,
Michael P.A. Cohen and
Kristen Warden 
The number of countries across the globe that actively pursue cartel enforcement continues to increase, and more countries are imposing significant fines on corporations and creating criminal enforcement programmes. In 2010, massive fines were imposed in three crossborder price-fixing investigations involving TFT-LCD, international air cargo and refrigerator compressors.
Competition authorities in both the United States (US) and the EU announced significant fines in 2010 as a result of their investigation into the TFT-LCD industry, which began in late 2006. To date, total fines in the TFT-LCD investigation conducted by the US Department of Justice Antitrust Division (Antitrust Division) have exceeded US$890 million. In June, HannStar Display Corp agreed to plead guilty and pay a US$30 million fine. In December 2010, the European Commission (EC) fined five of the world's leading producers of LCD screens €649 million.
Meanwhile, the Antitrust Division indicted a major Taiwanese LCD panel maker, AU Optronics Corp and its US subsidiary, AU Optronics Corp America, along with six of its executives. Indictments of major corporations by the Antitrust Division are relatively rare.
The air cargo and freight forwarding price-fixing investigations were two of the most significant global criminal investigations in 2010. On the US front, five airlines have pleaded guilty. In 2010, six international freight forwarders pleaded guilty and paid a total combined fine of US$50.27 million. The fines imposed on freight forwarders were much less than anticipated. The EC announced fines totaling €799 million against 11 airlines. While the total amount of the fines was significant, the fact that the EC did not impose fines on 11 other carriers that were part of the administrative process suggests that the alleged conspiracy was not as extensive as first believed. The Korea Fair Trade Commission (KFTC), Canada's Competition Bureau and the Mexican Federal Competition Commission have all imposed fines in 2010 – totaling more than US$102 million – on participants in the air cargo cartel.
Competition authorities raided numerous refrigeration compressor manufacturers' offices in Germany, Denmark, Italy, the US and Brazil in 2009. In 2010, the Antitrust Division fined Panasonic Corp and Embraco North America, Inc more than US$140 million for manipulating the prices of refrigerator compressors in the US from 2004 to 2007. Similarly, Canada's Competition Bureau fined Embraco C$1.5 million in October 2010 for its role in the cartel. This global investigation remains ongoing.
Brazil and the United Kingdom (UK) demonstrated this past year that cartel enforcement is receiving new enforcement vigour. September's record-breaking cartel penalty on the 'Gases Cartel' – US$1.7 billion – is the latest example of how Brazil has become more vigilant in detecting, prosecuting and deterring cartel behaviour. In April, the UK's Office of Fair Trading (OFT) imposed the largest fine ever under the Competition Act – £225 million – on two tobacco companies and nine retailers that entered into arrangements that fixed the price of tobacco products.
In the US, the Antitrust Division continues to focus on the prosecution of select foreign executives. In February 2010, Scott D Hammond, the deputy assistant attorney general for the Antitrust Division, commented that 'no-jail deals' for corporate executives located outside the US are a 'relic of the past.' (Scott D Hammond, Deputy Assistant Attorney General, Antitrust Division, Remarks Prepared for the 24th Annual National Institute on White Collar Crime: The Evolution Of Criminal Antitrust Enforcement Over the Last Two Decades (25 February 2010)). Nevertheless, the number of individuals prosecuted, when compared to the number of companies investigated, remains relatively small, and the percentage of individuals who are 'carved out' from the protections of a company's plea agreement that are later prosecuted is relatively low. Although the Antitrust Division has recently prosecuted foreign nationals in the TFT-LCD, cathode ray tube and air cargo price-fixing investigations, the jail sentences imposed are generally lighter than the recommended sentences under the US Federal Sentencing Guidelines. In fiscal year 2010, the Antitrust Division claims that foreign nationals were sentenced to an average of 10 months in prison (Carl Shapiro, Deputy Assistant Attorney General for Economics, Antitrust Division, Remarks as Prepared for the American Bar Association Section of Antitrust Law Fall Forum: Update From the Antitrust Division (18 November 2010). In 2010, the Antitrust Division's prosecutions were focused primarily on foreign-based companies, not US-based companies. The increased enforcement activity in the US involving antitrust violations dovetails with an increased global enforcement of foreign bribery. On occasion, these two areas overlap. For example, Panalpina World Transport recently pleaded guilty in the US for both antitrust and foreign bribery conduct. Like the Antitrust Division's cartel enforcement, this new era of FCPA enforcement activity is characterised by escalating numbers of criminal investigations and a focus on prosecuting individuals. In 2010, the Department of Justice brought 48 FCPA enforcement actions and collected more than US$1 billion in corporate fines and disgorgements. Moreover, the Department of Justice is seeking jail time in most FCPA cases (in April 2010, for example, Charles Paul Edward Jumet was sentenced to 87 months in prison for his 2009 convictions on FCPA and false statements charges, and two of the defendants in the ongoing Haiti Teleco investigation were sentenced to 48 and 57 months respectively for FCPA and money laundering convictions).
