LEGAL SUPERHEROES: VOL 2. MAKING YOU A LEGAL SUPERHERO! Session 7: 3:30-4:30 Presented by Sidley Austin Title: Antitrust Audits as part of a Gold Standard Compliance Program Speakers: Peter Huston, Partner, Antitrust, Sidley Austin Sarah Flanagan, Intel, Global Director of Antitrust Compliance
PARTNER Peter K. Huston Antitrust/Competition White Collar: Government Litigation & Investigations Commercial Litigation and Disputes PHUSTON@SIDLEY.COM SAN FRANCISCO +1 415 772 1280 PETER K. HUSTON is a partner in Sidley s San Francisco office and a member of the firm s Antitrust, White Collar and Complex Commercial Litigation practices. He has 25 years of experience in high-stakes civil and criminal antitrust litigation, trials, government investigations and merger clearance work, both in and out of government. Peter was acknowledged as one of the Top 100 Lawyers in California by the Daily Journal in 2012 and received a California Lawyer Attorney of the Year (CLAY) Award for corporate antitrust in 2013. Prior to joining Sidley, Peter served as Assistant Chief in the San Francisco Office of the Antitrust Division of the United States Department of Justice where he led and supervised both criminal cartel matters and civil merger matters. For his government service, Peter was awarded the Attorney General s Distinguished Service Award and was twice awarded the Antitrust Division s Award of Distinction. Peter was the lead lawyer on multiple high-profile antitrust investigations and trials, including the Antitrust Division s successful prosecution of members of the LCD cartel, regarded by many as one of the most significant antitrust cases in recent history. He also led other criminal matters, including investigations conducted in coordination with foreign competition authorities, and helped oversee the work of the San Francisco office s prosecutors. While at the Antitrust Division, Peter was also the head of the office s civil program and investigated several proposed mergers. He was the lead trial counsel in United States v. Bazaarvoice, the government s successful challenge to the consummated merger of the two leading providers of online rating and review software and services. Before his government service, Peter was in private practice for nearly 20 years. He has represented clients faced with civil and criminal antitrust and unfair competition exposure and has represented entities seeking agency approval for mergers and acquisitions. He has conducted internal investigations for major international corporations in cartel matters, worked on many complex antitrust cases and has significant
defense-side trial experience. Peter also provides clients with antitrust advice on numerous subjects and helps them establish effective compliance programs tailored to their specific needs. Peter earned his J.D. from Cornell Law School, where he was editor of the Cornell International Law Journal. He graduated from the University of California, Santa Barbara, with honors and a B.A. in Political Science and Psychology. MEMBERSHIPS AND ACTIVITIES Member, Executive Committee of the California State Bar s Antitrust and Unfair Competition Law Section Member, Antitrust Section of the ABA (Joint Conduct; Corporate Counseling; Civil Practice & Procedure; Health Care & Pharmaceuticals; Distribution & Franchising Committees) Member, Litigation Section of the ABA Member, Bar Association of San Francisco Past vice chair, ABA Antitrust Section s Business Torts and Unfair Competition Committee Past associate editor, The Antitrust Source (ABA Antitrust Section s online publication) Past officer and board member, Homestead Valley Land Trust, a community organization that manages approximately 85 acres of park and open space in Southern Marin County PUBLICATIONS "Getting the Deal Through: Cartel Regulation 2017," Law Business Research Ltd (November 2016) "Joint Ventures In The Antitrust Crosshairs At 6th Circ.," Law360 (May 4, 2016). "Will the 'Yates Memo' Affect Antitrust Division Plea Policy?" Daily Journal (December 23, 2015). "5th Circ. Steel Boycott Ruling Likely To Be Controversial," Law360 (December 18, 2015). "Getting the Deal Through: Cartel Regulation 2016," Law Business Research Ltd (November 2015). "Capitalizing on Judicial Antitrust Experience," Competition The Journal of the Antitrust and Unfair Competition Law Section of the State Bar of California, Vol 24, No. 2 (Fall, 2015). "Overseas Price Fixing Questions Linger," Daily Journal (June 18, 2015). "The United States v. Bazaarvoice Merger Trial: A Panel Discussion Including Insights from Trial Counsel," Competition The Journal of the Antitrust and Unfair Competition Law Section of the State Bar of California, Vol 24, No. 1 (Spring, 2015). "Antitrust Roundtable," California Lawyer (July 2015). Contributing author, "Chapter 1, Restraints of Trade," ABA Section of Antitrust Law, Antitrust Law Developments (7th ed. 2012). "Make Your Regression Analysis Part of a Bigger Trial Story," ABA Antitrust Section Economics Committee Newsletter (Fall 2008 edition).
