Co-chair John Wilson, vice president and deputy general counsel of Alcoa Inc. set the tone in stating that antitrust counseling is a core competency at Alcoa. Alcoa does not have in-house antitrust specialists per se - every commercial lawyer must have antitrust counseling capability in working with his or her areas of business. "We use a single antitrust case team quarterbacking each case," stated Wilson. "Several of the transactions undertaken in the last 10 years have been large-scale multijurisdictional mergers involving large numbers of lawyers."
Alcoa attorneys turn to business group leaders to recruit a team that understands their market. "Using people in the acquiring unit of the company is vital to making the correct questionnaire responses, in preparing briefs and suggesting arguments that can be used with regulators. In each principal area of business as you go through the approval processes you need two types of people - one who drives the effort, collecting data, etc., the "drill sergeant," and one who has the depth of understanding of the market and can help with legal arguments," Wilson added.
Among the team recruited, "it is important to find the right executive who can deal with the regulatory staff in an articulate manner," according to Richard Parker, former director of the Bureau of Competition at the Federal Trade Commission and currently a partner with O'Melveny & Myers LLP. He suggested that this person must be likeable, patient and smart. "Save the CEO as a last resort." Outside counsel should identify persons who can be "expert witnesses." Rachel Deming, associate general counsel of Ciba Specialty Chemicals Corporation, declared that "once U.S. regulators are involved, they prefer to deal with senior people." Robert Kwinter, partner in the Competition Law Group of Blake, Cassels & Graydon LLP agreed that spokesmen for a company must be keyed into the facts and the process. "What might be seen as good for a company is often negative in an antitrust case. People must be trained to think like witnesses." All participants generally agreed that finding a person with intellectual firepower who fully understands the market as well as one who is a good witness is sometimes difficult to achieve but essential.
When dealing with foreign regulators, it is a good principle to have someone from that country representing the company in talks with regulators. Riccardo Celli, head of O'Melveny & Myers' Brussels office and the firm's European Antitrust/Competition Practice, echoed this sentiment in stating that "for this reason it is important to coordinate with corporate personnel around the globe." Trevor Soames, Howrey LLP's managing partner in Brussels, commented that "for a corporation to be able to react in a timely and accurate manner [to a regulator's request] is to ensure that it has effective internal lines of communication enabling it to access the information necessary in those countries or regions where the agencies or regulators are interfacing with the corporation."
The Trick Is To Bring The Deal In On Budget
Not all agreed that companies can budget for all the costs entailed in making acquisitions. It is important to anticipate the massive amount of time required not only by lawyers but by the business and financial people in the company who are pulled away from their other duties. Investigations by regulators take place around the world, 24 hours a day. Since the U.S. engages in a "document-centric" process, documents turn up in every corner of the globe and have to be examined. That can overwhelm the team if not organized properly. Sean Boland, co-chair of Howrey LLP's antitrust practice, added that "one problem in budgeting is knowing the number of documents that need to be reviewed in e-discovery." Richard Parker mentioned that "business people don't understand the size of the commitment and do not realize how much Hart-Scott-Rodino can hold up procedures."
Another complication arises from the number of jurisdictions with their multitude of laws and regulators who have differing views of competition. Bruce Ortwine, joint general manager and general counsel of The Sumitomo Trust & Banking Co., Ltd. inquired as to "whether there are any trends in developing uniform standards, especially in less developed countries?" Of the 100 or more filing jurisdictions, there is a network of competition regulators seeking to bring about consistent regulations. The International Competition Network (ICN) has developed "best practices" for merger filing which 56 percent of the jurisdictions have now implemented by regulation or are seeking legislation to do so.
John Frank, co-chair of the forum and deputy general counsel of Microsoft in charge of Legal Compliance, mentioned that there are many challenges for international companies in managing relationships with multiple competition authorities. "The rules across jurisdictions are not consistent. There is still a fundamental debate about what conduct is pro-competitive." The source of disparity is that states adopt rules unilaterally with some favoring the U.S. model, others the European model, and some states picking and choosing between the two models, leaving a patchwork of rules. "Sometimes regulators compete to see who is tougher," Frank declared. Advising clients is extremely difficult where one group of regulators treats a situation as pro-competitive and another treats it as anti-competitive.
Other participants agreed that getting comity among regulators to defer to fellow regulators who, using appropriate resources, have come to one conclusion is essential. This holds true for regulators from different countries. Once the regulators have agreed, a further hurdle is getting the courts to agree.
Also, in keeping with an effort to pare costs, one should be clear as to when a filing is necessary. Sean Boland suggested "being prudently aggressive with respect to foreign filings and file only after a careful analysis has been completed." It is important to distinguish between mergers that require registration and those that do not. Those mergers that do not require filings or very limited filings because of a lack of size or other reasons may still need careful handling. Be sure you are on solid ground by doing a careful economic analysis. "Think about the definition of your market. Will it come back to haunt you?" asked Boland. Also, "consider whether the jurisdiction is necessary for your business before undertaking a filing." The message is: be creative and aggressive and avoid filing wherever you can.