Finally, the Antitrust Division successfully extradited a foreign national defendant to the US this past March. The extradition of Ian Norris – the Morgan Crucible Company executive – from the UK to the US on charges arising from a criminal antitrust investigation was the Antitrust Division's first-ever extradition of a foreign national. It took US prosecutors seven years and two trips to England's highest court to extradite Norris to the US on three counts of obstructing justice in the federal investigation of price-fixing in the carbon products industry.
Recent amendments to cartel regulations in Canada, Japan, New Zealand, Romania and the US
Canada, Japan, New Zealand, Romania and the US have promulgated significant changes to their anti-cartel legislation in 2010. Major revisions to Canada's antitrust laws became effective in March 2010. The amendments to Canada's Competition Act created a new per se criminal provision that prohibits agreements between competitors to fix prices, allocate markets and restrict output. The amendments increased the maximum penalty for criminal cartel offences to 14 years in prison and increased the maximum fine to US$25 million.
Japan's revised Anti-Monopoly Act became effective on 1 January 2010, and now imposes significantly heavier penalties on cartels, including increased fines and longer terms of imprisonment. The amendments increase the fines for price-fixing and bid-rigging by 50 per cent for those who:
- initiate the conduct and request other firms to participate in or continue to engage in the illegal conduct;
- continuously fix prices, agree to input, output or market share restraints or allocate customers in response to the conspirator's request; or
- carry out certain other acts that significantly aid the conspirator's illegal conduct.
Under the amendments, the fines range between 1.5 per cent and 15 per cent of the relevant turnover. The amendments also increase the potential prison sentence for participation in a cartel from three to five years. To further strengthen cartel enforcement, the amendments permit affiliated companies to file a joint leniency application and increase the number of applicants who can qualify for a fine reduction.
The New Zealand Commerce Commission (NZCC) released a revised Leniency Policy in March 2010. Under the previous Leniency Policy, immunity was only available if the Commission was unaware of the cartel. Today, however, immunity may be granted even if the Commission is aware of the cartel, provided the Commission does not have evidence of the cartel. The revised Leniency Policy also introduces two new features: markers and amnesty plus. The marker system allows an applicant to 'hold its place' as the first party when there is preliminary knowledge of a cartel, but before full information is available. 'Amnesty plus' allows an applicant who is not eligible for immunity for one cartel to reduce its penalty by informing the NZCC of a different cartel.
In August 2010, amendments to Romania's Competition Law No. 21/1996 came into force. Under the amendments, fines can be reduced by 10-25 per cent by admitting participation in the cartel. In addition, the amendments authorise the Romanian Competition Council to conduct dawn raids and simplify the method for calculating fines to represent 0.04 per cent of the annual profits in the preceding year. These revisions are the biggest overhaul of Romanian competition law in almost a decade and bring the legislation further into line with EU legislation.
In the US, the Antitrust Criminal Penalty Enhancement and Reform Act (ACPERA) was signed into law on 9 June 2010. ACPERA limits the civil liability of cartel members that are accepted into the Department of Justice's Leniency Programme. With the extension, damages in associated civil litigation are limited to 'actual damages' suffered by the plaintiff as a result of the defendant's conduct, rather than the treble damages and joint-and-several liability ordinarily imposed under the Sherman Act.
Groundbreaking cartel cases of 2010
TFT-LCD price-fixing investigation
The Antitrust Division has continued its investigation into the TFTLCD industry, which began in late 2006. In June 2010, Taipei-based HannStar Display Corp agreed to plead guilty and pay a US$30 million criminal fine for its role in fixing the price of liquid-crystal display panels. The Antitrust Division also indicted a major Taiwanese LCD panel maker, AU Optronics Corp and its US subsidiary, AU Optronics Corp America, along with six of its executives. In addition, four executives from Taiwanese LCD panel maker Chi Mei Optoeletronics Corp, and a former executive from Taiwanese LCD panel maker HannStar Display Corp, agreed to plead guilty and serve jail time in the US, ranging from seven to 14 months.
