Author Archives: Michael O'Kane

About Michael O'Kane

Michael O’Kane is a partner and Head of the Business Crime team at leading UK firm Peters & Peters. Described as ‘first-rate’ (Legal 500 2012), he “draws glowing praise from commentators” (Chambers 2013) for handling the international aspects of business crime, including sanctions, extradition and mutual legal assistance. Called to the Bar in 1992 and prior to joining Peters & Peters he was a senior specialist prosecutor at the Crown Prosecution Service Headquarters(CPS). At CPS HQ he was a key member of a small specialist unit responsible for the prosecution of serious and high profile fraud, terrorist and special interest criminal matters including the Stansted Airport Afghan hijacking and the prosecution of Paul Burrell (Princess Diana’s butler). Michael joined Peters & Peters in 2002. He became a partner in May 2004, and Head of the Business Crime team in May 2009. Since joining Peters & Peters, Michael has dealt with a wide range of business crime matters. He has particular expertise in international sanctions, criminal cartels, extradition, corruption, mutual legal assistance, and FSA investigations. Described as“ an influential practitioner in fraud and regulatory work, so much so that he is top of the referral lists of many City firms for independent advice for directors” (The Lawyer’s Hot 100 2009), he was recognised as one of the UK’s most innovative lawyers in the 2011 FT Innovative Lawyer Awards and included in the list of the UK's leading lawyers in 'The International Who's Who of Asset Recovery 2012. In 2012 he was the winner of the Global Competition Review Article of the Year. Michael regularly appears on television and radio to discuss his specialist areas and he is the author of the leading textbook on the UK Criminal Cartel Offence “The Law of Criminal Cartels-Practice and Procedure” (Oxford University Press 2009). Recent/Current Sanctions Work • Representing 109 individuals and 12 companies subject to designation by the European Council under targeted measures imposed against Zimbabwe. This is the largest and most complex collective challenge to a sanctions listing ever brought before the European Court. • Acting for a former Egyptian Minister and his UK resident wife, challenging their designation by the European Council of Ministers under targeted measures brought against former members of the Egyptian Government. • Advising a company accused in a UN investigation report to have breached UN sanctions imposed in relation to Somalia. • Advising a UK company in relation to ongoing commercial relationships with an Iranian company listed under both EU and UN sanctions. • Advising an individual in relation to a UK investigation for alleging breaching nuclear export controls.

SHOWA PLEADS GUILTY TO US CARTEL

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showaOn 23 April 2014, the US Department of Justice, Anti-Trust Division announced that the Showa Corporation, a Japanese car parts manufacturer, has agreed to plead guilty to US charges of price-fixing and bid-rigging, paying a $19.9 million fine. The cartel activity related to pinion-assist type electric powered steering assemblies. Showa has agreed to co-operate with the Department’s ongoing investigation.

According to the Division, between 2007 and 2012 Showa engaged in a conspiracy to suppress competition in the automotive parts industry by agreeing to rig bids for steering assemblies sold to Honda Motor Company Limited and certain of its subsidiaries. Those involved in the conspiracy kept their conduct secret by using code names and meeting in remote locations. They monitored adherence to the agreed-upon bid-rigging and price-fixing scheme, selling steering assemblies at collusive and non-competitive prices.

To date, 27 companies and 24 executives have pleaded guilty or agreed to plead guilty in the Division’s ongoing investigation into price-fixing and bid-rigging in the auto parts industry. Those involved in cartel activity have agreed to pay a total of $2.3 billion in criminal fines.

Showa stated that “in order to restore the trust and confidence of our stakeholders as well of the public, Showa has implemented functional organization changes, enhanced the business auditing system for our corporate group, re-organized executive management line-up, and ensured prevention of the recurrence of the violation by adopting more stringent and comprehensive compliance training for antitrust laws, as well as other applicable laws and regulations, to our associates.” The company’s directors and operating officers have volunteered to return part of their salaries.

Bill Baer, Assistant Attorney General in charge of the Division said that “Today’s guilty plea marks the 27th time a company has been held accountable for fixing prices on parts used to manufacture cars in the United States. The Antitrust Division and its law enforcement partners remain committed to prosecuting illegal cartels that harm US consumers and businesses.”

SFO and CMA AGREE MEMO OF UNDERSTANDING

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cmaOn 29 April 2014, the new UK Competition and Markets Authority (“CMA”) and the Serious Fraud Office (“SFO”) published a new Memorandum of Understanding (MoU).

