United States: Global Cartel Enforcement Report

Last Updated: January 12 2016
Article by Morgan Lewis Antitrust Practice

GLOBAL COMPETITION AGENCIES CONTINUE TO AGGRESSIVELY ENFORCE CARTEL LAWS

Although some major US Department of Justice (DOJ) investigations are ending, increased international cooperation and new probes confirm expanding cartel enforcement.

As in recent years, competition authorities worldwide continued to aggressively investigate and prosecute cartel activity in 2015. The United States led the way with a total of $3.8 billion in cartel fines. The European Union countries and Japan also garnered significant fines this year, although down from last year. Taiwan imposed its largest criminal antitrust fine ever in 2015: $177 million for a cartel of capacitor manufacturers. Although the longstanding DOJ auto parts investigation is winding down in 2016, the DOJ continues its aggressive cartel enforcement in other industries. The DOJ has already opened new investigations and accelerated other investigations, including in the capacitors, resistors, other electronic components, e-commerce, financial services, and generic pharmaceuticals industries. Other countries continue to investigate and pursue various auto parts companies.

Increasingly more countries are considering whether to criminalize cartel conduct, such as Chile, which is currently debating the ramifications of making cartel violations a crime. Indonesia and New Zealand also considered but ultimately rejected legislation to criminalize cartel conduct in 2015. This trend not only increases the stakes for violations a crime, but also potentially makes extradition a more powerful tool in the DOJ's cartel-fighting arsenal. Most extradition treaties have a "dual criminality requirement" (i.e., the conduct at issue must constitute a crime both in the extraditing and receiving country). This requirement has posed a challenge to past efforts by the DOJ to prosecute executives located outside the United States. It is probably no coincidence that the DOJ has increasingly stressed the importance of extradition in its cartel enforcement agenda. It is likewise no coincidence that the DOJ is seeking to push the boundaries of its jurisdiction, arguing for the extension of US antitrust laws to cartel conduct outside the United States.

Finally, the United States, Canada, and other countries have underscored in 2015 the importance of effective corporate compliance programs to mitigate criminal cartel liability or, in the case of ineffective compliance programs, to create cartel liability. The United States provided the first fine reductions in cartel cases in 2015 for "effective compliance programs." Canada and the UK have also recently announced incentives for compliance programs, and others (such as France and Colombia) are also seriously considering them.

TRENDS

EMERGING AND CONTINUING TRENDS IN CARTEL ENFORCEMENT

  • Global Cartel Fines Are Mixed: Cartel fine totals in 2015 were driven by a handful of large matters. Most of the record $3.8 billion in cartel fines collected by the United States in 2015 derived from the global investigations of collusion concerning foreign exchange markets. Countries within the European Union assessed $2.5 billion in cartel fines in 2015, slightly higher than the $2.3 billion assessed in 2014. Most of the European fines resulted from financial benchmark investigations and a French investigation of the freight forwarding industry in that country. Also, the Japanese Fair Trade Commission (JFTC) assessed approximately $57 million in fines in 2015, a fraction of the $398 million assessed in 2014. The JFTC fines are, however, in line with historical levels. 2014 fine totals were unusually high, driven largely by a $223 million fine on roll-on/roll-off shipping companies. (See page 6.)
  • Industries in Focus: 2015 saw significant enforcement actions and significant new investigations in the automotive, financial services, electronic component, transportation, real estate, and pharmaceutical industries. Looking ahead, the DOJ is focusing on new industries, including those engaged in e-commerce and electronic components. (See page 12.)
  • Various Countries Consider Criminalization of Cartel Violations: In general, competition agencies continue to consider whether to criminalize cartel conduct. For example, Chile's legislators are considering a bill to introduce criminal penalties for individuals, with possible ramifications of up to 10 years of prison time. However, other countries, such as Indonesia and New Zealand, have rejected efforts to impose criminal sanctions on antitrust breaches. Politicians in Indonesia argued that criminalizing the antitrust laws would unfairly harm small business owners, who were unfamiliar with that country's competition law. New Zealand rejected a criminalization measure based on the argument that criminalization would have a chilling effect on procompetitive company collaboration. (See page 1.)
  • Taiwan Steps into the Cartel Enforcement Spotlight: 2015 has shown the Taiwan Fair Trade Commission (TFTC) to be aggressive in investigating and prosecuting alleged cartel conduct by using new powers granted by an amendment of the Taiwan Fair Trade Act. In February 2015, Taiwan amended the Fair Trade Act to allow the TFTC to infer the existence of collusive agreements from market structure, characteristics of products of service, costs and profit considerations, and economic rationality of the conduct under review. In December 2015, the TFTC fined seven aluminum capacitor companies and three tantalum capacitor companies $177 million. (See page 15.)
  • Joint DOJ Investigations and Prosecutions Continue: The DOJ's Antitrust Division has been teaming with other divisions of the DOJ, particularly the Criminal Division, to pursue joint investigations and prosecutions of cartel conduct. This trend has increased the complexity of responding to and resolving cartel investigations. Earlier this year, a company that received amnesty from the Antitrust Division was prosecuted by the Criminal Division for the same conduct underlying its amnesty application and was forced to pay a fine in connection with the Libor investigation. (See page 16.)
  • Continued Uncertainty Concerning the Extraterritorial Application of US Antitrust Law: In June 2015, the US Supreme Court denied requests to resolve conflicting lower court decisions regarding the scope of the Foreign Trade Antitrust Improvements Act (FTAIA). The standards that govern the application of the Sherman Antitrust Act to conduct that occurs outside the United States remain a source of contention, uncertainty, and litigation. (See page 24.)
  • Increasing International Cooperation: Countries that seek to bolster their competition agencies have also been cooperating with one another. For example, China's National Development and Reform Commission (NDRC) recently signed a Memorandum of Understanding with the Federal Antimonopoly Service of Russia (in September 2015), the JFTC (in October 2015), and the Australian Competition and Consumer Commission (ACCC) (in November 2015). Global coordination is increasingly the norm in international cartel investigations. (See page 30.)
  • Auto Parts Investigation Winding Down: Although the auto parts cartel investigations are winding down in the United States, competition agencies in Europe, Asia, Australia, South America, and Africa continue to aggressively probe alleged price fixing and bid rigging that involve various types of automotive parts. (See page 18.)
  • Prison Sentences: The DOJ charged 66 individuals and 20 corporations in fiscal year 2015 (from October 2014 through September 2015). However, looking at individual prison sentences for calendar year 2015 (January through December), 11 individuals were sentenced to prison, and 15 individuals pleaded guilty but have not yet been sentenced. Four of the individuals sentenced this calendar year were defendants in the real estate bid-rigging investigation based out of the Antitrust Division's San Francisco Field Office. Eight individuals have pleaded guilty in the real estate bid-rigging investigation but have not yet been sentenced. Between October and December 2014, the beginning of Fiscal Year 2015, the majority of the individuals who either pleaded guilty or were indicted by the DOJ were defendants in various real estate auction cases. (See page 10.)
  • Compliance Remains at the DOJ's Forefront: DOJ leaders continue to emphasize the importance of effective compliance programs in both detecting potential cartel violations and mitigating corporate criminal exposure if such misconduct exists. (See page 26.)

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