In December 2010, the EC fined five of the world's leading producers of LCD screens – Chimei InnoLux, AU Optronics, Chunghwa Picture Tubes, HannStar Display and LG Display – €649 million for running a price-fixing cartel between 2001 and 2006. The five manufacturers met approximately 60 times, mostly in Taiwanese hotels, for what they called 'the Crystal Meetings'. In addition to fixing prices, the cartel members swapped information on future production plans, capacity utilisation and trading conditions.
International air cargo investigation
The air cargo price-fixing investigation remains a high priority across the globe. In 2010, five airlines pleaded guilty in the US, including All Nippon Airways, Singapore Airlines Cargo, China Airlines, Northwest Airlines and Polar Air Cargo. The total criminal fines imposed by the Department of Justice in the air cargo price-fixing investigation amount to more than US$1.7 billion.
The airlines are under similar scrutiny by other competition authorities around the world. The EC, for example, fined 11 air cargo carriers €799 million in November and Canada's Competition Bureau fined Cargolux Airlines CA$2.5 million in October. In May 2010, the KFTC fined 19 airlines involved in the air cargo cartel 119 billion won, the most the KFTC has ever fined an international cartel. And the Mexican Federal Competition Commission (CFC) imposed a 30 million pesos fine on the National Chamber of Cargo Transportation, five trucking companies and five individuals who agreed to impose a standard fuel surcharge on cargo shippers.
EC's first settlement in price-fixing case with DRAM makers
In May 2010, the EC announced a settlement with 10 dynamic random access memory chip (DRAM) manufacturers. This settlement is the first of its kind to follow the EC's simplified settlement procedure established in June 2008.
Under the new settlement framework, companies accused of involvement in a cartel may acknowledge liability for their involvement in the cartel after reviewing the evidence in the Commission's file and submitting a 'common understanding' as to the scope of the EC's potential objections. Companies agreeing to participate in this settlement procedure receive a 10 per cent reduction in fines. Infineon Technologies, Samsung Electronics and Hynix Semiconductor Inc are among 10 DRAM manufacturers that participated in this landmark settlement with the EC. They agreed to pay over €331 million, after taking into account the 10 per cent reduction granted to each party.
EC's first 'hybrid' cartel settlement
In July, the EC announced its first 'hybrid' cartel settlement, in which some companies admit to taking part in the cartel while others opt not to settle and face the regular enforcement procedure. Here, the EC issued a streamlined settlement decision against 12 producers of animal feed phosphates and a standard decision against Timab Industries, a phosphate producer that chose not to settle. For settling with the EC and admitting their participation in a cartel that lasted over 30 years, the fines for the 12 phosphate producers were reduced by 10 per cent (totaling €115 million).
Timab Industries did not receive a discount and was fined €59.85 million. China's first public anti-cartel action under the Anti-Monopoly Law This past year was also a historic one for antitrust enforcement in Asia. In March, China announced the first enforcement action against a price cartel since the Chinese Anti-Monopoly Law (AML) came into force on 1 August 2008. China exercised its cartel-busting muscle by breaking up a price cartel among 33 Chinese rice noodle producers. The NDRC, the Chinese competition authority tasked with enforcing the AML, found that the cartel members' conduct constituted an 'unfair price act' in violation of the Price Law and the AML. The three organisers of the cartel were fined 100,000 renminbi and 18 other participants were fined between 30,000-80,000 renminbi.
Global refrigerator compressor cartel
The Antitrust Division's ongoing investigation into the worldwide refrigerator compressors market progressed in 2010. In October 2010, Panasonic and Embraco North America, Inc agreed to plead guilty and pay US$49 million and US$91 million respectively for their role in an international conspiracy to fix the prices of refrigeration compressors from 2004 to 2007. Embraco also pleaded guilty in Canada to fixing the price of hermetic refrigeration compressors sold to a Canadian refrigerator and freezer manufacturer and agreed to pay a C$1.5 million fine.
