Lisa M. Phelan, Megan E. Gerking, and Rob Manoso
Antitrust Law, Antitrust Law | Cartels, and Antitrust Law | Litigation
To provide a quick overview of developments in criminal antitrust investigations and prosecutions, in the U.S. and globally, we summarize below some of the most significant Department of Justice (“DOJ”) announcements, policy shifts, investigations, statistics, case filings, and court rulings. Our fall report discusses trends and developments in criminal antitrust enforcement, including: a recent arrest of a Honduran executive in Florida on sealed antitrust charges; recent plea agreements by companies in the capacitors and packaged seafood investigations; the DOJ’s recent loss in its prosecution against individual foreign exchange currency rate traders; and the implications of the Tenth Circuit’s opinion in the DOJ’s heir locator appeal.
Honduran Pro Soccer Team President Arrested and Charged in New Cargo/Price Fixing Investigation
Key Points: (1) DOJ focus on shipping and transport continues; and (2) DOJ can seal criminal charges until an executive travels to the U.S. and have the FBI waiting at the border.
A new criminal price fixing investigation by the DOJ’s Antitrust Division (“the Division”) surfaced this summer when Roberto Dip, the owner of a freight shipping company and president of a Honduran professional soccer team, and his colleague Jason Handal were arrested in Miami when visiting the U.S. The DOJ charges Dip and Handal with agreeing with other heads of freight-forwarding companies to raise prices to U.S.-based customers who used their firms to ship cargo to Honduras and elsewhere. Dip, his colleague Jason Handal, and others are alleged to have sent follow-up emails to coordinate implementation of the agreement, to end “unjustified price wars.”
Nippon Chemi-Con Fined $60 Million for Role in Capacitor Price Fixing Scheme, Receives Discount for Government Attorney Conflict, but Record Corporate Probation
Key Point: If accused by the DOJ of bad conduct, consider whether DOJ has its house in order.
Nippon Chemi-Con (NCC), a Japanese manufacturer of electrolytic capacitors, agreed to pay a $60 million fine in early October for its participation in a price fixing conspiracy that ran from 1997 through 2014, along with a five-year term of probation requiring annual reports on its compliance efforts. NCC is the last of eight companies sentenced after pleading guilty to participation in the long-running conspiracy. Corporate fines have totaled over $150 million in this investigation. The DOJ also charged ten individual executives as defendants, two of whom have pleaded guilty while the other eight remain under indictment.
StarKist Co. (“StarKist”) Reaches Resolution with DOJ, Admitting Role in Canned Tuna Fish Price Fixing Conspiracy Uncovered During Merger Review
Key Point: Before submitting documents to a competition agency for merger approval, be sure the materials have been properly reviewed for possible collusive competitor contacts. Antitrust counsel should also carefully consider market dynamics when advising companies of potential regulatory risk associated with transactions.
In October, the DOJ announced that StarKist agreed to plead guilty and pay up to $100 million in criminal fines for fixing the prices of packaged seafood from as early as November 2011 through at least as late as December 2013. The fine amount will be determined at a sentencing hearing. The Information, filed in the US District Court for the Northern District of California, charged StarKist with agreeing to fix, maintain, and raise prices of canned tuna fish during in-person meetings and other conversations with other major packaged-seafood firms.
Three South Korean Companies Agree to Pay $236 Million in Civil Damages Under Clayton Act Section 4A and Criminal Fines for Role in Bid Rigging Scheme
Key Point: If the U.S. government is victim of a bid rigging conspiracy, the DOJ may seek to tie resolution of criminal charges to agreement to pay civil damages under the Clayton Act.
On November 14, 2018, the DOJ announced global settlements with three South Korea-based fuel companies for their role in a decade-long bid-rigging conspiracy that targeted fuel supply contracts to U.S. military forces in South Korea. The DOJ alleged that SK Energy Co. Ltd., GS Caltex Corporation, and Hanjin Transportation Co. Ltd. were three members of a large conspiracy that colluded in the fuel supply contract bids for numerous bases across South Korea. The settlements resolve Antitrust Division criminal charges and a Civil Division complaint against the three defendants.
