The Antitrust Division, through a federal grand jury, indicted seven Japanese executives for conspiring to fix prices in the long running auto parts investigation. There were two separate indictments. One charged executives from Mitsubishi Electric Corp. with conspiring to fix the prices of starter motors, alternators and ignition coils from at least 2000 through 2010. In the second indictment, four executives from Hitachi Automotive Systems were charged with conspiring to fix prices of multiple auto parts including starter motors, fuel injection systems, and ignition coils.

Atsushi Ueda, Minoru Kurisaki, and Hideyuki Saito of Mitsubishi Electric Corp. were charged with conspiring to fix the prices of certain automotive products sold to Ford Motor Company, General Motors LLC, Chrysler Group LLC, Fuji Heavy Industries Ltd., Nissan Motor Company Ltd., and Honda Motor Company Ltd. in the United States and elsewhere. This indictment also charged Kurisaki and Saito with knowingly conspiring to obstruct justice by destroying documents and corruptly persuading, and attempting to persuade others, to destroy documents. Saito was charged in an additional count with knowingly and corruptly persuading, and attempting to persuade, executives to destroy documents and delete electronic data that may contain evidence of antitrust crimes.

The second indictment charged Takashi Toyokuni, Ken Funasaki, Kazunobu Tsunekawa and Tomiya Itakura of Hitachi Automotive Systems Ltd. with conspiring to fix the prices of at least nine automotive parts sold to various automobile manufacturers such as, Ford Motor Co., General Motors LLC, Nissan Motor Co. Ltd., Toyota Motor Corp., and Honda Motor Co. Ltd., in the United States and elsewhere.

In the auto parts investigation 28 companies, mostly Japanese, have been fined more than $2.4 billion. In addition, 43 individuals have been charged. Twenty-six individuals have pleaded guilty and have been sentenced to prison terms ranging from a year and a day to two years.  Both Mitsubishi Electric and Hitachi Automotive pleaded guilty in November 2013 to criminal price-fixing charges, and were fined $190 million and $195 million, respectively. As discussed below, the indicted executives were “carve-outs” from the corporate plea agreement and subject to prosecution.  Many if not all of the corporate plea agreements have likely included carve-outs, so there may be additional indictments against individuals as the auto parts investigation moves through its final phase.

Carve-Outs

Corporate plea agreements between the Antitrust Division and corporate defendants typically deal with individual executives as well. The corporation would like to receive non-prosecution protection for as many executives as it can in return for their cooperation with the government. But, the Antitrust Division seeks to hold individuals accountable and will demand that certain individuals be “carved out.”  Carve-outs are not covered by the plea agreement and are subject to prosecution. Of these carve-outs, some reach a separate plea agreement of their own with the Division and agree to plead guilty, serve some jail sentence and cooperate in the investigation. Twenty-six individuals have done so in the auto parts matter. Other “carve-outs” who don’t reach plea agreements are identified in the corporate plea agreement in an Appendix that is filed under seal. These individuals are subject to prosecution. The individuals indicted yesterday were carve-outs from the corporate plea agreements reached last year between the Antitrust Division and Mitsubishi Electric and Hitachi. Not all carve-outs are ultimately indicted, but it is current DOJ policy to name only those likely to be indicted as carve-outs in the filing placed under seal. A carved-out individual may also be indicted under seal. [Read more…]

Antitrust enforcement, or competition law as it is known elsewhere, is international in scope. Cartels (“the supreme evil of antitrust”) are the top priority of all the major enforcement agencies worldwide. While I occasionally comment on enforcement actions in other countries, I’ve always wondered what the leading practioneers in those countries thought. So, I asked them! And, the idea grew to post occasional comments on Cartel Capers from experienced cartel defense attorneys from around the globe. As you can see below, it is my good fortune to know some pretty accomplished international colleagues. Today, I am posting short bios, and soon (as soon as I can figure out the software) I will have a drop down tab as a home for their bios and their insights.

Disclaimer: We have all worked on and continue to work on major international cartel matters.   Ethics and good judgment limit us from commenting on cases we are working on and prevent us from disclosing non-pubic/sensitive information. The information posted is not intended to be legal advice. We are not offering legal opinions, just our personal insights on major cartel developments. But, let me introduce my friends. I am sure you will be anxious to read their take on important cartel practice and procedure developments in the jurisdictions where they practice.  Guest posts will begin appearing in the near future.

