Cartel and Criminal Practice Committee Update

December 17, 2015

Douglas Tween, Jonas Koponen, Bernd Meyring, Liz Jordan

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US Antitrust Update. (As of August 2015)

17 December 2015 Douglas Tween

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I. US Criminal Enforcement Update FY 2015

US Criminal Enforcement Trends FY 2015

Source: http://www.justice.gov/atr/criminal-enforcement-fine-and-jail-charts

US Criminal Enforcement Trends FY 2015

Source: http://www.justice.gov/atr/criminal-enforcement-fine-and-jail-charts

II. US Cartel Investigation Updates & Follow-On Civil Litigation

LIBOR

• On November 25, 2015, investors reached a $14 million settlement following allegations that Barclays manipulated the LIBOR rate.

• On November 13, 2015, Barclays reached a $120 million settlement with “over the counter” investors for similar claims.

• On November 5, 2015, a federal jury found two ex-Rabobank executives guilty of manipulating Libor in the first US trial against individuals accused of rate-rigging. The decision was based in part on the defendants’ testimony to the UK FCA. Both defendants face lengthy prison terms at sentencing, which has been scheduled for March 2016. Three former Rabobank traders previously pled guilty to conspiracy and testified against the defendants. • On November 23, 2015, the defendants called for a new trial, claiming that

the government failed to show that the bankers were successful in manipulating the rate, stating that the jury’s decision was not rational.

• A former Asia-based Rabobank trader also faces trial in the US after his arrest in Australia in October.

LIBOR Regulatory Settlements to Date

In December 2013, the EC also announced fines against Societe Generale ($500 million), JP Morgan ($90 million), and Citigroup ($80 million).

DATE BANK SETTLEMENT AMOUNTS

CFTC DOJ FCA OTHER TOTAL (USD)

June 27, 2012 Barclays $200 million $160 million $94 million – ~$454 million

Dec. 19, 2012 UBS $700 million $500 million $259 million $64 million

(Swiss FINMA) ~$1.5 billion

Feb. 6, 2013 RBS $325 million $150 million $137 million $500 million

(EC) ~$1.142 billion

Sept. 25, 2013 ICAP $65 million – $22 million – ~$87 million

Oct. 29, 2013 Rabobank $475 million $325 million $170 million $96 million

(Dutch DPP) ~$1.1 billion

May 15, 2014 RP Martin $1.2 million – $1.1 million – ~$2.3 million

July 28, 2014 Lloyds $105 million $86 million $179 million – ~$370 million

April 23, 2015 Deutsche Bank

$800 million $775 million $340 million $1400 million (NYDFS; EC)

~$3.4 billion

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LIBOR Regulatory Settlements to Date

Forex

• On December 15, 2015, a NY federal judge gave preliminary approval

to $2 billion settlement reached by nine banks and investors claiming that defendants manipulated the foreign exchange market.

• On November 20, 2015, a federal judge in San Francisco transferred a proposed class action alleging forex manipulation by several banks to the Southern District of New York, where defendants are facing similar claims.

• In November 2015, news broke that NY Attorney General Eric Schneiderman was investigating ‘ghosting’ of forex options, which involved false offers and bids on the forex options market for emerging currencies, creating a fabricated appearance of market interest.

Forex: Class Actions

In October 2015 defendants agreed to pay over $2 billion to settle claims of forex manipulation.

Bank Settlement (millions) Date

Barclays $384 October 2015

HSBC $285 October 2015

RBS $225 October 2015

Goldman Sachs $135 October 2015

BNP Paribas $115 October 2015

Citibank $394 May 2015

Bank of America $180 April 2015

UBS $135 March 2015

JP Morgan Chase $99.5 January 2015

Forex Total Fines

Citigroup JPMorgan RBS Barclays Bank of America

HSBC UBS TOTAL

Federal Reserve $342 M $342 M $274 M $342 M $205 M - $342 M ~$1.85 B

NY Dep’t of Financial Services

- - - $635 M - - - $635 M

CFTC $310 M $310 M $290 M $400 M - $275 M $290 M $1.8 B

DOJ $925 M $550 M $395 M $710 M - - $203 M ~$2.78 B

Office of the Comptroller of the Currency

$350 M $350 M - - $250 M - - $950 M

UK Financial Conduct Authority

$358 M $352 M $344 M $441 M - $343 $371 M ~$2.2 B

Swiss Financial Market Supervisory Authority

- - - - - $133 M ~$133 M

TOTAL $2.285 B $1.904 B $1.303 B $2.5 B $455 M $618 M $1.345 B $10.785 B

Forex Total Fines

Auto Parts

• On December 9, 2015, a federal grand jury returned an indictment against three German executives for conspiring to set the price of parking heaters used in commercial vehicles that had been sold into the US.