Building on the previous MoU between the OFT and the SFO, dated October 2003, the new MoU sets out the basis on which both agencies will co-operate to investigate and prosecute criminal cartels in the UK.

The new MoU places greater emphasis on the sharing of intelligence and information between the agencies and ensuring that systems are in place to improve lines of communication and co-operation.

As with the previous MoU, both agencies retain the ability to prosecute criminal cartels, with the SFO to take the lead in circumstances where the case meets it entry criteria. The MoU places clear obligations on each agency to ensure effective decision-making in respect of leniency and immunity, when such decision may impact on other investigations.

EU FINES CABLE COMPANIES €302m

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almuniaOn 2 April 2014, the Commission announced the imposition of fines totalling €301,639, 000 on 11 producers of high voltage power cables that it alleged had operated a cartel. The companies concerned included most of the world´s largest high voltage power cable producers, namely ABB, Nexans, Prysmian (previously Pirelli), J-Power Systems (previously Sumitomo Electric and Hitachi Metals), VISCAS (previously Furukawa Electric and Fujikura), EXSYM (previously SWCC Showa and Mitsubishi Cable), Brugg, NKT, Silec (previously Safran), LS Cable and Taihan. ABB received full immunity from fines under the Commission’s 2006 Leniency Notice as it was the first to reveal the cartel to the Commission.

The cartel operated for a decade from 1999-2009 and according to the Commission, the participants openly weighed up the risk of being caught running a cartel against the potential profits that would result, as well as making extensive efforts to delete incriminating documents.

In general terms the companies allocated bids between them, agreeing price levels in advance to ensure that a designated supplier would offer the lowest price. The Japanese and Korean members of the cartel agreed not to bid against their European counterparts whenever they received requests from European customers. The members of the cartel regularly met in hotels in Europe and South-East Asia, sending e-mails and faxes to reach agreements. The participants divided up the world into regions and agreed to stay out of one another’s home territories.

Of particular note is the €37.3m fine announced on Goldman Sachs for its role as a former owner of Prysmian. According to the Commission, it is sufficient for an investment company to have a “decisive influence” over the commercial policy of the investee company to attract liability.

Commission Vice President in charge of competition policy Joaquín Almunia said: “These companies knew very well that what they were doing was illegal. This is why they acted cautiously and with great secrecy. Despite this and through joint efforts by several competition authorities around the world, we have detected their anti-competitive agreements and brought them to an end.”

FIRST EVER EXTRADITION ON AN ANTITRUST CHARGE

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marine hoseOn 4 April 2014, the US Department of Justice announced the successful extradition from Germany of Italian, Romano Pisciotti, for the criminal cartel offence under section 1 of the Sherman Act, arising from his alleged role in the long-running global marine hose investigation. This constitutes the first ever successful extradition of a defendant on a criminal antitrust charge.

Pisciotti, a former executive with Parker ITR Srl, a marine hose manufacturer headquartered in Veniano, Italy, was arrested in Germany on 17 June 2013 and arrived in Miami on 3 April 2014. He made his initial appearance on 4 April 2014 in the U.S. District Court in Fort Lauderdale.

The marine hose investigation became public in June 2007 with the arrest of eight foreign executives, while attending the annual industry trade fair in Houston, Texas. All subsequently pleaded guilty and received varying terms of imprisonment. In 2008, the ninth defendant, a former Bridgestone manager, pleaded guilty to an FCPA violation and was sentenced to two years imprisonment.

Marine hose is a flexible rubber hose used to transfer oil between tankers and storage facilities. According to the Department of Justice, the conspiracy began at least as early as 1999 and continued until at least May 2007. Pisciotti was charged with joining and participating in the conspiracy from at least 1999 until at least November 2006. According to an indictment dated 26 August 2010, Pisciotti carried out the conspiracy by agreeing to allocate shares of the marine hose market among the conspirators. The conspiracy included an agreement not to compete for customers with other marine hose sellers, either by not submitting prices or bids or by submitting intentionally high prices or bids, all in accordance with the agreements reached among the conspiring companies.

To date, five companies, including Parker ITR; Bridgestone Corp. of Japan; Manuli SPa of Italy’s Florida subsidiary; Trelleborg of France; and Dunlop Marine and Oil Ltd, have pleaded guilty in the US.

Assistant Attorney General Bill Baer of the Department of Justice’s Antitrust Division said that “This first of its kind extradition on an antitrust charge allows the department to bring an alleged price fixer to the United States to face charges of participating in a worldwide conspiracy. This marks a significant step forward in our ongoing efforts to work with our international antitrust colleagues to ensure that those who seek to subvert U.S. law are brought to justice.”

