Cartel Enforcement Archives - Page 9 of 24

Cartel Enforcement

Supreme Court Asked to Clarify the Reach of U.S. Antitrust Laws to Foreign Conduct

by Louise Aberg and Lisa A. Peterson | Mar 24, 2015 | Cartel Enforcement, DOJ Developments, Private Litigation

On March 16, 2015, AU Optronics Corporation America Inc. (AU Optronics) and Motorola Mobility LLC separately asked the U.S. Supreme Court to clarify the Foreign Trade Antitrust Improvements Act (FTAIA) and the extent to which its language allows foreign conduct to be brought within the scope of the Sherman Act. The requests for review follow from potentially conflicting holdings from the Seventh and Ninth Circuits in cases that stem from distinct interpretations of the same provisions in the FTAIA and involve the very same conduct – AU Optronics’ and its co-conspirators’ agreement overseas to fix the prices of liquid crystal display (LCD) panels. The cases have different procedural foundations in that the Ninth Circuit case is a criminal suit brought by the Department of Justice (DOJ), while the Seventh Circuit case is a civil matter in which private parties are seeking damages.

In Hsiung,[i] AU Optronics appeals the Ninth Circuit’s holding that the Sherman Act via the FTAIA can support criminal charges against foreign cartel conduct. In that case, the court had affirmed AU Optronics’ conviction in July 2014 and rendered an amended opinion on January 30, 2015. Meanwhile, Motorola Mobility appeals the Seventh Circuit’s finding in Motorola Mobility[ii] that a civil price-fixing claim against the same cartel could not be supported under the same provisions of the FTAIA. The Seventh Circuit decided the case on November 26, 2014 (after vacating a previous opinion from March 2014) and later amended its opinion on January 12, 2015. The companies believe that these interpretations of the FTAIA are conflicting and, therefore, ripe for Supreme Court review.

The FTAIA was adopted to clarify the enforcement scope of U.S. federal antitrust laws as applied to anticompetitive conduct that occurs abroad. Since its enactment, however, lower courts have interpreted the FTAIA differently, which has led to conflicting decisions and legal uncertainty. Under the FTAIA, all foreign conduct is placed outside the scope of the Sherman Act, unless (1) the alleged conduct involves import commerce (import commerce exemption) or (2) it has a “direct, substantial, and reasonably foreseeable effect” on U.S. commerce and the criminal charge or civil claim “arises from” that effect (domestic effects exception).

The circuit courts interpreted certain language in these provisions differently, specifically “import commerce” and “direct effect,” and when such effect “gives rise to a Sherman Act claim.” In Hsiung, the Ninth Circuit considered import commerce to be any conduct affecting an import market, which means that it need not be shown that a foreign defendant directly imported goods himself into the U.S. As to the domestic effects exception, the Ninth Circuit further explained that foreign conduct has a direct effect on U.S. commerce where the conduct “follows as an immediate consequence of the defendant[s’] activity.” According to the court, AU Optronics’ conduct had a direct effect on U.S. commerce that gave rise to a Sherman Act claim because the price-fixed goods manufactured abroad were a significant component of [...]

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Parking Heater Manufacturer Pleads Guilty to Price-Fixing

by Young Cynn | Mar 17, 2015 | Cartel Enforcement, DOJ Developments

On March 12, 2015, the U.S. Department of Justice (DOJ) announced that Espar Inc., pleaded guilty to one count of price-fixing under the Sherman Act in a scheme involving parking heaters for commercial vehicles that ran from October 2007 through December 2012. Parking heaters heat the inside of a vehicle when the engine is not running.

According to the press release, Espar, a parking heater manufacturer, agreed to pay a criminal fine and cooperate in the DOJ’s ongoing investigation. Espar and its co-conspirators discussed prices for parking heaters and agreed to set a price floor for parking heater kits sold to aftermarket customers. Further, the companies agreed to coordinate the timing and amount of price increases, and enforced the agreement by exchanging information. Investigation into the other companies is ongoing, with assistance from the Federal Bureau of Investigation.

Although the judge initially agreed to Espar’s and DOJ’s joint request to waive the pre-sentence investigation report and schedule sentencing on the same day as the plea hearing, the judge later changed his mind. The judge stated in his order that his review of the pre-sentence report would ensure that “the agreed-upon fine is not too modest” and address any concerns that the terms of the plea agreement may implicate Fifth Amendment issues for individual employees who are required to cooperate with DOJ. Espar’s plea agreement is still subject to court approval, and sentencing is scheduled for June 5, 2015. The maximum fine for price-fixing in violation of the Sherman Act for corporations is either $100 million, or the amount twice the gain derived from the crime or twice the loss suffered by the victims—whichever is greater.

