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EVENTS AND ROUNDTABLES > Chief marketing officer: the law firm change agent

Trends in Antitrust Litigation

New York, 27th January 2016

The Legal 500 and GC magazine recently gathered together a selection of in-house counsel in New York, alongside Hughes Hubbard and Reed partners Ethan Litwin and Elizabeth Prewitt, to discuss trends in antitrust litigation and how companies should best prepare.

Attendees reported a wide range of internal approaches to investigations, influenced by the culture of the corporation itself. How issues are tackled is affected heavily by the relationship of the legal department to the wider company – including if and when people approach the legal department.

This was vividly illustrated by an anecdote told to the group about a company with a California-based plant, where the manager was visited by FTC investigators. He showed them around the plant and thought nothing of it – not reporting to anyone else in the organisation. A week or so later he received a subpoena from the FTC but ignored it and put it in a drawer. A couple of days before the deadline he looked at it and tried to cope himself, but eventually realised this was too much for him. Only at that point – with about 24 hours to go – did he involve the general counsel for the first time!

This true story, told by Ethan Litwin, shows the problems that can develop from a lack of communication and training around antitrust issues. For many of our attendees, much of the focus centres on trying to make sure that staff are aware and prepared so that violations of antitrust laws don’t occur. As our guests mostly came from regulated industries, compliance and training is a significant issue and at the forefront of their minds.  In many major companies, antitrust issues have to be woven through all training and compliance, and cannot be siloed off.

But what are the most successful ways to get the message to sink in?

Howard S. Harris, Vice President of Legal Affairs and General Counsel, and Joe Pitstick, an Associate General Counsel, of the US BMW Group companies are firm believers in voluntary face-to-face training over electronic or online training. They feel that if there are issues of unease or concern for those taking part, they are much more likely to raise them face to face with a lawyer during training – usually one on one after the session – than via an online portal. There was also a general sense that allowing people the opportunity to ask questions of a live trainer allows information to be provided more effectively.

For most companies around the table, social network mapping has become a key component of spotting potential violations before they happen. This can be as simple as tracking whether employees with sensitive pricing information have access to talk to competitors. In many organisations, this is tracked on an ongoing real-time basis, not just when an issue is looming.

At some companies, the training has become completely immersive and includes the staging of mock dawn raids. Hughes Hubbard and Reed recently conducted one such exercise for a client, which highlighted a concern raised by the California subpoena story – that of employees being too co-operative. While total cooperation with the government might seem like the best way, it can often needlessly imply that certain issues are red flags, and thereby extend or complicate the investigation. According to Litwin, the most practical response is either to bury one’s head, ostrich-like, in the sand; to over co-operate with the government and provide too much information, much of which may not be relevant to the scope of the investigation; or the third way (the best tactic, according to Litwin), which involves limited cooperation, informed by guidance from the FTC on the exact scope of the inquiry.

A growing concern for global companies such as those present at our discussion is the extraterritorial nature of many of these investigations, and the conflicting regulations and regulatory approaches involved. For example, some practices may be illegal in the EU but not in the US. This can lead to challenges in isolating what one’s focus should be during an investigation. According to Litwin, the best practice for companies is to always consider matters in regards to both EU and US regulations, even if an investigation initially seems contained.

The increase of antitrust enforcement in Asia has been a concern for many companies as differing attitudes towards hierarchies at work can complicate investigations. The methods by which investigations are carried out can also vary quite considerably. For example, the Japan Fair Trade Commission (JFTC) does not allow interviewees to have counsel present during the interview. This practice has been routinely criticised by businesses but, as of writing, there has been no change in the procedure, which can take many companies by surprise, as they imagine they will have some oversight of what is discussed due to the presence of outside counsel.

One of the biggest challenges for our attendees was coping with the potential double onslaught of government enforcement alongside civil litigation. Civil litigation is now very much part of the story, and in many cases can start before the official investigation, triggered by rumour or precipitous news reporting. The growth of the civil Bar generally has meant that this issue is not going away and is, in fact, increasing, with the European Commission Directive on Antitrust Damages Actions intensifying the potential for civil litigation in Europe.

The intersection of governmental enforcement and civil cases means that, for our attendees, a joint strategy, considering both potential governmental enforcement and civil litigation at the same time, was seen as the logical way forward. This is notwithstanding the presence of procedural differences, such document review, and the matter of whether discovery in the civil case can have extraterritorial application in criminal investigations.

In conclusion, our discussion highlighted the fact that these trends in antitrust litigation have far-reaching implications for global companies’ preparation and response, and nothing can ever be taken for granted or siloed away.