Cartel Digest

FAQs

Below is a list of frequently asked questions about cartels and anti-cartel enforcement. If you have a more specific question please contact one of our lawyers.

What infringements of competition law does the leniency program cover?

The leniency programme applies to criminal violations of Section 1 of the Sherman Act, which is the primary criminal statute enforced by the Antitrust Division.  The language of Section 1 of the Sherman Act does not indicate whether certain violations are to be addressed criminally or civilly, but the Antitrust Division has a long-standing policy of seeking criminal indictments only in cases involving “per se” violations of Section 1, such as agreements to fix prices, bid-rigging, or market or customer allocation.  The leniency programme does not cover civil antitrust enforcement by either the DOJ or the Federal Trade Commission (“FTC”).

 

The leniency programme may also apply to related offenses committed in furtherance of the criminal antitrust violation.  For example, the model corporate leniency letter posted on the DOJ’s website, available at http://www.justice.gov/atr/public/criminal/239524.pdf, provides amnesty “for any act or offense [the applicant] may have committed [time period covered] in connection with the anticompetitive activity being reported.”  That language provides leniency not only for criminal antitrust violations, but also for other offenses committed in connection with the antitrust violation.  For example, conduct that is usually integral to the commission of a criminal antitrust violation, such as mailing, faxing, or emailing bids agreed upon with competitors, can constitute other offenses, such as mail or wire fraud violations or conspiracies to defraud.  The protections of the conditional leniency letter apply to such additional offenses.  Note, however, that the conditional leniency letter binds only the Antitrust Division, and not other federal or state prosecuting agencies.

What notable recent cases have applied the leniency program?

Since the 1993 policy revisions, the Antitrust Division’s leniency programme has become widely used.  According to the Antitrust Division, of the approximately 50 international cartel investigations underway at any given time, more than half are initiated by a leniency applicant; and, of the

$5 billion in fines the Antitrust Division collected though the 2000-2009 time period, over 90% was from investigations assisted by a leniency applicant.  In particular, parties have sought the benefits of the leniency programme in a number of notable recent cases, including the DOJ’s investigations of the air cargo, LCD panel, DRAM (dynamic random access memory), rubber chemicals, vitamins, and graphite electrodes markets.

What laws provide for a leniency program and which regulatory authority administers it? Is there any published guidance?

Regulatory authority

The Antitrust Division of the Department of Justice (“DOJ”) derives its authority to administer the leniency programme from its prosecutorial discretion to decide whether to seek an indictment against a company or individual voluntarily reporting that they have participated in a criminal violation of the federal antitrust laws, principally Section 1 of the Sherman Act. 

 

Applicable laws and guidance

As part of its role in prosecuting criminal violations of the federal antitrust laws, the DOJ administers the United States’ antitrust leniency programme.  That programme is divided into two policies: (1) the Corporate Leniency Policy, which was first introduced in 1978 and revised in 1993; and (2) the Individual Leniency Policy, which was introduced in 1994.  The official statements setting forth the details of each policy can be found at the portion of the DOJ’s website dedicated to the leniency programme, http://www.justice.gov/atr/public/criminal/leniency.html.  A useful guide addressing frequently asked questions relating to the operation of the leniency programme is also available on the DOJ’s website at http://www.justice.gov/atr/public/criminal/239583.htm.  

Is there a sliding scale of available leniency from civil fines?

As noted above, if an amnesty applicant cooperates fully with plaintiffs in the related civil action, the applicant may limit its liability to only single damages caused by its own sales (and no joint and several liability with the other co-conspirators).

Is immunity or leniency available for companies and/or individuals in relation to criminal prosecution? What are the implications for individuals when an undertaking has been granted immunity or leniency?

The Antitrust Division’s Corporate Leniency Policy offers two types of amnesty: “Type A,” which applies to situations where an applicant approaches the Antitrust Division before an investigation is initiated, and “Type B,” which applies where an applicant approaches the Antitrust Division after an investigation has begun.  As described below, the conditions for meeting either Type A or Type B leniency are similar.

