other countries to investigate and prosecute international cartels. The U.S. has entered into bilateral agreements on antitrust cooperation with Germany, Australia, the European Community, Canada, Israel, Japan, Brazil, Mexico, Russia, Chile, and China.88 These agreements generally provide for: (1) information sharing;

84. U.S./EC Agreement, supra note 26, at Article III(3); see generally Michelle Chowdhury, Am. Antitrust Inst. Working Paper No. 11-09 - From Paper Promises to Concrete Commitments: Dismantling the Obstacles to Transatlantic Cooperation in Cartel Enforcement (Nov. 28, 2011). 85. U.S./EC Agreement, supra note 26, at Article VIII. 86. Fed. R. Crim. P. 6(e) generally prohibits disclosure of must not disclose “a matter occurring before the grand jury” unless a specific exception contained in Fed. R. Crim. P. 6(e)(3) applies. 87. Scott D. Hammond, Dir. Criminal Enforcement, Antitrust Div. Beating Cartels at Their Own Game – Sharing Information in the Fight Against Cartels, Remarks before the Inaugural Symposium on Competition Policy by the Competition Policy Research Center, Fair Trade Commission of Japan (Nov. 20, 2003). 88. See Agreement [with Germany] Relating to Mutual Cooperation Regarding Restrictive Business Practices, June 23, 1976, U.S.-F.R.G., 27 U.S.T. 1956, T.I.S. No. 8291, reprinted in 4 Trade Reg. Rep. (CCH) ¶ 13,501; Agreement Between the Gov’t of the United States of Am. and the Gov’t of Austl. Relating to Cooperation on Antitrust Matters, Jun. 29, 1982, U.S.-Austl.,


T.I.A.S. No. 103 65, reprinted in 4 Trade Reg. Rep. (CCH) ¶ 13,502; Agreement between the Gov’t of the United States of Am. and the Gov’t of Austl. on Mutual Antitrust Enforcement Assistance, Apr. 27, 1999, reprinted in 4 Trade Reg. Rep. (CCH) ¶ 13,502A; Agreement between the Gov’t of the United States of Am. and the Eur. Communities Regarding the Application of Their Competition Laws, 30 I.L.M. 1491 (Nov. 1991), reprinted in 4 Trade Reg. Rep. (CCH) ¶ 13,504 (U.S./EC Agreement); Agreement between the Gov’t of the United States of Am. and the Eur. Communities on the Application of Positive Comity Principles in the Enforcement of Their Competition Laws, June 4, 1998, reprinted in 4 Trade Reg. Rep. (CCH) ¶ 13,504A; Memorandum of Understanding as to Notification, Consultation, and Cooperation with Respect to the Application of the Nat’l Antitrust Laws, Mar. 9, 1984, U.S.-Canada, reprinted in 4 Trade Reg. Rep. (CCH) ¶13,503A; Agreement between the Gov’t of the United States of Am. and the Government of the State of Isr. Regarding the Application of Their Competition Laws, Mar. 15, 1999, reprinted in 4 Trade Reg. Rep. (CCH) ¶13,506; Agreement between the Gov’t of the United States of Am. and the Government of Japan Concerning Cooperation on Anticompetitive Activities, Oct. 7, 1999, reprinted in 4 Trade Reg. Rep. (CCH) ¶ 13,507; Agreement between the Gov’t of the United States of Am. and the Gov’t of the Federated Republic of Braz. Regarding Cooperation between Their Competition Authorities in the Enforcement of Their Competition Laws, Oct. 26, 1999, reprinted in 4 Trade Reg. Rep. (CCH) ¶ 13,508; Agreement between the Gov’t of the United States of Am. and the Gov’t of the United Mexican States Regarding the Application of Their Competition Laws, July 11, 2000, reprinted in 4 Trade Reg. Rep. (CCH) ¶ 13, 509.; Memorandum of Understanding on Antitrust Cooperation Between the United States Department of Justice and the United States Federal Trade Commission, on the One Hand, and the Russian Federal Anti-Monopoly Service, on the Other Hand, Nov. 10, 2009, available at http://www.justice.gov/atr/public/international/251836.htm; Agreement on Antitrust Cooperation Between the United States Department of Justice and the United States Federal Trade Commission, of the One Part, and the Fiscalía Nacional Económica of Chile, of the Other Part, Mar. 31, 2011 , available at http://www.justice.gov/atr/public/international/docs/ 269195.htm; Memorandum of Understanding on Antitrust and Antimonopoly Cooperation Between the United States Department of Justice and Federal Trade Commission, on the One Hand, and the People’s Republic of China National Development and Reform Commission, Ministry of Commerce, and State Administration for Industry and Commerce, on the Other Hand, July 27, 2011, available at http://www.justice.gov/atr/public /international/docs/273310a.pdf.

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(2) coordination of parallel investigations; and (3) periodic meetings and consultations. The DOJ has coordinated several “dawn raids” with antitrust enforcement agencies around the world in recent years.