• On November 19, 2015, Nagoya-based INOC Corp. pled guilty and agreed to pay $2.35 million in criminal fines for fixing prices of auto parts installed in Toyota cars.

• On September 16, 2015, Tokyo-based KYB Corp. pled guilty and agreed to pay $62 million in criminal fines for fixing the price of shock absorbers installed in US cars and motorcycles.

• The calculation included a fine reduction for “forward-looking compliance efforts.” • On September 3, 2015, Nagoya-based NGSK Insulators Ltd. pled guilty and agreed

to pay $65.3 million in criminal fines for fixing prices and rigging bids for ceramic substrates for catalytic converters installed in US cars, as well as obstruction of justice.

• A total of 38 companies and 58 executives have been charged in the ongoing investigation, agreeing to pay a total of more than $2.6 billion in criminal fines.

Ongoing Investigations

• SSA Bonds – On December 9, 2015, news broke that the DOJ had launched an investigation into potential violations related to supranational, sovereign, and agency bonds (“SSAs”), a $9 trillion market including debt issued by state and government entities, as well as the World Bank.

• Water Chemicals – On October 27, 2015, the first defendant pled guilty in connection with fixing prices, allocating customers, and rigging bids for liquid aluminum sulfate, a chemical used by water treatment plants for municipalities and paper companies in the US. On November 3, 2015 the former executive and his company, General Chemical Corp., were hit with the first of many class actions in NJ federal court.

• Capacitors - On September 12, 2015, NEC Tokin Corp. became the first defendant to plead guilty in the ongoing capacitators investigation, agreeing to pay a criminal fine of $13.8 million for conspiring to fix the price of electrolytic capacitors sold to customers in the US.

• Real Estate – On October 7, 2015 a Georgia real estate investor pled guilty for rigging bids and committing mail fraud at public real estate foreclosure auctions. An Alabama investor pled guilty to similar charges on September 2, 2015. A total of nine investors have pled guilty in Georgia and 11 in Alabama for conspiracies involving foreclosed homes.

Individual Prosecutions

• CDT- On November 18, 2015, a former executive of a large Taiwan-based color display tube (“CDT”) manufacturer, was the first individual to plead guilty in connection with a worldwide conspiracy to fix CDT prices. Four other individuals who were indicted in August 2009 and November 2010 remain fugitives. Samsung CDI Company pled guilty and paid a fine of $32 million for its role in the conspiracy.

• Auto Parts - On October 8, 2015, one former and two current Japanese auto executives were indicted for allegedly conspiring to rig bids and fix prices for body sealing products sold to Honda and Toyota in the US.

• Ocean Freight - On October 6, 2015, three former ocean freight executives were indicted for their alleged participation in a conspiracy to allocate customers, rig bids, and fix prices for roll-on, roll-off cargo to and from the US. A total of seven executives have been charged in the investigation to date, with four pleading guilty and being sentenced to jail time. Three companies have also pled guilty and paid over $136 million in criminal fines.

Noteworthy Trials

• NYPA – On December 3, 2015, a second defendant pled guilty to filing a false tax return in connection with bid rigging contracts awarded by the New York Power Authority, facing up to three years in prison and a $250,000 fine. The first defendant pled guilty in June 2015, and a former NYPA employee was sentenced to more than three years in prison and ordered to pay a $5,000 fine in January 2009 for his role in the conspiracy.

• NJ Tax Liens – On October 5, 2015 a jury convicted one and acquitted four defendants of rigging bids for tax lien auctions in NJ.