The Antitrust Division's recent focus on prosecuting foreign nationals is consistent with FCPA enforcement
The Antitrust Division's recent focus on prosecuting foreign nationals
Over the past year, the Antitrust Division has pursued a vigorous enforcement policy in prosecuting international cartel offences against individual violators, mostly foreign nationals. The Antitrust Division's particular focus on prosecuting foreign nationals is significant. Carl Shapiro, the deputy assistant attorney general for economics at the Antitrust Division, stated on 18 November 2010 that '[t]he incarceration of foreign nationals who participated in cartels that were detrimental to the US and its consumers continues to be a priority of the Division, despite the additional challenges that can arise in such cases' (Carl Shapiro, Deputy Assistant Attorney General for Economics, Antitrust Division, Remarks as Prepared for the American Bar Association Section of Antitrust Law Fall Forum: Update From the Antitrust Division (18 November 2010)).
The Antitrust Division has prosecuted over 40 non-US executives since May 1999, or approximately four individuals per year (Scott D Hammond, Deputy Assistant Attorney General, Antitrust Division, Remarks Prepared for the 24th Annual National Institute on White Collar Crime: The Evolution Of Criminal Antitrust Enforcement Over the Last Two Decades (25 February 2010)). These individuals hail from countries such as Canada, France, Germany, Japan, Taiwan, South Korea, the Netherlands, Austria, Belgium, Italy, Mexico, Norway, Sweden, Switzerland and the UK. Those individuals have served, or are currently serving, prison sentences in the US for violating the Sherman Act or obstructing an investigation of an international cartel.
In the past year, the Department of Justice has indicted and charged individuals from Thailand, Mexico and Haiti for FCPA violations. At a speech in Paris in May 2010, the attorney general of the US, Eric Holder, addressed the Department of Justice's focus on prosecuting foreign nationals: 'For decades – since the passage of the Foreign Corrupt Practices Act in 1977 in the wake of the Watergate investigations – US law enforcement has pursued bribe payers of all stripes: large corporations and small companies; powerful CEOs and low-level sales agents; US companies and foreign issuers; citizens and foreign nationals; direct payers and intermediaries (Eric H Holder, Attorney General of the United States, Remarks As Prepared For Delivery By Attorney General Holder at the Organization for Economic Co-operation and Development (31 May 2010) (emphasis added)).
The Antitrust Division's recent high-profile prosecutions of foreign nationals in the TFT-LCD, cathode ray tube and air cargo price-fixing investigations underscore this foreign focus. For example, in the TFT-LCD price-fixing investigation, a total of 22 foreign executives from eight companies have been indicted or pleaded guilty in the US and were sentenced to jail time in the US. All of these individuals who entered guilty pleas were foreign nationals, based abroad, and for whom extradition would have been difficult. These foreign nationals included six executives from Taiwanese LCD panel maker AUO Optronics Corp, four executives from Taiwanese LCD panel maker Chi Mei Optoelectronics Corp, one Japanese Hitachi executive, two executives from Taiwanese LCD panel maker HannStar Display Corporation, three Taiwanese Chunghwa Picture Tube executives and two Korean LG executives. The incarceration periods range from six to 14 months. These guilty pleas continue the Department of Justice's trend of forcing foreign executives who participated in price-fixing to serve US jail sentences.
In the related cathode ray tube investigation, 2010 brought four additional indictments of Taiwanese executives in the US. In November, South Korean executives Seung-Hyu 'Simon' Lee, Yeong Ug 'Albert' Yang, and Jae-Sik 'JS' Kim were indicted for their participation in a global conspiracy to fix prices of colour display tubes used in computer monitors. In March 2010, Alex Yeh, another Taiwanese executive, was indicted for participating in a conspiracy to fix the prices of colour display tubes used for computer monitors.
Finally, three additional foreign nationals were indicted in 2010 for their involvement in the air cargo price-fixing conspiracy. In August, Joo Ahn Kang and Chung Sik Kwak – both citizens of Korea and executives of Asiana Airlines – were indicted for participating in a conspiracy to fix passenger airfares for travel between the US and Korea. The next month, the Antitrust Division indicted a Swedish national and Martinair executive – Maria Christina 'Meta' Ullings – for his alleged role in fixing surcharges on international air cargo shipments and for allegedly obstructing justice. To date, two US citizens and two foreign nationals have been sentenced to prison sentences ranging from six to eight months as a result of their involvement in the air cargo price-fixing conspiracy.
