Seeking amnesty internationally for cartel allegations
Whether, when and how Taiwanese corporations should request regulatory leniency for potential antitrust violations
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The Taiwan Fair Trade Commission (TFTC)'s recent investigation into possible toilet paper price-fixing and recent global fines and litigation arising from alleged antitrust violations are reminders that company growth and success also bring potential legal pitfalls. Allegations of cartel conduct in particular can pose significant problems for international corporations.
Taiwanese companies face potential scrutiny not only domestically, but also globally. In 2016 – 2017, competition authorities globally collected fines totaling more than US$12 billion for cartel violations. Each year, we see new record fines. Thus far in 2018, Singapore, Australia and Egypt have issued their largest fines ever against companies alleged to have participated in a variety of industry cartels.
For in-house and outside counsel, uncovering and responding to alleged cartel violations is a complex task. Where matters entail an allegation of price-fixing and other "hard-core" antitrust conduct, the risks increase exponentially, but also invite the possibility of leniency from government prosecutors.
The best means of limiting your antitrust exposure is to develop a robust, effective internal compliance program.
THE LENIENCY OPTION
Leniency (sometimes called amnesty) programs have become global mainstays in antitrust enforcement regimes. These programs allow corporations with knowledge of criminal cartel activity to apply and cooperate with regulators in exchange for a complete exemption, or sometimes reduced exposure, from administrative fines or criminal penalties.
Historically, Taiwanese companies have been the targets of leniency programs, rather than their beneficiaries. However, understanding both how and when to seek out global leniency programs offered by competition authorities is vital to any effective mitigation of antitrust risks and antitrust compliance.
Deciding whether your company should pursue leniency involves analyzing the potential risks and benefits related to specific, individualized considerations about the company, its industry and the facts at issue. An effective strategy should consider multiple jurisdictions worldwide, with the expectation, for example, that the TFTC will itself coordinate with foreign enforcement agencies.
WHEN TO REQUEST LENIENCY
Whether a regulator will grant leniency often depends on a variety of factors, including the applicant's timing relative to other alleged cartel members, the nature of the conduct, role of the applicant in the conduct, the nature and materiality of information the applicant possesses about the conduct of other cartel members, and other considerations.
Assessing these and other issues is critical to deciding whether to address the issues internally or proceed with an amnesty application.
In-house counsel are the first line of defense to uncovering cartel activity. Obtaining information as quickly and efficiently as possible allows you to work with the necessary parties to analyze the issues and potential exposure and to consider any leniency options.
Your company's timing is crucial. In jurisdictions like the United States, amnesty is only available to the first-in-time applicant. In other jurisdictions, such as Taiwan and throughout Asia and Europe, regulators will reduce fines and mitigate criminal penalties for second, third and sometimes even fourth applicants.
However, amnesty is not for every company or every potential violation.
IS LENIENCY THE BEST OPTION?
Almost inevitably, one government agency's investigation will give rise to other jurisdictions investigating— and potentially to civil litigation. These are important considerations in any decision about whether your company should seek amnesty. The nuances and distinctions among different jurisdictions' substantive law and procedural rules will affect your company's opportunities to defend itself against alleged violations.
So, you should carefully coordinate any amnesty effort across all relevant jurisdictions to maximize the benefits and limit potential penalties for your corporation.
Taiwan is not party to the Hague Evidence Convention, adding a further consideration when assessing leniency. Jurisdictional limits on discovery affect how foreign enforcers and civil plaintiffs obtain discovery from Taiwan companies. Thus, evidence held by Taiwanese entities may more complicated to obtain, but is by no means out of reach from international regulators.
Another essential concern with any amnesty application is whether regulators may uncover multiple conspiracies within your industry. From freight and airline fees to auto parts and technology, regulators have been relentless in leveraging pleas from purported cartel members to launch new investigations and root out perceived anti-competitive conduct.
The US, for example, achieved so much success utilizing cartel members' information to investigate other corporate wrongdoing that it launched an Amnesty Plus program. This program allows cartel members during plea negotiations to offer information on a separate conspiracy, obtain amnesty from participation in that conspiracy and reduce their fines in the current investigation. While this can create perverse incentives to mischaracterize facts and suggest a second conspiracy where there is none or only weak evidence of one, it also illustrates why a thorough internal investigation can pay dividends when pursuing an amnesty application.
As with all antitrust issues, the best means of limiting your exposure and positioning your company to take advantage of global amnesty programs is to develop a robust and effective internal compliance program that will both limit the likelihood of cartel liability and catch potential cartel violations quickly.
In today's enforcement landscape, managing information flow and encouraging internal reporting allows in-house counsel to identify potential exposure to cartel activity early, respond strategically and effectively, and limit a company's ultimate liability.
Jonathan Klaren, an associate at White & Case, assisted in the development of this publication.
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