Cartel Simulation Sessions:

The Game Chip Cartel“Crime and Punishment Redux: The Practice,

Procedure and Substance of Criminal Competition Law”

May 17, 2010

The persons and events described in this

hypothetical are fictional. Any resemblance

to actual persons or events is entirely

coincidental.

Headshot Tech Inc.

• Located in Tiny Township,

Ontario

• A Canadian manufacturer of

a game controller chip

• Achieved global prominence

in the international video

game market

• Recently acquired by

Megalomax Inc. (a global

hedge fund, headquartered in

Basel, Switzerland)

The Global Game Chip Market

Headshot

45%

Volksbot

25%

Robochip

10%

Matsumax

15%

Truscani

5%

• Volksbot GmbH,

Germany

• Matsumaxi Co. Ltd.,

Japan

• Robochip Ltd.,

United States

• Truscani, Italy

Eddie Goalstick, CEO of Headshot

• Goalstick was instrumental in arranging the acquisition of Headshot by Megalomax

• He has been retained as CEO, subject to an earnout arrangement to be paid over a two-year period

• On the acquisition of Headshot, the entire legal

department was summarily discharged

• Ms. Becky Byte, Megalomax’s executive VP

(legal), has assumed the role of Chief General

Counsel for the company

• Ms. Byte engaged E-services Inc. to conduct a

discreet external audit of Goalstick’s accounts

and activities

• E-Services reported that certain encrypted files were found in Goalstick’s database

• The encryption appeared to be accomplished with “off-the-shelf” software and could be readily cracked

• The files contained a

number of cryptic and

blurry handwritten

documents

• The documents have

the names of

“Volksbot” and

“Matsumaxi”, and

corresponding

columns and figures

• Insert g-mail image

0

1 0

2 0

3 0

4 0

5 0

6 0

7 0

8 0

20

04

20

05

20

06

20

07

20

08

20

09

H e a d s h o t

V o lk s b o t

M a t s u m a x i

R o b o c h ip

T r u s c a n i

• Ms. Bytes instructs Headshot’s market research division to prepare a spreadsheet of global price ranges and trends for the game controlled chip among all manufacturers for the last 5 years

• It reveals an extended period of double-digit price increases in game controllers in lock-step with all competitors in the market

• Headshot’s North America Marketing Manager has just reported the loss of his portable computer while on a business trip in Europe

• She asks IT to see if crucial files can be recovered

• She is told that a large amount of material has recently been deleted from the Manager’s email accounts and documents folders, although IT may be able to recover this using the backup tapes

• Insert gmail email

• The next day, Ms.

Byte receives a

telephone call from

Houston Murdock, a

local white-collar

defence counsel

• Headshot’s COO received a strange call from his counterpart at Volksbot

• There are rumours of some antitrust activity involving Volksbot and Headshot

• He suggested a meeting at which they could “get to the bottom” of this and “put it all behind them”

• He suggested that “we have to keep this out of the hands of the regulators and lawyers”

• E-services prepared a report

• Ms. Byte wants to prepare a preliminary report for Megalomax’s CEO

• She is comforted in her belief that the report would be privileged

Ms. Byte meets with her external

Canadian and US counsel for advice.

Canadian external counsel makes a call to

the Senior Deputy Commissioner,

Competition Bureau to place a “marker”

US external counsel makes a call to the Chief

of the National Criminal Enforcement Section

of the Antitrust Division of the Department of

Justice to place a “marker”

The Chief of the National Criminal Enforcement

Section of the Antitrust Division of the

Department of Justice and the Senior Deputy

Commissioner, Canadian Competition

Bureau discuss the matter

The Investigation and the

Consequences

• Headshot has now applied for immunity from the Bureau (as well as other agencies, on a global basis)

• In Canada, the maker and proffer processes have been completed

• Headshot has supplied a detailed description of the Game Chip Cartel to the Bureau

• Headshot declined to

enter into a joint defence

with Goalstick

• Goalstick has not

cooperated with

Headshot’s investigation

• Goalstick has been

quietly put on a form

of administrative leave

from Headshot

• Headshot instead

received a relatively

complete debrief from

its North American

Marketing Manager

The problems continue… • Goalstick, though his own

counsel, has applied to the Bureau for individual immunity

• He asserts that he is aware of additional anti-trust conduct within Headshot that he believes may not have been disclosed

• His counsel asks that he be provided with disclosure or details of Headshot’s immunity proffer

… and continue…

• Headshot’s U.S. Counsel learns that

Robochip applied for “amnesty plus” with

the Divison

• They assert that the participants were

involved in another conspiracy relative to

game console software

… and continue …

• The Marketing Manager has actively been destroying documents, even after cautioning

• The Manager has retained his own counsel and is refusing to be interviewed by the Bureau until he receives guarantees that he will not be prosecuted for obstruction

… and continue…

• Headshot is instructed not to pay legal

fees for the Marketing Manager, in light of

his conduct

• The Manager says he cannot afford the

expenses and refuses to attend an

interview with counsel

… and continue …

• A press notice from some of the target companies confirms that dawn raids had taken place

• A noted Canadian Plaintiff’s law firm approached Headshot indicating that it was about to file a class action lawsuit and offered Headshot the opportunity to participate in that Firm’s immunity program

… and continue.

• The Plaintiffs proceed with their claim and Headshot is instructed to quickly reach a settlement

• Headshot thus wants to produce its documents and make its witnesses available for review and interview by the Plaintiffs’ firm – which wants to use this cooperation in order to pressure the remaining parties to settle

• Headshot’s Canadian counsel seeks the Bureau’s advice and consent on this issue

Questions?