Notwithstanding the existence of bilateral agreements and increased coordination between antitrust enforcers in the U.S. and abroad, there are important restrictions on information that may be shared by the Department of Justice and other antitrust enforcement agencies. For example, while the bilateral agreement between the U.S. and the European Community provides that each party to the agreement agrees to “provide the other Party with any significant information that comes to the attention of its competition authorities about anticompetitive activities that its competition authorities believe is relevant to, or may warrant, enforcement activity by the other Party’s competition authority,”89 the agreement goes on to limit the information the Parties are required to disclose by stating that the parties need not disclose information if such disclosure is contrary to the domestic law of the party possessing the information or incompatible with important interests of the party possessing the information.90

As a general matter, the DOJ will not share confidential information provided voluntarily by a target of an investigation unless the person or entity providing the information executes a waiver allowing dissemination. Even absent a waiver, however, general information about the investigation may be shared among the DOJ and other international enforcement agencies to allow coordination of investigations.

5. Confidentiality/Privilege Of Information/Statements Provided To Agency

Pursuant to the general rule of grand jury secrecy articulated in Federal Rule of Criminal Procedure 6(e), information received by the DOJ from amnesty or leniency applicants and second-in-the-door cooperators is treated as confidential, including the applicant’s identity unless the applicant agrees to the disclosure of their information. Indeed, “it is the DOJ’s policy to treat the identity of and information provided by, leniency applicants as confidential, much like the treatment afforded to confidential

89. U.S./EC Agreement, supra note 26, at Article III(3); see generally Michelle Chowdhury, American Antitrust Institute Working Paper No. 11-09 - From Paper Promises to Concrete Commitments: Dismantling the Obstacles to Transatlantic Cooperation in Cartel Enforcement (Nov. 28, 2011). 90. U.S./EC Agreement, supra note 26, at Article VIII.


informants.”91 There are exceptions to this rule, however. The DOJ may divulge information to other government attorneys or law enforcement officials for the purpose of enforcing federal or state laws where there is a particularized need.92 On occasion, the DOJ is required to disclose certain information pursuant to a court order in connection with litigation. Courts generally will not, however, enter such an order where the materials sought to be disclosed are relevant to an ongoing DOJ investigation.93

The same general rules apply to information provided pursuant to grand jury subpoenas, which is held confidential unless and until it is used in a trial. Information designated “Confidential” by the producing party will not be shared with other investigating agencies without the producing party’s consent.

G. Extradition

The United States has entered into extradition treaties with more than 100 countries. Those treaties require other countries in certain circumstances to extradite to the United States for prosecution of an antitrust violation. Those treaties generally require the charged offense to be criminal in both the extraditing country and in the receiving country. Some of the treaties, in fact, require the underlying crime to be punishable by imprisonment of at least one year.

Because the United States is one of the few countries that criminalizes antitrust violations, this “dual criminality” requirement has limited the

91. See Scott Hammond, Dep. Asst. Atty. Gen., Criminal Enforcement and Belinda Barnett, Senior Counsel, Antitrust Div., Frequently Asked Questions Regarding the Antitrust Division’s Leniency Program and Model Leniency Letters, Nov. 19, 2008, available at ww.usdoj.gov/atr/public/criminal/239583.htm. 92. See United States v. John Doe, Inc. I., 481 U.S. 102, 111-117 (1987). 93. For example, civil plaintiffs pursing antitrust claims arising out of a price- fixing conspiracy may file a request seeking the disclosure of certain documents under the Freedom of Information Act (FOIA), 5. U.S.C. § 552. FOIA exemption 7(A) excludes from the types of documents plaintiffs are entitled to receive “records or information compiled for law enforcement purposes” that “could reasonably be expected to interfere with enforcement proceedings.” 5. U.S.C. § 552(b)(7)(A). Similarly, Federal Rule of Criminal Procedure 6(e) prohibits the disclosure of records relating to grand-jury proceedings to private plaintiffs so as to prevent the unauthorized disclosure of a matter occurring before a grand jury.


opportunities for the United States to seek extradition in relation to antitrust violations. The United States has never extradited an individual to another country in relation to an antitrust violation, and has only successfully sought extradition of an individual in relation to an antitrust violation in one instance. In that case, described further below, extradition was, as a technical matter, sought in relation to the crime of obstruction of justice, notwithstanding the fact that the underlying investigation and prosecution which gave rise to the obstruction of justice charge was an antitrust violation. With the UK, Australia and Canada, among others, now criminalizing antitrust violations, however, extraditions of individuals in connection with antitrust violations may become more common in the future.

In March 2010, the Antitrust Division secured the first extradition of a foreign national in relation to an antitrust crime. Ian Norris, the former CEO of Morgan Crucible, was extradited to the U.S. and charged with obstruction of justice in relation to the Division’s investigation of electrical carbon product manufacturers. He was subsequently convicted and sentenced to eighteen months in prison.94

The extradition of Ian Norris was the conclusion of years of legal proceedings in the U.S. and U.K. Morgan Crucible pleaded guilty to one count of witness tampering and one count of document destruction in 2002.95 In 2004, a federal grand jury indicted Norris on one count of price-fixing, one count of conspiring to obstruct justice, and two counts of obstructing justice.96 The Division initially sought Norris’s extradition for price-fixing as well as the obstruction of justice charges. The House of Lords, however, ruled that Norris could not be extradited for price-fixing because price-fixing was not a criminal offence in the U.K. at the time of the conduct, the dual-criminality requirement of the U.S.-U.K. extradition treaty was not satisfied.97 The Division subsequently succeeding in securing

94. United States v. Norris, No. 2:03-cr-00632 (E.D. Pa. Dec. 13, 2012) (order entering sentence). 95. U.S. Department of Justice, Antitrust Div., U.S. Company and U.K. Parent to Plead Guilty to Charges Involving an International Electrical Carbon Products Cartel (Nov. 16, 2002), available at http://www.justice.gov/atr/public/press_releases/2002/200423.pdf. 96. United States v. Norris, No. 2:03-cr-00632 (E.D. Pa. Sept. 28, 2004) (second superseding indictment). 97. Norris v. Government of the United States of America, [2008] UKHL 16, [62], [2008] 2 All. E.R. 1103. Price-fixing became a criminal offense in the U.K. in 2003.


