There were two items of interest last week related to cartels and Japan that I wanted to pass on.
A. Japanese Executives Sentenced to Prison (suspended) In Japan
On February 4, the Tokyo District Court convicted NTN Corporation, a Japanese bearing manufacturer, and two of its former executives for violations of Japan’s Antimonopoly Act in connection with its participation in an alleged cartel to fix prices for the sales of bearings, according to Nikkei Shinbun.
As a result of the verdict, the Court imposed a criminal fine of 400 million yen (approximately 3.4 million USD) on the company. The two former executives, one a former director, were sentenced to 18 months and 12 months respectively. However, both sentences were suspended pending completion of a three-year probationary period.
The Japan Fair Trade Commission raided NTN, as well as other Japanese bearing manufacturers, in July 2011. In June 2012, NTN and the two executives were indicted with their alleged conduct in connection with the cartel.
The company immediately filed an appeal to the Tokyo High Court, according to its press release.
The case is noteworthy to me because unlike most cartel cases in Japan, it was not handled administratively by the JFTC. The JFTC cannot bring criminal charges, but can make a referral to the Tokyo prosecutor’s office, which they did in this case. While the prison sentences were suspended for the individual executives, it is a positive development for cartel enforcement that the indivuduals (and the company) were criminally charged. (Prison sentences were very rare for nearly a century under the Sherman Act).
Also, the Chinese National Development and Reform Commission had previously fined NTN, after providing leniency to one cooperating company. Cartels can be extremely profitable, and it is still probably the case that most cartels go undetected. But, with the cartel-disruptive force of leniency, and the ever-increasing penalties, the cost-benefit calculus should be changing more often in favor of “I think I’ll pass on that meeting in the smoke-filled back room of the .…”
B. Two Former Japanese Auto Parts Executives Indicted on Sherman Act and Obstruction Counts
Another item of note is that on February 5, 2015, a grand jury returned a two-count indictment against Hiroyuki Komiya and Hirofumi Nakayama, former executives of Mitsuba Corporation. One count charges price-fixing, the other obstruction of justice. In one way the indictment is unremarkable. The auto parts investigation has entered the “cleanup” phase during which the Antitrust Division will bring cases against individuals the Division deemed culpable enough to charge and who were not willing to enter into plea agreements acceptable to the Division. What is, or may be, noteworthy is the fact that the former executives were indicted for obstruction of justice in addition to price-fixing.
The reason this caught my eye was the possibility of extradition. There are many Japanese fugitives in various global cartel investigations dating back to at least the late 1990’s. The Antitrust Division has never succeeded in having a Japanese national extradited from Japan to face a Sherman Act (15 U.S.C. Section 1) charge, and I don’t believe it likely that the Japanese government will anytime soon agree to extradite one of its citizens for price-fixing. But might it do so for obstruction? I don’t know; but I note that the Division did succeed in having British national extradited for obstruction of justice in 2010 (after a seven-year extradition battle).
The defendant there, Ian Norris, was charged in a four-count indictment: one count of price-fixing and three counts of obstruction. The U.K. extradited the defendant to face the obstruction charges, but not the price-fixing charge. Price fixing was not a crime in the U.K. (at the time) so the price-fixing charge did not meet the “dual criminality” requirement for extradition under the U.S.-U.K. Mutual Legal Assistance Treaty. (All MLATs contain a similar provision.) But if Japan has the equivalent of the U.S. crime of obstruction of justice in its criminal code, which seems likely, it ought to accede to an extradition request, if one is made. Whether it actually will do so or whether it will find some basis on which to deny the request, of course, remains to be seen. But, as the saying goes, “The cover up is worse than the crime,” so a government may be persuaded to agree to extradition for obstruction, even if the defendant will not be extradited to face the price-fixing charge.
In the case of the British executive who was extradited to face obstruction charges, the indictment spelled out in great detail (in three counts) the extent and degree of the obstruction. In the current case against the Japanese executives, the indictment charges obstruction in fairly generic language. Perhaps this means the obstruction indictment is not a prelude to seeking extradition of the defendants from Japan. The obstruction charge, however, will make international travel even more perilous for the indicted defendants as the grounds for extradition on obstruction is more universally recognized.
For further background, below are some excerpts from the recent Antitrust Division press release describing the charges.
On February 5, 2015, two former executives of Mitsuba Corp. were indicted for their participation in a conspiracy to fix prices and rig bids of automotive parts and for obstruction of justice for ordering the destruction of evidence related to the conspiracy. The indictment charged Hiroyuki Komiya and Hirofumi Nakayama with conspiring to fix the prices of various automotive parts, including windshield wiper systems and components, sold in the United States and elsewhere. The defendants were also charged with knowingly and corruptly persuading, and attempting to persuade, employees of Mitsuba to destroy documents and delete electronic data that may contain evidence of antitrust crimes in the United States and elsewhere.
Komiya participated in the conspiracy as Mitsuba Director of Automotive Sales. In 2007, he was promoted to Executive Managing Officer and Vice President of Sales. Nakayama was the Office Manager of Mitsuba’s Nagoya sales office. In 2005, he was promoted to Sales Operating Officer.
Mitsuba had previously been charged with price-fixing and obstruction in the auto parts investigation. On November 6, 2014, Mitsuba pleaded guilty and agreed to pay a $135 million criminal fine for its role in the conspiracy as well as obstruction of justice. The Mitsuba information alleged that “[a]fter becoming aware of the FBI search of Defendant’s co-conspirator’s U.S. offices, Executive A informed certain of his subordinates employed at the U.S. subsidiary of Defendant about the FBI search, and instructed such subordinates, as well as other employees of Defendant, to locate, conceal and destroy documents and electronic files that were likely to contain evidence of antitrust crimes in the United States and elsewhere.” Executive A also destroyed and concealed documents in his possession, custody and control in the Eastern District of Michigan that were likely to contain evidence of antitrust crimes in the United States and elsewhere.
I’d be interesting in comments from others about how/whether cartel enforcement is ramping up in Asia.
Thanks for reading.