# Presentation: 349878

## Cracking Cartels With Leniency Programs 
Scott D. Hammond
Deputy Assistant Attorney General for Criminal Enforcement
Antitrust Division, U.S. Department of Justice
OECD Competition Committee
Working Party No. 3 Prosecutors Program
Paris, France
October 18, 2005

- Cracking Cartels With Leniency Programs
- Scott D. Hammond
- Deputy Assistant Attorney General for Criminal Enforcement
- Antitrust Division, U.S. Department of Justice
- OECD Competition Committee
- Working Party No. 3 Prosecutors Program
- Paris, France
- October 18, 2005

## The Single Greatest Investigative Tool 

- Since its revision in 1993, the Antitrust Division’s Corporate Leniency Program has been the Division’s _most_ effective investigative tool
- Cooperation from leniency applicants has cracked more cartels than all other tools at our disposal combined --  searches, FBI “drop-in” interviews, informants, Interpol red notice watches, etc.

## Benefits of a Leniency Program

- A company will admit conduct before investigation is opened or turn on others after investigation underway
- Provide critical cooperation of inside participants
- Access to documents regardless of location
- Access to witnesses regardless of nationality
- May provide opportunity for covert operations

## The Success of the Leniency Program 

- Led to detection and dismantling of the largest global cartels ever prosecuted and resulted in record-breaking fines in the U.S., EU, Canada, Australia, and elsewhere
- In US, resulted in over $2 billion in criminal fines; EU figure even higher
- Many of these cartels would not have been cracked and may have remained undetected to this day without the lure of leniency
- E.g., the “Vitamins, Inc.” cartel

## Sample Investigations Advanced By Leniency(U.S. fine figures only)

- Vitamins
- F. Hoffmann-La Roche - 	$500 Million
- BASF                               	$225 Million
-  DRAM
- Samsung			$300 Million
- Hynix			$185 Million
- Infineon 			$160 Million
- Graphite Electrodes
- SGL                                  	$135 Million
- Mitsubishi                      	$134 Million
- UCAR                                	$110 Million
- Fine Arts Auctions
- Sotheby’s		          	$ 45 Million

## The Carrot

- Huge incentives to be the first to self report and implicate the other conspirators
- No charges filed against the company
- No charges filed against cooperating employees
- No criminal or administrative fine
- Promise of confidentiality

## The Stick

- Full immunity is only available to the first company to self report and meet the conditions of the program
- The second company - even if second by only a matter of minutes or hours as has been the case - and those that follow (as well as their executives) face severe sanctions

##                   The Race  

- The winner-take-all approach creates distrust and panic within the cartel and *destabilizes* it
- There is no honor among thieves
- With the stakes so high, the cartel members can no longer afford to trust one another and go back to being cutthroat competitors
- The “empty seat at the table” scenario
- Individual exposure creates a race between the company and its own employees

## Leniency Programs Are Uniquely Designed for Fighting Cartels 

- Leniency programs would make no sense for most other offenses
- Cartels are inherently difficult to prove - you need an _insider_ willing to cooperate
- Cartels are conspiracies – so always other remaining companies/individuals left to prosecute after the first one reports the conduct

## Cornerstones of an Effective Leniency Program

- Threat of Severe Sanctions
- Heightened Fear of Detection
- Transparent Application of Program

## The Threat of Severe Sanctions

- Avoiding the risk of prison is the greatest inducement to self reporting
- The EU’s success relying on heavy fines
*BUT* the threat of criminal sanctions will act as a *DISINCENTIVE* to reporting unless policy is clear in advance that public prosecutor will not prosecute leniency recipients

## Cultivating a Fear of Detection

- Cultivating a fear of detection requires a demonstrated track record of cracking cartels
- Over 50% of our international investigations initiated as result of a lead generated in completely separate market (see cartel profiling, amnesty plus, and penalty plus policies)

## Transparency is Essential

- If company cannot predict how it will be treated, it is far less likely to report
- Experience of US and others with failed programs
- 20-fold increase in U.S. applications after we revised our program to make it more transparent and predictable

## Resources

- U.S. Corporate Leniency Documents and Speeches available at
- 	_[http://www.usdoj.gov/atr/public/criminal.htm](http://www.usdoj.gov/atr/public/criminal.htm)_
- ICN Cartel Working Group Website
- 	_[http://www.internationalcompetitionnetwork.org/cartels.html](http://www.internationalcompetitionnetwork.org/cartels.html)_
- Request a Free Copy of DVD from 2004 ICN Leniency Workshop:
- Freedom of Information Act UnitAntitrust Division, Department of Justice Liberty Place Building, Suite 200Washington, D.C.  20530-0001Voice: (202) 514-2692Fax: (202) 616-4529