The Auto Parts Investigation

Scott D. Hammond Deputy Assistant Attorney General U.S. Department of Justice, Antitrust Division

Detroit, Michigan February 15, 2013

The Auto Parts Investigation • Largest criminal antitrust investigation ever: • Impact on U.S. businesses and consumers • Number of companies and executives involved • Cooperation and coordination with enforcers abroad • Prosecutions to date: • l 2 individuals have pled guilty and are cooperating • 10 of 12 surrendered to U.S. jurisdiction • Jail sentences range from 1-2 years • 9 companies have pled guilty and are cooperating • $809 million in total fines imposed to date • $470 million criminal fine imposed on Yazaki 2

Auto Manufacturer Issues RFQs for New Model

Conspirators Fix Prices and Submit Rigged Bids

Conspirators Meet and Allocate Sales

Conspirators Meet and Coordinate Annually

Contracts Awarded To Conspirators At Collusive Prices

Road Map to Auto Parts Investigation • Global network of enforcement to deter and detect cartel offenses • Raising the stakes for antitrust crimes • Tools and strategies used by the Antitrust Division to detect antitrust crimes • Tools and incentives provided to companies to implement effective antitrust compliance programs and to conduct thorough and effective internal investigations 4

ICN Member Survey on Trends and Developments in Anti-Cartel Enforcement • Survey of 46 jurisdictions represented in ICN Cartel Working Group • The world is changing – heightened focus on detecting and deterring hardcore cartels including new laws, harsher sanctions, and more aggressive investigative tools • Where you can find complete results: http://www.internationalcompetitionnetwork.org/ uploads/library/doc613.pdf. 5

Number of Countries

50 45 40 35 30 25 20 15 10 5 0 11 7 6

Adoption of Per Se Standard

10

Remedial Provisions

Settlement Provisions

11

Obstruction Provisions

Increased Statute of Limitations

23

New Violation Provisions

Institutional/ Procedural Provisions

35

Leniency Provisions

Investigative Powers

Increased Penalties

Changes in Competition Laws

What changes/developments in your competition law have impacted your cartel enforcement program over the last 10 years?

43 35

19

6

Creation of New Investigative Powers

39 33

31 21 12 5 Wiretap Authority

New Powers to Interrogate or Obtain Statements from Witnesses

Compulsory Process for Documents/ Information

Changes in Leniency Program

Expanded Search Powers

8 Adoption of Leniency Program

45 40 35 30 25 20 15 10 5 0

Adoption of or Changes in Leniency Program

Number of Countries

What changes/developments have taken place in your competition law over the last 10 years, with respect to the creation of new investigative powers that have advanced your cartel enforcement efforts?

7

Ramped Up Enforcement in U.S. • U.S. Congress raised statutory maximum penalties in June 2004 to 10 years incarceration (individuals) and $100 million fine (corporations) • Full investigative arsenal: wiretap authority, search warrants, FBI investigators, border watches and Interpol Red Notices for fugitives • Emphasis on individual accountability through the imposition of jail sentences for culpable executives 8

Incarceration Trend Average Prison Sentence in Months 25 20

8

1990-1999 Average

2000-2009 Average

2010-2012 Average 9

Percentage of Defendants Sentenced to Prison 71% 62% 37%

1990-1999 average

2000-2009 average

2010-2012 average

10

Total Criminal Antitrust Fines $1 Billion

$701 $630 Million Million $473 Million

$1.1 Billion

$555 $524 Million Million

$350 $338 Million Million $107 Million

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

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Proof of Actual Deterrence • U.S. DOJ has detected numerous cartels that violated competition laws around the world but chose not to extend cartel activity to U.S. market, because they feared U.S. detection and sanctions • The risk of under-punishment by a jurisdiction is that its businesses and consumers will be victimized by cartels that could have been deterred

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The Leniency Carrot • The Division’s Corporate Leniency Policy offers huge incentives to be the first to voluntarily disclose antitrust crimes – No charges filed against company – No charges filed against cooperating employees – No fines and no jail – Eligible for reduced civil damage exposure – Confidentiality policy protecting applicant identity and information 13

The Leniency Stick • Full immunity is only available to the first company to self report and meet the conditions of the program • The second company and those that follow (as well as their executives) face severe sanctions

14

The Leniency Race • The winner-take-all approach creates distrust and panic within the cartel and destabilizes it • Individual exposure also creates a potential race between the company and its own employees

15

Type A Corporate Leniency Conditions 1. Division has no information about the activity 2. Upon discovery, took “prompt and effective” action to terminate 3. Candor, and continuing and complete cooperation 4. Confession a truly corporate act, not isolated to individuals 5. Where possible, restitution 6. No coercion, not the leader or the originator 16

Type B Corporate Leniency Conditions 1. First in 2. Without evidence likely to result in sustainable conviction 3.- 6. “Prompt and effective” termination; candor, continuing and complete cooperation; truly corporate confession; restitution 7. Leniency would not be unfair considering nature of activity, applicant’s role, and timing (burden increases with time) 17

Conducting Internal Investigations • The majority of antitrust investigations lead to the discovery of additional, unrelated antitrust crimes • The cultivation of “cartel trees” • How the Antitrust Division provides companies with the necessary tools and incentives to detect and report misconduct before it is too late 18

The Amnesty Plus Program • Company negotiating plea agreement in current investigation of Product “A” obtains lower fine by disclosing existence of second, unrelated conspiracy involving Product ”B” • Company receives amnesty for Product “B” and receives a substantial additional reduction (the “plus”) in the fine for Product “A” • Key that interests of both company and its employees are aligned in internal investigation because both stand to benefit from self reporting 19

The Flip Side to Amnesty Plus • The Division is looking for additional, unrelated crimes and employs “cartel profiling” techniques • Use of the “omnibus question” in witness interviews to ferret out additional wrongdoing • If we find it first, then the penalties are likely to be severe – the Division’s “Penalty Plus” program 20

Looking For More Information? • For more information on the Antitrust Division’s Corporate Leniency Policy please visit: http://www.justice.gov/atr/public/criminal/lenienc y.html • For an Antitrust Primer on how to detect antitrust crimes please visit: http://www.justice.gov/atr/public/guidelines/2115 78.htm • •

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