Previously, the most high profile attempt at extraditing on an antitrust charge had been the US request for UK national, Iain Norris. In March 2008, the House of Lords ruled that the alleged conduct from 1989-2000, did not amount to a criminal offence in the UK at that time as the UK did not introduce the cartel offence until 2003.

NEW UK CRIMINAL CARTEL OFFENCE IN FORCE

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cmaToday heralds a new criminal cartel offence in the UK introduced by section 47 of the Enterprise and Regulatory Reform Act 2013 (“ERRA 2013”).

The Competition Commission and the OFT are now merged into the Competition and Markets Authority (“CMA”) and the CMA will have primary responsibility for the investigation and prosecution of criminal cartels.  It has published a number of guidance documents describing how it will exercise its powers, reiterating publicly that the approach to enforcement does not differ fundamentally from that taken by the OFT. The CMA today released a statement setting out its 5 strategic goals.

The main change to the previous offence is  that for cartel conduct occurring after 1 April 2014,  the prosecution no longer needs to prove dishonesty to secure the criminal conviction of an individual.

The new cartel offence, like the old one, can be committed regardless of whether the illicit agreement is actually implemented. However, the new offence is defined to exclude agreements that are made openly. Under a new section 188A of the Enterprise Act, the cartel offence will not be committed where, under the arrangements:

  1. customers are given relevant information about the arrangements before entering into agreements for the supply to them of the product or service affected; or
  2. in the case of bid-rigging arrangements, the person requesting bids is given relevant information about the arrangements before or at the time a bid is made; or
  3. relevant information about the arrangements is published in the London Gazette before they are implemented.

The exclusion of agreements that are made openly reflects the Government’s intention to target only the most serious cartels. In addition to the exclusions in section 188A, section 188B provides the following defences to the cartel offence:

  1. At the time of making the agreement, the individual did not intend that the nature of the arrangements would be concealed from customers or from the CMA; or
  2. The individual took reasonable steps, before making the agreement, to ensure that the nature of the arrangements would be disclosed to professional legal advisers for the purposes of obtaining advice on them before their implementation.

The CMA’s Cartel Offence Prosecution Guidance of March 2014 states that the phrase “professional legal advisers” is intended to cover both external and in-house legal advisers who are appropriately qualified. For this defence to succeed, an individual must have made a genuine attempt to obtain legal advice about the arrangement, including making full disclosure of all relevant facts to the professional legal adviser.

The UK Government’s position is that the requirement to prove dishonesty in the previous offence prevented more cases being prosecuted. Since the implementation on the criminal cartel offence in June 2003, only two cases have come to court, one resulting in convictions. By contrast, in Ireland, where dishonesty is not required, over the same period, there have been 38 criminal convictions from 6 separate cases.

EUROPEAN COURT REDUCES COMMISSION’S LARGEST EVER FINE

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carglassOn 27 March 2014, the European Court announced its decision to reduce from €880 million to €715 million, the fine imposed for cartel activity upon subsidiaries of the Saint-Gobain Group and its parent company. The fine had been the largest ever imposed by the European Commission, for participation between 1998 and 2003 in the car-glass cartel. In 2008 the Commission fined four car-glass makers €1.3 billion for participating in a cartel between 1998 and 2003.

Saint-Gobain had been the subject of previous Commission decisions relating to similar infringements in 1984 and 1988. The 2006 Fining Guidelines give the Commission the power to increase fines by 100% for repeat offending, even if the infringements took place long before the existence of the cartel in question. In this instance, the Commission increased Saint-Gobain’s fine by 60% for earlier violations.

However, the European General Court decided that, for repeated infringement to count as an aggravating circumstance, the infringements must have been committed by the same undertaking. Since the 1988 decision concerned a different subsidiary of the same parent, it was decided that a finding of repeated infringement applied only to the 1984 decision. The Court pointed out that the passage of a long period of time since the adoption of an earlier decision may make it more difficult, if not impossible, for the parent company to contest the circumstances upon which a finding of repeated infringement was based.

AUSTRALIAN FEDERAL COURT FINES FLIGHT CENTRE FOR “PRICE-FIXING”

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ACCCOn 28 March 2014, the Australian Competition and Consumer Commission (“ACCC”) announced that travel agent, Flight Centre had been ordered by the Autralian Federal Court to pay fines totaling AU$11 million for “repeatedly attempting [between 2005 and 2009] to enter into anti-competitive arrangements with three international airlines to eliminate differences in international air fares offered to customers.”