The Antitrust Division succeeds in its first-ever extradition of a foreign national
The Antitrust Division's interest in prosecuting foreign nationals is also apparent in its recent efforts to extradite foreign nationals to the US for prosecution of antitrust and related offences. Although it is a new weapon to the Antitrust Division, the Criminal Division has relied heavily on the extradition of foreign nationals to bring FCPA violators – regardless of citizenship or location – into US courts. Last year alone, there have been four high-profile extraditions of foreign nationals to the US to face FCPA charges. In July 2010, Italian citizen Flavio Ricotti, former executive at Control Components Inc, was extradited to the US after being arrested in Germany. The Department of Justice alleges that Ricotti was involved in making corrupt payments of over US$1 million to state-owned companies and private employees in the United Arab Emirates, Kazakhstan, India and Qatar.
Ousama M Naaman, a dual citizen of Canada and Lebanon, was arrested in Germany in July 2009 and extradited to the US in 2010. Naaman pleaded guilty to violating the FCPA by paying bribes to Iraqi officials on behalf of a publicly traded chemical company in exchange for contracts under the United Nations Oil for Food Programme. In April of 2010 a UK court approved the Department of Justice's request to extradite Jeffrey Tesler and Wojciech Chodan, British citizens whom the agency alleged were involved in KBR's bribery of Nigerian officials. The Ricotti, Naaman, Tesler and Wojciech extradition experiences portend a general increased willingness to extradite foreign nationals to the US to face FCPA charges.
In 2010, the Antitrust Division followed suit. In March, the Antitrust Division successfully extradited British citizen Ian Norris, the former executive of the British engineering firm Morgan Crucible Company PLC, to the US on charges arising from a criminal antitrust investigation. Prior to this year, the Antitrust Division has been unsuccessful in its efforts to have foreign nationals extradited to the US for prosecution for antitrust violations. In 2003, Norris was indicted in the US for Sherman Act violations related to the carbon products price-fixing agreements and for obstruction of justice.
Since 2005, the Department of Justice has sought to have Norris extradited on both the Sherman Act violation and on obstruction of justice charges. Norris challenged the extradition, arguing that pricefixing was not illegal in the UK until 2002, well after Norris' alleged participation in the carbon products price-fixing scheme, and therefore not an extradition offence. The House of Lords, the UK's highest domestic court, accepted Norris' argument in 2008, but left open the possibility that he could be extradited for obstruction of justice for his role in directing the preparation of scripts that company employees should follow if they were questioned in the investigation.
After seven years and two trips to the UK's highest court, the Antitrust Division finally succeeded in extraditing Norris in March 2010. On 27 July 2010, a federal jury in Philadelphia convicted Norris of conspiracy to obstruct justice and he was sentenced to serve 18 months in prison.
The Norris case may signal that extradition will play a more important role in US cartel enforcement in the future, though significant extradition hurdles remain. The Antitrust Division's ability to seek extradition was historically hampered by the 'dual criminality' requirement of most extradition treaties. But with the passage of the UK's Enterprise Act in 2002, which introduced criminal sanctions for antitrust violations, the stage was set for a growing international recognition that punishing individuals is an important part of effective cartel enforcement. A number of jurisdictions around the world, including Brazil, Australia, the Czech Republic, Denmark, Estonia, France, Greece, Ireland, Norway, Portugal, Romania, Russia and Slovakia, have recently passed legislation to criminally prosecute those involved in cartel activity. The Norris case serves to illustrate the extraordinary lengths to which the Antitrust Division will go to reach foreign national defendants who try to evade the Division's jurisdiction. The Antitrust Division has also instituted a policy of placing indicted individuals fleeing prosecution on an Interpol 'Red Notice', which would subject the defendant to arrest if he or she crosses an international border and could result in his or her extradition.
Looking ahead
The global trend towards criminalising cartel behaviour has continued its steady march forward in 2010. This increased attention to cartel conduct has resulted in greater coordination among global enforcement authorities. In response, companies subject to antitrust investigations must be careful to coordinate any leniency applications, investigation responses and plea agreements so as to avoid having the response to enforcement in one jurisdiction compromise the defence in another.
In addition, the threat of extradition and Red Notices bring significant new risks to travelling business people. After Norris, competition authorities across the world may pursue extradition using other theories of criminal liability, like obstruction of justice. This has important practical and legal consequences for foreign business executives with cartel exposure. It will undoubtedly be harder for a foreign national to remain overseas in an attempt to avoid the investigating authority's jurisdiction. It is therefore important for international business people to understand the increased risks of detection and punishment by competition authorities around the globe.
The content of this article does not constitute legal advice and should not be relied on in that way. Specific advice should be sought about your specific circumstances.
