Antitrust in Asia: HONG KONG: June 2-3, 2016

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I wanted to pass on some information about another great ABA Antitrust Section program“Antitrust In Asia.”  The program is in Hong Kong, China on June 2-3, 2016, but early registration savings end on May 12.  The faculty includes enforcers from China, Competition Commission of Hong Kong, Competition Commission of India, Japan Fair Trade Commission, Korea Fair Trade Commission, Competition Commission of Singapore, and the U.S. DOJ & FTC.

Antitrust enforcement in Asia has taken a prominent and increasingly important place in the global competition ecosystem. This conference features leading enforcers, academics, and practitioners who will address key developments across the Asia-Pacific region, as well as provide conference attendees unique opportunities to interact with top policy-makers.  Here is a link to the full agenda, which includes: Merger Review, Enforcement Directions in Asia, Abuse of Dominance, and Private Actions.  The conference also features a “Roundtable with Enforcers From China’s AML Agencies” (Ministry of Commerce (MOFCOM), National Development and Reform Commission (NDRC) and State Administration for Industry and Commerce (SAIC)).  While the panels are always great, even better are the informal encounters with the enforcers, corporate counsel and other colleagues who attend the event.

Unfortunately, I won’t be attending.  I blew my modest international travel budget on the ABA Cartel Workshop in Tokyo, Japan in February.  Here is a short Cartel Caper blog post from that conference and a link to a conference follow-up article I wrote for Law 360 (here).  If you do attend the Antitrust in Asia conference and would like to post a blog entry about it, I’d be happy to publish it.  I am always looking to expand the international content of the blog.

Thanks for reading.



Today we have an update from Brazil by Mauro Grinberg, a former Commissioner of CADE, a former Attorney of the National Treasury and senior partner of Grinberg Cordovil.


A Resolution issued by Conselho Administrativo de Defesa Econômica (CADE), dated March 11, 2015, made a comeback of the procedure for antitrust guidance to be requested to CADE. This request for guidance can be used in all competition cases, including cartels.

The first article of such Resolution says that any interested party can forward a request for guidance to CADE, related to specific situations, which may be real or potential. Interested parties can also be trade associations which have, as their goals, representation of the involved sector and can demonstrate that at least one of the represented companies is legitimately interested in such guidance.

There are some requirements for such request for guidance and, although it is pointless, for the purpose of this note, to go through all of them, it is interesting to mention that the party must declare all CADE´s precedents related to the object. So, no request for guidance can be asked before a thorough research through CADE´s jurisprudence. However, any research may have its problems and it is not clear what will happen if a certain research does not present a decision that CADE may understand as fundamental.

Another point that must be reported says that the request for guidance cannot refer to a purely hypothetical issue. This may be a somewhat tricky question because CADE may understand that a question that is not under practice is hypothetical (which, in a way, it may be). It is not clear what can happen if, e.g., a party asks whether it is legitimate to have certain contacts with competitors and, if the conduct is approved by CADE and the party does not perform it due to a further strategic and/or commercial decision, could the party can be punished for having submitted a request for guidance that CADE may consider hypothetical?.

The answer to the request for guidance is binding for CADE and the parties for five years, although the Resolution states that CADE can reconsider its decision, if based on new facts. So, in practice, the Resolution is really binding only for the parties submitting the request for guidance.

A last problematic article states that, if CADE understands that an already existing conduct, which is the object of the request for guidance, has the possibility of being illegal, an administrative file will be opened in order to prosecute the interested party. If the conduct is a possible cartel, a criminal file may also be opened. So, it is fundamental that, in case a party wants to make such request related to a conduct that is under way, it is advisable to stop such conduct before requesting the guidance.

Consequently, a request for guidance, in order to be in the safe side, must be related to conducts that are not being performed but are to be performed and depend on the guidance, with the additional task of demonstrating to the authorities that the request for guidance is not hypothetical.

Mauro Grinberg is a former Commissioner of CADE, a former Attorney of the National Treasury and senior partner of Grinberg Cordovil.

