1/21/2015

Ch

Developing and
Implementing an
Effective Antitrust
Compliance Program
January 23, 2015
Taipei, Taiwan

Chris Neumeyer
chrisneumeyer@asialaw.biz

Hypothetical Scenario
Your company and a competitor will bid for a project at
an upcoming customer auction. On the street, you run
into an employee of the competitor who wants to discuss
mutually beneficial strategies for bidding at the event.
What should you do?
a. Listen to what he says, but say nothing in return.

b. Put nothing in writing. Only discuss off the record.

c. Suggest that he contact your boss to discuss it.
d. Refuse to discuss the subject and leave if he insists.
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Antitrust Obligations

Most countries have laws that prohibit:

Unfair or deceptive methods of competition.
Monopolies with respect to goods or services.
Corporate transactions that lessen competition.
Agreements that restrain trade in goods or services.

Common Violations
Bid-Rigging: Agreement with competitors to
manipulate bidding, giving illusion of competition.
Price-Fixing: Agreement with competitors to charge
same prices, same rates, limit production, etc.
Price Signaling: Public statements about prices
intended to influence competitors pricing.
Customer Allocation: Agreement with competitors
to divide customers, markets, or territories.

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US Criminal Fines

Many defendants also must pay restitution.

Most defendants also face multiple civil lawsuits.
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US Prison Sentences

68% of all US antitrust sentences against individuals

include a prison sentence (not just a fine).
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US Prison Sentences

In 2013, the president of one company received a

5-year prison sentence for illegal price-fixing.
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US Presence Not Required for US Liability

Asian companies are often penalized in the US and

Asian individuals are often sent to prison in the US
for conduct that took place solely in Asia.
Foreign conduct may be subject to US law if it:
Involves US imports; or
Has a direct, substantial, reasonably foreseeable
effect on US commerce.

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Major China Penalties

$71 million
Liquor makers
including
Wuliangye
Yibin and
Kweichew
2012

$109 million
Six dairy
producers
including
Danone and
Mead Johnson

$40 million
Audi
$5 million
Chrysler
2014

2013

$57 million
Six LCD manufacturers
including Innolux and

Chunghwa Picture
Tubes

$200 million
Auto part
manufacturers
including Yazaki and
Sumitomo
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Minimizing Penalties
Amnesty: The first member of a cartel may avoid
prosecution if it admits fault and cooperates in the
prosecution of others. (True in US and Taiwan).
Leniency: The US Sentencing Commission issued
guidelines recommending lenient sentencing if a
company has an effective program that...

Serves to detect and prevent criminal conduct.

Promotes organizational culture of ethical conduct
and legal compliance.

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Case Studies

AU Optronics (2012)
A US court found AUO guilty of one count of pricefixing, fined it US$500 million and ordered it to
implement an effective ethics & compliance program.

Morgan Stanley (2013)

A US court sentenced a MS Managing Director to
prison for paying bribes in China, but authorities took
no action against MS, due to its strong ethics &
compliance program just one rogue employee.

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Benefits of Compliance
Increase awareness of unacceptable conduct.
Prevent violations from occurring.
Detect and resolve problems early.
Potential amnesty or reduced penalties.

Greater employee, customer and investor loyalty,

satisfaction and performance.

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How Does One Build a Compliance Program?

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US Sentencing Guidelines
Minimum requirements for effective program:
1. Clear standards and procedures.
2. Board oversees program, supported by high-level
management and sufficient resources.
3. Exclude employees known to commit violations.
4. Effective trainings and communication of standards.
5. Monitor/audit to detect violations & effectiveness.
6. Promote program through incentives and discipline.
7. Respond appropriately if violation detected.
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How Does One Build a Compliance Program?

Phase I

Phase II

Assessment,
Commitment
& Approval

Assess Risks
Obtain Top-Level
Commitment
Board Resolution

Laying the
Foundation

Phase III

Rolling Out
the Program

Phase IV

Reporting,
Responding
& Refining

Assign Suitable
Management

Communicate
Standards

Internal Reporting
System

Establish Clear
Standards &
Procedures

Launch Trainings

Respond to
Concerns

Apply Incentives &

Discipline

Monitor, Audit &

Refine
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Assess Your Antitrust Risks

Evaluate annually as part of overall risk management.
Are others in the industry in trouble?
Interview Legal, Finance, Audit, Business leaders.
Agreements with competitors?
Joint ventures or joint purchasing?