Brazil: Mauro Grinberg

Mauro Grinberg is a partner at Grinberg Cordovil. He is one of the leading competition lawyers in Brazil with an incredible range of experience. Mr. Grinberg is a former Commissioner of CADE, the Brazilian antitrust agency; Former Attorney of the National Treasury of Brazil; Founder, Former Head and presently member of the Board of IBRAC (the main Brazilian antitrust think tank); Member of IBA (Antitrust Committee) and of ABA (Section of Antitrust Law); and author of many articles and frequent speaker on antitrust issues.

Canada: James Musgrove

James Musgrove is the Co-Chair, Competition and Antitrust Practice of the Canadian law firm, McMillan. Mr. Musgrove is recognized as a leading competition lawyer by various organizations, including Chamber Global, GCR, Lexpert, Best Lawyers and Who’s Who Legal, amongst others. He is active in national and international antitrust organizations, is Past Chair of the Canadian Bar Association National Competition Law Section, and currently serves on Council of the American Bar Association Section on Antitrust Law.   In 2014 he won the GCR award for Behavioural Matter of the Year – Americas for his successful defence of MasterCard, and was recently named Advertising and Marketing Lawyer of the Year—Toronto—by Best Lawyers’.

China:  Jingwen Zhu

Jingwen Zhu leads DLA Piper’s Asia competition practice. She is experienced in advising Chinese and international clients on multi-jurisdictional merger notifications, antitrust investigations, private antitrust litigations, antitrust counseling and compliance. She also has experience in state owned monopolies, privatisation of infrastructure and subsequent sector regulation, especially in cases concerning essential facilities.

Ms. Zhu is qualified as a lawyer in the People’s Republic of China. Ms. Zhu speaks Chinese (Cantonese), Chinese (Mandarin), English and German.

European Union: Dr. Markus Röhrig

Markus Röhrig is a partner at the European law firm Hengeler Mueller. Hengeler Mueller is a partnership of lawyers with offices in Berlin, Düsseldorf, Frankfurt, Munich, Brussels and London.   Mr. Röhrig joined Hengeler Mueller in 2004 and has been a partner since 2009. He is based in the Brussels office.

Mr. Röhrig has received his legal education at the University of Cologne and Georgetown University. He is admitted to the German and the New York bars. Mr. Röhrig specialises in German and European competition law. Mr. Röhrig frequently advises clients with respect to European and German cartel investigations, behavioral issues (abuse of dominance) and merger control cases.   Recently, he has been involved in major international cartel cases that are being pursued by the European Commission, the US Department of Justice and the Japanese JFTC in the automotive and other sectors.

India:    Avinash B. Amarnath

Avinash Amarnath is an associate at ‘Vinod Dhall and TT&A’ in New Delhi, India. Prior to his current position, Mr. Amarnath was an associate at the competition team in Amarchand & Mangaldas & Suresh A Shroff & Co. He has advised clients across various sectors such as automobiles, financial services, pharmaceuticals, steel, private equity, petrochemicals and electronic lab equipment on Indian competition law. Mr. Amarnath has written numerous articles on the Competition Commission of India and competition law in India. Mr. Amarnath is a graduate of Kings College London with an LLM in Competition Law.

 

 

 

Yesterday I had the good fortune to attend the 8^th Annual Georgetown University Law Center Global Antitrust Enforcement Symposium. I was invited to attend by Bates White, a leading economic consulting firm. Bates White is a sponsor of the program. The agenda covered all areas of antitrust enforcement including merger enforcement, abuse of dominance and IP and high-tech issues. But in keeping with the theme of this blog, I’d like to comment on the star of the program—Cartel Enforcement—”the supreme evil of antitrust.”

Bill Baer, Assistant Attorney General for the Antitrust Division was the keynote speaker. Baer focused his remarks completely on cartel enforcement. A copy of his speech is available here.

Compliance was in the air. Both Baer, and another Antitrust Division leader, Brent Snyder, Deputy Assistant Attorney General for Criminal Enforcement, emphasized the need for corporations to have strong and effective compliance programs. Baer pointed out that the average jail term for an individual convicted of price fixing or bid rigging is now at 25 months.   And, courts have fined corporations as much as $1.4 billion in a single year. Baer emphasized, “effective compliance programs minimize the chance that companies will conspire to fix prices. And they maximize the chance for a company guilty of price fixing to find out about the conspiracy early enough to qualify for corporate leniency or otherwise cooperate with our investigation.”   [Read more…]

I’m pleased to announce my role as an Antitrust Ambassador for Emtrain — a leading provider of modern ethics & compliance training. I will be partnering with my friend Jared Bona, The Antitrust Attorney, to create an engaging antitrust compliance program for Emtrain.

Jarod and I are joining a distinguished team of experienced practitioners, including Mike Koehler (FCPA), Sally March (Corporate Compliance & Ethics), Chris MacDonald (Business Ethics), and Timothy Crudo (Governance and Insider Trading).

Here’s a recent thought leadership clip I created with the Emtrain team in San Francisco. Click here to watch the video and please let me know what you think.

Speaking to a camera was much different than speaking to a jury, and in some ways more difficult.  Fortunately, with the benefit of multiple takes, I was able to avoid reversible error.

Also, by happy coincidence, I am a speaking at the SCCE Compliance Conference in Chicago on September 15, 2015 on a panel titled “Global Antitrust Compliance and Risk—Creating an Effective Program.”

Emtrain has an information booth at the conference and I’ll be there hoping to talk some competition law (or football) to any willing partners. If you are at the conference, please stop by and say hello at booth #96.  I’m looking forward to meeting you.

The 2014 Compliance & Ethics Institute conference is at the Hyatt Regency Chicago, September 14-17, 2014.

 

In Dahl v. Bain Capital Partners, LLC., former shareholders of companies purchased through leveraged buyouts alleged a per se violation on the part of Carlyle Group, Goldman Sachs, Blackstone and others by conspiring to fix the prices paid in leveraged buyouts. The defendants were accused of conspiring to suppress takeover prices by establishing “club rules” which kept the firms from outbidding each other once buyouts were made public. 937 F. Supp. 2d 119, 124 (D. Mass. 2013)(“Plaintiffs contend that defendants understood that, by working together, they could suppress competition and avoid another price escalation.”).  The Carlyle Group was the last defendant to settle this class action–for a reported $115 million.   In August, Blackstone Group LP, KKR & Co LP and TPG Capital LP disclosed in a court filing they agreed to pay $325 million to settle the lawsuit. Prior to that, Silver Lake Partners LP settled with the plaintiffs for $29.5 million. Goldman Sachs and Bain Capital Partners LLC settled for $67 million and $54 million, respectively (here).  The firms faced up to $36 billion in liabilities if potential damages were trebled under the Sherman Act.

The case helps re-learn some lessons about cooperation among buyers: it can be a per se violation; legitimate joint ventures can easily slide into buyer collusion, experienced antitrust counseling pays, and private plaintiffs negotiate much like the DOJ.   [Read more…]

Last week, China’s National Development and Reform Commission (NDRC) imposed its first fines in the worldwide auto parts investigation. Eight Japanese auto parts companies and four Japanese bearing makers were fined a cumulative total of just over $200 million. In a related development, Batman and Robin announced that they have directed Alfred to determine whether the Batmobile contains any of the price-rigged parts.

OK, maybe that is a little far-fetched, but the point is that cartel enforcement has clearly become a worldwide event. With China pulling up a seat at the table, the risks have never been higher for would be cartelists. “This sends a warning to companies engaging in global price-fixing that they should beware of China,” said Chen Danzhou, a lecturer specializing in anti-monopoly law at the University of International Business and Economics in Beijing. “The government is getting more aggressive as it tries to make a structural adjustment to the market.” (Bloomberg)   China had also recently fined 6 companies from South Korea and Taiwan $56 million for participation in the LCD panel cartel.

The Antitrust Division coordinated the auto parts investigation with the Japanese Fair Trade Commission, the European Commission, Canadian Competition Bureau, Korean Fair Trade Commission, Mexican Federal Economic Competition Commission and Australian Competition and Consumer Commission. What this usually means, at a minimum, is that the agencies coordinate timing of search warrants, dawn raids, inspections or wherever term is used to pay an unscheduled visit on businesses (and in some cases executives’ homes) to seize paper and electronic documents. The coordination minimizes the ability of subjects to clean house before the guests arrive. China did not participate it the auto parts coordination kickoff, but followed on as other nations brought cases.   But, China is thought to have cooperated with the DOJ, European Union Japanese, Korean and Taiwan Fair Trade Commission, (JFTC, KFTC, TFTC, respectively) in launching the recent investigation of the global capacitors industry. [Read more…]

In its first Munibonds trial in 2012, the Antitrust Division convicted three former General Electric executives for rigging bids to suppress interest rates paid to municipalities on funds they raised through bonds and then invested in guaranteed investment contracts until such time as the funds were needed.  The indictment charged that the interest rates were rigged on investment agreements ranging “from as short as one month to as long as thirty years.” The three defendants were in jail when the Second Circuit reversed their conviction in a split vote (2-1) on November 26 on statute of limitations grounds. An opinion followed: United States v. Grimm, 738 F.3d 498 (2d Cir 2013).  The Antitrust Division sought an en banc hearing, which was denied last Friday in an 8-4 vote.

The case raised the statute of limitations issue because the Antitrust Division was relying on what is often called the “payments theory.” In a road construction case, for example, the bid may be rigged on Day 1 but the indictment returned outside the Sherman Act statute of limitations of five years.  The payments on the rigged contract, however, are considered overt acts in furtherance of the conspiracy because the object of the conspiracy is to be paid at the rigged, inflated price. Therefore the statute does not begin to run until the winning conspirator has received its last payment on the rigged contract.  Six circuits have endorsed the payments theory and held that conspiracies did not end when the rigged contract was obtained but continued as long as a conspirator made or received a contractual payment. United States v. Anderson, 326 F.3d 1319, 1328 (11th Cir. 2003); United States v. Evans & Assocs. Constr. Co., 839 F.2d 656, 661 (10th Cir. 1988); United States v. N. Improvement Co., 814 F.2d 540, 542 (8th Cir. 1987); United States v. A-A-A Elec. Co., Inc., 788 F.2d 242, 245 (4th Cir. 1986); United States v. Girard, 744 F.2d 1170, 1172-74 (5th Cir. 1984); United States v. Walker, 653 F.2d 1343, 1346-49 (9th Cir. 1981).

The government relied on the payments theory in Grimm. The applicable statutes of limitations were: five years for general fraud, and six years for conspiracy to defraud the United States by violating the internal revenue laws. The overt acts in question were the payments made by GE to the municipalities at suppressed interest rates. Each time such a payment was made the statute of limitations restarted. The government argued that this case fell within the payment theory as set forth in the Second Circuit in United States v. Salmonese, 352 F. 3d 608 (2d Cir. 2003). In Salmonese the Court held that a conspirator’s receipt of anticipated profits from the sale of stripped warrants constituted an “overt act in furtherance of an economically-motivated conspiracy.” 352 F.3d at 616. The Court, in accord with other circuits stated, “where a conspiracy’s purpose is economic enrichment, the jointly undertaken scheme continues through the conspirators’ receipt of ‘their anticipated economic benefits.’” Id. at 615. [Read more…]

Last Friday Judge Lucy H. Koh issued an unusual ruling in a somewhat unusual case.  The ruling was unusual in that the court rejected a proposed settlement in the hi-tech wage collusion class action case.  Judge Koh denied a request to preliminarily approve a $324.5 million deal to end the antitrust class action against Google Inc., Apple Inc., Intel Corp. and Adobe Systems Inc.  The suit alleged the companies agreed to not compete for each others’ high-tech employees such as software engineers and computer scientists. The court found the proposed settlement too low and indicated it should be at least $55 million more.  The civil case followed a similar suit by the Antitrust Division charging a per se violation for agreeing not to compete, but the Division’s case was brought as a civil action.