Norris’s extradition for the obstruction of justice charges, which were subject to criminal sanction at the time of the conduct.

The Norris case is the latest episode in the ongoing convergence of antitrust enforcement. While Norris was ultimately extradited and convicted for obstructing justice, as more countries criminalize price-fixing and other hard core antitrust offenses, the potential for extraditions for antitrust offenses increases.

H. Follow-On Damages Actions

Criminal prosecutions in the United States are frequently followed by damages actions brought by companies and individuals allegedly injured by the antitrust violation. Injured parties are entitled to recover three times the damages they sustained as a result of an antitrust violation, plus their attorneys’ fees and costs associated with bringing suit. In addition, the antitrust laws make each participant in a conspiracy “jointly and severally liable” for any injuries caused, and there is no right of contribution among defendants. This creates substantial damages risk for companies convicted of antitrust violations. The risk is exacerbated by the class action mechanism, which serves to aggregate the damages claims of all individuals. Follow-on damages actions in antitrust cases are frequently brought as class actions.

1. Collateral Estoppel Effect of Prior Criminal Action

Given the complexity of antitrust actions, private plaintiffs often wait for a government action to end, and then use the factual determinations obtained in the government action in their own follow-on litigation. This helps alleviate for plaintiffs the huge costs that accompany discovery in large antitrust actions.

Under Section 5(a) of the Clayton Act, certain final judgments and consent decrees made in government antitrust actions can be later used against the defendant in follow-on private litigation as “prima facie evidence.”98 This creates a rebuttable presumption in favor of the plaintiff and against each defendant for whom the government judgment was entered.99 Before the 1980, courts interpreted Section 5(a)’s prima facie clause as plaintiffs’ only option, replacing the existing common law 98. 15 U.S.C. 16(a). 99. See, e.g., Ill. v. Gen. Paving Co., 590 F.2d 680, 681 (7th Cir. 1979).


doctrine of collateral estoppel.100 Congress amended the statute in 1980 to ensure that plaintiffs could use offensive collateral estoppel, whereby courts may give prior judgments a conclusive – i.e., irrefutable – effect, subsequent to Department of Justice actions.101

The doctrine of collateral estoppel prevents a litigant from re-litigating an issue already resolved by court in a separate cause of action.”102 Four prerequisites must be met before the collateral estoppel effect can be given to a prior judgment: (1) the issues in both proceedings must be identical; (2) the issue must have been actually litigated and decided in the prior proceeding; (3) there must have been a full and fair opportunity to litigate the issue in the prior proceeding; and (4) the resolution of the issue must have been necessary to support a valid and final judgment on the merits.103

In Parklane Hosiery Co. v. Shore, the Supreme Court first permitted so-called “offensive” non-mutual collateral estoppel, which occurs when a plaintiff prevents the defendant from litigating an issue the defendant previously litigated unsuccessfully in an action with another party.104 Noting that at times offensive collateral estoppel “would be unfair to a defendant,” the Court held that district courts should have “broad discretion” to determine when to disallow its use.105 The Court articulated a “general rule” that offensive collateral estoppel should not be given effect where: (1) “a plaintiff could easily have joined in the earlier action”106; (2) the “defendant in the first action [was] sued for small or nominal damages”

100. See, e.g., id., 590 F.2d 680, 682-83 (7th Cir. 1979); Fradette v. Am. Serv. Corp., 1980-2 Trade Cas. (CCH) ¶ 63,403, at 76,055-56 (S.D. Fla. 1979); In re Indep. Gasoline Antitrust Litig., 79 F.R.D. 552, 556 n.3 (D. Md. 1978). 101. Antitrust Procedural Improvement Act of 1980, Pub. L. No. 96-349 § 5(a), 94 Stat. 1157. 102. Montana v. United States, 440 U.S. 147, 153-54 (1979) (“[O]nce an issue is actually and necessarily determined by a court of competition jurisdiction, that determination is conclusive in subsequent suits based on a different cause of action involving a party to the prior litigation.”). See also, e.g., Allen v. McCurry, 449 U.S. 90, 94 (1980) (“[O]nce a court has decided an issue of fact or law necessary to its judgment, that decision ... preclude[s] relitigation of the issue in a suit on a different cause of action involving a party to the first case.”). 103. See, e.g., United States v. Currency in the Amount of $119,984.00, 304 F.3d 165 (2d Cir. 2002). 104. 49 U.S. 322 (1979). When collateral estoppel is used by a defendant, it is called “defensive collateral estoppel.” Id. at 326. 105. Id. at 331. 106. Id.


so that the defendant had “little incentive to defend vigorously;”107 (3) “the judgment relied upon as a basis for the estoppel is itself inconsistent with one or more previous judgments in favor of the defendant;”108 or (4) “the second action affords the defendant procedural opportunities unavailable in the first action that could readily cause a different result.”109

