Friday, September 16, 2011

Bridgestone Agrees to Plead Guilty to Fixing Prices for Marine Hose

This posting was written by Jeffrey May, Editor of CCH Trade Regulation Reporter.

Bridgestone Corporation has agreed to plead guilty and to pay a $28 million criminal fine for its role in conspiracies to rig bids and to make corrupt payments to foreign government officials in Latin America related to the sale of marine hose and other industrial products, the Department of Justice announced yesterday.

The company has agreed to cooperate with the Justice Department in its ongoing investigations and has committed to extensive remediation and to enhance its compliance program and internal controls.

Conspiracy to Rig Bids, Fix Prices, Allocate Markets

According to a two-count criminal information filed on September 15 in the federal district court in Houston, the Japan-based Bridgestone conspired to rig bids, fix prices, and allocate market shares of marine hose in the United States and elsewhere in violation of Sec. 1 of the Sherman Act and, separately, conspired to make corrupt payments to government officials in various Latin American countries to obtain and retain business in violation of the Foreign Corrupt Practices Act (FCPA). The challenged conduct took place between 1999 and 2007.

As part of the antitrust conspiracy, Bridgestone and others allegedly agreed to allocate shares of the marine hose market, agreed to establish a price list for marine hose in order to implement and monitor the conspiracy, and agreed not to compete for one another’s customers through bid rigging.

Payments to Government Officials

With respect to the FCPA count, Bridgestone was charged with authorizing and approving corrupt payments to foreign government officials employed at state-owned entities in order to secure sales of marine hose in Mexico and other Latin America countries. The 11-page criminal information details e-mail exchanges purportedly detailing the company’s efforts to influence foreign officials through local sales agents.

Bridgestone, best known for its tires, is the fifth company to be charged in the Department of Justice Antitrust Division’s investigation into bid rigging in the marine products industry.

Last year, Parker ITR S.R.L. of Italy agreed to plead guilty and to pay a $2.29 million criminal fine for its role in the conspiracy. Two subsidiaries of the Swedish company Trelleborg AB, one based in Virginia and the other in France, agreed to plead guilty and pay a total of $11 million in criminal fines in 2009. British marine hose manufacturer Dunlop Oil & Marine Ltd. agreed to plead guilty and pay $4.54 million fine in 2008. Manuli Rubber Industries SpA of Italy also agreed to plead guilty to similar charges and to pay more than $2 million in criminal fines.

In addition, a number of industry executives have been charged with participating in the marine hose conspiracy, including Bridgestone’s former general manager of international engineered products, Misao Hioki.

While most of the executives have pleaded guilty, two have been acquitted. In 2008, an Italian national and a Florida man who both worked for Manuli were found not guilty of participating in the antitrust conspiracy by a jury in West Palm Beach, Florida. A German national and former executive with Dunlop's former parent company—Phoenix AG—who was indicted in 2007 is awaiting trial.

Company’s Response

Bridgestone issued in statement today, saying that the $28 million fine is a significant reduction from the applicable sentencing guidelines due to the company’s “extraordinary” cooperation in the investigation and remediation efforts. As part of the remediation efforts, Bridgestone has dismantled its International Engineered Products Department, closed its Houston office of Bridgestone Industrial Products of America, Inc., terminated many of its third party agents, and taken remedial actions with respect to its employees.

The Justice Department has been investigating Bridgestone’s involvement in international cartel activities relating to the sale of marine hose since May 2007, according to the statement.

The case is U.S. v. Bridgestone Corp., Criminal No. H-11-651.

A Department of Justice press release on the development appears here. Bridgestone’s statement appears here.

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