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price fixing

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.”

Court of Justice of the European Union Rejects the Appeal of Italian National Extradited to the United States for Price-Fixing Violation

by Emily Townsend | Feb 9, 2015 | EC Developments, Italian Developments

On February 9, the Court of Justice of the European Union made public its January 28, 2015 order rejecting the appeal of Mr. Romano Pisciotti, an Italian national who was extradited from Germany to the United States in April 2014 for his role in the marine hose price-fixing conspiracy.

On July 2, 2014, the General Court of the European Union rejected Pisciotti’s appeal as manifestly inadmissible because, under Article 258 of the Treaty on the Functioning of the European Union, individuals do not have power to appeal European Commission’s decisions to not start infringement proceedings. Pisciotti had appealed the European Commission’s April 11, 2014 decision rejecting his complaint against Germany for having granted the extradition to the United States, allegedly in breach of EU law on the freedom to provide services.

Mr. Pisciotti is the first foreign national to be successfully extradited to the United States for a price-fixing violation.

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.

Summary Judgment Affirmed by Sixth Circuit in Broker Commission Price-Fixing Litigation

by Emily Townsend | Nov 21, 2014 | Private Litigation

On November 13, 2014, the Sixth Circuit Court of Appeals upheld the dismissal of price-fixing claims against two home brokerage service firms in Kentucky, McMahon Co. and HomeService of America, Inc. Hyland, et al. v. HomeServices of America Inc., et al., case number 12-5947. The plaintiffs, a class of Kentucky brokers, alleged that the defendants conspired to raise the price of broker commission fees in violation of Section 1 of the Sherman Act. The plaintiffs supported their claims by alleging that public comments made by McMahon Co. regarding not cutting fees in the face of competition from internet brokers showed a unity of purpose amongst the defendants. They also pointed to the fact that defendant companies typically set their listing commission fee at six percent. The defendants, on the other hand, argued that the fee was not set through agreement between brokers and that commission fees could be negotiated for specific transactions. The Western District of Kentucky granted summary judgment for the defendants, and the plaintiffs appealed.

The appellate court affirmed, determining that there was no direct evidence of an agreement and insufficient circumstantial evidence for the plaintiffs’ claims to defeat summary judgment. Citing the Supreme Court’s precedent in Matsushita Electrical Industrial Co. v. Zenith Radio Corp., 475 U.S. 574 (1986) and the Sixth Circuit decision in Re/Max, Int’l, Inc. v. Realty One, Inc., 173 F.3d 995 (6th Cir. 1999), the Sixth Circuit explained that circumstantial evidence cannot support an inference of a conspiracy when the evidence is equally consistent with independent conduct as conspiratorial behavior. To survive summary judgment, circumstantial evidence must tend to exclude the possibility of independent conduct. Upon review of the record, the panel agreed with the district court that evidence, such as the fact that the defendants would deviate from the six percent commission rates through negotiations and the fact that there appeared to be no impact on the defendants’ pricing as a result of comments made at public hearings, did not exclude the possibility of independent conduct. Because the plaintiffs’ circumstantial evidence of conspiracy was equally consistent with permissible behavior on the part of the defendants, the plaintiffs failed to support an inference of conspiracy.

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.

Automotive Bearings Price-Fixing Allegations Survive FTAIA Defense

by McDermott Will & Emery | Aug 28, 2014 | Private Litigation

On August 26, 2014, the Eastern District of Michigan denied a motion by a Japanese manufacturer and its U.S.-based subsidiary (NTN Corporation and NTN USA Corporation) to dismiss the direct and indirect purchaser complaints in In re Bearings, 2:12-cv-00500-MOB-MKM (E.D. Mich. Aug. 26, 2014), one of the cases in the In re Automotive Parts Antitrust Litigation MDL, No. 12-md-02311. Following an investigation by the Japan Fair Trade Commission in 2013, NTN admitted to participating in a conspiracy to fix prices for bearings, which the complaints describe as “friction-reducing devices that allow one moving part to glide past another moving part.”

According to NTN, the plaintiffs were trying to use NTN’s participation in a price-fixing conspiracy in Japan to “link NTN to a different conspiracy in the United States” simply because NTN had “knowledge that some of its bearings sold in foreign markets would enter the United States market.” This “theory of global United States antitrust jurisdiction,” NTN contended, is prohibited by the Foreign Trade Antitrust Improvements Act (FTAIA).

The court was unpersuaded. The plaintiffs’ allegations depicting foreign investigations were not merely attempts to recover for conduct that occurred in other countries; rather, the existence of foreign investigations and guilty pleas was what “render[ed] Plaintiffs’ claims of a conspiracy directed at the United States plausible.” According to the court, the FTAIA arguments did not apply to NTN USA, which was alleged to have manufactured and sold bearings in the United States. And “[w]ith respect to NTN, Plaintiffs allege[d] that NTN USA manufactured and sold price-fixed bearings directly into the United States market at the direction of NTN.” The court concluded that “[t]he conduct at issue in this case is not the type of conduct Congress sought to exclude from the Sherman Act’s reach.”

Chinese Magnesite Producers Antitrust Class Action Complaint Dismissed

by Michelle Lowery | Jul 30, 2014 | Chinese Developments, Energy/Commodities, Private Litigation

On July 24, 2014, the district court in Animal Sci. Prod., Inc. et al. v. China Nat’l Metals & Minerals Imp. and Exp. Corp. et al., Case No. 2:05-cv-04376 (D.N.J.), dismissed direct purchaser plaintiff’s Amended Complaint without prejudice in favor of magnesite producers accused of engaging in a price fixing scheme for magnesite and magnesite products sold in the United States. The court found that the direct purchaser plaintiff, Resco, did not plausibly plead facts to establish antitrust standing as a direct purchaser. The analysis was complicated by the fact that Resco inherited its claim from an assignor, Possehl (US), and the Amended Complaint contained no facts supporting the allegation that Possehl made direct purchases from the defendants. The court recommended amending the complaint to identify specific transactions and the governing agreements for those purchases.

The dismissal is another setback for the plaintiffs, who filed suit in 2005 against 17 foreign companies, 16 of which are located in China. None of the Chinese defendants responded to the complaint and in 2007, and plaintiffs filed a motion for a default judgment. Seven of the companies responded in 2008 with a motion to compel arbitration. However, before any of the motions were resolved, the case was administratively closed while the Third Circuit determined the appropriate standard for analyzing whether the district court had jurisdiction to hear the case under the Foreign Trade Antitrust Improvements Act. The case was reopened in April 2012 and the district court asked for briefing on antitrust standing issues, which resulted in the dismissal of the Amended Complaint.

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