[Link: China’s Export Policy Changes After U.S. Antitrust Case - Bloomberg Law]
As it turns out, “the government made us do it” is in fact an acceptable defense for foreign companies facing charges of price-fixing in the United States (See ~1:30). But as the above video explains, that excuse didn’t work for a group of Chinese Vitamin C makers accused of collusion to increase prices.
Two Chinese companies were ordered to pay $162 million following their conviction for conspiring to artificially inflate the global price of Vitamin C, the first time Chinese companies were found liable for price-fixing in the US. But the case is unique for another reason, write Christopher Nedeau and Natasha Saggar Sheth of law firm Nossaman LLP:
“In a novel and high-risk defense, the companies did not deny price-fixing. Instead, they argued that the Chinese government directed them to align with competitors on pricing and supply output. The seldom-invoked foreign sovereign compulsion doctrine is intended to protect defendants who are compelled by their own government to break U.S. laws. In an unprecedented move, China’s Ministry of Commerce came forward on behalf of defendants, filing an amicus brief in support of defendants’ motion for summary judgment filed in 2009. The Ministry stated that the government had indeed created a regime under which defendants risked incurring penalties or loss of the right to export Vitamin C if they failed to coordinate pricing. A retired Chinese government official even testified at trial on behalf of defendants, stating the he had been tasked with coordinating export pricing and quantities in order to prevent ‘malicious competition.’”
Read the full update, U.S. Jury Finds Chinese Companies Liable for Price-Fixing, Fined $162 Million - Nossaman LLP»
China’s recent interpretation of the law criminalizing corruption “reiterates and further clarifies a number of key terms and issues under the Criminal Law of China with respect to paying bribes and punishment of this crime,” write attorneys from Morrison & Foerster. But will it help eliminate the problem?
“On one hand, the joint issuance of the Interpretation by China’s judicial and legislative entities signals intent to streamline and intensify enforcement of China’s Criminal Law against bribery. On the other hand, it remains to be seen whether the Interpretation—or the newly issued civilian and military regulations—will have a significant effect on the giving and receiving of bribes and the day-to-day conduct of government officials. One test will be whether judicial authorities independently act to enforce the Interpretation before an incident of corruption has been so widely reported and re-blogged at the grassroots level that it becomes politically charged. A second and more telling test would be the dismissal of a high level official revealed through enforcement of the Interpretation to have accepted bribes. Significantly, the Interpretation addresses the paying but not the receipt of bribes, which can be interpreted both as representing China’s intention to more vigorously pursue instances of bribery as well as an indication that private individuals may increasingly bear the brunt of the campaign against government graft.”
Read the full update, China’s Renewed Focus on Anti-Corruption Efforts Highlighted by a New Interpretation on Criminal Offense of Paying Bribes - Morrison & Foerster LLP»
China appears to be broadening the scope of anti-corruption efforts to go after the foreign companies that pay bribes in addition to those who receive them. But is the government merely shifting attention away from Chinese corruption? From Reid Whitten and Thad McBride of law firm Sheppard Mullin:
“It is hard to avoid the conclusion that the PRC is fertile ground for corruption: many of its major industries are dominated by state-owned or -controlled companies. A tradition of gift-giving and hospitality may blur the distinction between friendly gesture and kickback. And the sheer volume of business transacted in the country makes policing illicit exchanges for business advantages a tall order for any enforcement agency…
China may be changing: the government recently released new guidance on its anti-bribery laws that could signal it is ready to address corruption head-on. It is also possible, however, that China is simply seeking to punish foreign companies and distract attention from internal realities and practices that have made corruption endemic in the country.”
Read the full update, Is China Getting Serious or Redirecting Responsibility? New guidance on Chinese Anti-Bribery Enforcement - Sheppard Mullin Richter & Hampton LLP»
China appears to be broadening the scope of anti-corruption efforts to go after the foreign companies that pay bribes in addition to those who receive them. But is the government merely shifting attention away from Chinese corruption? From Reid Whitten and Thad McBride of law firm Sheppard Mullin:
“It is hard to avoid the conclusion that the PRC is fertile ground for corruption: many of its major industries are dominated by state-owned or -controlled companies. A tradition of gift-giving and hospitality may blur the distinction between friendly gesture and kickback. And the sheer volume of business transacted in the country makes policing illicit exchanges for business advantages a tall order for any enforcement agency…
China may be changing: the government recently released new guidance on its anti-bribery laws that could signal it is ready to address corruption head-on. It is also possible, however, that China is simply seeking to punish foreign companies and distract attention from internal realities and practices that have made corruption endemic in the country.”