DOJ Assistant Attorney General Bill Baer stated that the “plea demonstrates the Antitrust Division’s commitment to holding companies accountable for conspiracies that fix prices on parts used in every day products,” and that “[t]he Antitrust Division will vigorously prosecute companies that engage in schemes that subvert normal competitive processes and defraud American consumers and businesses.”

Seventh Circuit Denies Rehearing in LCD Price-Fixing Suit by Motorola

by Emily Townsend | Jan 20, 2015 | Cartel Enforcement, Private Litigation

On January 12, the Seventh Circuit Court of Appeals refused Motorola Mobility LLC’s petition for a rehearing en banc of its price-fixing claims against foreign manufacturers of liquid crystal display (LCD) panels. Motorola Mobility LLC v. AU Optronics Corp., et al., case number 14-8003. Motorola alleged that these foreign manufacturers violated Section 1 of the Sherman Act by conspiring with each other to set the price for LCD panels. Only approximately 1 percent of the panels sold to Motorola by defendants were purchased by and delivered to Motorola in the United States to be used in the assembly of Motorola cellphones. Motorola’s foreign subsidiaries purchased the rest – with 57 percent of all panels bought by a Motorola entity incorporated into cellphones sold abroad, and the remaining 42 percent assembled by the Motorola foreign subsidiary into cellphones and then sold to and delivered to Motorola for resale in the United States. The Northern District of Illinois granted partial summary judgment to the defendants, ruling that Motorola’s claim as to the 99 percent of panels purchased by foreign subsidiaries was barred by the Foreign Trade Antitrust Improvement Act (FTAIA), 15 U.S.C. §§ 6a, which has been interpreted to limit the extraterritorial reach of U.S. antitrust law. The district judge certified an order for immediate appeal.

In November, the Seventh Circuit affirmed the district court’s partial grant of summary judgment. In his amended opinion filed January 12, Judge Posner determined that the effect of the alleged foreign cartel did not give rise to a federal antitrust claim because the plaintiff could only be injured indirectly. Under federal antitrust jurisprudence, claimants that purchase indirectly and/or suffer derivative harm lack antitrust standing to bring suit in the United States. Posner explained that plaintiff’s foreign subsidiaries were the direct purchasers injured by the alleged LCD panel conspiracy. In response to Motorola’s argument that it and its foreign subsidiaries should be treated as a single entity, Posner asserted that the corporate formalities of the U.S. parent and its foreign subsidiaries should be respected. Motorola decided to have its subsidiaries incorporated in and pay taxes to these foreign jurisdictions, and therefore, the subsidiaries must seek relief in the countries in which they or the alleged conspirators are incorporated. A parent does not have a right to sue for damages on behalf of its foreign subsidiaries in the United States. Importantly, although Posner’s opinion could protect an alleged foreign conspirator from facing treble damages in U.S. civil court, his opinion also made clear that if the alleged price-fixing has a direct, substantial and reasonably foreseeable effect on U.S. commerce, then the FTAIA does not block the U.S. Department of Justice from seeking injunctive or criminal relief.

In December, Motorola petitioned the Seventh Circuit for a rehearing en banc. It argued that defendants purposefully negotiated directly with Motorola in the United States and that Motorola determined the prices and quantities of panels purchased from defendants by its U.S. subsidiaries. The defendants purposefully engaged in business with the plaintiff, and [...]

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Foreign Airlines Move to Dismiss Rate-Fixing Litigation

by Emily Townsend | Jan 16, 2015 | Cartel Enforcement, Private Litigation

Last Friday, foreign cargo carriers filed motions to dismiss an air freight price-fixing suit brought by Schenker AG, the logistics division of Germany’s national railway company, Deutsche Bahn, in the Eastern District of New York. Schenker AG v. Societe Air France, et al., case number 1:14-cv-04711. In its complaint filed last August, Schenker alleged that seven foreign airlines conspired to fix surcharge rates for various air cargo routes to, from and within the United States. This suit is just the latest in a series of investigations and claims concerning anticompetitive behavior in the air cargo industry, which began in 2006 when the U.S. Department of Justice (DOJ), in conjunction with the European Commission and South Korea’s Fair Trade Commission, organized raids of the offices of numerous air carriers around the world. Airlines have paid billions of dollars in fines to competition agencies throughout the world and nearly a billion more dollars in settlements to direct purchaser plaintiffs in a multi-district litigation in U.S. federal court.