Judge Koh was troubled by the fact that the settlement called for disproportionately less from the defendants than settlements reached earlier with Intuit Inc., Lucasfilm Ltd. and Pixar Animation Studios Inc. This didn’t seem right to the court because the $324.5 agreement was reached after the court had granted class certification, which should have upped the ante for the hold out defendants.  The court explained: “Counsel’s sole explanation for this reduced figure is that there are weaknesses in plaintiffs’ case such that the class faces a substantial risk of non-recovery.  However, that risk existed and was even greater when plaintiffs settled with the settled defendants a year ago, when class certification had been denied.”  More details about the case and settlement rejection can be found here:  (NY Times); here (WSJ); and here (Reuters).

The Class Action Followed USDOJ Antitrust Division’s Earlier Civil Suits

The plaintiffs’ case followed a civil lawsuit filed by the Antitrust Division in 2011 that was settled by consent decree   The defendants were perhaps fortunate that the Division chose to proceed civilly for collusion that in other contexts might have resulted in criminal prosecutions. The complaint charged a per se violation of the Sherman Act stating: “These no cold call agreements are facially anticompetitive because they eliminated a significant form of competition to attract high-tech employees, and, overall, substantially diminished competition to the detriment of the affected employees who were likely deprived of competitively important information and access to better job opportunities.” One example from the complaint of the agreements reached is the Apple-Google agreement:

 17. Beginning no later than 2006, Apple and Google agreed not to cold call each other’s employees. Senior executives at Apple and Google reached an express no cold call agreement through direct and explicit communications. The executives actively managed and enforced the agreement through direct communications.

18. The Apple-Google agreement covered all Google and all Apple employees and was not limited by geography, job function, product group, or time period. Moreover, employees were not informed of and did not agree to this restriction.

[Read more…]

I’ve posted recently on my concerns with the Antitrust Sentencing Guidelines (2R1.1) as they relate to individual defendants (here).  Other submissions have been made to the Commission by people/institutions with great insight and influence in the cartel arena.  I’ve summarized a few of these below.

A. Department of Justice 

The Department of Justice, Criminal Division, in its annual report to the Sentencing Commission included a section on the Antitrust Offenses guideline (2R1.1)(here see pps. 24-25).  The DOJ believes the current guidelines are sufficient and provide the transparency and the flexibility to properly deter cartel behavior and other criminal antitrust offenses. David Baumann, who reports on cartel matters for PaRR, (Policy and Regulatory Report)(http://www.parr-global.com) wrote the following summary which he kindly allowed me to reprint:   [Read more…]

The United States Sentencing Commission posted a notice soliciting comments for possible revisions to USSG 2R1.1 (Antitrust Offenses) to be submitted by July 29th.  I have posted about this previously. (here)(here).  This week I submitted my comments to the Commission.  I limited my comments to my concerns over the guidelines as they apply to individual defendants.  My basic concern is that the volume of commerce is a poor measure of an individual defendant’s culpability, yet it is the primary driver of the offense level.  More specifically, my comments set forth my three primary concerns with the antitrust guidelines as applied to individuals: 1) that the maximum prison sentence of 10 years under the Sherman Act should be reserved for the most egregious cases such as recidivism or explicit economic coercion; 2) that the volume of commerce be de-emphasized as the primary determinant of an individuals’ culpability and be applied only for defendants who had the authority to commit their company to the cartel; and 3) that other factors that more accurately reflect culpability (such as motive) play a role in guidelines calculation.

I also discuss how the Antitrust Division has changed its investigative strategy from “Big Fish/Little Fish” to a “Race to the Courthouse.” This strategy, while successful on one level, has highlighted the inequity of the guidelines of relying principally on volume of commerce to determine an individuals’ recommended guideline sentence. The letter also explains how the failure of the guidelines to reflect an individual’s culpability has led Courts to nearly uniformly depart from imposing a  guidelines sentence, even when recommended by the prosecutors.

Finally, the letter asks the Commission to consider my suggested antitrust guideline reforms that I believe will better reflect an individual’s personal culpability.  While I have opinions based on my many years of prosecuting antitrust crimes, I certainly don’t have all the answers. My hope is to contribute to an informed discussion of how the antitrust sentencing guidelines can be amended to punish based on relative individual culpability and also best serve the purpose of general deterrence of price-fixing and bid rigging.

A complete copy of my letter to the Sentencing Commission can be found here.  Or, email me and I would be happy to send you a copy.

Thanks for reading!