Cartel Watch

January 2017

Volume 4, Issue 2 U.S. Criminal In this issue of Cartel Watch, Implications of the Change in Administration for Cartel Antitrust Cartel Watch has a special sidebar we continue our coverage Enforcement on the first page exclusive to this of notable developments in publication. On January 20, 2017, President Trump took office as the 45th President U.S. and international cartel of the United States. In the antitrust sector, many questions have arisen 1. Change the Edition numbers marked enforcement and provide our as to President Trump’s stance toward possible anticompetitive behavior, with the Flagged color swatch. Cartel Fine Tracker for Q3 2016 including criminal cartel enforcement. Both Democrats and Republicans through December 31, 2016. 2. Delete the standard Article Title, In historically have taken a hard line against bid rigging and price fixing; no This Issue, and Highlight Bullet boxes noticeable changes in cartel prosecution trends have occurred since the on the Content layer to resolve the mid-1990s when the Antitrust Division of the Department of Justice (“DOJ”) overset text. Text wrapping makes implemented its corporate leniency program, marking the modern era of it disappear under the box it is enforcement. Accordingly, we do not expect that the change in administration replacing. is likely to result in significant changes in the substance or manner of cartel enforcement in the United States. 3. Delete this Instruction box. 4. Place the Article Title and Byline in New Indictments of Capacitor Company Executives Brings Total to Nine the main content box beneath the On December 15, 2016, a California federal grand jury indicted three Cartel Watch masthead. executives from two different Japanese capacitor companies for alleged price fixing of circuit board components called electrolytic capacitors, which are found in various electronic items. The names of the companies have not yet been released.1 According to the DOJ, the anticompetitive activity occurred from 1997 to 2014, during which time the price-fixed parts were sold to U.S. consumers.2 The recent indictments bring the total number of individual indictments to nine; six executives from four different Japanese companies were indicted in November for conduct related to the same conspiracy.3 In addition to the individual indictments, the DOJ has charged five companies in connection with the capacitor conspiracy: NEC Tokin, Hitichai Chemical Co., Rubycon Corp., Elna Co., and Holy Stone Holdings Co. Ltd. With respect to fines, NEC Tokin agreed to pay $13.8 million in September 2015, and Hitichai Chemical Co. agreed to a $3.8 million fine inApril 2016. Furthermore, Rubycon Corp., Elna Co., and Holy Stone Holdings Co. Ltd. pled guilty in August 2016. While the parties agreed that, under the Sentencing Guidelines, the appropriate fine should be $30.7 million, the court

Weil, Gotshal & Manges LLP Cartel Watch subsequently reduced the fine to $12 million upon Deferring to international comity, the appeals court the government’s motion for a downward departure, held that the U.S. courts lacked jurisdiction to hear the given the company’s substantial cooperation with the case.9 DOJ’s investigation, and consideration into Rubycon’s This long-running litigation involves various U.S. inability to pay.4 vitamin C purchasers against Chinese vitamin C DOJ Indicts Two Executives in Generic Drug Price manufacturers Hebei Welcome Pharmaceutical Fixing Investigation Co. and North China Pharmaceutical Group Corp. Defendants argued that they had acted in On December 14, 2016, the DOJ charged two accordance with Chinese vitamin C export pricing former executives of Heritage Pharmaceuticals regulations; thus, they should not be held liable for Inc. (“Heritage”) with conspiring to fix prices of an any anticompetitive effects in the United States.10 The antibiotic and a diabetes treatment. The indictments, Chinese government filed an amicus curiae brief to unsealed in federal court in Pennsylvania, allege that support the defendants’ argument, claiming that it had the executives rigged bids and allocated customers indeed implemented the vitamin C regulations.11 The in connection with two price-fixing conspiracies that district court rejected this argument.12 ran until December 2015 or later. The DOJ, who has not named the company for whom the pair worked, The Second Circuit found that a “true conflict” existed alleges that the conspiracy to fix the price of the between U.S. and foreign law because the Chinese antibiotic, doxycycline hyclate, began as early as April government provided a reasonable interpretation of 13 2013, and the conspiracy to fix the price of glyburide, its law. Because the Chinese government actively a drug used to treat Type 2 diabetes, began in April participated in the conduct that was the subject of the 2014.5 On January 9, 2017, Heritage’s former CEO litigation, the court concluded that U.S. courts lacked 14 Jeffrey Glazer and former president Jason Malek pled jurisdiction to hear the case. guilty to participating in the price-fixing scheme.6 Auto Parts Litigation Update In addition to the criminal indictments of the On November 28, 2016, United States District former Heritage executives, twenty states – led by Judge Marianne O. Battani of the Eastern District of Connecticut and including New York, Delaware, Michigan gave final approval to $125 million in class Florida, Pennsylvania, and Massachusetts – have action settlements between automobile dealership filed a civil lawsuit against Heritage and five other plaintiffs and ten defendants accused in a multidistrict generic drug manufacturers in federal court in litigation (“MDL”) of conspiring to rig the prices of Connecticut, alleging collusion in connection with automobile parts. The settlements involve twenty- the same two drugs. The defendants in that case six component parts that the auto-dealer plaintiffs are: Heritage; Mylan Pharmaceuticals Inc.; Teva contend were the subject of coordination, bid- Pharmaceuticals USA Inc.; Aurobindo Pharma USA rigging, and price-fixing. The settling defendants are: Inc.; Citron Pharma LLC; and Mayne Pharma (USA) Sumitomo Electric Industries, Ltd. et al. (“Sumitomo); Inc. The complaint alleges that Heritage orchestrated DENSO Corporation et al. (“DENSO”); NSK Ltd. et al. the big rigging and market allocation agreements (“NSK”); LEONI Wiring Systems, Inc. and Leonische among the defendants.7 Holding Inc. (“LEONI”); Omron Automotive Electronics Co. Ltd. (“Omron”); Furukawa Electric Co., Ltd. and U.S. Civil American Furukawa, Inc. (“Furukawa”); Schaeffler Second Circuit Dismisses In re Vitamin C and Group USA Inc. (“Schaeffler”); Mitsubishi Electric Upholds International Comity Doctrine Corporation et al. (“MELCO”); Sumitomo Riko Co. Ltd, et al. (“Sumitomo Riko); and Valeo Japan Co., Ltd. 8 In the In re Vitamin C Antitrust Litigation decision, (“Valeo”). the Second Circuit reversed a $147.8 million jury verdict against two Chinese vitamin C manufacturers.

