The United States Sentencing Commission periodically reviews and revises current guidelines and submits proposed guideline amendments to the Congress for approval not later than the first day of May each year. The Sentencing Commission is currently seeking comments on possible priority policy issues for the amendment cycle ending May 1, 2015. One of the priority guidelines the Commission is seeking comment on is the guideline for sentencing antitrust individuals and corporations for Bid Rigging, Market Allocation and Price Fixing, §2R1.1. Comments are due by July 29, 2014.
An area that is of great interest to me is how the guidelines calculate guideline range individual jail sentences. This area needs major reform if this guideline is to be rational and equitable and taken seriously by the Courts. I’ll just touch on one critical aspect of the individual sentencing guideline in this post. The current guideline gives far too much weight to volume of commerce as a measure of culpability. In most international cartels, (such as the Liquid Crystal Display cartel) even a mid-level executive (i.e. sales manager) who is directed by a superior to attend cartel meetings may be facing the maximum ten years in prison under the Sherman Act. By contrast, a hypothetical business owner in the U.S. who rigs a $2 million construction contract and pockets a $200,000 overcharge would be far less culpable under the current guideline. The hypothetical calculations look like this:
- Sales Manager in international cartel:
Base offense: 12
Agreement Included bid rigging +1
Volume of commerce (more than $1 billion) +14
Role in the Offense (manager) + 3
Total Offense Level 30
Guideline Jail Range (97 to 121 months)
- Construction Company CEO
Base offense 12
Agreement Included bid rigging +1
Volume of Commerce (more than $1 million) +2
Role in the Offense (organizer/leader) +4
Total Offense Level 19
Guideline Jail Range (30-37 months)
The guideline range sentence for the sales manager in an international cartel is much higher than that for the CEO of a small firm who personally profits from his scheme because the main driver of the guidelines range is volume of commerce.
Another grievous unfairness in using volume of commerce as the principal factor in setting a guideline range is that it does not differentiate culpability of participants at different levels of authority. Most international cartels involve “Top Guy” and “working group” meetings. The Top Guy is the C-suite executive who initiates the company’s participation in the cartel and makes major cartel decisions, including who to send to working group meetings. The working group guy exchanges price and volume information with his competitors and may reach agreements subject to the approval of the Top Guy. Under the current guidelines, there is virtually no difference in culpability between the Top Guy and his subordinate. This is because the volume of commerce is based only on the duration of the individuals’ participation in the cartel—not his role in it. The current guideline reads: “For purposes of this guideline, the volume of commerce attributable to an individual participant in a conspiracy is the volume of commerce done by him or his principal in goods or services that were affected by the violation.” So, if the Top Guy, for example the CEO, and the working group guy, a sales manager that was sent to the meetings by the CEO, were involved in the cartel for the same duration, their volume of commerce is the same. This is wrong and should be changed.
The Sentencing Commission is also considering revisions to the corporate fines under the antitrust guidelines. I suspect there will be numerous comments regarding whether the fines for corporations are substantial enough to provide deterrence or are just a “cost of doing business.” There is already a fair amount of scholarship on the subject. One thing that has changed in the last decade with respect to international cartels is the dramatic increase in worldwide enforcement actions–both by governments and private plaintiffs. The first major international cartel prosecution was the lysine cartel involving ADM and other international companies. The lysine cartel fixed prices on a global basis, but faced sanctions in a much more limited geographic scope (i.e. U.S., Canada, E.U.). It may well have been a profitable cartel. The geographic scope of the penalties was far less than the global reach of the cartel. Today, global competition agencies have stepped up enforcement, including the enforcers in the huge markets of China, India, Brazil and Russia. Moreover, class action practice has been exported from the U.S. to other areas of the world. These developments may have at least tipped the scale towards making international cartels a money-losing proposition—at least for the ones that get caught. But, how, if at all do these developments impact the U.S. sentencing guidelines?
The only comment I have on corporate fine guidelines is that the penalty for price-fixing in the U.S. should still be rationally related to the harm caused in the U.S. But, what level those penalties should be involves a study of empirical evidence and data. Since I don’t have the data, or training to comment on corporate penalties, I won’t. (Unless I run out of other topics to blog about). But, if you are interested, the Sentencing Commission would like to hear from you.
I am preparing a submission for the Sentencing Commission that will expand on some of my “beefs” with the current guidelines for individuals. Another area that could use reform in my opinion, for example, is the “Role in the Offense” adjustment. In future posts, I’ll share some of my thoughts on guidelines reform for individuals under the antitrust guidelines and would appreciate any feedback. Or, if you have any thoughts, experiences or suggestions that you want to share please leave a comment or contact me directly. Robert.firstname.lastname@example.org.
Thanks for reading.
[Comments should be sent to the Commission by electronic mail or regular mail. The email address is email@example.com. The regular mail address is United States Sentencing Commission, One Columbus Circle, NE, Suite 2-500, South Lobby, Washington, DC 20002-8002, Attention: Public Affairs — Priorities Comment. ]