 

Type A Leniency
 

Type A leniency will be granted if a company comes forward before the Antitrust Division has initiated an investigation and if the following conditions are met:

  • At the time the company comes forward to report the illegal activity, the Antitrust Division has not received information about the illegal activity from any other source;
  • The company, upon its discovery of the illegal activity, took prompt and effective action to terminate its part of the activity;
  • The company reports the wrongdoing with candor and completeness and provides full, continuing, and complete cooperation to the Antitrust Division throughout the investigation;
  • The confession of wrongdoing is truly a corporate act, as opposed to isolated confessions of individual executives or officials;
  • Where possible, the company makes restitution to injured parties; and
  • The company did not coerce another party to participate in the illegal activity and clearly was not the leader in, or originator of, the activity.

 

Type B Leniency

 

Type B leniency is available to firms that cooperate after an investigation has begun if the following conditions are met:

  • The company is the first one to come forward and qualify for leniency with respect to the illegal activity being reported;
  • The Antitrust Division, at the time the company comes in, does not yet have evidence against the company that is likely to result in a sustainable conviction;
  • The company, upon its discovery of the illegal activity being reported, took prompt and effective action to terminate its part of the activity;
  • The company reports the wrongdoing with candor and completeness and provides full, continuing, and complete cooperation that advances the Antitrust Division’s investigation;
  • The confession of wrongdoing is truly a corporate act, as opposed to isolated confessions of individual executives or officials;
  • Where possible, the company makes restitution to injured parties; and
  • The Antitrust Division determines that granting leniency would not be unfair to others, considering the nature of the illegal activity, the confessing company’s role in it, and when the company comes forward.
     

In applying the last condition, the Corporate Leniency Policy notes that “the primary consideration will be how early the corporation comes forward and whether the corporation coerced another party to participate in the illegal activity or clearly was the leader in, or originator of, the activity.  The burden of satisfying [this] condition . . . will be low if the corporation comes forward before the [Antitrust] Division has begun an investigation into the illegal activity.  That burden will increase the closer the [Antitrust] Division comes to having evidence that is likely to result in a sustainable conviction. 

 

Second-In Applicants

 

Even when the Antitrust Division has already awarded amnesty in an investigation, companies implicated in a cartel may still be able to obtain significant benefits by entering into plea agreements and cooperating with the Antitrust Division.  There are a number of means by which the Antitrust Division can reward “second-in” companies for their cooperation, such as substantially reducing fines, spreading fine payments over a series of installments, or treating culpable executives more favorably, particularly when applied together with the Amnesty Plus policy, described in more detail below.  

 

Proceedings against individuals

If a company qualifies for leniency, then all directors, officers, and employees of the company who admit their involvement in the illegal antitrust activity as part of the company’s confession will receive leniency, in the form of not being charged criminally for the illegal activity, if they admit their wrongdoing with candor and completeness and continue to assist the Antitrust Division throughout the investigation.

 

An individual who approaches the Antitrust Division on his or her own behalf to report illegal antitrust activities may qualify for leniency under the Leniency Policy for Individuals.  As with a corporate applicant, an individual leniency applicant is required to admit to his or her participation in a criminal antitrust violation.  The individual must not have approached the Antitrust Division previously as part of a corporate approach seeking leniency for the same conduct.  Once a corporation attempts to qualify for leniency under the Corporate Leniency Policy, individuals who come forward and admit their involvement in the criminal antitrust violation as part of the corporate confession will be considered for leniency solely under the provisions of the Corporate Leniency Policy.

 

Leniency will be granted to an individual reporting illegal antitrust activity before an investigation has begun if the following three conditions are met: 

  • At the time the individual comes forward to report the activity, the Antitrust Division has not received information about the activity being reported from any other source;
  • The individual reports the wrongdoing with candor and completeness and provides full, continuing, and complete cooperation to the Antitrust Division throughout the investigation; and
  • The individual did not coerce another party to participate in the activity and clearly was not the leader in, or the originator of, the activity.

 

Employees' interests

Conflict of interest issues may arise when counsel represents both a company and an employee of that company in the same criminal action.  Although the company can seek to protect its employees’ interests by including them in the company’s leniency agreement with the Antitrust Division, the time may come, depending upon the facts of the case, where separate representation for certain employees is appropriate. 

When should an application for leniency be made?

Because it grants only one corporate leniency per application, the leniency programme rewards those who come first to the Antitrust Division to disclose a violation.  Therefore, if a decision to seek leniency is made, the initial contact with the Antitrust Division should typically occur as promptly as possible after the violation is discovered.  The Antitrust Division has reported that, in some instances, the second company to inquire about leniency has been beaten by a prior applicant by only a matter of hours.  Because gathering all of the facts relating to a violation takes time, the Antitrust Division has implemented a “marker” system, described more fully below, which facilitates early contact with the Antitrust Division by giving an applicant a period of time to complete its internal investigation after making an initial approach. 