• CDS – On October 1, 2015, twelve banks finalized a settlement of $1.86 billion based on allegations that the banks conspired to rig the market for credit-default-swaps. The DOJ has been investigating anticompetitive activity in the CDS market since 2009. In August of 2013, the DOJ filed charges against two derivatives traders at JP Morgan Chase for overstating the value of billions of dollars of assets to cover up mounting losses. An investigation by the EC is also ongoing.

Cartels-Recent Developments in the EU Courts’ Case Law.

(As of August 2015)

17 December 2015 Jonas Koponen, Dr. Bernd Meyring

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I. Single Overall Agreements (“SOAs”)

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Background

• Relevant for statute of limitations, fines, follow-on damage claims • Existence of an overall plan pursuing a common objective

• Case C-239/11 Siemens v Commission • This cannot be determined by a general reference to the distortion of competition • Complementarity between different cartel activities is not a necessary condition

• Intentional contribution of the undertaking to that plan • Case C-444/11 Team Relocations v Commission

• Not necessary that an undertaking has contributed from the start of the infringement • Or to have pursued the plan in exactly the same way as other cartelists

• Case C-204/00 Aalborg Portland A/S v Commission • Having reservations on whether to participate /intention to cheat does not

exclude that an undertaking is party to an SOA • Awareness of the offending conduct of the other participants

Case T-82/139 CRT (General Court, September 9, 2015)

• In 2012, the European Commission (“EC”) fined 7 groups of companies €1.47bn for participating distinct cartels in relation to CPTs (TV tubes) and CDTs (computer monitor tubes).

• Toshiba sought partial annulment of the EC decision with regard to the characterisation of its participation in certain bilateral contacts/multilateral meetings as forming part of an SOA.

• An undertaking participating in one or more aspects can be held liable for the whole infringement.

• EC has to establish that the undertaking was aware of anticompetitive conduct of the others or that it could have reasonably foreseen it. This requires that the undertaking knew/should have known that it was joining the overall cartel.

• Some isolated bilateral contacts and participation in four meetings do not establish awareness of the overall CPT cartel.

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Case T-62/11 e.a. - Airfreight Cartel (General Court, December 16, 2015)

• In 2010, the EC fined 11 air cargo carriers for operating a worldwide cartel affecting the cargo services in the EEA (surcharges for fuel and security without discounts over a 6-year period)

• All carriers 50% reduction on sales between EEA and third countries as part of the harm fell outside the EEA

• The General Court (“GC”) annulled the EC decision as the grounds and the operative part are contradictory. As a result, companies were not able to challenge the decision effectively and judges could not exercise effective judicial review

• The GC stressed the consequences for follow-on damage claims (national courts bound by the Commission decision, also on the scope of the infringement)

• Commission found at the same time one global SOA and several sub-SOAs with different scopes and participants

• Commission did not explain why certain companies were not held liable for certain practices despite the fact that they were liable for the global conspiracy

• Inconsistent start dates for certain carriers (SOA v Start of activity on relevant routes)

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II. Parental Liability

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Background

• Case C-521/09 Elf Aquitaine v Commission • Exercise of decisive influence

• Real autonomy in determining its commercial policy on the market • All the relevant factors relating to the economic, organisational and legal links

• Case T-132/07 Fuji Electric Co Ltd v Commission • A minority shareholder can exercise decisive influence • Criteria: size of the shareholding, representation on the BoD, ability to influence

the commercial policy, actual evidence of attempts to do so • Case C-179/12 Dow Chemical v Commission (and C-172/12 El du Pont)

• 50:50 JV, parents responsible for participation in Chloroprene Rubber Cartel • Where the parent companies have 50% shareholdings in a JV and both parents

exercise decisive influence, single undertaking • No presumption • Autonomy of a full-function JV under the EU Merger Regulation does not prevent

the parents from exercising decisive influence over the JV for the purposes of Art. 101 TFEU

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Case T-91/13 CRT (GC, September 9, 2015)

• 50:50 JV. • LGE and Philips could control how strategic commercial decisions were

adopted and supervise the management of the JV • Several Members of the JV’s supervisory board simultaneously held

management positions within Philips and LGE • The supervisory board met during the infringement period and

discussed matters related to market developments, sales, prices, stock volumes and investments

• The supervisory board took decisions that showed that it influenced how the JV operated and was organised. It changed the organisation structure of the group by replacing the group management with the executive board. It decided to start using a central management style.