Defendants All Nippon Airways Co., Ltd. and Cargolux Airlines International S.A. moved the district court to dismiss the action on the grounds of forum non conveniens under the Second Circuit’s precedent in Capital Currency Exch., N.V. v. Nat’l Westminster Bank PLC, 155 F.3d 603, 609 (2d Cir. 1998). According to these defendants, Schenker’s choice of forum should be afforded little deference because Schenker is a foreign corporation that was forum shopping, choosing the United States for its treble damages. Instead, defendants argued that Germany was an adequate alternative forum, especially given that Schenker is owned by the German government and that many of the witnesses and documents are located in Europe. In addition, defendant Qantas filed a separate motion to dismiss on the basis that Schenker filed its claims after the Clayton Act’s four year statute of limitations had run. Qantas argued that if Schenker had performed the requisite due diligence, then it would have been aware of its claims on February 15, 2006, the day after which it was reported that the DOJ organized the raids of the airlines. Even considering that the statute of limitations was tolled until May 2011 when Schenker opted out of the middle-district class action against the airlines, Qantas contended that Schenker had to file its complaint before June 1, 2014, which the plaintiff failed to do.

Former Toyoda Gosei Executive Pleads Guilty to Price-Fixing, Bid-Rigging

by McDermott Will & Emery | Jan 13, 2015 | Cartel Enforcement, DOJ Developments

On January 6, 2015, Makoto Horie of Toyoda Gosei North America pled guilty to the United States Department of Justice (DOJ) for conspiring to fix the prices of automotive hoses sold to U.S. companies. Mr. Horie was sales general manager for Toyoda Gosei in Japan. He will serve one year and one day in a U.S. prison and pay a $20,000 criminal fine for participating in the conspiracy between March 2007 and September 2010.

Toyoda Gosei pled guilty in September 2014 to price-fixing and bid-rigging for automotive hoses, airbags and steering wheels. Unlike Toyoda Gosei’s plea agreement, Mr. Horie’s Information did not allege any wrongdoing related to automotive airbags or steering wheels. Including Mr. Horie and his former employer, 29 individuals and 32 companies have now admitted guilt to the DOJ. These individuals and entities have agreed to pay over $2.4 billion in fines.

Mr. Horie’s plea agreement is subject to approval by the United States District Court for the Northern District of Ohio.

Japanese Shipping Company Rolls Over, Pleads Guilty to Price Fixing

by Lisa A. Peterson | Oct 21, 2014 | Cartel Enforcement, DOJ Developments

On September 26, 2014 Japanese transportation company Kawasaki Kisen Kaisha Ltd. (K-Line) agreed to plead guilty to price fixing, bid rigging and allocating customers for international ocean shipping services for “roll-on, roll-off” cargo. K-Line will be fined $67.7 million. Roll-on, roll-off cargo is a special type of ocean shipping for cars, trucks, agricultural and construction equipment, and other objects that can be rolled on and rolled off a vessel. Roll-on, roll-off cargo does not involve shipping containers.

K-Line pleaded guilty to one count—a violation of Section One of the Sherman Act. The plea agreement states K-Line participated in the conspiracy from at least February 1997 until at least September 2012. The conspiracy involved customers and shipping routes both to and from the United States at the Port of Baltimore and other ports. The conspiracy regarding roll-on, roll-off ocean shipping involved only deep-sea (or trans-ocean) shipping. It did not include short-sea or coastal water freight shipping.

K-Line and its co-conspirators attended meetings and engaged in communications to discuss bids and tenders, including refraining from competing for certain bids and tenders for ocean shipping; to allocate customers by refraining from competing for each other’s existing business on certain routes; and to discuss prices. K-Line acted on these illegal restraints of trade by submitting in accordance with its agreement with co-conspirators and providing roll-on, roll-of shipping services at supra-competitive rates.

K-Line’s guilty plea is the second plea agreement in the Department of Justice’s investigation into the international shipping cartel for roll-on, roll-off cargo. In February 2014, Chilean company, Compania Sud Americana de Vapores SA pleaded guilty and agreed to pay a $8.9 million criminal fine.

Limitation Periods for Antitrust Damages Actions in The European Union

by Dr. Boris Uphoff, Martino Sforza and Steffen Woitz | Jul 2, 2014 | Cartel Enforcement, EC Developments

The last decade or so has seen a marked increase in antitrust damages actions brought before the national courts of the EU Member States. As things currently stand, such actions are governed by the various national laws of the 28 Member States. This patchwork of differing national rules further complicates the already complex underpinning of antitrust damages actions. In order to facilitate the initiation of such actions, the European institutions have recently agreed upon a new directive that provides for a minimum degree of harmonisation of certain rules governing actions for damages under national laws (the Damages Directive). Its promulgation is now just a formality.