Read the full update, Is China Getting Serious or Redirecting Responsibility? New guidance on Chinese Anti-Bribery Enforcement - Sheppard Mullin Richter & Hampton LLP»
From law firm McDermott Will & Emery, an overview of anti-bribery and anti-corruption laws in China, the United Kingdom and selected European countries, and the United States,
“What emerges is that, whilst both the long reach of the US rules and pressure from the Organisation for Economic Cooperation and Development has meant that foreign corrupt practices are now to a greater extent unlawful in many jurisdictions worldwide, significant differences remain as to enforcement regimes. For example, facilitation payments are exempt in Germany in certain circumstances, but are not exempt under any circumstances in either the United Kingdom or the People’s Republic of China. In many other countries, both public and private bribery (whether domestic or foreign) are expressly outlawed, but the tests vary widely. Notably, In the United States under the US Foreign Corrupt Practices Act (the FCPA), a territorial nexus that is seemingly only tangential—such as a phone call or email from the United States or use of a US bank to clear funds relating to the foreign transaction—may be sufficient for the Department of Justice to exert US jurisdiction.
The clear trend is that the enforcement of anti-corruption laws has become a major focus of law enforcement and regulatory authorities not just in the United States but globally.”
Read Anti-Bribery and Corruption Law Multi-Jurisdictional Client Guide - McDermott Will & Emery»
“Although China’s AML specifically provides for private enforcement, in practice relatively few actions have been brought before the courts in the four years since it came into force. Companies and individuals who have brought actions before the courts have had little success; based on publicly available information, the courts have so far ruled in favor of the defendant. There are a number of reasons for this lackluster enforcement, including an absence of procedural guidance for the courts, making them reluctant to accept jurisdiction over antitrust cases, and the difficulty plaintiffs have had in discharging their burden of proof.”
Read the entire Orrick update: Cartels and Dominance: New Risks and Opportunities for Companies in China»
In late June, Hong Kong published its Competition Ordinance, the special administrative region’s first set of rules and regulations governing anti-competitive behavior by companies operating in Hong Kong. From law firm Skadden Arps:
“The Ordinance has three primary areas of focus. The so-called First Conduct Rule regulates agreements that restrict competition in Hong Kong (regardless of where those agreements are negotiated or executed,). The Second Conduct Rule (together with the First Conduct Rule, the Conduct Rules) prohibits abusing a substantial degree of market power to restrict competition in Hong Kong (again, regardless of where the conduct itself occurs). In addition, the very limited Merger Rule, at least initially, regulates only those mergers, acquisitions and joint ventures affecting the telecommunications sector in Hong Kong.
Despite its publication, the Ordinance is not yet in full effect. Indications from the secretary for Commerce and Economic Development who is responsible for the initial implementation, suggest that its provisions will enter into force through a staged approach, with the Conduct Rules and Merger Rule becoming effective in the next several months.”
Read the update, The 2012 Hong Kong Competition Ordinance - Skadden, Arps, Slate, Meagher & Flom LLP»
From law firm Bryan Cave:
“Chinese media sources report that more than 1,000 officials across Guangdong province in southern China have been investigated for corruption as part of a yearlong crackdown on economic crimes, including commercial bribery.
In Shenzhen, across the border from Hong Kong, authorities have arrested 146 party officials and civil servants since February for corrupt activities involving RMB 150 million (more than US$30 million).
The campaign has extended to other second-tier cities within the province as well. The South China Morning Post reported that eight government officials in Shantou were arrested in recent months on corruption charges…”
Read the entire update: Yearlong Crackdown on Economic Crimes in China’s Guangdong Province Underscores Need for Corporate Compliance»
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From law firm McKenna Long:
“[T]he ultimate resolution of the matter – in which two of the three criminal charges involved not the exports themselves but the companies’ handling of the voluntary disclosure – highlights the importance of careful and skilled management of the voluntary disclosure process. All three companies were charged with making false statements in connection with voluntary disclosures, a stark example of the need for thorough investigations into suspected violations in order to ensure absolute accuracy in any statements to the government. Further, while DDTC maintains a voluntary disclosure program, not all disclosures are voluntary. The charges against P&WC and HSC of failing to report transfers to China serve as a reminder of the mandatory disclosure provisions of 22 C.F.R. §126.1(e)…”
Read the entire advisory: Lessons From the United Technologies Export Enforcement Case»
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Also see from Skadden Arps:
