A groundbreaking direct settlement deal has taken US/UK antitrust enforcement co-operation to a new level. Michael O'Kane and Jasvinder Nakhwal warn that cartel participants from countries that have not criminalised such conduct are at a distinct disadvantage.
In addition to having in their armoury the simplified mutual legal assistance and extradition procedures between many jurisdictions, in a recent case the US Department of Justice (DoJ) and the UK's Office of Fair Trading (OFT) have demonstrated their joint determination to tackle cartels by adding a new and imaginative dimension to cross-jurisdictional co-operation and enforcement.
On 2 May 2007, the DoJ arrested eight foreign executives in Houston, Texas in relation to alleged cartel conduct. On 3 December, the DoJ filed a one-count felony charge that from early 1999 to May 2007, the defendants participated in a conspiracy, the primary purpose of which was to suppress and eliminate competition by rigging bids, fixing prices and allocating market shares for sales of marine hoses in the US.
In furtherance of the conspiracy, it was alleged that the defendants attended meetings and engaged in discussions with executives from other marine hose manufacturers. On conviction for a violation of section 1 of the Sherman Act 1890, each of the defendants could have faced a maximum of ten years imprisonment.
Meanwhile, in the UK, the OFT launched a simultaneous criminal investigation into suspected cartel conduct in relation to that country's market for marine hoses.
Innovative Plea
What is most notable about this case is the innovative plea agreement reached with the three UK nationals arrested in Houston. In essence, they agreed to plead guilty in the US to conduct that had an impact in that country and then to have their sentences deferred for them to return to the UK and plead guilty to cartel conduct that occurred in the UK and which affected the UK market.
The way in which the conduct was split between the UK and the US was intended to minimise the risk of the double jeopardy bar to extradition being engaged. Typically, a foreign national sentenced to imprisonment in the US would need to apply under the prisoner transfer treaties to serve part of his sentence outside of the US, a process that can take an average of 12 months to organise.
The most novel aspect of this agreement is that each day of any UK sentence of imprisonment imposed is off-set against the sentence set out in the US plea agreement. If the UK sentence is the same or greater than the US-agreed sentence, then the US sentence will be deemed served and it is hoped that the three would be sentenced in absentia in the US. It is important to note that plea agreements make reference to time imposed' rather than time served'. This takes account of the UK-US Prisoner Transfer Treaty, whereby any UK national whose application to serve a sentence in the UK is approved, will thereafter have the advantage of the UK parole provisions on return to the country.
Therefore, it is envisaged that the marine hose defendants will not serve a single day of their prison sentences in the US. Not only will they enjoy all of the benefits that will ensue from serving their sentences in their home country, but they will also be subject to the appreciably more generous parole rules available in the UK. (US prisoners serve a minimum of 85 per cent of their sentences, whereas in the UK prisoners serve a maximum of 50 per cent).
Breaking New Ground
This deal is unprecedented in international criminal law enforcement and was achieved through the defendants' full cooperation with the US and UK authorities. Through this agreement, not only 13 has the OFT been able to initiate the first criminal prosecution under the Enterprise Act 2002 in the UK, but the DoJ has obtained guilty pleas and agreed sentences that will carry a powerful deterrent message in the UK, the US and elsewhere.
The arrangement was only possible for the UK nationals in this conspiracy because cartel conduct is criminalised in the UK. For the other foreign nationals who have or may plead guilty or be convicted in the US, there is no alternative but to serve the duration of their sentences in America. They will also be unable to take advantage of the prisoner transfer treaties as they cannot be imprisoned in their home jurisdictions for conduct that is not considered to be a crime.
While the UK's recent fraud review does not endorse the application of a US-style plea bargaining system in the UK, the US experience generally and the marine hose case specifically clearly demonstrates how effective a direct settlement procedure can be in addressing some of the issues that plague the current UK and EU cartel enforcement regimes. Indeed, the European Commission itself is considering favourably the saving of resources and the shortening of investigations by encouraging early cooperation, admissions and assistance in uncovering the full extent of any delinquency.
The European Commission has launched a public consultation on a package designed to allow for settlements of cartel cases where the parties not only acknowledge their involvement in the cartel and their liability for it, but also agree to a faster and simplified procedure. The package consists of a draft commission notice and a draft commission regulation amending regulation (EC) Nº 773/2004.
As the DoJ's antitrust division expands its international cartel enforcement and seeks additional co-operation from the international community in vigorously prosecuting those charged with antitrust offences, being a citizen of a foreign country with a different culture and attitude to cartels has not been an argument that the department has entertained.
The marine hose case has added an exciting dimension to tackling international cartel prosecutions and demonstrates that being a cartel participant from a country that has not criminalised cartel conduct could prove very disadvantageous. If it works, it could form the blueprint for similar deals being done in relation to other forms of criminal conduct outside the cartel arena.
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