• The JV group was the principal supplier of CRT products for the parent companies

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Case T-104/13 - CRT (GC, September 9, 2015)

• Toshiba had a 35.5% shareholding in MTPD, the infringing entity. • The Commission had found that Toshiba had participated in the

infringement before transferring its CRT activities to MTPD. The GC annulled this finding.

• Toshiba argued that its rights as a minority shareholder did not enable it to exercise day-to-day control over the JV and that it was not in a position to exercise decisive influence over its JV’s conduct on the market

• The GC held that Toshiba exercised joint control, as both parent companies had veto rights with respect to matters of strategic importance which were essential for the pursuit of the JV’s activities

• In particular, veto rights in the adoption of business plans and major investment decisions and rights concerning senior management approval and dismissal and budget approval.

• The GC upheld the finding on Toshiba’s liability for MTPD’s conduct. 26

Case C-597/13 Total (ECJ, September 7, 2015)

• Total SA and its subsidiary Total France were found to have participated in a cartel concerning paraffin waxes the EEA and slack wax in Germany.

• The GC reduced the fines to the subsidiary but not to the parent company because it found errors in the Commission’s determination of the duration.

• The CJEU set this finding aside. Where the liability of a parent company is purely derivative of that of its subsidiary and no other factor individually reflects the conduct for which the parent company is held liable, the liability of that parent company cannot exceed that of its subsidiary.

• Provided that certain procedural requirements are satisfied, i.e. the bringing of parallel applications having the same object by the subsidiary and its parent company

• The notion of the ‘same object’ does not require that the scope of the applications of those companies, and the arguments on which they relied, must be identical

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Case C-542/14 VM Remonts (AG Wathelet’s December 3, 2015)

• 3 companies fined by a National Competition Authority for rigging tenders through a separate company.

• Can companies be held liable even if it cannot be proved that employees gave consent/were aware of the infringement?

• EU Competition Law does not require that an individual from the main company knew- or consented to- about the contractor’s behaviour.

• There is a rebuttable presumption for liability for external contractors. To rebut this presumption, companies: • have to establish that the contractor was acting outside his mandate and that

they communicated to prevent competition law infringements when appointing the contractor

• have to show that they reported suspect conduct by the contractor to the authorities as soon as they became aware of it

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III. Liability for “Cartel Facilitators”

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Case C-194/14 AC-Treuhand (Court of Justice of the European Union,

October 22, 2015)

• EC 2009: 10 firms fined €173 million in Heat stabilisers (COMP/38.589) • AC-Treuhand organised cartel meetings at its Swiss offices, fined €348,000

• AC-Treuhand appealed, key questions: • Can a consultancy firm be held liable Art. 101 TFEU infringement, where the firm

actively contributes to the implementation and continuation of the cartel? • Is the fact that it is active on a separate market relevant?

• GC: Yes! This follows from wording of Art. 101 itself (Case T-27/10) • Advocate General (“AG”) Wahl: AC-Treuhand should not be fined – it was

not active on the relevant/related markets; not a full member of the cartel • The Court of Justice of the European Union (“CJEU”): the wording of Art.

101 does not support AG Wahl’s view; AC-Treuhand played an “essential and similar role” by organising meetings, collecting and supplying information, offering to act as a moderator

• AC-Treuhand’s activity was not merely the provision of services

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Liability for other “facilitators”

• EC 1980: Italian Cast Glass (IV/29.869) • Fides-Unione Fiduciaria liable due to facilitation, but no fine imposed given no previous case

• EC 2003: Organic peroxide (COMP/37.857) • AC-Treuhand fined €1,000 (first time) for facilitating the cartel

• GC: Upheld the EC’s decision on appeal in Case T-99/04 AC-Treuhand • Any “undertaking” – also if not active on the “cartelised market” – involved in an “agreement”

or “concerted practice” should reasonably foresee that Art. 101 was applicable in principle • The EC’s decisional practice and earlier case-law was sufficiently clear on this point