Member of trade groups? Who? What? Why?

Conduct likely to decrease competition?
Legitimate business reasons for the conduct?
Employee motivations to commit violations?
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Consider Using a Risk Matrix

Plot risks on the matrix.

Focus policies, resources and trainings accordingly.
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Commitment and Approval

Sr. Management & Board must be fully committed:
Recognize importance of ethics & compliance.
Sincerely desire to establish effective program.
Agree to devote necessary time & resources.
Willing to walk the walk, not just talk the talk.
Board Resolution: Our company is committed to
complying with the law, takes ethics & compliance
seriously, and resolves to implement a formal
ethics & compliance program.

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Assign Suitable Management

When approving the program, the Board should
appoint a Chief Ethics & Compliance Officer (CECO).
CECO must have direct access to Board and CEO;
will report to Senior Management, Auditor and Board.
For SME, this person can have other functions, but
CECO should be part of their job description.
Each remote location should have a person in charge
of ethics & compliance who reports to CECO.

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Clear Standards & Procedures

Code of Conduct:
Basic statement of expectations: honesty, integrity,
respect for others, etc.
General statements on gifts, privacy, bribery, child
labor, environment, antitrust, etc.
State that it applies to all employees and violations
may lead to discipline/termination.
Include preface by CEO.
Management should respect it and refer to it often.
Publish on Website, including translations.
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Clear Standards & Procedures

Guidelines/Manuals:
More detailed than Code of Conduct.
Clear rules of conduct in plain, simple language.
Address real situations that might arise, tailored
for different employees and business units.

Should make sense from business perspective.

Distribute to all sites; translate as appropriate.
Often includes list of Dos and Do Nots.

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Guidelines for Meeting Competitors

DO meet only for legitimate purpose.

DO require a meeting agenda in advance.

DO stick to the agenda and keep a meeting record.
DO object, and leave, if improper discussion.
DO NOT discuss prices, terms, volume, etc.
DO NOT agree upon market or customer allocation.
DO NOT discuss off the record.
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Guidelines for M&A

DO limit discussions to just the M&A team.
DO discuss only for purposes of potential M&A.
DO obtain all required government approvals.
DO NOT boast about market domination or lack of
competition due to acquisition.

DO NOT coordinate business activities, sales, or

purchasing prior to closing.
DO NOT exchange non-public info such as prices,
terms, costs, customers, etc., prior to closing.
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Communicate Standards
Treat program launch as marketing event.
CEO announcements in meetings, emails, etc.
Compliance awareness days, contests, prizes, etc.
Dedicated compliance page at company website.
Eye-catching posters stating real-life issues, company
policies, CECO contact details, website URL, etc.
Ethics & compliance column in company newsletter.
Wallet cards, mugs, pens, memo pads, etc.
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Trainings Logistics
Require trainings for all, especially new employees.
Further training for high-risk (sales) or promotion.
CEO attends first training, records video message
to play at subsequent trainings.
Employees must sign in, so theres training record.
Not abstract laws or policies: train them to identify
concerns in real situations and respond properly.
Purchase training materials, or develop in-house.

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Trainings Methodology
Online, face-to-face, or combination.
Preferably learner-centered, performance-based.
Training, not teaching: small groups, interactive,
quizzes, discussion, role-playing, etc.
Encourage them to provide questions, examples,
discussion, suggestions, solutions, information.
Tap into their experiences: how can they apply this?
Pay attention, as they may indicate potential issues.
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Incentives (carrots)
Include ethics/compliance in employee evaluations.
Ethics/compliance counts in recruiting/promotion.
Public or private recognition from CEO or CECO for
person or business group that shows leadership, etc.
Special parking space, bonus, etc., for good deeds.
BUT, rewards may be controversial, as some may
feel acting ethically/legally is just doing your job.
And, incentive based on absence of incidents may
mean rewarding for failure to report.
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Discipline (sticks)
for failure to attend training or violating policy.
Formal or informal warning & attend training.
Demotion or non-promotion & attend training.
Forfeit bonus, stock options, benefits, etc..
Dismissal with or without notice.
BUT, must announce clearly to all in advance.
And, must apply evenly to all, regardless of seniority.
And, evaluate if acted in GF, or approved by superior.
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Internal Reporting System