EVENTS Panelist, "Insights from the Battlefield: Advanced Trial and Class Action Practice," The State Bar of California 88th Annual Meeting (Anaheim, CA, October 2015) Panelist, Antitrust Roundtable organized by California Lawyer, which published an article on the discussion in its July 2015 edition, (June 11, 2015) Panelist, "Big Stakes Antitrust Trials: United States v. Baazarvoice," Golden State Antitrust and Unfair Competition Institute (San Francisco, CA, October 2014) Panelist, Bar Association of San Francisco, CLE, "Fundamentals and Current Developments in Antitrust Merger Review" (San Francisco, CA, April 2014) Panelist, CLE International, "Criminal Antitrust II: Rocks and Hard Places The Difficult Decisions to Make in Antitrust Matters" (San Francisco, CA, February 2013) Faculty member, The Sedona Conference, 14th Annual Conference on Antitrust Litigation: Strategic & Tactical Considerations in the Trial of an Antitrust Case (San Diego, CA, October 2012) Panel leader, "The Trial of a Criminal Case with a Jury" Panel member, "Trial of a Merger Case" Panel member, "Trial of a Private Antitrust Case with a Jury: Part I B2B Cases" Panel member, "The Trial of a Private Antitrust Case with a Jury: Part II Class Actions" SERVICES Antitrust and Unfair Competition Antitrust Counseling Antitrust Government Investigations Antitrust Litigation Antitrust/Competition ADMISSIONS & CERTIFICATIONS U.S. Court of Appeals, 4th Circuit U.S. Court of Appeals, 6th Circuit U.S. Court of Appeals, 7th Circuit U.S. District Court, E.D. of California Commercial Litigation and Disputes Merger Clearances Multidistrict Litigation Trials White Collar: Government Litigation & Investigations U.S. District Court, N.D. of California U.S. District Court, C.D. of California U.S. District Court, N.D. of Ohio California EDUCATION Cornell Law School, J.D., 1990 (Editor, Cornell International Law Journal) University of California - Santa Barbara, B.A., 1984 (with honors) Attorney Advertising - Sidley Austin LLP, One South Dearborn, Chicago, IL 60603. + 1 312 853 7000. Sidley and Sidley Austin refer to Sidley Austin LLP and affiliated partnerships as explained at www.sidley.com/disclaimer. Prior results do not guarantee a similar outcome. 2017 Sidley Austin LLP.
