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DOJ Developments

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.

Agencies Sign New Cooperation Agreement with Colombia

by Young Cynn | Sep 18, 2014 | DOJ Developments, FTC Developments

The Department of Justice (DOJ) Antitrust Division announced on September 16 that the DOJ and Federal Trade Commission (FTC) have entered into a new antitrust cooperation agreement with Colombia’s Superintendence of Industry and Commerce, stating that the “agreement will enable the antitrust agencies in the two countries to further enhance their law enforcement relationship.”

According to DOJ Assistant Attorney General Bill Baer, cooperation between the United States and Colombia is “critical to maintaining competitive markets in the Americas, particularly for economies as linked as ours.” The agreement contains provisions for enforcement cooperation and coordination, conflict avoidance and consultations for enforcement actions, and technical cooperation. It also contains a provision to maintain the confidentiality of any sensitive information.

The agreement, effective September 16, 2014, is similar to those previously entered into with other countries such as Brazil, Canada, Chile and Mexico, and does not change any current laws in either country. Antitrust agencies from both countries have already established a strong working relationship under the U.S.-Colombia Trade Promotion Agreement which was signed in 2006. “We look forward to working with the Superintendence to advance our shared goal of promoting convergence around sound competition policy throughout the hemisphere,” stated FTC Chairwoman Edith Ramirez.

The Importance of an Effective Compliance Program

by Emily Townsend | Sep 12, 2014 | DOJ Developments

On September 9, 2014, Brent Snyder, Deputy Assistant Attorney General of the U.S. Department of Justice Antitrust Division, provided prepared remarks on the subject of “Compliance is a Culture, Not Just a Policy,” before the International Chamber of Commerce/United States Council of International Business Joint Antitrust Compliance Workshop in New York City. Snyder explained that an effective corporate compliance program is an important part of a company’s effort to prevent antitrust violations.

According to Snyder, compliance programs make good business and common sense. He noted that compliance programs help prevent companies from committing crimes. And, that even if a compliance program is not entirely successful, a partially successful compliance program may help a company qualify for leniency. Snyder believes there is no one-size-fits-all compliance program. Instead, an effective compliance program should be designed to account for the markets a company operates in and the nature of a company’s business. He also reviewed five things the Antitrust Division looks at when evaluating a company’s compliance program.

First, a company’s board of directors and senior executives must engage in and be fully supportive of the company’s compliance efforts. This means that senior management must be fully knowledgeable about the company’s compliance efforts, including providing the necessary resources and having the appropriate personnel oversee the program. Second, the entire company needs to be committed to executing the policy. Companies show this by training all executives and managers, and most employees, especially the employees with pricing and sales responsibilities. Third, the compliance policy should be proactive. To do so, companies should monitor and audit “risk activities.” Fourth, a company should have an approach to individuals that break the antitrust laws, including being willing to discipline employees for any violations. Finally, a company that uncovers criminal antitrust conduct should be equipped to prevent the conduct from happening again, which can mean making changes to its compliance program and being prepared to accept responsibility for that conduct.

Snyder also mentioned that having a compliance program may still benefit a company planning to plead guilty to an antitrust crime. The examples he provided were companies with compliance policies possibly being able to avoid additional oversight by the court and the Division. The Sentencing Guidelines require an effective compliance program. If a company does not have one or can’t show it is updating its existing one, a company will most likely be on probation. However, if a company can show that they adopted or strengthened an existing compliance program it may be able to avoid probation. The Division is also considering possible ways to credit a company that proactively strengthens or adopts a compliance program after the commencement of an investigation.

In the end, however, Snyder was clear that the purpose of “having an effective compliance program is not so that the Division will cut you a break if your company commits a crime.” Instead, the purpose of an effective compliance program, as described by Snyder, is to be a “good and responsible corporate citizen.”

DOJ Makes Headway in Fight Against Financial Fraud

by McDermott Will & Emery | Sep 4, 2014 | DOJ Developments

On August 18, 2014, following a Department of Justice (DOJ) investigation and criminal indictment, Paul Robson became the second former Rabobank employee to plead guilty for his participation in a scheme to manipulate the Japanese Yen London InterBank Offered Rate (LIBOR). This latest success for the agency “demonstrates the Department of Justice’s continued resolve to hold individuals and institutions accountable for their involvement in fraud in the financial markets,” said Assistant Attorney General Leslie Caldwell of the DOJ’s Criminal Division.

The charges against Robson came in the wake of Rabobank’s October 2013 admission of guilt for its involvement in the global scheme. The bank agreed to pay a $325 million penalty as part of a deferred prosecution agreement with the DOJ. Three months later, the agency charged Robson along with two Rabobank derivatives traders with submitting fraudulent LIBOR figures in order to benefit their own trading positions. LIBOR is a benchmark interest rate used by lenders worldwide as a basis for calculating interest rates on short-term and various other loans. A London-based trade association calculates LIBOR for 10 different currencies based on rates submitted by the world’s leading banks, which are supposed to reflect each bank’s estimation of the rate it would be charged for a short-term loan. Robson played his role in the scheme as the primary submitter of Yen LIBOR for Rabobank, one of 16 banks that contributed to the published Yen LIBOR.