One of the key, yet often overlooked, legal considerations in antitrust damages actions is the issue of limitation periods. For a defendant, a careful assessment of this issue is core to any cartel defence strategy and must be considered at the time of administrative proceedings, as it can have huge implications on the decision of whether or not an appeal should be considered (see the Morgan Crucible proceedings before the English courts, discussed below).

For a claimant, it is equally crucial in order to ensure that a claim is not time-barred and, as a result, left with no legal remedy. An action brought out of time will fail, no matter how robust the claim is perceived to be. A complication arises in this context, however, given the often cross-border nature of antitrust infringements, which means a claim may be brought in a number of Member States, each of which have different rules in place with respect to the length and calculation of limitation periods.

Calculating a given limitation period will often be a relatively straightforward exercise but complexities do sometimes arise. This is illustrated by the Morgan Crucible cases in the United Kingdom, which only recently resolved key questions relating to the calculation of limitation periods for the purposes of bringing an action before the English courts.

Against this backdrop, this special report looks at the limitation periods in those EU Member States that are arguably at the forefront of developments in antitrust damages actions: France, Germany, Italy, the Netherlands and the United Kingdom. In particular, this report analyses the complexities relating to limitation periods, as illustrated by the UK courts’ attempts to grapple with the matter in a complex line of cases, ending up before the UK Supreme Court. This special report also highlights potential problem areas with respect to the limitation periods that are not addressed by the Damages Directive and may adversely affect the interplay between the public and private enforcement system in the European Union.

Read the full Special Report here.

2014 Cartel Penalties On Pace to Set Record

by Lisa A. Peterson | Jun 30, 2014 | Cartel Enforcement

Global antitrust regulators are on pace to levy record-breaking cartel penalties in 2014. If global regulators keep pace, cartel penalties will surpass 2013’s record total. Through June, U.S. antitrust regulators issued fines totaling $709 million (USD), while European regulators imposed fines of $1.95 billion.

The record-breaking fines are the result of global regulators more actively enforcing antitrust and competition laws. While the U.S. and Europe have been rigorously investigating cartel activity, Russia and many Asian countries have also seen a noticeable uptick in activity. To date, China has levied $36.3 million in fines, and Japan and South Korea are considerably ahead of the pace needed to exceed 2013 totals. If the current rate continues through the second half of 2014, global regulators are likely to hit all-time highs by the end of the year, especially considering that many large fines are frequently handed out near year’s end.

In addition to increased fines and enforcement activity, many jurisdictions are also more proactively taking a role in multinational cartel investigations. Particularly, Asian countries have been more vocal about the extraterritorial reach of U.S. and European antitrust laws. For example, in Motorola Mobility LLC v. AU Optronics Corp., et al., Taiwan, Japan and South Korea submitted letters to the Seventh Circuit expressing concerns about allowing recoverable damages for the purchase of end-products made with price-fixed products sold abroad.

EU’s Top Court Rules Cartel Victims Can Claim Damages From Cartelists Despite No Contractual Link

by Irina Denisova | Jun 10, 2014 | Cartel Enforcement, EC Developments

by Martina Maier, Philipp Werner and David Henry

In a landmark ruling, the EU’s top court, the European Court of Justice (ECJ) in Kone and Others C-557/12 of 5 June 2014, has held that, where a cartel causes competing companies to increase their prices, the members of the cartel may be held liable for losses incurred by victims of those price increases.

Please click here to read the full article.

Commission Holds Goldman Sachs Liable for Former Portfolio Company’s Antitrust Infringement

by Irina Denisova | Apr 7, 2014 | Cartel Enforcement, EC Developments

by Veronica Pinotti, Lionel Lesur, Martino Sforza, Nicolò di Castelnuovo

In its decision of 2 April 2014 in relation to the underground and submarine high voltage power cables cartel case (COMP/39610), the European Commission (Commission) held the parent companies of the producers involved liable, on the basis that they had exercised decisive influence over the producers. The fines levied by the Commission in this case totalled €301.6 million. One of the businesses found liable was Goldman Sachs, the former owner of Prysmian, which is one of the companies that allegedly participated in the cartel.

This case has important implications for private equity funds. It confirms that, in principle, the Commission does not view private equity funds differently to other businesses for the purpose of the application of the parental liability doctrine.

Read the full article

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