Connolly’s Cartel Capers: A Look at Other Significant Submissions to the Sentencing Commission on Possible Reforms to the Antitrust Guidelines (2R1.1)

A Look at Other Significant Submissions to the Sentencing Commission on Possible Reforms to the Antitrust Guidelines (2R1.1)

I’ve posted recently on my concerns with the Antitrust Sentencing Guidelines (2R1.1) as they relate to individual defendants (here).  Other submissions have been made to the Commission by people/institutions with great insight and influence in the cartel arena.  I’ve summarized a few of these below.

Click Here For the “Rest of the Story” (hat tip to Paul Harvey)

Connolly’s Cartel Capers: Consciousness of Innocence (continued)

Consciousness of Innocence (continued)

On July 8, 2014 Rengan Rajaratnam was acquitted by a federal jury of participation in an insider trading conspiracy. The verdict was the government’s first trial loss in a wide-ranging probe that has led to 85 convictions of traders, analysts, lawyers and executives, with most sentenced to prison. Raj Rajaratnam, the defendant’s older brother, is currently serving an 11 year jail term. In an earlier post I reported that in a pretrial motion, Rajaratnam’s counsel persuaded the court that he should be able to introduce evidence that he was in Brazil at the time he learned of his indictment and he immediately returned to the United States to face the charges. This evidence, Rajaratnam argued, and the court agreed, could be considered by the jury as “consciousness of innocence.” The jury acquitted Rajaratnam, and no doubt many factors were at play, but in fact, Rajaratnam did introduce such evidence at trial.   [Read more…]

Connolly’s Cartel Capers: Seventh Circuit Panel to Rehear Motorola Mobility v. AU Optronics

Seventh Circuit Panel to Rehear Motorola Mobility v. AU Optronics: A Preview of Some of the FTAIA Issues in Component International Price Fixing Cases

The Seventh Circuit has decided to rehear the appeal from a judgment dismissing nearly Motorola’s entire $3.5 billion antitrust claim against foreign manufacturers of LCD panels. The Court has not yet set a schedule for the filing of supplemental briefs.

In Motorola Mobility v. AU Optronics Corp, No. 14-8003, 2014 WL 1243797 (7th Cir. Mar. 27, 2014)(vacated), the Seventh Circuit (J. Posner) upheld a lower court ruling dismissing most of Motorola’s damage claims from price fixing of LCD panels. The commerce at issue was LCD panels sold by defendants to Motorola’s foreign subsidiaries and incorporated into products such as cell phones. The finished product was imported into the U.S. The Court found that a damage claim based on the purchases by Motorola’s foreign subsidiaries was barred by the FTAIA. The Court held that because the price-fixed panels were sold to customers overseas, the effect on U.S. commerce was indirect, even though the price of the finished product later imported into the U.S. may have been inflated by the component price fixing.

The Motorola Mobility Court rejected the view that the component price fixing had a “direct, substantial and reasonably foreseeable effect” on U.S. commerce. The Court noted “nothing is more common nowadays than for products imported into the United States to include components that the producers had bought from foreign manufacturers.” From this the Court concluded: “The position for which Motorola [and the U.S.] contends would if adopted enormously increase the global reach of the Sherman Act, creating friction with many foreign countries and ‘resent[ment at] the apparent effort of the United States to act as the world’s competition police officer,’ a primary concern motivating the foreign trade act.” The DOJ joined in the request for en banc review. Motorola Mobility involves the same LCD panel cartel that the Antitrust Division successfully prosecuted, sending many foreign defendants to prison.