The Fourth Circuit recently examined the use of offensive collateral estoppel in follow-on private antitrust litigation.110 In In re Microsoft Corp. Antitrust Litig., the Fourth Circuit stressed that a district court could not permit collateral estoppel of previously litigated factual determinations unless the factual determinations were “critical and necessary” to the first judgment.111 A mere showing that the prior factual determination was “supportive of” the prior judgment would not suffice.112 The Fourth Circuit cautioned that district courts must strictly apply the criteria for collateral estoppel strictly.113

If collateral estoppel is unavailable, a judgment may nevertheless be granted prima facie effect under Section 5(a) of the Clayton Act. Under Section 5(a), a final judgment rendered against a defendant in a government antitrust action is prima facie evidence in follow-on private antitrust litigation.114 Conversely, consent judgments and consent decrees entered into before any testimony has been taken may not be used, or referred to in any way, in follow-on litigation under Section 5(a).115

107. Id. at 330. 108. Id. 109. Id. at 331. See also ABA Section of Antitrust Law, Antitrust Law Developments, 979 ( 6th ed. 2007) (reviewing the four prerequisites to collateral estoppel). 110. 355 F.3d 322 (4th Cir. 2004). 111. Id. at 327. 112. Id. 113. Id. 114. 15 U.S.C. § 16(a). (“A final judgment or decree heretofore or hereafter rendered in any civil or criminal proceeding brought by or on behalf of the United States under the antitrust laws to the effect that a defendant has violated said laws shall be prima facie evidence against such defendant in any action or proceeding brought by any other party . . . as to all matters respecting which said judgment or decree would be an estoppel as between the parties.”). 115. Id. (“Provided, that this section shall not apply to consent judgments or decrees entered before any testimony has been taken.”) See, e.g., Cinema


Private plaintiffs must satisfy four requirements to admit a prior judgment into court as prima facie evidence in follow-on litigation.116 First, the governmental judgment must be “final,” meaning the defendant has exhausted all appeals, or the time period to make such appeals has expired.117

Second, the final judgment or decree must have been brought by or on behalf of the United States government.118

Third, the previous action must have been brought “under the antitrust laws.”119 Although some jurisdictions have permitted FTC orders filed under the Clayton Act to serve as prima facie evidence, FTC orders filed under the FTC Act do not qualify as “antitrust laws,” and consequently do not receive the prima facie effect.120 Also, although the final judgment must effectively state that the defendant violated antitrust laws, the judgment need not explicitly state an antitrust violation occurred.121 Fourth, as stated, the judgment cannot be a consent decree that was entered into before any testimony has been taken.122 As detailed below, a plea of nolo contendre is considered a “consent decree” for the purposes of Section 5(a).123 Accordingly, the fate of the

Services Crop. v. Twentieth Century-Fox Film Corp., 477 F. Supp. 174, 177 (W.D. Pa. 1979). 116. See ABA SECTION OF ANTITRUST LAW, ANTITRUST LAW DEVELOPMENTS

983 ( 6th ed. 2007). 117. 15 U.S.C. § 16(a) See Int’l Shoe Mach. Corp. v. United Shoe Mach Corp, 315 F.2d 449, 457 (1st Cir. 1963); State of Ill. v. Sperry Rand Corp., 237 F. Supp. 520, 523 (N.D. Ill. 1965); De Luxe Theatre Corp. v. Balaban & Katz Corp, 88, F.Supp. 311 (N.D. Ill. 1950); Twin Ports Oil Co. v. Pure Oil Co., 26 F. Supp. 366, 368 (D.C. Minn. 1939). 118. 15 U.S.C. §16(a). 119. Id. 120. See In re Antibiotic Antitrust Actions, 333 F. Supp. 317, 322-23 (S.D.N.Y. 1971) (“It is this court’s conclusion that while the FTC proceeding under § 5 of the FTC Act relied on by plaintiffs was an action to prevent, restrain or punish violations of the antitrust laws, it cannot be characterized as a proceeding “under the antitrust laws” for purposes of § 5(a) of the Clayton Act.”), see also Lippa’s, Inc. v. Lenox, Inc. 305 F.Supp. 182 (D.C. Vt., 1969) compare with, e.g., Purex Corp. v. Procter & Gamble Co., 453 F.2d 288, 289-91 (9th Cir. 1971) (FTC order under §7 of Clayton Act was a final judgment under Section 5(a)). 121. State of Mich. v. Morton Salt Co., 259 F. Supp. 35, 62 (D.C. Minn. 1966). 122. 15 U.S.C. § 16(a); See, e.g.,, In re NASDAQ Mkt.-Makers Antitrust Litig., 187 F.R.D. 465, 475 (S.D.N.Y. 1998); Sablosky v. Paramount Film Distrib. Corp., 137 F. Supp. 929 (D.C. Pa. 1955). 123. See, e.g., City of Burbank v. GE, 329 F.2d 825, 834 (9th Cir. 1964).

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government massive litigation costs related to trying would-be

plaintiff’s follow-on private action will hinge on whether the defendant entered into a “final judgment” or “consent decree” (i.e., a guilty plea vs. a plea of nolo contendre), and, if a “consent decree,” whether it was entered into before any testimony has been taken.