Earlier this year, Rabson was indicted on 15 different counts, each of which carried up to a 30-year prison sentence. Rabson pled guilty to one count of conspiracy to commit wire and bank fraud. His sentencing is scheduled for June 2017.

FTC and DOJ Host Conditional Pricing Programs Workshop

by Jon B. Dubrow | Jun 25, 2014 | DOJ Developments, FTC Developments

The Federal Trade Commission (FTC) and United States Department of Justice (DOJ) hosted a workshop on June 23, 2014 discussing the law and economics of “conditional pricing” programs. Most panelists were academics, including economists and law school professors. The bulk of the presenters advocated a more aggressive posture towards these arrangements than the courts have recently adopted.

Conditional pricing programs. Conditional pricing generally encompasses pricing, discounting and contracting practices in which a company’s prices charged will vary depending upon the level of purchases the customer makes from the company’s competitors. Examples include:

Bundled discounts: Supplier X, which sells dominant product A and competitive product B, grants a discount on product A (which the customers have to buy) so long as customers buy a certain percentage of their needs of product B from Supplier X, rather than from its competitors.
Loyalty / market share discounts: Supplier X, which has a dominant position in product A, grants discounts from its baseline pricing if customers purchase a high percentage (e.g., 90 percent) of Product A from Supplier X, rather than from its competitors.

Theories of harm. The panelists discussed two basic categories of theories of competitive harm.

Exclusion of rival manufacturer. When a smaller rival, perhaps a new entrant, tries to break in to a market, the dominant incumbent may impose a conditional pricing program that makes it hard for the new entrant to get a significant share of sales, which may deprive it of critical scale efficiencies and render it a marginal supplier, or perhaps even force an exit.
Coordination / collusion of customers / distributors. A retailer can be viewed as providing retailing services in the sale of the manufacturer’s products. The purchases and contracts different retailers receive from manufacturers can be thought of as inputs in the retailer’s provision of its services. Some of the economists stated their view that customers who may desire to coordinate their behavior as sellers can use conditional pricing programs from their suppliers to ensure that the input costs are comparable, which can reduce competition among retailers. For example, the conditional pricing program may ensure that no retailer switches over from the dominant supplier to the new entrant with a lower cost product. Keeping the customers from switching to the new entrant may make it easier to achieve or maintain coordination.

Relevance of cost based tests. The panel addressed cost-based safe harbors in great detail, with most of the economists opining that they were simply not helpful. The issue is whether conditional pricing programs that result in a product being sold “above cost” should fit within a safe harbor.

Legal background. This discussion starts with the Supreme Court’s Brook Group case, which found that above cost pricing cannot create liability under a predatory pricing theory. In cases involving bundled /multiproduct discounts, there has been a circuit split with the Third Circuit (LePage’s) allowing liability even if prices are above costs, and the Ninth Circuit (Peace Health) holding that above [...]

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Ringing Regulatory Rumors: Deutsche Telekom Purportedly Agrees to Sell T-Mobile US

by Lisa A. Peterson | Jun 2, 2014 | DOJ Developments, Mergers & Acquisitions

Reports circulated out of Japan and Germany late last week indicating Deutsche Telekom AG, owner of T-Mobile US Inc., reached a tentative agreement to sell T-Mobile to Softbank, owner of Sprint Corp. The potential merger of the third and fourth largest wireless carriers has sent rumors of regulatory challenges flying. Other news agencies, like Reuters, have said that crucial details including “price and financing remain to be worked out.” None of the companies, however, have commented on the possible buyout.

Both Deutsche Telekom and Softbank have been frank about their desire to ink a deal. Likewise, leading regulators at the Department of Justice (DOJ) have raised public concerns about the anticompetitive effects of the potential deal. Earlier this year, William Baer, the assistant attorney general for the antitrust division at the DOJ, voiced his opinion that “consumers have benefitted from much more favorable competitive conditions” by having four major players in the wireless carrier industry. As a result, he has expressed hesitation about the DOJ antitrust division’s ability to clear the long-rumored deal, which would create a narrower sector.

Sprint’s chairman, Masayoshi Son, has countered with a public campaign touting the benefits of the tie-up, including creating a more equal competitor to level the playing field with rival behemoths Verizon and AT&T. Son has also encouraged regulators to more broadly consider access to internet, rather than the wireless industry alone. Along those lines, he has made several proposals regarding mobile broadband and promised that with “a three heavy-weight fight” he would engage in “a more massive price war, a technology war.”

Still, industry commentators doubt the ability of the deal to clear regulatory hurdles. Some have pointed to a lack of evidence from Son and Softbank showing that more effective price competition could flourish in a competitive environment with only three major players. Such data is likely crucial to the fate of the tie-up, as a lack of similar data helped bring down AT&T’s prior proposed deal to purchase T-Mobile. Additionally, the deal would require the Federal Communications Commission’s (FCC’s) approval alongside that of the DOJ. Many cite FCC Chairman Tom Wheeler’s cable and wireless industry experience as indicating opposition to the deal.

