Investigation and settlement

Legal representation

Under which circumstances would the company and officers or employees need separate legal representation? Do the authorities require separate legal representation during certain types of investigations?

Separate representation is appropriate when a potential conflict arises between the company and the employees, such as when the officer or employee may have violated the law or company policy. Prior to conducting preliminary interviews of employees, counsel for the corporation is required to inform each employee that he or she represents the corporation and not the employee as an individual. Counsel further informs each employee that if he or she has any concerns about his or her involvement in the alleged activity he or she should consider separate representation.

Authorities do not require separate legal representation but expect that key individuals who have violated the law are represented by separate counsel.

Dawn raids

For what types of infringement would the regulatory authority launch a dawn raid? Are there any specific procedural rules for dawn raids?

Dawn raids are becoming rare in the US and occur in cases where the DOJ anticipates the spoliation of evidence.

In cartel investigations, the DOJ will issue broad requests seeking electronic documents, paper files and phone and text records, including from central files and share drives and individual computers and phones. The search warrant will be limited to certain entities and certain locations.

It is critical that employees never hide or destroy evidence, as the penalties for obstruction of justice are severe. Federal obstruction charges can result in jail terms of up to 20 years and fines in excess of $500 million. See, for example, 18 US Code section 1510 (obstruction of criminal investigations); 18 USC section 1512(c)(2) (obstruction of official proceeding); 18 USC section 1519 (destruction of records); see generally, 18 USC Chapter 73; US Sentencing Guidelines, Guideline Fine Range - Organizations,

What are the company’s rights and obligations during a dawn raid?

Targets of a search warrant have legal rights against overbroad and unlawful searches.

Settlement mechanisms

Is there any mechanism to settle, or to make commitments to regulators, during an investigation?

Settlements are very common. The overwhelming majority of the DOJ’s major cartel investigations are initiated following a leniency application, followed by negotiated plea agreements where lesser sentences are imposed in exchange for timely cooperation. These plea agreements for ‘second-in’ companies must charge the company with the ‘most serious, readily provable’ offence, and may only reduce the sentence from the probable sentence faced if convicted to an extent reflecting the ‘totality and seriousness’ of the company’s conduct.

As to agreements or commitments without a determination of violation, the closest procedure in the US would be a deferred prosecution or non-prosecution agreement. These agreements can require ongoing cooperation and compliance, and have been used by the DOJ. Most recently, the agreements have been used in various major financial services industry investigations where there are overlapping government investigations by non-antitrust agencies. In these circumstances, the DOJ may accept remediation and compliance requirements, and ongoing interim reporting for the period of the agreement, in return for non-prosecution. Companies should be aware that a subsequent violation of a deferred prosecution agreement can result in severe penalties.

What weight will the authorities place on companies implementing or amending a compliance programme in settlement negotiations?

See question 4.

Corporate monitorships

Are corporate monitorships used in your jurisdiction?

The DOJ has recently requested outside third-party monitors in two high-profile cases, following successful antitrust trials that were particularly unusual and highlighted severe antitrust compliance concerns.

In AUO, a Taiwanese company and its American subsidiary were placed on probation for three years. The court required the appointment of an independent monitor to administer an antitrust compliance programme. Similarly, in Apple e-books, the compliance monitor was appointed for two years to review and evaluate Apple’s antitrust compliance programmes.

Subsequently, in both the AUO and e-books cases, the parties disagreed on the terms and responsibilities of the appointed monitors, leading the parties back before the court on multiple issues. Nevertheless, the DOJ has stated it will continue to consider corporate monitors in situations with a significant risk of recidivism.

Statements of facts

Are agreed statements of facts in a settlement with the authorities automatically admissible as evidence in actions for private damages, including class-actions or representative claims?

A final judgment in a US government action is prima facie evidence against the defendant as all civil matters regarding the same conduct, pursuant to section 5(a) of the federal Clayton Antitrust Act. A criminal conviction following a guilty plea qualifies as a final judgment for these purposes.

Invoking legal privilege

Can the company or an individual invoke legal privilege or privilege against self-incrimination in an investigation?

The US constitutional right against self-incrimination applies to US criminal antitrust proceedings. This protection includes testimonial communications. In addition there is an ‘act of production’ privilege, based on the same principles, involving testimonial communications made through documents.

The attorney-client privilege protects confidential communications between an attorney and client for the purpose of seeking or rendering legal advice. The protection applies equally to external or in-house attorneys communicating with company employees for the purpose of receiving legal advice, so long as that legal advice was pursuant to the attorney’s professional capacity. The US attorney-client privilege is held by the client, and can only be waived by the client.

While sharing privileged information with a third party waives any privilege, parties to a joint-defence agreement can preserve the privilege by agreement in furtherance of the joint-defence privilege. Joint-defence agreements are commonplace in cartel and merger investigations, given the common interests in sharing confidential information regarding the investigation.

The attorney work-product privilege covers materials prepared in anticipation of litigation or trial and reflecting the mental impressions or opinions of an attorney. The US Supreme Court recognised the work-product doctrine so that counsel would have sufficient privacy in their litigation preparation from opposing parties and their counsel (Hickman v Taylor, 329 US 495 (1947)).

Confidentiality protection

What confidentiality protection is afforded to the company and/or individual involved in competition investigations?

Criminal investigations typically proceed pursuant to grand jury subpoenas governed by the Federal Rules of Criminal Procedure. A grand jury determines whether there is sufficient probable cause to indict the target of a criminal investigation, and may subpoena testimony and evidence. In this process, the matters before the grand jury may not be disclosed by the prosecutors, jurors, and court employees. This secrecy is strictly enforced with violators subject to contempt of court proceedings.

Civil investigations are also confidential, including both the existence of the investigation as well as confidential company information and witness testimony disclosed (15 USC section 1313(c); 15 USC section 57b-2(b)).

Plea negotiations are generally confidential. However, a defendant in breach of a plea agreement - such as by failing to cooperate in the investigation - may forfeit this confidentiality. In the US, courts do not participate in these discussions, but the resulting agreements are generally disclosed in open court (unless doing so would jeopardise a secret investigation) for acceptance of the court.

Refusal to cooperate

What are the penalties for refusing to cooperate with the authorities in an investigation?

Refusing to cooperate with the DOJ will forfeit any leniency or sentencing enhancement associated with cooperation. Furthermore, refusal to appropriately produce witnesses and documents could subject the company to criminal contempt and obstruction of justice charges. The penalties for obstruction of justice are often much more severe than those for the underlying cartel offence. Obstruction of a government antitrust investigation can be punished by a jail term of up to 20 years. See, for example, 18 USC section 1512(c)(2), and fines in excess of $500 million. See 18 USC section 1512(c)(2).

The DOJ has regularly prosecuted companies it deems to have corrupted its investigative processes, especially with false statements or alteration of documents.

Infringement notification

Is there a duty to notify the regulator of competition infringements?

Leniency applicants are required to fully cooperate with the DOJ. While there is no duty to notify the regulator of competition infringements, not doing so may lead to drastic criminal penalties and civil litigation.

Limitation period

What are the limitation periods for competition infringements?

The statute of limitations for criminal conspiracies, including antitrust conspiracies, is five years. For civil actions, a suit must commence within four years after the cause of action has accrued.