The differing applications of “final judgments” and “consent decrees” in follow-on litigation serve two distinct purposes.124 Section 5(a)’s first and primary purpose is to reduce expenses for private plaintiffs.125 Before passage of Section 5(a), private plaintiffs could not use previous DOJ judgments against defendants in civil cases and were consequently burdened with expensive discovery.126 Congress sought to alleviate some of the costs related to private action by enabling plaintiffs to reap the rewards of the government action.127 The statute also seeks to save the government litigation costs; by preventing the use of consent decrees in subsequent private litigation, the proviso both provides incentives for defendants to come clean with the government, while saving the

124. Polychrome Corp. v. Minn. Mining. & Mfg. Co. 263, F. Supp. 101, 102 (S.D.N.Y. 1966). 125. See Minn. Mining & Mfg. Co. v. New Jersey Wood Finishing Co., 381 U.S. 311 (1965). (“The broad aim of this enactment was to use ‘private self- interest as a means of enforcement’ of the antitrust laws.”); City of Burbank, 329 F.2d at 826-836 (“The Clayton Act, and particularly § 5(a), was passed to encourage private litigation, and to add the threat of treble damage recoveries, as well as fines, as a deterrent to antitrust law violation.”). See also Note, Section 5(a) of the Clayton Act and Offensive Collateral Estoppel in Antitrust Damage, 85 YALE L.J. 541 (1976) (“The prima facie effect given to a government enforcement judgment “magnifies” that judgment by encouraging private plaintiffs to use it to establish their own case. In making recovery by private plaintiffs easier, § 5(a) increases the probability that an antitrust violation proved in a government enforcement action will give rise to treble damage recoveries.”) 126. Buckeye Powder Co. v. E.I. Dupont De Nemours Powder Co., 248 U.S. 55 (1918); see supra note 123, 85 Yale L.J. 541 at 548 (“Prior to 1914, private antitrust actions had been few and unsuccessful, largely because of the great cost of antitrust litigation and the inequality in financial resources between potential plaintiffs and defendants.”) 127. See Emich Motors Corp. v. General Motors Corp., 340 U.S. 558 (1951); Nat’l Ass’n of Broadcasters, 553 F. Supp. 621, 623 (D.C. D.C. 1982); See inn. Mining & Mfg. Co. v. New Jersey Wood Finishing Co, 381 U.S. 311 1965).


defendants.128 Defendants have an incentive to strike a deal with the government when they know their damning admissions cannot be used by private plaintiffs in follow-on litigation.

Agreements with the government must be entered with caution to make sure

2. Grand Jury Secrecy

that the agreement is not a “final judgment.” The determination of what constitutes a final judgment depends largely on how a defendant pleads or when a defendant enters into a consent decree.

Plaintiffs who file antitrust actions subsequent to a government criminal inve

from disclosing “any matter occ

stigation often seek grand jury materials to aid in their private action. Inevitably, these plaintiffs must face the issue of grand jury secrecy, a practice dating back to 17th century England, and one which federal courts have historically followed.129 Federal Rule of Criminal Procedure 6(e) codifies grand jury secrecy protections.130

Rule 6(e) prohibits certain persons urring before the grand jury” with limited exceptions.131

The most significant exception, Rule 6(e)(3)(E)(i), provides that when “in connection

128. City of Burbank, 329 F.2d at 836 (“It is true that the Congress had another purpose in mind in passing § 5(a)- to encourage antitrust law malefactors to ‘confess’- to ‘capitulate’-and thus cut down on the length of trials, eliminate the large number of ‘big cases,’ and save costs of prosecution. This purpose is important.); Polychrome Corp. v. Minn. Mining & Mfg. Co. 263, F. Supp. 101, 102 (S.D. N.Y. 1966); U.S. v. Ling-Temco-Vought, Inc., 315 F.Supp. 1301 (W.D. Pa. 1970); State of Mich. v. Morton Salt Co., 259 F. Supp. 35, 58 (D.C. Minn. 1966). 129. United States v. Proctor & Gamble Co., 356 U.S. 677, 681 (1958) (“[W]e start with a long-established policy that maintains the secrecy of the grand jury proceedings in the federal courts.”). For a detailed evolution of grand jury secrecy, see Mark Kadish, Behind the Locked Door of an American Grand Jury: It’s History, Its Secrecy, and Its Process, 24 FLA.ST.U.L.REV. 1 (1996). 130. Fed. R. Crim. P. 6(e) provides in part: (2) Secrecy (A) No obligation of secrecy may be imposed on any person except in accordance with Rule 6(e)(2)(B). (B) Unless these rules provide otherwise, the following persons must not disclose a matter occurring before the grand jury: (i) a grand juror; (ii) an interpreter; (iii) a court reporter; (vi) an attorney for the government; or (vii) a person whom disclosure is made under Rule 6(e)(3)(A(ii) or (iii). 131. Fed. R. Crim. P. 6(e)(2)(B).


en justified for five reasons: (1) to prevent esca

a. The Particular Need Standard

In United States v. Proctor & Gamble Co., the Supreme Court held that a p

with a judicial proceeding,” grand jury materials may be disclosed.132 Parties subject to secrecy under Rule 6(e) include grand jurors, interpreters, stenographers or operators of recording devices, typists, attorneys for the government, and government personnel who assist government attorneys in the enforcement of federal criminal law.133 The “matter(s) occurring before the grand jury” that cannot be disclosed include both testimony134 and witness names.135