Reports stated that Deutsche Telekom, which owns a 67 percent stake in T-Mobile, may be interested in keeping a small portion of its ownership interest—perhaps as much as 15 percent—in T-Mobile. If Softbank moves forward, it may face challenges in a bid for T-Mobile, including cable giant Comcast.

FTC and DOJ Release FY 2013 HSR Annual Report

by Emily Townsend | May 27, 2014 | DOJ Developments, FTC Developments

On May 21, 2014, the Federal Trade Commission (FTC) and Department of Justice (DOJ) released the Hart-Scott-Rodino Annual Report covering Fiscal Year (FY) 2013 (October 1, 2012 – September 30, 2013). The report describes key merger enforcement actions over the past year and provides interesting data regarding the agencies’ antitrust enforcement activity.

Specifically, the report indicates that in FY 2013, 1,326 transactions were reported under the Hart-Scott-Rodino (HSR) Act, representing an approximate 7 percent decline in reported transactions from FY 2012. The FTC was granted clearance to investigate 145 of these transactions, while the DOJ was granted clearance to investigate 72 transactions. Of the 145 transactions the FTC investigated in FY 2013, it only issued 25 second requests. In other words, the FTC only issued second requests in 17.2 percent of its investigations in FY 2013. The DOJ’s Antitrust Division, on the other hand, issued second requests in 22 of the 72 transactions it was granted clearance to investigate (i.e., 30.6 percent of its investigations).

However, of the FTC’s 25 second requests in FY 2013, it brought 23 merger enforcement actions. That is, the FTC brought enforcement actions in more than 90 percent of the transactions for which it issued a second request in FY 2013. The DOJ’s Antitrust Division brought only 15 merger enforcement actions in FY 2013, or just under 70 percent of the transactions for which it issued a second request (15 out of 22).

This information can be a helpful tool to assist clients in evaluating their chances before the merger enforcement agencies at various stages of the HSR notification process. While the FTC and DOJ together only investigated 217 transactions in FY 2013, most of those investigations were brought by the FTC. Furthermore, the agencies’ decisions to issue second requests made it increasingly likely that they would bring enforcement actions to block or unwind the transactions, particularly with respect to the FTC.

Perspectives from the Federal Antitrust Enforcement Agencies

by Ashley Fischer, Michelle Lowery and Stephen Wu | May 20, 2014 | DOJ Developments, FTC Developments, Healthcare Antitrust

At the recent Antitrust in Health Care conference in Arlington, Virginia, representatives from the Federal Trade Commission and U.S. Department of Justice Antitrust Division discussed important health care and antitrust topics. Speakers stressed that the Affordable Care Act is not an opportunity for anticompetitive consolidation and conduct. Providers and payers alike should continue to analyze every acquisition, collaborative arrangement, contract or unilateral action under the traditional framework of antitrust law.

Please click here to read the full article.

DOJ and FTC to Hold Conditional Pricing Practices Public Workshop

by Emily Townsend | May 9, 2014 | DOJ Developments, FTC Developments

The U.S. Department of Justice (DOJ) and Federal Trade Commission (FTC) announced on Tuesday, May 6, that the agencies will jointly hold a public workshop on June 23, 2014, to consider the economic effects and antitrust law treatment of conditional pricing arrangements.

Conditional pricing arrangements, such as loyalty discounts or bundled product discounts, are programs through which a seller may discount prices based upon a buyer purchasing specific volumes of or combinations of products. Loyalty discounts are practices by which a seller charges a buyer a lower price for purchasing a certain volume of a product or products. In bundling, another common pricing arrangement, a seller may offer several products for sale as one combined product, often charging less for the combined product than the sum of the prices of the component products.

Courts have been concerned that loyalty discounts and bundled discounting could be anticompetitive if utilized to exclude competitors from a market or to facilitate a predatory pricing scheme.

Despite these concerns, loyalty discounts and product bundling can also be procompetitive. Both programs can produce efficiencies. For example, by selling a greater volume of products or certain products together, a firm may reduce shipping or marketing costs. Further, these practices decrease prices through discounts, and courts have long recognized that “cutting prices to increase business often is the very essence of competition.”

No clear legal standard has been established for determining which conditional pricing arrangements are anticompetitive. For loyalty discounts, courts have attempted to articulate a standard by evaluating the economic theory that loyalty programs can facilitate exclusive dealing or predatory pricing schemes. For bundled discount practices, courts are split among three different legal standards, and a fourth was recommended by the Antitrust Modernization Commission in 2007.

The agencies have welcomed the public to submit comments on conditional pricing practices on its website. Comments are being accepted through August 22, 2014.

First Successful Extradition of Foreign National for Price-Fixing Violation

by McDermott Will & Emery | Apr 7, 2014 | Cartel Enforcement, DOJ Developments, German Developments

For the first time, the U.S. Department of Justice (DOJ) has successfully litigated an extradition of a foreign national on an antitrust charge. This extradition shows that the DOJ is still pursuing individuals it charged several years ago with criminal price-fixing conduct and is a watershed moment in DOJ criminal enforcement of the antitrust laws.

Read the full article.

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