What are the procedural rules for leniency applications?

Relevant authority

Applications for leniency can only be made to the DOJ.

 

Applicant

Counsel representing the potential applicant should make the initial contact with the Antitrust Division orally. 

 

Informal guidance

It is possible to approach the Antitrust Division on a confidential, “no-names” basis and receive informal guidance from the Antitrust Division regarding whether amnesty is available in relation to a particular market.

 

Form of application

There is no particular form of application.  Counsel for the potential applicant should make the initial contact orally.

 

Markers

The Antitrust Division frequently gives a leniency applicant a “marker” for a finite period of time to hold its place at the front of the line for leniency while counsel gathers additional information through an internal investigation to perfect the company’s leniency application.  While the marker is in effect, no other company can “jump over” the applicant that has the marker. 

 

The amount of time granted the company to conduct its internal investigation and perfect its marker depends upon the company’s place in the queue of applicants.  If it is toward the front of the queue, it may be granted weeks or months; if it is toward the back of the queue, the marker may be available for only a very limited time.  The Antitrust Division has noted that a 30-day marker is common, particularly in situations where the Antitrust Division is not yet investigating the wrong-doing.  If necessary, the marker may be extended at the Antitrust Division’s discretion for an additional finite period as long as the applicant demonstrates it is making a good-faith effort to complete its application.

 

To obtain a marker, counsel for an applicant must: (1) report that he or she has uncovered some information or evidence indicating that his or her client has engaged 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 Antitrust Division to determine whether leniency is still available and to protect the marker for the applicant; and (4) identify the client (although it is also possible to place a marker for an anonymous client, in which situations the Antitrust Division might give counsel 2-3 days to gather additional information and report the client’s identity).

 

Information/evidence

Under the leniency program, an applicant must provide “full, continuing, and complete cooperation” during the course of the Antitrust Division’s investigation.  As suggested by the language summarized below from a model leniency letter, available on the Antitrust Division’s website at http://www.justice.gov/atr/public/criminal/239524.pdf, that commitment comprises a wide range of information regarding the industry and the applicant’s participation in the cartel.  Applicants are expected to: 

  • Provide a full exposition of all facts known to the applicant relating to the anticompetitive activity being reported;
  • Provide promptly, and without requirement of subpoena, all documents, information, or other materials in the applicant’s possession, custody, or control, wherever located, not privileged under the attorney-client privilege or the work-product privilege, requested by the Antitrust Division;
  • Use its best efforts to secure the ongoing, full, and truthful cooperation of the current directors, officers, and employees of the applicant, and encourage such people to voluntarily provide the Antitrust Division with any relevant information they may have;
  • Facilitate the ability of current employees to appear for such interviews or testimony that the Antitrust Division may require;
  • Use best efforts to ensure that current employees who provide information to the Antitrust Division respond completely, candidly, and truthfully to all questions asked in interviews, in grand jury appearances, and at trial;
  • Use best efforts to ensure that current directors, officers, and employees who provide information to the Antitrust Division make no attempt to either falsely protect or falsely implicate any person or entity; and
  • Make all reasonable efforts, to the satisfaction of the Antitrust Division, to pay restitution to any person or entity injured as a result of the anticompetitive conduct.

 

Oral statements

Oral statements are accepted. 

 

Short-form applications

EU member states only. If your jurisdiction is not an EU member state, please write "Not applicable."

What are the applicable procedures and timetable?

There is no particular timetable for progressing through the leniency application process.  As discussed above, the amount of time available to qualify for leniency or some form of “second-in” amnesty will depend largely upon the applicant’s place in the queue of other companies applying.  Typically, an application goes through the following steps:

  • Initial contact with the Antitrust Division.  During this discussion, the Antitrust Division will indicate whether amnesty is still available, and the applicant will place down a marker;
  • The applicant completes its internal investigation, marshalling its facts and witnesses;
  • The applicant provides the Antitrust Division with a “proffer,” which gives an overview of the key evidence that the applicant can supply the Antitrust Division.  Following that proffer, the applicant may provide additional evidence and arrange for witness interviews at the Antitrust Division’s request.
  • If the Antitrust Division is satisfied with the applicant’s showing, it gives the applicant a letter stating that it has been accepted into the Corporate Leniency Program on the condition that it satisfy its cooperation obligations; and
  • After those cooperation obligations are met (typically when the investigation is concluded), the applicant is given a letter indicating that the leniency application has been granted.
In what circumstances and at what stage of the proceedings can leniency be withdrawn? What implications does the withdrawal of leniency from one company have for other applicants?