Documents used in grand jury proceedings sometimes fall within the scope of Rule 6(e); however, courts often treat them differently than transcripts.136

Grand jury secrecy has bepe of those whose indictment may be contemplated; (2) to ensure

freedom in grand jury deliberations and to prevent outsiders, including those subject to indictment, from influencing grand jurors; (3) to prevent perjury or tampering with grand jury witnesses who may later testify at trial; (4) to encourage free and full disclosures by those with information of the purported crime; and, (5) to protect the accused, who are later exonerated, from disclosure of the fact they were once under investigation.137 The Supreme Court has recognized a particular need to protect secrecy in antitrust suits, where witnesses “may be employees or even officers of potential defendants, or their customers, their competitors, their suppliers.”138

arty that seeks to obtain grand jury materials pursuant to Rule 6 (e)(3)(E)(i) must show a “particular need” for such materials.139

There, a grand jury investigated possible antitrust violations before its term expired

132. Fed. R. Crim. P. 6(e)(3)(E)(i). 133. Fed. R. Crim. P. 6(e)(2)(B). 134. See, e.g., Douglas Oil Co. v. Petrol Stops Nw., 481 U.S. 211 (1987). 135. See Fund for Constitutional Government v National Archives, 656 F.2d 856. 869 (D.C. Cir 1981) (witness names). 136. See infra, part 2(b); see also Andrea M. Nervi, FRCP 6(e) and the Disclosure of Documents Reviewed By the Grand Jury, 57 U.CHI.L.REV. 221 (1990). 137. United States v. Rose, 215 F.2d 617, 628-29 (3rd Cir. 1954). 138. United States v. Proctor & Gamble Co., 356 U.S. 677, 681 (1958). 139. Id. at 682.


without an indictment.140

The government subsequently filed a civil suit, and while awaiting trial, government lawyers used grand jury testimony for trial preparation.141 The defense sought access to the same materials.142 The court denied the request.143 The Court held that parties must show a “compelling necessity” to break through the “countervailing policy” of grand jury secrecy, and must show this necessity with “particularity.”144 The Court noted that a particular need generally arises, for instance, when “the grand jury transcript [is used] at the trial to impeach a witness, to refresh his recollection, to test his credibility and the li 145ke.”

The Supreme Court further elaborated the standard for overcoming the presumption of grand jury secrecy in Douglas Oil Co. v. Petrol Stops Northwest, an antitrust case in which a private party attempted to use grand jury testimony in follow-on private action.146 The Court found the following standard applicable to obtain grand jury testimony:

Parties seeking grand jury transcripts under Rule 6(e) must show that the material they seek is needed to avoid a possible injustice in another judicial proceeding, that the need for disclosure is greater than the need for continued secrecy, and that their request is structured to cover only material so needed.147

The government, just like private plaintiffs, must satisfy the particular needs test to obtain grand jury materials when it conducts follow-on civil litigation.148 In United States v. Sells Eng’g Inc., the Court held that not all government attorneys have automatic access to materials pursuant to Rule 6(A)(1), which grants certain government attorneys working on a criminal case automatic access.149

Still, the Court in Sells Engineering stated that

140. Id. 141. Id. at 678. 142. Id. 143. Id. at 683. 144. Id. 145. Id. 146. Douglas Oil Co. v. Petrol Stops Northwest., 481 U.S. 211, 214-17 (1987). 147. Id. at 223. 148. See U.S. v. Sells Eng’g Inc., 463 U.S. 427 (1983) (“Rule 6(e) was never intended to grant free access to grand jury materials to attorneys not working on the criminal matters to which the materials pertain.”). 149. Id. See also Fed. R. Crim. P.6(e)(3)(A)(i) (“Disclosure of a grand-jury matter--other than the grand jury’s deliberations or any grand juror’s vote- may be made to: (i) an attorney for the government for use in performing


district courts need not “pretend that there are no differences between government bodies and private parties.”150 Consequently, district courts may impose a lesser burden on government requests, depending on the circumstances of the case and the need for secrecy.151

Along these lines, the Court has stated that the particularized need test is both “flexible” and “adaptable to different circumstances.”152 Courts are afforded great deference in applying the “particularized need” test.153 The flexibility used to apply the particularized need test to the facts of a particular case is exemplified in In re Screws Antitrust Litig.154 In Screws, various individuals who testified in a criminal grand jury proceeding sought to exclude such testimony from related civil litigation, arguing that such use would impair their standing in the business community and would harm the integrity of the grand jury system.155 The Massachusetts District Court disagreed, noting that some of the employees were retired and therefore would not be harmed within the business community.156 The court subsequently enforced protective orders to limit dissemination of their grand jury testimony to ensure future grand jury witnesses would be forthcoming.157

Once a grand jury investigation has terminated, the need for grand jury secrecy lessens, but it is not eliminated.158

In Douglas Oil Co. v. Petrol

that attorney’s duty.”) Prior to Sells Eng’g, it was uncertain whether this section granted all government attorneys unfettered access to grand jury materials to use in subsequent civil litigation, as opposed to just attorneys working on the particular criminal matter. 150. See Sells Eng’g, 463 U.S. 427 at 445. 151. Id. 152. Sells Eng’g, 463 U.S. 427. 153. Douglas Oil Co. v. Petrol Stops Nw., 481 U.S. 211, 223 (1987) (“[W]e emphasize that a court called upon to determine whether grand jury transcripts should be released necessarily is infused with substantial discretion.”); U.S. v. John Doe, Inc. I, 481 U.S. 102, 116 (“[W]ide discretion must be afforded to district court judges in evaluating whether disclosure is appropriate.”); United States v. Evans & Assocs. Constr. Co., 839 F.2d 656, 658-59 (10th Cir.) (District courts have “substantial discretion” in determining whether grand jury transcripts can be released.) 154. 91 F.R.D. 47 (D. Mass. 1981) 155. Id. at 49. 156. Id. at 49-50. 157. Id. 158. See Douglas Oil. Co. v. Petrol Stops Northwest., 441 U.S. at 222.