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Connolly’s Cartel Capers: Plea Agreements in a Criminal Antitrust Trial

The Proper Use of Plea Agreements in a Criminal Antitrust Trial

by Robert E. Connolly

Criminal antitrust trials occur relatively infrequently these days, so an occasional review of some of the issues that arise at trial can be useful as a refresher. Many government witnesses at a criminal antitrust trial are testifying pursuant to some type of agreement with the government. Such agreements include amnesty, immunity, non-prosecution/cooperation agreements and plea agreements. The essence of the agreement is that the witness will receive some type of benefit in the form of a reduced punishment (or immunity). In return, the witness agrees to cooperate with the government and testify at trial. If the witness does not give truthful testimony, he/she is theoretically subject to prosecution for perjury, and may also lose the benefits conferred by the agreement

A recent Second Circuit decision, U.S. v. Certified Environmental Services, Inc., No. 11-4872 (2d Cir. May 28, 2014), provides a chance to review the proper use of plea agreements at trial.   The court reversed convictions on several counts related to a scheme by defendants to violate various state and federal environmental regulations. The convictions were reversed based, in part, on the government having improperly bolstered the witness’s credibility by referring to the cooperation agreement requirement that the witness tell the truth.

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Robert E. Connolly’s Cartel Capers: Second Circuit on FTAIA to Extraterritorial Anticompetitive Conduct

The Second Circuit Adds Its Voice to the Debate Over the Application of the FTAIA to Extraterritorial Anticompetitive Conduct

One of the hottest topics in cartel enforcement today is the question of how the Foreign Trade Antitrust Improvements Act of 1982 (“FTAIA”) limits the extraterritorial reach of the Sherman Act. The FTAIA applies to both governmental and private actions. On June 4, 2014 the Second Circuit offered its views on the subject in Lotes Co., v. Hon Hai Precision Industry, No. 13-2280, slip op. (2d Cir. June 4, 2014).

The Foreign Trade Antitrust Improvements Act of 1982 (“FTAIA”), 15 U.S.C. Section 6a, limits the extraterritorial reach of the Sherman Act. The Supreme Court has explained that the FTAIA initially lays down a general rule placing all (nonimport) activity involving foreign commerce outside the Sherman Act’s reach. The FTAIA then brings such conduct back within the Sherman Act’s reach provided that the conduct both (1) sufficiently affects American commerce, i.e., has a “direct, substantial, and reasonably foreseeable effect” on American domestic, import, or (certain) export commerce, and (2) has an effect of a kind that antitrust law considers harmful,i.e., the “effect” must “giv[e] rise to a [Sherman Act] claim.” F. HoffmannLa Roche Ltd. v. Empagran S.A., 542 U.S. 155, 162 (2004) (quoting 15 U.S.C. § 6a(1), (2)).  

In Lotes, a manufacturer of UBS connectors (Lotes), alleged monopolization by the defendants of the market for UBS 3.0 connectors. Lotes alleged that the defendants breached their obligation to provide RAND‐Zero licenses to adopters of the USB 3.0 standard, which included Lotes. This, Lotes claimed, gave the defendants unlawful monopoly power over the manufacture of USB 3.0 connectors in China. While the anticompetitive conduct took place in China, Lotes’s theory was that monopoly driven price increases in USB 3.0 connectors would “inevitably” be passed on to consumers in the United States. Lotes alleged, therefore, that the monopolization conduct in China would have a “direct, substantial, and reasonably foreseeable effect on U.S. commerce.”

The Second Circuit upheld the dismissal of the complaint because Lotes did not satisfy the second requirement under the FTAIA that “such effect gives rise to a claim under the provisions of this Act.” The effect in the United States from the defendants’ alleged conduct was claimed to be higher consumer prices. But, Lotes’s injury, as a competitor of the defendants, was that it was allegedly wrongly denied a license to manufacture the connectors.  Higher U.S. consumer prices did not give rise to Lotes’s antitrust injury. In fact, Lotes’s injury predated the higher prices. Lotes’s complaint therefore was dismissed because any domestic effect caused by the defendants’ foreign anticompetitive conduct did not “give[] rise to” Lotes’s claims. 15 U.S.C. § 6a(2). Lotes at 47.

There are several other important aspects to the Lotes decision:

1) The Second Circuit joined the Third and Seventh Circuit in holding that the requirements of the FTAIA were not jurisdictional, but were substantive elements of a Sherman Act offense. The importance of this holding is obvious. Motions to dismiss under Fed. R. Civ. P. 12(b)(1) based on lack of subject-matter jurisdiction place the burden on the plaintiff to establish jurisdiction.  The plaintiff must meet its burden before discovery takes place.  Instead, because satisfying FTAIA requirements is now considered an element of the Sherman Act violation, defendants must file a motion to dismiss under Rule 12(b)(6) and all reasonable inferences will be drawn in favor of the plaintiff.

