Record-Setting Antitrust Law Enforcement: Stiffer Fines And Longer Sentences Call For Rigorous Compliance Programs

1. INTRODUCTION

   The Antitrust Division of the U.S. Department of Justice ("Antitrust Division") believes that "[h]olding individuals accountable for their actions is the surest way to deter executives from choosing to collude rather than compete for business,"1 and promises to aggressively combat anticompetitive conduct that affects U.S. markets. Indeed, 2013 was another record-setting year for the Antitrust Division. In 2013, the Antitrust Division continued to pursue its largest antitrust investigation, imposed and collected harsher criminal fines, sought stiffer criminal penalties, and obtained the longest criminal sentence ever imposed on an individual for an antitrust violation. In 2013, the Antitrust Division charged or prosecuted 20 corporations (up from 16 in 2012) and 52 individuals (down from 63 in 2012), and matched its 2012 record of $1.1 billion in criminal fines.

   For corporations, these record setting penalties demonstrate that antitrust compliance programs are imperative more now than ever before. Compliance programs provide companies the ability to prevent antitrust violations by teaching employees how to comply with the antitrust laws. If problems already exist, a compliance program may help a company uncover and address those problems. If the issues uncovered are serious enough, a company may have the opportunity to apply for acceptance into the Antitrust Division's Leniency Program, and avoid antitrust fines and prison sentences for its employees and executives.2 Additionally, while the Antitrust Division historically has not credited a compliance program when an antitrust violation already has occurred, as discussed below, the U.S. Sentencing Guidelines state that compliance programs may be taken into account as a mitigating factor potentially reducing the level of a fine.3 Moreover, perhaps recent messages from other parts of the Department of Justice regarding credit for compliance will cause the Antitrust Division to reconsider its position on this issue. Regardless, in light of the Antitrust Division's aggressive enforcement efforts, the benefits of a robust compliance program have never been more starkly evident.

2. INVESTIGATIONS AND ENFORCEMENT

   1. Antitrust Division's Statistics

      The Antitrust Division's enforcement statistics for criminal fines and prison sentences continue to trend upward. Total criminal antitrust fines increased from, for example, $359 million in 2004 to $1.1 billion in the Antitrust Division's 2013 fiscal year, which runs from October 1 to September 30. In 2013, the Antitrust Division charged or imposed criminal fines on 20 corporations: 14 in the automotive parts investigation; two in the LIBOR investigation; and four in the real estate and municipal tax lien auctions investigation. The Antitrust Division also collected more than $1.1 billion in criminal penalties, matching its 2012 record for criminal antitrust fines.4

      The average prison sentence for antitrust violations has increased from eight months in the 1990s to 25 months in the last three years.5 In 2013, the Antitrust Division charged or prosecuted a total of 52 individuals in antitrust investigations:6 14 in the automotive parts investigation; three in the LIBOR investigation; one in the TFT-LCD panels investigation; two in the coastal water freight transportation investigation; 28 in the real estate and municipal tax liens investigation; three in the municipal bonds investigation; and one in the Environmental Protection Agency ("EPA") Superfund sites investigation. Notably, in December 2013, a court imposed a five-year prison sentence -- the longest sentence in U.S. history for an antitrust violation. This upward trend in criminal fines and prison sentences may continue in 2014.

   2. International Investigations

      "Cracking down on international price-fixing cartels that target U.S. businesses and consumers has been, and will continue to be, among the top priorities for the Antitrust Division."7 The Antitrust Division's vigorous investigation of anticompetitive conduct in the automotive parts industry is evidence of the Antitrust Division's commitment to this priority.

      The Antitrust Division also has pursued LIBOR manipulation and allegations of TFT-LCD price-fixing, both international investigations that potentially affect U.S. business consumers.

      i. Automotive Parts Investigation

      According to the Antitrust Division, its current investigation into price-fixing, bid-rigging and other anticompetitive conduct in the automotive parts industry is the largest criminal investigation ever pursued, both in terms of scope and commerce affected.8 The Antitrust Division states that its automotive parts investigation spans "international price-fixing conspiracies [that] affected more than $5 billion in automobile parts sold to U.S. car manufacturers, and more than 25 million cars purchased by American consumers."9 The investigation began in 2010 and first became public in 2011, when the Antitrust Division announced a $200 million corporate fine and prison sentences for several executives of Furukawa Electric Co. Ltd., a Japanese manufacturer of wire harnesses.10 Prior to 2013, nine companies and 12 executives pled guilty and were fined and/or sentenced for their participation in price-fixing and bid-rigging in the automotive parts industry, and agreed to pay over $790 million in criminal fines.11 Two other executives who agreed to plead guilty and serve time in prison were awaiting sentencing.12

      In 2013, the Antitrust Division significantly expanded its investigation to include additional auto parts.13 The expanded investigation covered new companies and yielded additional criminal fines. Fourteen corporations were charged and agreed to pay approximately $1 billion in criminal fines in 2013.14 Some of the implicated automotive parts giants and the fines imposed include Hitachi Automotive Systems Ltd ($195 million); Mitsuba Corporation ($135 million); Toyo Tire & Rubber Co. Ltd. ($120 million); Jtekt Corporation ($103.27 million); NSK Ltd. ($68.2 million); and Panasonic Corporation ($45.8 million).15 Over the entire course of the investigation, 23 corporations have been charged and have agreed to pay over $1.8 billion in criminal fines.16

      In addition to the corporate fines assessed in 2013, 14 individuals pled or agreed to plead guilty for their roles in the alleged automobile parts price-fixing and bid-rigging scheme.17 The executives implicated include former vice presidents, directors, and general managers of marketing divisions.18 Prison sentences for the sentenced executives range from 12 months and one day to 19 months.19 Including pre-2013 numbers, a total of 26 individuals have been charged for their roles in the alleged automotive parts price-fixing conspiracy.

      ii. London Interbank Offered Rate ("LIBOR")20

      The investigation into whether financial institutions manipulated the leading benchmark interest rates used in financial products and transactions around the world continued in 2013. The allegations are that defendants falsely inflated or deflated their rates to favor their trading positions, or to appear more creditworthy than they were.21 As many as 20 financial institutions are being investigated by ten authorities around the world.22 Regulators indicate that as of the second half of 2009, interest rate contracts valued at more than $450 trillion were outstanding, and presumably affected by this conspiracy.23

      In 2012, following multiple criminal settlements with Barclays Bank for $160 million24 and UBS AG for $1.2 billion ($500 million to the Antitrust Division and $700 million to the CFTC),25 the Antitrust Division promised it would diligently investigate the LIBOR manipulation facts.26 In 2013, two companies pled or agreed to plead guilty and three individuals were charged for their involvement in this conspiracy.

      First, in February 2013, the Antitrust Division entered into its first ever Deferred Prosecution Agreement ("DPA") and imposed its first fine in the LIBOR investigation.27 The Antitrust Division entered the DPA with the Royal Bank of Scotland, plc, ("RBS plc") and its wholly-owned subsidiary, RBS Securities Japan Limited ("RBS Japan" collectively with RBS plc, "RBS"). Under the DPA, RBS agreed to pay a fine of $150 million ($100 million fine for RBS plc, and $50 million fine for RBS...