Leniency can be withdrawn if the applicant fails to meet its obligations as set forth in its conditional leniency agreement.  Before the Antitrust Division makes a final determination to revoke a corporate applicant’s conditional leniency, it will notify applicant’s counsel in writing of staff’s recommendation to revoke the leniency and provide counsel with an opportunity to meet with the staff and Office of Criminal Enforcement regarding the revocation.  During the time that a recommendation to revoke an applicant’s leniency is under consideration, the Antitrust Division will suspend the applicant’s obligation to cooperate so that the applicant is not put in the position of continuing to provide evidence that could be used against it should the conditional leniency be revoked.  If the Antitrust Division follows through with staff’s recommendation to withdraw leniency, the appropriate avenue for challenging a revocation of a leniency letter is to raise the letter as a defense post-indictment.  See Stolt-Nielsen, S.A. v. United States, 442 F.3d 177, 183-187 (3d Cir. 2006).

 

If the Antitrust Division revokes a company’s conditional acceptance into the leniency programme, the protection provided to employees no longer exists.  However, the Antitrust Division has stated that, as a matter of prosecutorial discretion, it will not elect to prosecute individual employees, so long as they had fully cooperated with the Antitrust Division prior to the revocation and, in the Antitrust Division’s view, were not responsible for the revocation.  See Scott Hammond & Belinda Barnett, Frequently Asked Questions Regarding the Antitrust Division’s Leniency Program and Model Leniency Letters (Nov. 19, 2008), available at http://www.justice.gov/atr/public/criminal/239583.pdf. 

 

To date, the Antitrust Division has withdrawn leniency because the applicant failed to meet its obligations in one instance, which involved the marine chemical shipping company Stolt-Nielsen, S.A.  There, the leniency agreement was voided because Stolt-Nielsen had not taken prompt and effective action to terminate its participation in the cartel, and because it had not provided full and truthful cooperation.  The Antitrust Division subsequently brought an indictment against Stolt-Nielsen and two of its former executives.  That indictment was later dismissed, the court having found no evidence that the company or its executives had failed to cooperate with the Antitrust Division, that the company terminated its participation in the anticompetitive activity, and that the Antitrust Division had received the benefit of its bargain and had no basis for voiding the leniency agreement.

What is the scope of leniency protection after it has been granted?

The protections of the leniency programme only apply to the infringing conduct disclosed by the applicant.   Therefore, if cooperation with the Antitrust Division uncovers other violations not covered by the original grant of leniency, then the applicant can be separately prosecuted for those infringements.  However, the Antitrust Division recognizes that companies frequently apply for leniency before completing their own internal investigations in order to ensure their place at the front of the line.  As a result, the Antitrust Division may learn from one of the applicant’s employees of anticompetitive activity that is more extensive than the conduct originally reported and that thus falls outside the scope of the conditional leniency letter.  In such cases, assuming that the applicant has not tried to conceal the conduct, that it is providing full, continuing, and complete cooperation, and that the applicant can meet the criteria for leniency on the newly discovered conduct it reported, the leniency coverage will be expanded to include such conduct.  If the newly discovered conduct is part of the original conspiracy reported, the leniency protection for the expanded conduct typically will be accomplished by issuing an addendum to the original leniency letter.  However, if the newly discovered conduct constitutes a separate conspiracy, the new leniency protection will be provided in a separate corporate conditional leniency letter. 

Does the competition authority offer any further reduction in fines for an undertaking's activities in one market if it is the first to disclose restrictive agreements and practices in another market (leniency plus)?

The Antitrust Division has also adopted “Amnesty Plus” and “Penalty Plus” policies to complement the general leniency program.  In creating incentives for companies to disclose violations, the Amnesty Plus policy can be considered the “carrot” to the Penalty Plus’ “stick.”

 

Amnesty Plus

 

Under Amnesty Plus, the Antitrust Division will give a benefit to a company being investigated for criminal activity in one product market (“Market A”) for any criminal activity in another product market (“Market B”) that the company voluntarily discloses, provided that the company meets the requirements for leniency in Market B.  The Antitrust Division confers that benefit by considering the company’s disclosures in Market B as a mitigating factor when assessing any fine the company may have to pay for its criminal activities in Market A. 