2) The Second Circuit did not reach the issue of whether the defendants’ conduct met the FTAIA “direct, substantial and reasonably foreseeable effect” requirement, but did rule that the district court used the wrong test to answer this question.The district court construed the FTAIA’s “direct effect” element to require the effect to follow “as an immediate consequence of the defendant’s activity.”   This is the rule in the Ninth Circuit. The Second Circuit, however, rejected this test. The Court adopted an alternative approach advocated by the Department of Justice and the FTC in amicus briefs. Under this more relaxed approach“the term ‘direct’ means only ‘a reasonably proximate causal nexus.’” Lotes at 35-36. The Seventh Circuit has also adopted the “reasonably proximate causal nexus” test. See Minn-Chen v. Agrium, Inc., 683 F.3d 845 (7th Cir. 2012).

While the Second Circuit did not reach the question of whether Lotes’s allegations of monopoly conduct in China met the “reasonably proximate causal nexus” the Court did note that, “This kind of complex manufacturing process is increasingly common in our modern global economy, and antitrust law has long recognized that anticompetitive injuries can be transmitted through multi‐layered supply chains.” Lotes at 43. The Court also observed that the “Supreme Court has held that claims by indirect purchasers are ‘consistent with the broad purposes of the federal antitrust laws: deterring anticompetitive conduct and ensuring the compensation of victims of that conduct.’” Lotes at 43, citing California v. ARC Am. Corp., 490 U.S. 93, 102 (1989).

3) It may be significant that the Second Circuit adopted the approach advocated by the DOJ and FTC that the “the term ‘direct’ means only ‘a reasonably proximate causal nexus’” and noted that this test may still be met even where the fixed-price product is manufactured overseas and becomes a component of a finished product that is later imported into the United States. By contrast, the Seventh Circuit recently found in Motorola Mobility v. AU Optronics, Case No. 14-8003, slip op. (7th Cir. Mar. 27, 2014) that the FTAIA’s requirements were not met where prices were fixed on LCD screens that were sold to Motorola’s overseas subsidiaries and then incorporated overseas into cell phones that were then imported into the United States. TheMotorola Court held that the fact that the purchasers of the price-fixed products were located overseas meant that the effect was not “direct.” The court, per Judge Posner, stated:

The effect on component price fixing on the price of the product of which it is a component is indirect, compared to the situation in Minn-Chem where “foreign sellers allegedly created a cartel, took steps outside the United States to drive the price up of a product that is wanted in the United States, and then (after succeeding in doing so) sold that product to U.S. customers.”

Continued at Robert E. Connolly’s Cartel Capers Blog

Connolly’s Cartel Capers “Auto Part Investigation Shifts Gears”

Auto Part Investigation Shifts Gears

In the last several months, the Antitrust Division has obtained indictments of a number of Japanese executives in the auto parts investigation. This is the hallmark of an investigation that is shifting gears. For the most part, but not entirely, the Division has picked the low hanging fruit with amnesty and non-prosecution agreements. It has shaken a few trees and obtained plea agreements with individuals who received substantially reduced 5K sentences in return for the plea and cooperation. Now enters the phase where individuals are indicted, either because the Division believed they were too senior to offer 5K discounts, the Division no longer needed cooperation, or because the individual declined the invitation to come to the United States and submit to US jurisdiction. Now, the investigation enters what could be likened to the “100 Years War,” depending upon the longevity of the fugitive defendant. The hostile parties keep their respective difference, with an occasional battle fought if there is an extradition or voluntary surrender.  

