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
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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?
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