Is It Wise To Enter Discussions With Regulators?
The answer to this question is: maybe "yes," maybe "no," depending on where discussions are held. In-house counsel and outside lawyers are not of one mind. Richard Parker thinks it is critical for outside counsel to have a dialogue with regulators since many policies are not in writing and there is no consensus on what is harmful and not harmful. Trevor Soames also stated the case for more dialogue with regulators: "Business groups in the EU have relations with regulators in order to understand their thinking and to better articulate their position."
Canada's approach is clearly an exception to that of the U.S. Rob Kwinter, partner of Blake, Cassels & Graydon LLP in Toronto, states that the new Commissioner of the Canadian Competition Authority has invited the corporate community to come and talk. "Canada's antitrust agency is quite small. She (the new Commissioner) is looking for ways to work closely with business."
There was general consensus among the participants that "some things we do in Europe, we cannot do in the U.S." Inside counsel expressed a need to keep a low profile, especially in the U.S. There is more collaboration between government and business on the Continent and in Canada.
How Do Companies Train Their People To Be Antitrust Savvy?
Antitrust training in "best practices" is part of good corporate governance. Rachel Deming stated that Ciba Specialty Chemicals sets forth a code of conduct for training on key business issues, such as antitrust, environmental compliance and human resources. "We have guidelines for refresher courses with the in-house counsel partnering with the business person to do the training." Various techniques are used: Internet training plus executive guidance in the case of Praxair and Alcoa; Microsoft uses films as well as lawyer guidance. John Frank concluded "Your best insurance is to hire a strong, bright work force."
How Do You Determine That Business Partners Have Adequate Compliance Training?
This is even more problematic since business partners, whether they be outside lawyers, joint venture partners or business people about to enter the corporation as a newly merged firm, are outside the ambit of the corporation's culture. John Wilson believes serious attention must be paid to this area. "Antitrust issues are labor intensive. . . . Lawyers must spend a lot of time with the business people. You should match up a law firm culture [with your company culture] in terms of how people relate to each other. There will come a time when a frank discussion will take place. A good relationship is needed."
Rachel Deming believes that when you integrate two companies after a merger, you figure out how quickly you can bring that culture under your aegis. "When you merge two companies, the integration process is easier than with [other types of] business partners."
Gabriel Miller, general counsel of Captivate Network (a Gannett company), suggested that hiring the right local counsel can be a key component in evaluating a business partner's compliance training. "The first step is to hopefully find someone you already trust to help with the choice. . . .The goal is to find local counsel that has the right experience, is well respected by the regulators and understands the local legal and business culture. In choosing local counsel, I need to meet with the local counsel in person, not just by telephone. As general counsel, I need the knowledge that the right local counsel can provide, in terms of both legal and business issues, necessary to help the business people understand and be able to assess and allocate risks."
Globalization Of Criminal Enforcement
A gulf separates the thinking of antitrust enforcement officials in Mediterranean lands and to a lesser extent others on the Continent from those in the U.S., the U.K. and Ireland. Carina Branco Oostergetel, general legal counsel of Novabase SGPS, S.A., a Portugese Information Technologies firm, expressed the thoughts of countries still having the Roman tradition that "individuals should respond for their own crimes, not for the ones committed by the companies they might be in charge of at a given time." Riccardo Celli pointed out that criminalization in Europe is still in its infancy, with Ireland and the U.K. being the only countries that resemble the U.S. "The EU does not have criminalization authority per se but relies on member states to take offenders into their respective courts."
Canada is a classic example of a jurisdiction that differs from the U.S. Because information provided by a U.S. company to Canadian authorities in an immunity from prosecution discussion may be discoverable by U.S. authorities, Robert Kwinter suggested that the best practice is to keep all immunity discussions oral. If the Canadian government produces a document, it is not discoverable by U.S. authorities - any plea agreement is protected.
Congress passed an amnesty program in 2004 as part of the Antitrust Criminal Penalty Enforcement and Reform Act of 2004 that somewhat mitigates the harshness of enforcement while at the same time imposing dramatically enhanced criminal penalties for businesses and individuals who commit violations. Since the Justice Department restructured its Corporate Leniency Policy in 1993, an individual or corporation that is the first cartel member to cooperate with the DOJ's investigation is granted amnesty so long as it observes its agreements with the government and cooperates. Others who follow may obtain reductions in sentences. Richard Parker points out that "companies that are dominant in their markets and first to cooperate may be exempt from antitrust prosecution if they cooperate with authorities. In any subsequent litigation they may be subject only to single damages."
Thus, the law provides a carrot and stick for enforcers of anti-competitive behavior where companies appear to engage in anti-competitive practices.
Martha Driver is Publisher of The Metropolitan Corporate Counsel.
The recent New York Counsel to Counsel Forum developed by LEXIS-NEXIS Martindale-Hubbell, "Growing by Leaps and Bounds: Managing Global Competition," brought together in-house and outside counsel to share experiences on approaches to mergers and investigations, interaction with regulators, contrasts among jurisdictions at home and abroad and compliance training.