Open door approach is simple, but may not work,
especially if manager is part of the problem.
Suggestion box? (Physical or online.)
Telephone hotline? (Internal or outsourced.)
Factors: anonymous, confidential, non-retribution,
two-way communications, possible follow-up, trained
interviewer, available to 3d parties, etc.
Global issues: translation & data privacy laws.
In any event, must promote/publicize it to employees.
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Respond to Concerns
Promptly investigate potential violation. Whistleblower
confidentiality and non-retaliation must be guaranteed.
CECO may interview staff and/or request documents.
May require legal assessment v. forensic investigation.
Outside counsel may assist w. investigation/strategy.
CECO reports regularly to Sr. Management and Board.
Potential issues: who to interview, how to interview,
formulating legal defense, whether to report to govt.,
whether to discipline, how to document investigation,
preserving confidentiality/legal privilege, etc.
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Monitor, Audit & Refine

Periodically assess effectiveness of program and if its
being applied consistently and adequately.
Track attendance rates at trainings and employee
awareness of laws & procedures.
Are mandatory controls being followed? (e.g., Must
obtain prior consent and keep records for meetings.)

Have auditors or others raised antitrust concerns?

Test reporting mechanisms and response received.
Develop/implement improvement plan as needed.
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Hypothetical Scenario
Your company and a competitor will bid for a project at
an upcoming customer auction. On the street, you run
into an employee of the competitor who wants to discuss
mutually beneficial strategies for bidding at the event.
What should you do?
a. Listen to what he says, but say nothing in return.

b. Put nothing in writing. Only discuss off the record.

c. Suggest that he contact your boss to discuss it.
d. Refuse to discuss the subject and leave if he insists.
32

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The Goal

Establish an effective compliance

program that serves to detect and
prevent criminal conduct and
promotes an organizational culture of
ethical conduct and legal compliance.

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Thank You

Chris Neumeyer
chrisneumeyer@asialaw.biz
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Christopher M. Neumeyer
Asia Law Foreign Legal Affairs Law Firm
17F, Suite B, No. 167
Dunhua North Road
Taipei 10549, Taiwan
Phone: +886-2-2717-1999
Website: www.asialaw.biz
E-mail: chrisneumeyer@asialaw.biz

Chris Neumeyer is Managing Partner of Asia Law, an international law firm based in Taipei.
He has represented global companies in Taiwan since 2000, including as counsel with Texas
Instruments and Legal Director at Lite-On Technology Corporation, where he was employed
for almost seven years.
Before that, he worked as a trial lawyer in California since 1991, handling all phases of
litigation, from pleadings and discovery through trials and appeal.
Chris has extensive experience negotiating and drafting patent licensing and other complex
agreements; leading mergers, acquisitions and investments; resolving cross-border disputes
and litigation; and assisting with the development, manufacturing, sales, distribution and
licensing of diverse products and intellectual property.
He has resolved over 100 patent licensing disputes, led more than $600 million in corporate
transactions, and negotiated countless commercial and corporate agreements with top-tier
companies such as Apple, Dell, Hewlett-Packard, Intel, Nokia and Samsung.
Chris has defended Taiwan companies, as counsel of record, in multiple US antitrust lawsuits,
including drafting motions, defending depositions and providing strategic advice with
respect to litigation and compliance.
He also delivers corporate trainings to participants from diverse industries on subjects
including negotiation skills, contract drafting, patent licensing and regulatory compliance.
Past training sessions were located in the US, Taiwan, Thailand, Singapore, China and Dubai.
Please write to chrisneumeyer@asialaw.biz if you have any questions or require assistance.