 

The size of the Amnesty Plus discount depends upon a number of factors, including: (1) the strength of the evidence provided by the cooperating company in the leniency product; (2) the potential significance of the violation reported in the leniency application, measured in such terms as the volume of commerce involved, the geographic scope, and the number of co-conspirator companies and individuals; and (3) the likelihood the Antitrust Division would have uncovered the additional violation absent the self-reporting.  Of those three factors, the first two are given the most weight.

 

Penalty Plus

 

Under the Penalty Plus policy, if a company in plea negotiations with the Antitrust Division fails to report its participation in a separate antitrust violation that is subsequently discovered and successfully prosecuted, the Antitrust Division will urge the court to consider the company’s failure to report that misconduct as an aggravating factor when sentencing the company.

What are the rules relating to confidentiality during a leniency application?

Identity disclosure

The Antitrust Division does not publicly disclose the identity of a leniency applicant, absent prior disclosure by, or agreement with, the applicant, unless required to do so by court order in connection with litigation.

 

Information disclosure

The Antitrust Division does not disclose the information provided by an applicant, absent prior disclosure by, or agreement with, the applicant, unless required to do so by court order in connection with litigation.  Of course, the Antitrust Division can use that evidence internally to guide its investigation of other cartel participants. 

 

Confidentiality requests

An applicant can request confidentiality, and the Antitrust Division can be expected to abide by its policy, described above, of maintaining that confidentiality, with the proviso that it may be required to disclose confidential information by court order.

What are the rules concerning disclosure of statements made in support of a leniency application?

Domestic submissions and domestic discovery

Information submitted to the Antitrust Division can be made subject to discovery in domestic courts.  This is one reason why submissions to the Antitrust Division are typically oral, not in writing, during the leniency application process.

 

Domestic submissions and foreign discovery

Information submitted to the Antitrust Division during the leniency process may be discoverable in foreign courts, depending upon the applicable laws of those jurisdictions.

 

Foreign submissions and domestic discovery

Courts in the United States are split on the question of whether information submitted in foreign jurisdictions can be made subject to discovery orders in domestic courts.  Some courts preclude the discovery of such information, basing their decisions on comity considerations.  See, e.g. , In re Payment Card Interchange Fee and Merchant Discount Antitrust Litig., 2010 WL 3420517 (E.D.N.Y. Aug. 27, 2010); In re Rubber Chemicals Antitrust Litig., 486 F. Supp. 2d 1078 (N.D. Cal. 2007); In re Methionine Antitrust Litig., No. C-99-3491 CRB (SCS) (N.D. Cal. July 29, 2002).  Other courts, however, have ruled that such information must be produced.  See, e.g., In re Air Cargo Shipping Antitrust Litig., 2010 WL 1189341 (E.D.N.Y. Mar. 29, 2010); In re Vitamins Antitrust Litig., Misc. No. 99-197 (TFH) (D.D.C. Dec. 18, 2002); Information Resources, Inc. v. Dun & Bradstreet Corp., 1998 WL 851607 (S.D.N.Y. Dec. 8, 1998).

Does the regulatory authority in your jurisdiction co-operate with regulatory authorities from other jurisdictions in relation to leniency? If so, what is the legal basis for and extent of co-operation?

The worldwide growth of leniency programs has been dramatic.  In 1990, the United States operated the sole leniency programme; by 2010, over

50 such programmes were in place around the globe.  That expansion also creates the opportunity for enforcement agencies to coordinate when assessing a leniency applicant’s application. 

 

It is the policy of the Antitrust Division that it will not disclose the identity of an applicant to a foreign enforcement agency without that applicant’s permission.  If a waiver is obtained from the applicant, then the Antitrust Division will seek to “coordinate investigative steps, share . . . information provided by a mutual leniency applicant, and coordinate searches.”  Speech by Scott Hammond, “The Evolution of Criminal Antitrust Enforcement Over the Last Two Decades” (Feb. 25, 2010), available at http://www.justice.gov/atr/public/speeches/255515.pdf

 

The Antitrust Division’s basis for obtaining information from other regulatory authorities are treaties or other agreements negotiated with those authorities’ home countries.

Are there any proposals for reform?

There are currently no outstanding proposals to reform the Antitrust Division’s leniency program.