Yesterday Gikou Nakajima, the highest-ranking global sales executive at Takata Corp. was indicted and charged with rigging bids for seat belts sold to various car companies.  Two weeks earlier, A Japanese executive was indicted on one count of bid rigging and also for obstruction of justice in a second count. In April, an indictment was returned against one current executive and two former executives of Bridgestone Corp. for their roles in an international conspiracy to fix prices of automotive anti-vibration rubber parts sold in the United States and elsewhere.  The return of indictments signals that the Division has secured sufficient cooperation from witnesses and reviewed enough documents to be confident enough in their facts to seek indictments.  The auto parts investigation has had many facets involving over many different parts. See USDOJ Chart, Auto Parts Targeted by Conspirators:  As each phase of this investigation wraps up, additional indictments should be forthcoming.

What Happens Next?

Usually, nothing. The Division has foreign fugitives in most of its international cartel cases dating back to ADM. In most cases the indictments, and the defendants’ identity, are public. But, in some cases the indictment of a foreign national may be under seal. (In the 1980’s, the Philadelphia office indicted an Israeli citizen under seal and he was arrested entering the US. That saga of that case is another story.) But, typically, the Division will have a foreign fugitive placed on an Interpol “Red Notice” making travel precarious for that executive for the rest of his life. In most cases, the executives preserved by the Division for indictment are the most senior members of the company involved in the conspiracy. Foreign fugitive defendants will likely retire, fire their travel agent and stay in the home country. The Division will maintain the documents and other evidence needed to try the case should Interpol actually pick up the fugitive. (One Japanese executive was arrested in India and spent some time in an Indian prison before the India authorities decided they would not extradite him on “dual criminality” grounds.). From time to time, Division attorneys may even get false alarms—foreigners with the same or similar name as a fugitive being picked up and held for questioning. The Division will maintain the file on its foreign fugitives indefinitely because unless it is notified, it has no way of knowing if the fugitive is dead or alive.

Sentencing Guidelines Are A Huge Factor

The primary measure of culpability under the US Sentencing Guidelines is volume of commerce.  Not surprisingly, international cartels tend to press the outer boundaries of the maximum ten year prison sentence under the Sherman Act.  A look at the possible Sentencing Guidelines for a fugitive like Mr. Nakajima shows why there is strong incentive for him to say put in Japan. While these figures may be off slightly, if he were convicted of the charged indictment, he would be facing a possible prison sentence under the United States Sentencing Guidelines of 87- 108 months in jail:


Base Offense 2R1.1                           +12

Offense involves Bid Rigging           +1

Volume of Commerce                       +12 (based on likely commerce of more than $500,00   but less than 1 billion

Role in the Offense                           +4

Total Offense Level                           29

Guideline Range                                87 – 108 months

If a foreign fugitive voluntarily submitted to US jurisdiction and plead guilty, he would be eligible for a 3-point reduction for acceptance of responsibility with a resulting guideline range of 63-78 months. (The court would likely depart from the sentencing guidelines over the Division’s objections and impose a lesser sentence. There is, however, no guarantee that this would occur.) The longest sentence one of Mr. Nakajima’s subordinates received was 19 months. It is not likely Mr. Nakajima will ever voluntarily submit to US jurisdiction.


 Yesterday, at an event in New York, Brent Snyder, Antitrust Division DAAG for Criminal Enforcement noted “More jurisdictions are adopting criminal antitrust statutes and what that will do is that it will make extradition easier to obtain. There are going to be fewer and fewer safe havens.” Also, the Division recently obtained what it called the “first of its kind” extradition on an antitrust charge against Romano Pisciotti, an Italian national who was involved in the marine hose global conspiracy.  Once in the U.S., Pisciotti quickly agreed to plead guilty will serve a total of two years in prison with credit for the nine months and 16 days he was held in the custody of the German government pending his extradition.  The Pisciotti extradition has been widely covered. It has been noted that Germany would not have extradited Pisciotti if he were a German citizen. But there are three main takeaways from his extraction journey that are worth repeating:


  • Pisciotti was indicted under seal. Foreign executives involved in a cartel who do not have some kind of agreement with the Antitrust Division may never know whether they are a fugitive
  • Pisciotti spent nine and half months in a German prison awaiting word of whether Germany would extradite him. If Interpol picks up a foreign fugitive, even if not ultimately extradited, the process can be a significant penalty in itself.
  • The Division has used the Pisciotti extradition as a platform to express its intention to work with competition agencies worldwide to shrink safe harbors for fugitives from cartel indictments.
  • To the extent that the Division is able to secure the extradition of more foreign executives to face cartel charges, the significant reductions in sentence that cooperating foreign executives receive in 5K downward departures will likely tick upward.

