China: The principle of Double Jeopardy in international cartel investigations

Introduction

A major concern for undertakings which are involved in international cartel cases is the possibility of receiving overlapping punishments for their cartel conduct by competition authorities in different jurisdictions.

Various jurisdictions, including China, recognize the concept of double jeopardy and have introduced provisions which attempt to prevent over-punishment in the context of national proceedings. Although there is no international standard to prevent double jeopardy in the context of antitrust enforcement of the same cartel by different jurisdictions, a number of competition authorities have taken the principle into account when imposing fines in international cartel cases, for example by excluding commerce or turnover attributable to certain sales or applying a reduction to the fine to take account of the fact that another jurisdiction has already imposed fines in respect of certain sales.

We recognize that double jeopardy is an important consideration for clients which are implicated in international cartels. The Chinese antitrust agencies have not yet expressed how they intend to address the issue. However, as they become more experienced in dealing with such cases, we hope that they will also become more aware of the issue and will clarify their approach to the issue of double jeopardy.

Scenarios in which double jeopardy may come into play

The concept of double jeopardy comes into play where a cartel arrangement affects competition in more than one jurisdiction. A straightforward example is in the case of a product which is manufactured in Country A and sold to distributors in Country A, which then resell all or part of the product to Country B. If the manufacturers enter into a cartel arrangement in respect of the product, it may well impact competition in both Country A and Country B. If the competition authority in Country A includes all sales to distributors in Country A when calculating the fines to be imposed, and the competition authority in Country B includes all the indirect sales which are made into Country B by the distributors in calculating the fines, there will be an overlap in the punishment of the manufacturers in respect of the products which are ultimately sold to Country B, as the two authorities will be imposing fines in respect of the same effects.

The Air Cargo cases provide another illustration of how double jeopardy may come into play. In that case, a number of air cargo carriers were involved in a price-fixing cartel in respect of freight rates and surcharges for shipping goods across various countries worldwide. The cartel affected competition at both starting point and the end point of each shipping route. However, if each of the competition authorities of the affected jurisdictions took into account all inbound and outbound shipments when determining the level of fine, the cartelists would be punished twice for the same effects for certain shipments.

China's approach to double jeopardy in international cartel cases

In China, Article 24 of the Law of the People's Republic of China on Administrative Penalty attempts to prevent double jeopardy in Chinese proceedings, stating that "for the same illegal act committed by a party, the party shall not be given a fine more than once".

In the context of antitrust enforcement, to date China has only been involved in a handful of international cartel investigations, including the LCD panels and the auto parts cases. In those cases, the NDRC did not appear to take the double jeopardy principle into account when imposing penalties on the cartelists.

Other competition authorities' approaches to double jeopardy

Various competition authorities have already taken steps to address the double jeopardy issue in the context of international cartel cases. For example, in 1991, the EU and the USA competition authorities entered into a Competition Cooperation Agreement, which provides that each party will notify the other party of important cases they are handling, to the extent that they concern the important interest of the other party, and they will take into account the important interest of the other party when taking measures to enforce their competition rules.

The Air Cargo cartel demonstrates that various competition authorities have already implemented measures when imposing fines in international cartel cases to address the double jeopardy issue in practice, in particular the USA Department of Justice ("DOJ"), the Australian Competition and Consumer Commission ("ACCC") and the European Commission:

• In a 2007 plea agreement with British Airways ("BA"), the DOJ set out the method for calculating the fine imposed on BA. It explained that, when assessing the volume of affected commerce, the DOJ had excluded commerce related BA's cargo shipments into the USA. However, in order to take account of the seriousness of the harm caused to USA victims by the BA's conduct, the DOJ made an upward adjustment from what would have been the bottom end of the sentencing range to reflect the commerce attributable to cargo shipments into the USA.
• In 2008, the ACCC fined Qantas for its participation in the cartel. In assessing the level of fine, the ACCC took into account the fines which had already been imposed in the USA and which were expected to be imposed by the European Commission. The ACCC noted that the base amount of the fines would have been much higher if the cartelists were not also facing substantial penalties elsewhere.
• In November 2010, the European announced that it had fined 11 air cargo carriers for their participation in the cartel. In its press release, the European Commission explained that, in calculating the fines, it only took into consideration 50% of the turnover achieved on routes between the European Economic Area ("EEA") and third countries, in recognition of the fact that, on these routes, part of the harm caused by the cartel partially fell outside the EEA.

Although these somewhat inconsistent approaches would have meant that there was still some overlap in the fines, they are nevertheless a useful reference for the Chinese antitrust agencies in assessing how to address the double jeopardy issue.

Looking ahead in China

It can be expected that the Chinese antitrust authorities will continue to learn from the antitrust enforcement experience of other, more established and sophisticated competition law regimes. As the Chinese authorities investigate further international cartel cases, we consider that double jeopardy will increasingly be brought to their attention and we anticipate and hope that they will clarify their intended approach to the issue.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.