Criminal and Cartel Antitrust Committee Update January 31, 2014 Donald C. Klawiter Jennifer M. Driscoll-Chippendale Nikolaus D. Schnermann
Agenda I. DOJ Update II. E-Books Status III. Private Litigation Developments Related to Criminal Violations IV. International Update
I. DOJ Update
Individual Liability Ex-Sea Star President, Frank Peake, was sentenced to 5 years for price-fixing on December 6. Longest prison sentence ever imposed for an antitrust violation. Also ordered to pay $25,000 in fines. Prosecutors had requested 87 months. This sentence reflects the serious harm these conspirators inflicted on American consumers, both in the continental United States and in Puerto Rico. - Bill Baer. DOJ using stiffer sentences rather than fines to promote deterrence.
Auto Parts On January 16, DOJ announced that Tokyo-based Koito Manufacturing will plead guilty and pay $56.6M for its role in conspiracies to rig bids for, and to fix, stabilize and maintain prices of automobile lighting fixtures and lamp ballasts. 24 th company to plead guilty as part of the auto parts investigation.
AU Optronics On October 10, a jury in San Francisco acquitted executive Richard Bai of pricefixing liquid crystal display panels. Mr. Bai was the last of six AUO executives to be indicted. The DOJ obtained convictions in three of those six cases.
AU Optronics On December 13, Judge Illston in California ordered the two former AUO executives convicted of conspiring to fix prices on liquid crystal display panels to be released from prison on $1M bail while their appeal is pending. The 9 th Circuit, which ordered the release of Hsuan Bin Chen and Hui Hsiung, found that they were not likely to flee despite being Taiwanese nationals, did not pose a danger to the community, and that their release would not delay the case.
Real Estate Auctions Northern California Florence Fung and Michael Navone pleaded guilty on December 17 to conspiring with others to rig public real estate foreclosure auctions in San Mateo and San Francisco Counties. Rudolph Silva, Thomas Bishop, and Leslie Gee pleaded guilty on January 2 to conspiring with others to rig public real estate foreclosure auctions in Costa and Alameda Counties. The Northern California investigation has resulted in 43 plea agreements to date.
Real Estate Auctions Eastern California Anthony Joachim of Stockton California pleaded guilty to conspiring with others to rig public real estate foreclosure auctions on December 30. The Eastern California investigation has resulted in 11 plea agreements to date.
Benchmarking On January 6, RBS Securities Japan Ltd., a Tokyo-based investment bank and wholly-owned RBS subsidiary, was sentenced for its role in manipulating the Japanese Yen London Interbank Offered Rate (LIBOR). The company will pay a $50M fine.
Benchmarking On January 13, three former Rabobank traders (Paul Robson of the United Kingdom, Paul Thompson of Australia, and Tetsuya Motomura of Japan) were charged with conspiracy to commit wire fraud and bank fraud as part of the investigation into the manipulation of Yen LIBOR. Rabobank entered into a deferred prosecution agreement in October in which it agreed to pay a $325M penalty.
II. E-Books Status
E-Books On January 21, the 2 nd Circuit ruled that a three-judge panel will hear Apple s motion to stay the imposition of the monitor while its appeal is pending. The panel hearing will occur as soon as possible, and the court granted an administrative stay to cover the interim period. DOJ and Apple remain embattled on the propriety of both the presence of a monitor and the use of his time.
E-Books A brief filed by two dozen state attorneys general seeking penalties of up to $9M argued that Apple was liable for violating 24 state antitrust laws that are congruent with federal antitrust law. Apple has argued that the plaintiffs still have to prove various facts under the different state laws.
III. Private Litigation
Auto Parts On January 7, Nippon Seiki Co. Ltd. became the first company to settle claims in the auto parts price-fixing multidistrict litigation. Under the terms of the deal, the company will pay $4.56M and will provide cooperation to plaintiffs. The company paid a $1M fine.
CAFA Decision On January 14, the Supreme Court ruled that the antitrust suit initiated by the State of Mississippi cannot be removed to federal court. The companies named in the suit argued that it should be removed under the Class Action Fairness Act (CAFA). The Court held that because the only named plaintiff was the State of Mississippi, federal courts did not have jurisdiction.
IV. International Update
EU: Benchmarking On December 4, the European Commission reached a settlement with eight financial institutions in which they will be fined a total of 1.71B for rate manipulation. The EC announced two separate sets of cooperation agreements: one for LIBOR and the other for Euribor.
EU: Benchmarking EC Euribor Settlement Details: Barclays received a 100% fine reduction for revealing the existence of the cartel. Deutsche Bank: 466M. Société Générale: 446M. Royal Bank of Scotland: 131M. Not Yet Settled: HSBC, Credit Agricole, JP Morgan.
EU: Benchmarking EC LIBOR Settlement Details: UBS received a 100% fine reduction for revealing the existence of the cartel. Royal Bank of Scotland: 260M. Deutsche Bank: 259M. JP Morgan: 80M. Citigroup: 70M. RP Martin:.2M. Not Yet Settled: ICAP.
Brazil On January 22, CADE proposed sanctions against six companies involved in the cement cartel. Reporting Commissioner Alessandro Octaviani proposed that defendants pay a combined total fine of 3.1B reais ($1.3B) and divest assets to form a new company in the market. Unprecedented level of fines and penalties may precipitate a court battle between CADE and the companies that could last for years.
India In a January 2 order, the Competition Commission of India upheld the exclusion of past offenders from participation in certain public sector bids for the supply of medical equipment. The complainant had previously been found guilty of bid-rigging by the commission, which disqualified it from participation under the procurement terms. It alleged that the government procuring agencies were in a dominant position and these conditions constituted an abuse of dominance.
Japan On January 9, the Japan Fair Trade Commission (JFTC) issued a draft order that would fine four shipping companies for pricefixing in the automobile shipping industry a total of 22B ($210M). The companies are Japan s Nippon Yusen KK, Kawasaki Kisen Kaisha, and Nissan Motor Car Carrier and Norway s Wallenius Wilhelmsen Logistics. If confirmed as expected, this will be Japan s second largest cartel penalty ever.
Japan On December 20, the JFTC issued cease and desist and surcharge payment orders against engineering companies participating in bidding on certain transmission line and facility work for Tokyo Electric Power Co. The total amount of the surcharge is 746.62M ($7.15M).
South Korea On January 2, South Korea s Fair Trade Commission imposed penalties on 21 contractors that it accuses of rigging bids on a subway project in the city of Incheon. The penalties totaled KRW 1.32T ($1.26B). The contractors include Hyundai E & C, Hyundai Development Co., POSCO E & C, GS E & C, SK E & C, and Daewoo E & C.
United Kingdom On January 27, the Office of Fair Trading charged Peter Nigel Snee with a cartel offence for misconduct in the supply of U.K. galvanized steel tanks for water storage between 2004 and 2012. Preliminary hearing set for February 4 before the Southwark Crown Court.
Thank you for your attention. Questions?