Cartel Watch
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March 2015 Cartel Watch Volume 3, Issue 1 U.S. Criminal Enforcement In this issue of Cartel Watch, Deputy Assistant Attorney General Indicates DOJ Might Target More we continue our U.S. and Remote Foreign Cartels international coverage of To date, the U.S. Department of Justice has only challenged foreign cartels select notable developments that involve at least some direct imports into the country. However, at the in cartel enforcement and New York State Bar Association Antitrust Law Section’s annual meeting on follow-on civil antitrust class January 29, 2015, Deputy Assistant Attorney General Brent Snyder indicated action lawsuits. that the DOJ would be willing to pursue cases involving solely indirect sales in the future. The Foreign Trade Antitrust Improvements Act (FTAIA), which limits the extraterritorial application of U.S. antitrust laws, has not applied to the cases brought by the DOJ in the past, because the statute exempts import commerce. “That said, even where there are no sales of the price- fixed product in or for delivery to the U.S. and the FTAIA does apply, the statute would permit us to bring cases purely on the sale of those component parts,” Snyder said, as reported in the trade press. “And we would certainly consider bringing cases on that basis alone.” Snyder further pointed out that the FTAIA did not amend the sentencing guidelines or in any way alter the DOJ’s ability to calculate fines based on global sales. In practice, the Antitrust Division has used its discretion in considering the same types of factors invoked by the FTAIA when calculating penalties, and it has never based prior fines on worldwide sales. Nevertheless, Snyder informed that, once the Division has used the relevant sales to establish a fine range under the sentencing guidelines, it will then look to global sales to determine the appropriate fine within that range. This calculation metric, however, has happened only in situations which presented a risk that the ultimate penalty might “significantly understate the harm to U.S. consumers,” Snyder added. Additional Auto Parts Guilty Pleas and Indictments ■■ Sanden Corp. Agrees to Plead Guilty to Price Fixing Compressors Installed in U.S. Cars ■■ In the ongoing U.S. auto parts cartel investigations, the DOJ announced on January 27, 2015 that Japanese auto parts maker Sanden Corp. has agreed to plead guilty to criminal charges that it conspired to bid-rig and fix the prices of compressors used in air Weil, Gotshal & Manges LLP Cartel Watch conditioning systems sold to Nissan North Japanese Freight Forwarding Firm Agrees to America, Inc. Sanden Corp. will pay a $3.2 Plead Guilty to Cartel Effecting Ocean Shipping million criminal fine. The DOJ filed a one- Services count felony charge in Michigan federal court Nippon Yusen Kabushiki Kaisha (NYK), a Japanese after Sanden agreed to cooperate in the freight forwarding firm, has agreed to plead guilty investigation. The information alleges that to a conspiracy to fix prices for international ocean Sanden’s participation in the scheme began as shipping services. As part of its plea agreement, the early as August 2008 and continued through at company will pay a $59.4 million criminal fine and least April 2009. The department noted that it cooperate with the DOJ’s ongoing investigation into has charged 33 companies and 50 individuals the industry. The agreement, reached on December as a part of its investigation into price-fixing 29, 2014, alleges that NYK participated in a scheme and bid-rigging in the auto parts industry. All to fix prices, allocate customers, and rig bids for roll- 33 companies have or will plead guilty, and, on, roll-off cargo shipping of items into the U.S. that collectively, they will pay more than $2.4 billion lasted over 15 years. This makes the DOJ’s second in fines. U.S. v. Sanden Corp., No. 2:15-cr- charge from its investigation into the international 20033 (E.D. Mich.). ocean shipping industry. U.S. v. Nippon Yusen ■■ Another Former Executive Agrees to Plead Guilty Kabushiki Kaisha, No. 1:14-cr-00612 (D. Md). in DOJ’s Auto Parts Investigation U.S. Civil Litigation Developments ■■ On January 6, 2015, a former executive at Toyoda Gosei Co. Ltd, a Japanese auto parts Supreme Court Rules Second Circuit Must Hear maker, agreed to plead guilty for his role in a Antitrust Appeal From Multi-District Litigation scheme to fix the price of automotive hoses. Makoto Horie, a former sales executive at The Supreme Court unanimously ruled on January Toyoda, will serve one year and one day in jail, 21, 2015 that investors whose sole antitrust claim was pay a $20,000 criminal fine, and cooperate with dismissed from an ongoing multidistrict litigation (MDL) the department’s ongoing investigation into the