• EC 2013: Yen Interest rate derivatives (“YIRD”) (COMP/39861) • RP Martin fined €247,000 (settled) • RP Martin facilitated infringements, used contacts with some JPY LIBOR panel banks (not in

the infringement), with the aim of influencing their JPY LIBOR submissions • EC 2015: YIRD/ICAP (COMP/39861)

• ICAP fined €14.9 million for facilitating 6 cartels in YIRD (contested) • ICAP found to disseminate misleading information and providing channel of communication

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IV. Restriction of Competition “By Object”

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Case C-345/14 Maxima Latvija (CJEU, November 26, 2015)

• Food retailer Maxima Latvija operates large- and hyper-markets • Series of commercial lease contracts for commercial premises in shopping

centres • Maxima Latvija, as the anchor tenant, given right to approve third party tenants in

shopping centres • Latvia’s Competition Council: this is a “restriction by object”, so not

necessary to demonstrate that the clauses obstructed entry of any particular operator

• CJEU: the content of the agreement does not reveal a sufficient degree of harm to competition, so effects must be assessed

• “By Object” must be interpreted restrictively • Horizontal price-fixing has by its very nature negative effects • In this case, by looking at the economic context, the content of the agreements

does not show a sufficient degree of harm to competition • Can it be a “by effect” restriction? In theory yes, but various factors would need

to be assessed

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An evolving concept, ever since 1966

• CJEU 2014: Case C-67/13P Cartes Bancaires • Only types of coordination between undertakings which by their very nature are

harmful to the proper functioning of normal competition can be considered as by object restrictions

• Horizontal price-fixing, for instance • Experience counts • Sufficient degree of harm to competition

• Consider the content of the provision, its objectives and the economic/legal context • Nature of the goods/services • Real conditions of the functioning/structure of the market • “By object” must be interpreted restrictively

• CJEU 2015: Dole v Commission • No need for a link between a concerted practice and consumer prices

• CJEU 2015: Del Monte v Commission • Pre-pricing communications, By Object

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Watch this space

• Case C-373/14 Toshiba Corp v Commission (pending) • AG Wathelet’s Opinion (June 25, 2015):

• Recent case-law has made it more difficult to draw the line between by object/by effect restrictions

• The boundary between by object/by effect cannot be fluid • This appeal provides the Court with a fresh opportunity to clarify the case

law

• Examples of confusion: The approach to Interchange fees saga, E-Books, Patent settlements

• Key pending cases before the GC, appeals against the EC’s decisions in • Citalopram (Lundbeck, et al) (COMP/39226) • Perindopril (Servier, et al) (COMP/39612)

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UK Antitrust Update: Developments in Private Enforcement.

(As of August 2015)

17 December 2015 Elizabeth Jordan

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New collective actions regime

• Regime effective from 1 October 2015 • Opt-out (UK domiciled claimants only) or

opt-in collective actions • Administered by specialist Competition

Appeal Tribunal (“CAT”): • Authorization of class representative • Certification of claims as eligible for inclusion • Guidance from other jurisdictions?

New collective actions regime: cont’d

• Issues with the new regime (no claims yet) • Practical application of new rules uncertain • Problems with transitional provisions • Financial incentives unclear • Comparative certainty of High Court process

• Collective settlement regime • Mandatory for opt-out collective actions • Available in other cases

Air cargo appeal judgment: economic torts

• Attempt to overcome limits of Commission decision using economic torts claims

• Court of Appeal struck out claims as no intention to injure

• Airlines could not know where any loss would fall due to pass through

• Use of economic torts undesirable for policy reasons

Air cargo appeal judgment: redactions

• Right to redact Commission findings that cannot be challenged on appeal • i.e. not reflected in the operative part • Addressees and non-addressees

• Confidentiality ring does not give adequate protection

Presenters

Jonas Koponen Partner Brussels +3225050227 jonas.koponon@linklaters.com

Douglas Tween Partner New York +12129039072 douglas.tween@linklaters.com

Elizabeth Jordan Managing Associate London +442074564947 elizabeth.jordan@linklaters.com

Bernd Meyring Partner Brussels +3225050332 bernd.meyring@linklaters.com