10 Steps You Can Take To Mitigate Your Risks
As the number of jurisdictions enacting antitrust laws surpasses 100, extraterritoriality (the ability of those outside a jurisdiction to be held liable within the jurisdiction) becomes a significant risk management issue for multi-national companies.
Conduct in one or just a few jurisdictions may end up being prosecuted around the world. A single instance of anticompetitive conduct may be subject to redress in multiple jurisdictions, levying a significant financial cost (legal fees, fines, and private damages) on defendants, forcing them to make multi-faceted leniency decisions and exposing them to the potential for divergent and/or contrasting legal requirements.
Furthermore, conduct that may be legally permissible within the host jurisdiction may be found to be illegal in other jurisdictions. This can have decided effects for multi-national companies and create significant headaches for chief risk officers and general counsels.
One need not look far to see indications of the increasingly transnational nature of anticompetitive behavior and the global consequences of collusion in structurally linked markets. Headlines during the past few months depicted international cartels in liquid crystal displays, financial services, auto parts, and mineral mining.
Many jurisdictions sanction the extraterritorial reach of their antitrust laws. The antitrust laws of the U.S. and EU apply to conduct that occurs outside the jurisdiction but that has substantial and intended effects within the jurisdiction. Thus, companies engraining in cartel behavior outside of these jurisdictions (e.g., in Asia) may nonetheless face liability in the U.S. or EU if the effects of the conduct can be felt there.
The liquid crystal display cases, and specifically AU Optronics, are illustrative of this point. There, four Taiwan LCD manufacturers and two Korean LCD manufacturers allegedly met monthly in Taiwan and engaged in a conspiracy to fix the price of LCDs. Prosecution of the conspirators occurred in the U.S. and the EU.
The U.S. court applying the standard, “Section One of the Sherman Act applies to wholly foreign conduct which has a substantial and intended effect in the United States,” held that the conduct was actionable under the U.S. antitrust laws.
The EU Commission similarly explained, “These agreements had a direct impact on customers in the European Economic Area because the vast majority of televisions, computer monitors and notebooks incorporating those LCD panels and sold in the EEA comes from Asia.” A similar situation exists around the conspiracy to fix automotive parts, which is being prosecuted in the US, EU and Japan.
Companies engaged in multinational conspiracies face the potential for fines in each affected jurisdiction, as well as potential liability in private lawsuits, which in some countries may be as large as treble damages. Corporate criminal prosecution is available in some jurisdictions. Company executives face potential fines and prison time. Cartel investigations may take years to wind down, exposing the company to business disruption and uncertainty.
Once a company engages in cartel behavior, there is little the company can do to outright eliminate liability. However there are 10 practical steps that a company can undertake to mitigate its risk and reduce its exposure.
10.Preserve evidence. Jurisdictions vary in the evidence preservation requirements. Play to the most onerous denominator. Decide which, among the jurisdictions where liability may exist, has the most onerous evidence preservation requirements and abide by those requirements. Evidence destruction is often uncovered and there is no sense in compounding conduct liability with obstruction of justice issues. Destruction of evidence can also jeopardize leniency.
Following these 10 practical steps should mitigate multi-jurisdictional antitrust liability for cartel activity and ensure that a company facing such liability is not over exposed.
 See, e.g., Minn-Chem Inc. v. Agrium Inc., 683 F.3d 845 (June 27, 2012).
 Order Denying Defendants’ Motion To Dismiss The Indictment, U.S. v. AU Optronics Corporation, M-07-1827SI, (N.D.Cal. Apr. 18, 2011) available at http://amlawdaily.typepad.com/Illstonauo.pdf.
 Press Release, European Commission, Antitrust: Commission fines six LCD panel producers €648 million for price fixing cartel, (December 8, 2010). See also United States Department of Justice and Federal Trade Commission, Antitrust Enforcement Guidelines for International Operations (April 1995) (“The reach of the U.S. antitrust laws is not limited, however, to conduct and transactions that occur within the boundaries of the United States. Anticompetitive conduct that affects U.S. domestic or foreign commerce may violate the U.S. antitrust laws regardless of where such conduct occurs or the nationality of the parties involved.”).
About the Author
Timothy Cornell, counsel in Clifford Chance’s U.S. Antitrust Practice, advises clients on antitrust issues in government civil and criminal investigations, the regulatory review of mergers and acquisitions, intellectual property and technology licensing, supply and distribution agreements, joint venture formation, retail pricing issues, horizontal and vertical restraints, private party civil litigation, and the adoption of antitrust best practices.
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About the Author Timothy Cornell, counsel in Clifford Chance's U.S. Antitrust Practice, advises clients on antitrust issues in government civil and criminal investigations, the regulatory review of mergers and acquisitions, intellectual property and technology licensing, supply and distribution agreements, joint venture formation, retail pricing issues, horizontal and vertical restraints, private party civil litigation, and the adoption of antitrust best practices. Mr. Cornell has advocated on behalf of more than two dozen clients before the U.S. Federal Trade Commission and U.S. Department of Justice, representing transacting parties and parties opposing transactions between their competitors. Mr. Cornell brings significant experience in assisting clients through government antitrust investigations, representing targets of governmental investigations and non-parties cooperating with the government. He has litigated antitrust and other high profile cases before arbitration panels, and in federal and state courts across the U.S. Mr. Cornell obtained his JD from Georgetown, cum laude, and his BS in political science from the United States Naval Academy. Contact information: Timothy J. Cornell Clifford Chance 2001 K Street, NW Washington, DC 20006 +1 202 912 5220 +1 201 519 7959