The judgment dated 28 March 2014 of Logan J, sitting in the Federal Court in Brisbane, names the three airlines as Singapore Airlines, Emirates and Malaysian Airlines. With regard to all three, Flight Centre “attempted to induce, including by threats to withdraw the provision of distribution and booking services” an agreement by which the three airlines would be forced to:

 (i)                  make all their fares for international passenger air travel available for sale by Flight Centre

(ii)                pay to Flight Centre a retail or distribution margin on all sales of international passenger air travel

(iii)               sell international passenger air travel directly to the public at a price not less than the net fare plus Flight Centre’s retail or distribution margin

 Logan J noted that during the period covered by the contraventions, Flight Centre had a  share of at least 20% of the market for the distribution and booking of international air travel from Australia. The judge added  that:

“[Flight Centre] was the principal distributor for each of the airlines in question. It was this market power which it deployed in each of the attempted inducements. The threats which were entailed carried all of the weight associated with that market power. They could not have been more deliberately made.”

He also described 2009 e-mails from Flight Centre Chief Executive Graham Turner, which were sent in reaction to the threat to the travel agent’s business of direct offers by the airlines to the public of international fares, as “the most blatant of all the charged attempts to induce.”

The ACCC welcomed the decision of the Federal Court. However, ACCC Chairman Rod Sims expressed disappointed that Logan J did not apply the maximum fine of 10% of the travel agent’s turnover, as the ACCC had recommended.

EU RAIDS AUTOMOTIVE EXHAUST COMPANIES

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exhaustOn 25 March 2014, the European Commission announced that it had conducted dawn raids at the premises of a number of car exhaust companies, based in several EU Member States. A full list of the companies has not been released, however, French company Faurecia, US company Tenneco Inc. and German company Eberspächer confirmed that they had been raided. Reports have suggested that Tenneco Inc. has also received a sub poena from the US Department of Justice, Antitrust Division.

The raids appear to relate to suspicion that the companies may have violated EU rules on cartel activity and restrictive business practices. Faurecia, which is 52% owned by PSA Peugeot Citroen, has confirmed that it is fully cooperating with the Commission.

In a statement, the Commission emphasised that “the fact that the Commission carries out such inspections does not mean that the companies are guilty of anti-competitive behaviour nor does it prejudge the outcome of the investigation itself.”

As reported in an earlier blog, the car industry faces numerous antitrust investagations globally, with as many as 70 companies involved.

PROPOSED EU DIRECTIVE AIMS TO HELP CARTEL VICTIMS

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almuniaOn 18 March 2014, MEPs and European Council representatives agreed on the terms of a new proposed directive on antitrust damages. The measure, which is expected to become law before the European elections in May 2014, is intended to make it easier for victims of cartel activity to claim compensation.

The main changes to the law will be that:

  • Decisions of national competition authorities will constitute full proof before civil courts that the infringement occurred.
  • Clear limitation period rules will be established.
  • Victims will be able to obtain full compensation for lost profits as well as actual loss suffered.
  • A rebuttable presumption that cartels cause harm will be established, and
  • Victims will have easier access to evidence to pursue cases.

Joaquín Almunia, the European Commissioner for Competition, said: “This directive will remove the barriers that currently prevent the victims of antitrust infringements in the EU from obtaining effective compensation. At the same time, it will ensure an adequate and balanced interaction between actions for damages and the effective public enforcement of competition law by the Commission and national competition authorities.”

ITALIAN COMPETITION AUTHORITY LAUNCHES BID-RIGGING PROBE

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On 18 March 2014 Italy’s Competition Authority, the Autorità Garante della Concorrenza e del Mercato (“AGCM”), announced the launch of a bid-rigging investigation into Chef Express S.p.A. and My Chef Ristorazione Commerciale S.p.A. Both companies manage motorway service restaurants.

The independent company managing the submission process for tenders drew the attention of the authorities to evidence of collusion. According to the AGCM, evidence indicated that the two companies had colluded on bids for 16 of the 43 licences available. It has been alleged that they intended to take 8 licences each.

The investigation is the latest in a series of probes into bid-rigging in Italy. The rail sector is one of the more prominent recent investigations. For the last 15 years, Italy’s motorway service restaurants have been controlled by Autogrill, which is majority owned by the company that runs Italy’s motorways, Autostrade. Both are controlled by the Benetton family.