June 8, 2017 Antitrust audits as part of a gold standard compliance program Peter Huston Sidley Austin LLP Sarah Flanagan Intel Corporation
Elements of a gold standard antitrust compliance program Risk identification and assessment Codes of conduct Tailored policies Embedded culture Empowered compliance officer Training Incentives Record keeping Procedures for investigating and reporting violations Oversight Helpline Audits of the compliance program Substantive antitrust audits SIDLEY AUSTIN LLP 2
What are antitrust audits? An examination of a business or business segment to determine adherence to antitrust laws and effectiveness of policies designed to avoid antitrust risk Proactive Flexible SIDLEY AUSTIN LLP 3
Why conduct an antitrust audit? Being proactive increases a company s options and provides an opportunity to avoid or minimize exposure Antitrust problems allowed to fully bloom can lead to enormous exposure Private treble damage actions in the U.S. Maximum corporate criminal fine in the U.S. of $100 million (increased from $10 million in 2004); maximum individual fine of $1 million (increased from $350,000 in 2004) Potentially higher criminal fines under the Alternative Fines Act: twice the gain or twice the loss from the conspiracy Maximum prison sentence of 10 years; Huge potential fines in the EU Other jurisdictions around the world are adopting antitrust laws and increasing antitrust penalties SIDLEY AUSTIN LLP 4
Global Spread of Antitrust: 1900 SIDLEY AUSTIN LLP 5
Global Spread of Antitrust: 1960 SIDLEY AUSTIN LLP 6
Global Spread of Antitrust: 1980 SIDLEY AUSTIN LLP 7
Global Spread of Antitrust: 1990 SIDLEY AUSTIN LLP 8
Global Spread of Antitrust: 2000 SIDLEY AUSTIN LLP 9
Global Spread of Antitrust: 2010 SIDLEY AUSTIN LLP 10
Global Spread of Antitrust: 2017 SIDLEY AUSTIN LLP 11
Why conduct an antitrust audit? (cont.) Catching an antitrust issue early can result in extraordinary benefits Leniency programs in the US and abroad ACPERA single damages Mitigation of damages Assess a recently acquired business Improved compliance programs Identify situations where the company may be a victim of an antitrust violation SIDLEY AUSTIN LLP 12
Why would you not to conduct antitrust audits? Cost / resources May open a can of worms The audit may uncover something that otherwise would never come to light. It may require action by management that puts the company in a difficult spot. E.g. company has to terminate an employee. It may trigger a leniency race (which even if you win, may leave the company with cooperation obligations and civil exposure). SIDLEY AUSTIN LLP 13
What issues would a comprehensive audit look for? Horizontal issues Hard core: Cartels, price fixing, bid rigging, market allocation Trade associations Joint ventures Information exchanges Price signaling Refusals to deal Vertical issues Tying Colgate / Unilateral Pricing Policies / Minimum Advertised Pricing Policies Dealer terminations Exclusive territories Dealer pressure Monopolization / Dominance issues Predation Exclusionary conduct Merger issues SIDLEY AUSTIN LLP 14
Designing an antitrust audit Who should do the audits? Should it be combined with other audits? How often should it be done? How much prior notice to affected employees and managers? SIDLEY AUSTIN LLP 15
Designing an antitrust audit (cont.) Focus on aspects of the operation most likely to have issues Identify the target business or function Prioritize businesses that have a high market share Prioritize businesses susceptible to price fixing, bid rigging, market allocation Concentrated markets, transparent pricing, commoditized product Bid process Interaction with competitors Identify geographies Understand the business being audited, the markets, the go-to-market strategies and the competitive dynamics Preliminary interviews with senior managers Identify key personnel / custodians Those with pricing authority; sales and marketing Don t overlook non-price aspects of competition: e.g. credit Go beyond high level executives SIDLEY AUSTIN LLP 16
Conducting an antitrust audit Collect documents / data Search terms / predictive coding / sampling Competitor names Antitrust and consciousness of guilt buzzwords Documents reflecting contacts with competitors Pricing documents Signaling documents Distributor agreements Expense reports Competitive decision making documents Strategic plans Market share documents Comply with local data protection, privacy and employment laws SIDLEY AUSTIN LLP 17
Conducting an antitrust audit Review documents and data Check for unexplained possession of competitors price information or other sensitive information Possibly check for suspicious pricing patterns or other economic evidence of collusion Interviews Have a plan for potential conflict issues; be ready to give Upjohn warnings SIDLEY AUSTIN LLP 18
Challenges Management buy-in Staffing and budget Maintaining friendliness and cooperation Private communication methods (Texts, instant messaging, social media, other cloud based or non-traditional modes of communication, especially where there is a bring your own device (BYOD) policy Privacy issues Finding criminal conduct Upjohn / conflict and privilege issues SIDLEY AUSTIN LLP 19
Audit results Share with whom? Written report? Follow up on specific issues uncovered SIDLEY AUSTIN LLP 20
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