Stops Northwest., the Court found that the particular need standard applied “even when the grand jury whose transcripts are sought has concluded its operations.”159 The Court noted, however, that after the grand jury has expired, secrecy becomes less important, and the party moving for disclosure has a lesser burden.160

The Supreme Court justified this policy based on the overall integrity of the grand jury system – to ensure future grand jury witnesses will come forward and testify honestly.161 Other courts have noted that the interest in protecting the accused, who are later exonerated, from disclosure of the fact they were once under investigation still exists even after the grand jury terminates.162

3. Discoverability of Law Enforcement Materials

A less frequently litigated issue is the discoverability of law enforcement investigatory materials, which is subject to the law enforcement investigatory privilege. The law enforcement investigatory privilege is not absolute and can be overcome by a showing of need for the privileged materials.163

In Dellwood Farms v. Cargill, the Seventh Circuit

159. Id. 160. Id. 161. See Douglas Oil Co., 441 U.S. 21 at 221-224. In considering the effects of disclosure on grand jury proceedings, the courts must consider not only the immediate effects upon a particular grand jury, but also the possible effect upon the functioning of future grand juries. Persons called upon to testify will consider the likelihood that their testimony may one day be disclosed to outside parties. Fear of future retribution or social stigma may act as powerful deterrents to those who would come forward and aid the grand jury in the performance of its duties. Concern as to the future consequences of frank and full testimony is heightened where the witness is an employee of a company under investigation. Thus, the interests in grand jury secrecy, although reduced, are not eliminated merely because the grand jury has ended its activities. See id. at 222. 162. See In re Grand Jury, 583 F.2d 128, 131 (5th Cir. 1978) (“The major danger posed by disclosure of grand jury materials to government personnel needed to assist attorneys for the government in investigation of a civil case is the increased hazard of information becoming public knowledge.”). 163. See Tuite v. Henry, 98 F.3d 1411 (D.C. Cir. 1996.); see also In re Sealed Case, 856 F.2d 268, 272 (D.C. Cir. 1988) (“[T]he law enforcement investigatory privilege is qualified. The public interest in nondisclosure must be balanced against the need of a particular litigant for access to the


held that law enforcement investigatory materials warranted some degree of protection, although less protection than grand jury materials.164 In Dellwood Farms, private civil plaintiffs sought tapes made by the FBI during a criminal investigation of a company.165 The government had played such tapes for defense attorneys during the course of the criminal investigation while attempting to extract a guilty plea from the defendant, but they did not enter into a confidentiality agreement with the defense attorneys.166 In the subsequent civil case, the Seventh Circuit concluded that when the government disclosed the tapes to the defense attorneys, it did not constitute a waiver of the investigatory privilege.167 The court did note, however, that such investigatory materials could be disclosed if a party showed an adequate need.168

In addition, one district court found certain grand jury materials are protected by the law enforcement privilege.169 In re Polypropylene Carpet Antitrust Litig., the Department of Justice inadvertently sent grand jury materials to the defendant, who then inadvertently passed such materials along to the plaintiffs.170

The court held that the law enforcement privilege protected those grand jury materials and subsequently prevented the plaintiffs from gaining further access, noting that the plaintiff’s need was outweighed by the need for confidentiality.171

privileged information.... The process of identifying and weighing the competing interests cannot be avoided.”) 164. 128 F.3d 1122 (7th Cir. 1997) 165. Id. at 1124. 166. Id. 167. Id. at 1126-27. 168. Id. 169. In re Polypropylene Carpet Antitrust Litig., 181 F.R.D. 680, 684 (N.D. Ga. 1998); see also ABA Section of ANTITRUST LAW, ANTITRUST LAW

DEVELOPMENTS, 938 (discussing discovery of law enforcement materials.) 170. 181 F.R.D. 680, 684 (N.D. Ga. 1998). 171. Id. at 687-91.