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The largest aggregate settlement was in the wire 3. Press Release, U.S. Dep’t of Justice, Five More Individuals harness systems automotive parts case, where Indicted for Their Roles in Capacitors Price-Fixing defendants MELCO, Sumitomo, DENSO, LEONI, Conspiracy, (Nov. 2, 2016), https://www.justice.gov/opa/pr/ three-more-individuals-indicted-their-roles-capacitors-price- and Furukawa agreed to settlement amounts totaling fixing-conspiracy. $30.8 million. MELCO and DENSO defendants also agreed to settlement amounts totaling $21.3 4. United States Sentencing Memorandum, Motion For Departure, And Request For Expedited Sentencing, United million in the alternators case. Other automotive States v. Rubycon Corp., No. CR-16-0367 (N.D. Cal. Sep. parts named in the final settlement approval order 7, 2016). include ignition coils, air conditioning systems, 5. Indictment, United States v. Jeffrey A. Glazer, No. 16-CR- starters, fuel injection systems, heater control panels, 00506-RBS (E.D. Pa. Dec 12, 2016). radiators, and anti-vibration rubber parts. In addition to approving the settlement amounts, the court also 6. Leah Nylen, Comment: Heritage exec pleas offer glimpse into DOJ generic drug investigation, MLex Global granted certification, for settlement purposes only, Antitrust (Jan. 10, 2017, 09:38 PM), http://www.mlex.com/ of the settlement classes set forth in the preliminary GlobalAntitrust/DetailView.aspx?cid=856841&siteid=191 approval orders of the settlements and their &rdir=1 (commenting on Plea Document as to Jeffrey A. respective settlement agreements.15 Glazer, United States v. Glazer, No. 16-00506-RBS (E.D. Pa. Jan. 9, 2017), ECF No. 18 and Plea Document as to Cartel Fine Tracker – Q3 2016 through Present Jason T. Malek, United States v. Malek, No. 16-00508-RBS (July 21, 2016, through December 31, 2016) (E.D. Pa. Jan. 10, 2017), ECF No. 17). 7. Complaint, Connecticut v. Aurobindo Pharma USA, Inc., Jurisdiction Fines Imposed No. 3:16-CV-02056-VLB (D. Conn. Dec. 15, 2016). U.S. Department $47.4 million 8. 837 F.3d 175 (2d Cir. 2016). of Justice 9. Id. at 195. European €651 million 10. Id. at 180. Commission 11. Id. Japan Fair Trade ¥0 12. 584 F. Supp. 2d 546 (E.D.N.Y. 2008); 810 F. Supp. 2d 522 Commission (E.D.N.Y. 2011). 13. 837 F.3d at 194. 14. Id. at 195. 1. Press Release, U.S. Dep’t of Justice, Three More Individuals Indicted for Their Roles in Capacitors Price- 15. Order Granting Final Approval to Auto Dealer Settlements Fixing Conspiracy, (Dec. 15, 2016), https://www.justice. With Certain Defendants and Certifying Settlement gov/opa/pr/three-more-individuals-indicted-their-roles- Classes, In re Automotive Parts Antitrust Litigation, 2:13-cv- capacitors-price-fixing-conspiracy. 00802 (E.D. Mich Nov. 28, 2016), ECF No. 184. 2. Second Superseding Indictment, United States v. Matsuzaka, No. 15-CR-0163-JD (N.D. Cal. Dec. 14, 2016).

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Cartel Watch is published by the Antitrust/Competition practice group of Weil, Gotshal & Manges LLP, 767 Fifth Avenue, New York, NY 10153, +1 212 310 8000, www.weil.com. If you have questions concerning the contents of this issue of Cartel Watch, or would like more information about Weil’s Antitrust/Competition practice, please speak to your regular contact at Weil, to the editorial board, or to the contributing authors:

Editorial Board: Steven Reiss (NY) Bio Page [email protected] +1 212 310 8174 Adam Hemlock (NY) Bio Page [email protected] +1 212 310 8281 Eric Hochstadt (NY) Bio Page [email protected] +1 212 310 8538

Authors: Alex Shear (NY) Bio Page [email protected] +1 212 310 8713 Sarah Segal (NY) [email protected] +1 212 735 4509

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