A Look Ahead
The country that leads the league in most executives as fugitives from US antitrust indictments is Japan. This is true overall and in the auto parts investigation. The US has not extradited any Japanese citizens for an antitrust violation. Because Japan also makes price fixing and bid rigging a criminal offense, the issue of dual criminality may not be an obstacle (though there are certain differences in the statutes of the two countries). An extradition of an executive from Japan would be an enormous development. As noted above, a Japanese auto parts executive was recently indicted on both price-fixing and obstruction. Coincidently, the first successful extradition by the Antitrust Division involved an executive indicted on both Sherman Act and obstruction charges. When I was Chief of the Philadelphia office, we indicted a British executive, Ian Norris, on both a price fixing count and three counts of obstruction. Eventually, he was extradited only on the obstruction counts. Norris was convicted on one count and sentenced to 18 months in prison. Will the Division take a page out of the same playbook here? More developments await.

Robert E. Connolly Launches New Blog: “Cartel Capers:”

Robert E. ConnollyGeyer Gorey Partner Robert E. Connolly Announces the Debut of A New Blog: “Cartel Capers:”

Robert Connolly recently joined GeyerGorey LLP as a partner in its Washington DC office. As with other GeyerGorey “former feds,” Mr. Connolly was a career federal prosecutor in the Antitrust Division. He was Chief of the Middle Atlantic Office of the Antitrust Division from 1994 until early 2013. Mr. Connolly has just launched his blog, Cartel Capers.

While at the Division, and particularly as a senior manager as Chief, Mr. Connolly had a seat at the table as the Division developed and implemented its successful leniency program.   He also had input on all major aspects of policy and procedure in the criminal program such as investigative strategies, charging decisions, trial game plans, sentencing policy issues, and extradition.   Since leaving the Division, Mr. Connolly has been a prolific author writing a number of articles for the ABA Criminal Cartel and Procedure committee, Mlex and Law 360. He has been quoted on cartel issues in Forbes, BusinessWeek, and various trade publications that focus on antitrust. He has decided to try his hand at blogging to provide more real time news, insight and analysis.

The blog, Cartel Capers, will provide current news in the cartel world. The focus will be on matters concerning the Antitrust Division, US Department of Justice, but will also cover major cartel related developments in the civil arena as well as worldwide. Besides reporting current developments, the aim of the blog is to provide insight and perspective from someone who worked at a high level in the Division for most of his career. The blog will analyze what the Division said, and what it did not say; what the Division did, and what it did not do—and what the Division is likely to do in the future. In short, the blog is intended to provide a behind the scenes look at the cartel world based on both personal experience and current contacts in the enforcement and broader antitrust community.

The blog will be enriched by contributions from other career DOJ prosecutors now at GeyerGorey. Hays Gorey, Joan Marshall and Brad Geyer will contribute both as editors and guest bloggers. Each has prosecuted a variety of high profile cartel cases and related violations in their long careers with the Division.

Please give Cartel Capers a try. Hopefully you will benefit form reading the blog and look forward to new entries. Also, any feedback or suggestions to make the blog more useful are most welcome. Cartel Capers:

Trustbusters Targeting Cartels Abroad Reined in by U.S. Judges

Trustbusters Targeting Cartels Abroad Reined in by U.S. Judges
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“The ruling opens the doors to foreign cartels to shield themselves from U.S. law by selling to a third party instead of directly into the U.S., said Robert Connolly, a lawyer at GeyerGorey LLP and a former prosecutor with the Justice Department’s antitrust division.

‘No Difference’

‘People can fix prices and then use a middleman,’ he said. ‘From an American consumer point of view, there’s really no difference.'”

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