Tuesday, December 30, 2008

Cartel Crackdown Highlighted DOJ Antitrust Enforcement in 2008

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

Cartel enforcement was once again the focus of the Department of Justice Antitrust Division in 2008. Cartel activity was the target of a significant number of the more than six dozen civil and criminal federal court actions resulting from Antitrust Division investigations. The number of actions was up significantly over recent years.

Record Fines

The year saw major fines, including the second highest criminal fine ever imposed by the Antitrust Division. In November, electronics manufacturers LG Display Company, Sharp Corporation, and Chunghwa Picture Tubes Ltd. agreed to plead guilty and pay a total of $585 million in criminal fines for their roles in conspiracies to fix prices in the sale of liquid crystal display (LCD) panels. LG’s $400 million fine was the second highest criminal fine ever imposed by the Antitrust Division.

Another large fine was imposed on Air France-KLM. The airline agreed to pay $350 million—the third highest fine—for its role in a multi-year conspiracy to fix prices for international air cargo rates. The fine against Air France-KLM was announced in June, along with fines against Cathay Pacific Airways of $60 million, fines against Martinair Holland of $42 million, and fines against SAS Cargo Group of $52 million.

Earlier in the year, Japan Airlines pleaded guilty and was sentenced to pay a $110 million fine. The investigation has also resulted in jail time for industry executives.

Enforcement Setbacks

Despite these victories, not all of the agency’s cartel enforcement efforts were successful. The Antitrust Division lost a price fixing action against two marine hose industry executives in November.

A federal jury acquitted two executives of Manuli Rubber Industries, who had been indicted in 2007 and charged with participating in a conspiracy to fix prices and allocate market shares for sales of marine hose used to transport oil.

Leniency Program

In November, the Antitrust Division released a series of questions and answers about its leniency program, as well as model letters related to the program, providing guidance on the program (Trade Regulation Reporter ¶50,235).

Some practitioners expressed concern regarding the Antitrust Division’s decision to reserve the right to limit the extent of the conditional leniency where “there is a significant lapse in time between the date the applicant discovered the anticompetitive activity being reported and the date the leniency application was made . . .”

Monopoly Report

In September, the Antitrust Division released a report explaining its view of the antitrust issues raised by single-firm conduct. The report, “Competition and Monopoly: Single-Firm Conduct Under Section 2 of the Sherman Act,” reflects the Justice Department's enforcement policy, according to the report (Trade Regulation Reporter ¶50,231).

Among the findings in the DOJ report were statements that exclusive dealing arrangements foreclosing less than 30 percent of existing customers or effective distribution should not be illegal; that the practice of tying can often promote efficiency and therefore the “historic hostility” towards the practice is unjustified; and that antitrust liability for mere unilateral, unconditional refusals to deal with rivals should not play a meaningful role in Section 2 enforcement.

The document was criticized by three of the FTC Commissioners: Pamela Jones Harbour, Jon Leibowitz, and J. Thomas Rosch. The three said that the report could radically weaken enforcement of Sec. 2 of the Sherman Act.

The Commissioners voiced two major problems with the report. The first was that it was “chiefly concerned with firms that enjoy monopoly or near-monopoly power, and prescribes a legal regime that places these firms’ interests ahead of those of consumers.” The second was that it “seriously overstates the level of legal, economic, and academic consensus regarding Section 2.” (See Trade Regulation Talk, September 8, 2008).

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