had the right to an immediate appeal. The antitrust cartel. The information alleges that, from as claim at issue concerned the alleged manipulation of early as March 2007 and lasting until at least the global benchmark interest rate known as Libor. September 2010, Horie actively participated The Court’s decision, authored by Justice Ginsberg, in meetings and exchanged competitively overturned the Second Circuit’s refusal to hear the sensitive information in order to fix prices and case. The decision clarified that the petitioners’ right rig bids for automotive hoses. “The division’s to an appeal ripened when the district court dismissed ongoing investigation has resulted in more their case, notwithstanding the fact that a variety of than two dozen executives serving prison time other claims are still proceeding in the wide-reaching for their participation in illegal conspiracies MDL. “The district court’s order dismissing the involving auto parts,” stated the DOJ’s press Gelboim-Zacher complaint for lack of antitrust injury, release. The plea agreement with Horie comes without leave to amend, had the hallmarks of a final in the wake of Toyoda Gosei’s own guilty plea decision,” wrote Justice Ginsberg. “As is ordinarily the in September 2014, under which it has agreed case, the [MDL] consolidation offered convenience to pay $26 million in criminal fines for its role for the parties and promoted efficient judicial in the conspiracy to fix the price of steering administration, but did not meld the Gelboim-Zacher wheels, airbags, and auto hoses. U.S. v. Horie, action and others in the MDL into a single unit.” MDL No. 3:15-cr-00003 (N.D. Ohio). defendants should take this ruling into consideration when raising issues in motions to dismiss – close- call issues might go up for appeal rather quickly, Weil, Gotshal & Manges LLP March 2015 2 Cartel Watch and negative results could affect the rest of the MDL former executives were sentenced to 18 months proceedings. For more information, please see an and 12 months in prison, respectively. However, in-depth discussion of the decision and its implications both sentences were stayed pending a three-year on our blog, available here. Gelboim et al. v. Bank of probationary period. After a raid by the Japan America Corp. et al., No. 13-1174 (S. Ct.). Fair Trade Commission in 2011, NTN and the two executives were indicted for their alleged participation Seventh Circuit Denies Motorola’s Request for a in the cartel in June 2012. The company has filed an Full-Panel Rehearing of Its Claims Dismissed on appeal with the Tokyo High Court. FTAIA Grounds Dutch Authority for Consumers and Markets Joins In a one-page order entered on January 12, 2015, the Trend of Holding Investment Firms Liable for the Seventh Circuit declined Motorola Mobility LLC’s Infringement by Their Portfolio Companies request for an en banc rehearing of an appellate panel’s second ruling that the Foreign Trade Antitrust A decision by the Dutch Authority for Consumers and Improvements Act (FTAIA) barred the vast majority of Markets (ACM) has put private equity firms across Motorola’s claims in its $3.5 billion price-fixing case Europe on guard. On December 30, 2014, the ACM against manufacturers of liquid crystal display (LCD) held that the conduct of flour producer Meneba could panels. Motorola asked for the rehearing in December, be attributed to its investment firms due to their role after a three-judge panel held that 99% of Motorola’s as controlling shareholders. The ACM fined two LCD purchases extended beyond the reach of U.S. investment firms – CVC Capital Partners and Bencis antitrust law because the LCD panels at issue were Capital Partners BV – between €900,000 and €1.5 purchased abroad by Motorola’s foreign subsidiaries, million ($1.07 million and $1.79 million) for the role incorporated into cell phones manufactured abroad, their investment company played in a flour cartel and only later sold in the U.S. (see our report in Cartel that operated from 2001 to 2007. Meneba was one Watch Vol. 2, Issue 5). “All the judges on the original of 14 flour producers in three countries that were panel have voted to deny the petition, and none of collectively fined nearly €82 million in late 2010 for the active judges has requested a vote on the petition participating in a cartel to allocate the flour market in for rehearing en banc,” stated the order, noting that the Netherlands. The Dutch regulator relied on the Circuit Judge Joel M. Flaum did not participate in the concept of the “undertaking” to establish the parent decision. It will be interesting to see if the Supreme companies’ liability – it reiterated that the behavior of Court grants certiorari, should Motorola appeal the a company may be attributed to its parent company decision. Motorola Mobility LLC v.