I. Practical Considerations for Defending Multi-Jurisdictional Investigations in the United States.

1. Joint Defense Agreements

Defendants in an antitrust investigation may enter into a joint defense agreement, whereby two or more defendants and their respective attorneys agree to form a single and cohesive trial strategy. Generally, joint defense agreements allow “defendants to share information so as to avoid unnecessarily inconsistent defenses that undermine the credibility of the defense as a whole.”172

Joint defense agreements often produce complicated confidentiality issues because the attorney-client privilege normally only protects communications made solely between the attorney and client.173

As a result, the joint defense privilege evolved to protect communications between the attorney and client, their co-defendants and counsel for other defendants.174

The Third Circuit articulated the parameters of the joint defense privilege In the Matter of Bevill, Bresler & Schulman Asset Management:

The joint defense privilege protects communications between an individual and an attorney for another when the communications are “part of an on-going and joint effort to set up a common defense strategy.” In order to establish the existence of a joint defense privilege, the party asserting the privilege must show that (1) the communications were made in the course of a joint defense effort, (2) the statements were designed to further the effort, and (3) the privilege has not been waived.175

Specifically, the joint defense privilege protects communications occurring between attorneys for the parties to a joint defense agreement.176 The attorney-client privilege does not protect communications between defendants outside the presence of attorneys.177

172. United States v. Stepney. 246 F. Supp. 1069, 1086 (N.D. Cal. 2003). 173. See, e.g., United States v. Gann, 732 F.2d 714, 723 (9th Cir. 1983). 174. See Stepney, 246 F. Supp.2d at 1086 (N.D. Cal. 2003). 175. In the Matter of Bevill, Bresler & Schulman Asset Mgmt. , 805 F.2d 120 (3rd Cir. 1986), quoting Eisenberg v. Gagnon, 766 F.2d 770, 787 (3d Cir.), 176. In re Grand Jury Proceedings - Auclair, 96 F.2d 65 (5th Cir. 1992). 177. See, e.g., U.S. v. John Gotti, et al., 771 F. Supp. 552 (E.D. NY 1991); see also United States v. Bay State Ambulance and Hosp. Rental Service, Inc., 874 F.2d 20, 29 (1st Cir. 1989).


Pursuant to this privilege, courts will sometimes impose conflict of

interest rules on attorneys with respect to their co-defendants.178 For example, in Wilson P Abraham Constr. Corp. v. Annco Steel Corp., an attorney defended a client in a criminal antitrust action, and while doing so, engaged in joint defense strategies with co-defendant Annco Steel.179 In subsequent civil litigation, the attorney sought to represent plaintiffs against Annco Steel.180 The Fifth Circuit found that “an attorney should also not be allowed to proceed against a codefendant of a former client wherein the subject matter of the present controversy is substantially related to the matters in which the attorney was previously involved.”181 Nonetheless, the court also stated that the attorney must have been privy to confidential information regarding the former client’s co-defendant before the attorney would be disqualified due to a conflict of interest.182 Other circuits have generally followed the line of reasoning in Abraham Construction.183

2. Attorney-Client Privilege

Because antitrust cases almost always involve companies, attorney-client privilege issues often arise as to when privileges arise between individuals and in-house attorneys.184 Although courts have adopted numerous tests, the extent to which the attorney-client privilege applies between counsel and individuals remains uncertain.

In Upjohn Co v. United States, the Supreme Court held that the attorney client privilege applies to any communication between counsel for a 178. Wilson P. Abraham Constr. Coro, v. Armco Steel Corp.. 559 F.2d 250, 253 (5th Cir. 1977). 179. Id. 180. Id. 181. Id. 182. Id. 183. See, e.g., Fred Weber, Inc. v. Shell Oil Co., 566 F.2d 602 (8th Cir. 1977), overruled on other grounds by In re Multi-Piece Rim Products Liability Litigation, 612 F.2d 377, 378 (8th Cir. 1980); Essex Chemical Corp, v. Hartford Accident & Indemnity Co., 993 F. Supp. 241. 251-52 (D. N.J. 1998); GTE North, Inc, v. Apache Products Co.. 914 F.Supp. 1575, 1580 (N.D. Ill. 1996). 184. In re Teleglobe Communications Corp., 493 F.3d 345, 360 (3rd. Cir. 2007) (“Because corporations act through human agents. the question of whose communications with the corporation’s attorneys are entitled to protection comes up often.”).


corporation and current or former corporate employees likely to have information necessary to provide legal advice.185 As explained by the Third Circuit,

Thus, following Upjohn’s lead in not applying the privilege mechanically does not counsel in favor of applying the privilege anytime it might increase the flow of information; rather, Upjohn counsels a more nuanced inquiry into whether according a type of communication protection is likely to encourage compliance-enhancing communication that makes our system for resolving disputes more operable.186

The confidentiality of attorney-client discussions also depends on whether the purpose for the conversation was legal or business in nature. Because only legal advice is protected under the attorney-client privilege, the Supreme Court has stated that “communications made by and to a lawyer with respect to business matters, management decisions, or business advice are not protected by the privilege.”187 Further, courts communications made between clients and attorneys that had a purpose of furthering an ongoing or future criminal or fraudulent act are not protected.188

185. 449 U.S. 383, 392-93 (1981).

186. Teleglobe 493 F.3d at 360 (emphasis original.) 187. United States v. Motorola, Inc., 199 WL 552553, *3 (D.D.C. 1999). 188. See, e.g., Rambus, Inc. v. Infineon Technologies AG, 222 F.R.D. 280 (E.D. Va. 2004). 2004-1 Trade Cas. (CCH) ¶ 74,320, at 98,601-04 (E.D. Va. 2004). See also United States v. Zolin, 491 U.S. 554, 562-63 (1989) (“The attorney-client privilege must necessarily protect the confidences of wrongdoers, but the reason for that protection – the centrality of open client and attorney communication to the proper functioning of our adversary system of justice – ceas[es] to operate at a certain point, namely, where the desired advice refers not to prior wrongdoing, but to future wrongdoing.”) (emphasis original, quoting 8 WIGMORE § 2298 p. 573).