U.S. Jury Finds Three UK-Based Traders Not Guilty of Foreign Currency Exchange Rate (“FX”) Price Fixing Conspiracy
Key Point: Jurors may be reluctant to find that antitrust prosecutors have met the “beyond a reasonable doubt” standard when individual executives are on trial.
On October 26, 2018, the U.S. District Court for the Southern District of New York acquitted three FX traders on charges of conspiracy to fix benchmark currency rates. Chris Ashton, Rohan Ramchandani, and Richard Usher, former traders at three prominent financial institutions, were indicted in January 2017, and the three came to the United States to face trial.
Recent Statements by DOJ Signal Greater Willingness to Credit Corporate Antitrust Offenders That Have Comprehensive Compliance Programs
Key Point: In light of seemingly greater willingness by competition agencies to credit companies for having robust compliance programs, companies should consider reviewing and refreshing their current compliance programs and efforts.
While the U.S. Sentencing Guidelines have long acknowledged that companies with effective compliance programs in place at the time of an offense should be given a reduction in fines, the Division has historically not agreed to credit companies for having such a program if the company violated antitrust laws. But, in recent years, the Division has agreed in limited instances to give credit to companies in their sentences for the existence or adoption of a strong, well-tailored compliance program. More significantly, recent remarks by DOJ officials suggest that the DOJ is considering a broader policy shift that would factor the existence of a compliance program into both charging and sentencing decisions.
DOJ Wins on Principle in Heir Locator Appeal, but Rule of Reason Ruling Stands
Key Point: The Tenth Circuit hands the DOJ a win in principle strongly suggesting that the per se standard should apply in criminal cases, but the DOJ is left in a tricky spot in this particular case. We will be watching the DOJ’s next move.
On October 31, 2018, the U.S. Court of Appeals for the Tenth Circuit reinstated the criminal indictment in U.S. v. Kemp & Associates, a case stemming from an alleged customer allocation agreement among competing heir location services, finding that the statute of limitations period had not run, contrary to defendants’ argument.
DOJ Celebrates 25th Anniversary of the Corporate Leniency Program
Key Point: As it hits the quarter-century mark, the Division’s Corporate Leniency Program remains a valuable option to be considered by companies that uncover possible cartel conduct by employees. The possibility of taking advantage of the Program if needed remains a compelling reason for companies to maintain a strong internal antitrust compliance program.
On September 26, 2018, the DOJ hosted a ceremony celebrating the Division’s Corporate Leniency Program. Speakers lauded the value of the program in incentivizing companies to “come clean” about cartel conduct in exchange for corporate leniency and protection for executives involved in such conduct. Some cautioned the Division to scrupulously abide by the long-standing features of the Leniency Program that make it attractive to companies—certainty, consistency, and transparency—lest it lose its attractiveness as an option for corporations to consider.
“No-Poach” Agreements a “No Go” with Enforcers
Key Point: In-house counsel must understand what, if any, employee non-solicitation clauses their companies have in place, given the emerging three-pronged attack on their use, and minimize risk accordingly.
With the October 2016 announcement by the DOJ and FTC that the DOJ would criminally prosecute naked wage-fixing and no-poach agreements, the DOJ ratcheted up potential tools to investigate, and penalties to be faced for, collusion in the hiring and HR space. Though it has yet to file a single criminal action, in April 2018, the DOJ announced its first resolution on a no-poach investigation since the guidance was issued: a civil settlement with Knorr-Bremse AG and Westinghouse Air Brake Technologies Corp. The DOJ pursued this civilly, rather than criminally, because the agreement at issue occurred prior to the time when DOJ issued the 2016 guidance.
Assistant Attorney General Delrahim Appears Before Congress at Oversight Hearing
Key Point: Expect international coordination on antitrust matters to increase.
On October 3, 2018, Makan Delrahim appeared before the Senate Judiciary Committee to report on the Division’s recent accomplishments and initiatives. AAG Delrahim noted that the Division prosecuted criminal antitrust violations across many important sectors of the economy in the period 2016-2017, imposing over $3.2 billion in criminal fines. He emphasized Division results in holding individual executives accountable for cartel crimes, with more than 30 executives sentenced to prison terms in 2017 alone. AAG Delrahim noted that a record number of cartel cases went to trial in 2017 — the highest of any year in the last two decades—demonstrating the Division’s willingness to litigate if companies or executives contest the Division’s allegations.
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