Department of Justice
Antitrust enforcement in the United States and throughout the Americas has never been more vigorous. The most notable recent developments in antitrust enforcement in the United States have come in the context of significant litigation successes and a continued commitment to close cooperation with domestic and non-US law enforcement partners. Across countries within the Americas, there have also been a number of significant developments in antitrust enforcement regimes, which collectively reflect the broad, international consensus on the harm inflicted by antitrust offences and the need for vigorous enforcement.
The Antitrust Division of the US Department of Justice continues to protect consumers and business through robust criminal and civil enforcement. This commitment was prominently on display this past year in a number of high-profile litigation efforts by both the Division’s criminal and civil enforcement programmes, and acting assistant attorney general Joseph Wayland has emphasised that the Antitrust Division’s vigorous enforcement of its mission will continue under his leadership. Two high-profile prosecutions by the Division dominated the criminal landscape this past year and confirmed both the reach and resolve of cartel enforcement in the United States. In March, a jury convicted AU Optronics Corp (AUO), its US subsidiary (AUOA) and its two highest executives for fixing the prices of liquid-crystal displays (LCDs) used in almost every flat-screen computer monitor or notebook computer sold worldwide, including in the United States. The conspiracy to fix the prices of LCD panels spanned over five years and was led by the top executives at six of the world’s largest LCD manufacturers. More than $23 billion in commerce in the United States alone was affected by the conspiracy, making it the largest and most harmful antitrust conspiracy ever taken to trial by the Division. AUO’s corporate co-conspirators pleaded guilty before trial and paid fines totalling nearly $900 million and, to date, 10 executives have been sentenced to serve jail time.
AUO, AUOA and its two top executives were found guilty by a jury after an eight-week trial. In addition to returning guilty verdicts, the jury also determined that the government had met its burden of showing that the ill-gotten gain to the conspirators was at least $500 million. This case marked the first time the Division sought to establish the amount of ill-gotten gain from a price-fixing conspiracy beyond a reasonable doubt before a jury in order to obtain a fine above the Sherman Act’s statutory maximum fine of $100 million. As a result of the jury’s verdict, AUO and its subsidiary will face fines of up to $1 billion when they are sentenced later this year, and the convicted AUO executives will face jail sentences of up to 10 years.
In May, the Division obtained another important criminal conviction at trial against three former financial services executives in connection with the ongoing municipal bonds investigation. The three executives on trial and their co-conspirators corrupted the bidding process for dozens of investment agreements to increase the number and profitability of investment agreements awarded to the provider companies where they were employed. The conspirators deprived the municipalities of competitive interest rates for the investment of tax-exempt bond proceeds that were to be used by municipalities for various public works projects, such as for building or repairing schools, hospitals and roads. Evidence at trial established that this anti-competitive conduct cost municipalities around the country millions of dollars.
These convictions were only the latest in a long line of corrupt financial services executives and institutions brought to justice in the Division’s municipal bonds investigation. Including the convictions of these three executives, a total of 15 individuals have been convicted as part of the Division’s municipal bonds investigation and three await trial. Additionally, one company has pleaded guilty. The municipal bond investigation has also produced numerous resolutions with large financial institutions implicated in the schemes, which have agreed to pay a combined total of nearly $750 million in restitution, penalties and disgorgement to federal and state agencies for their roles in the conduct.
The Division’s robust civil enforcement efforts were similarly punctuated with recent litigation successes. In August 2011, the Division filed an action seeking to prevent the proposed merger of AT&T Inc and T-Mobile USA Inc, two of the four wireless carriers with facilities located across the country. The parties abandoned their proposed transaction after four months of litigation. The $39 billion proposed deal was the second-largest transaction that the Division had ever challenged in a contested litigation.
In October 2011, the US District Court for the District of Columbia granted the Division’s request to stop H&R Block Inc’s proposed acquisition of TaxACT. The proposed merger would have combined two of the country’s three largest tax-software providers. The District Court’s decision marked the Division’s first litigated victory in a merger challenge since 2003. The decision is particularly notable for its extensive reliance on the Horizontal Merger Guidelines, which the Department of Justice and the FTC updated in 2010 to better reflect enforcement practices.
The Division also continues to litigate several significant civil non-merger matters affecting health care, credit cards and electronic books. Our litigation challenging Blue Cross Blue Shield of Michigan’s use of contractual provisions (known as ‘most-favoured-nation-plus’ provisions), requiring hospitals that contract with Blue Cross to charge higher rates to Blue Cross’s competitors, continues, and trial is scheduled to begin in 2013. We also continue to litigate our claims against American Express, challenging its use of provisions restricting the ability of merchants to offer benefits to consumers for using certain payment methods other than American Express.
Finally, we recently filed an action challenging agreements respecting the pricing of electronic books between Apple Inc and five of the largest book publishers - Hachette Book Group (USA), HarperCollins Publishers LLC, Simon & Schuster Inc, Penguin Group (USA) and Holtzbrinck Publishers LLC, which does business as Macmillan. Three publishers - Hachette, HarperCollins and Simon & Schuster - have already agreed to a proposed consent decree that would return to book distributors the ability to compete on price. Litigation against the other two publishers and Apple is ongoing.
Other highlights of current antitrust enforcement in the United States include the many examples of the Division’s continued commitment to working closely with domestic law enforcement partners, and with antitrust authorities in non-US jurisdictions, to successfully detect, investigate and prosecute antitrust offences. For example, in the criminal context, there were a number of significant developments in the Division’s ongoing auto parts investigation this year. The auto parts investigation is the largest criminal antitrust investigation we have ever conducted in terms of both its breadth and the potential volume of commerce affected in the United States. It is also a worldwide matter, which involves cooperation with several other non-US antitrust authorities. The investigation has already resulted in nearly $750 million in imposed fines, and seven individuals have been sentenced to serve significant prison sentences. This investigation is ongoing.
The Antitrust Division and the FBI have also worked with other domestic law enforcement partners to initiate a nationwide crackdown on bid rigging and fraud targeted at the US real estate market. The collusive schemes in these matters have targeted real estate foreclosure auctions around the country and seek to eliminate competition and prevent lenders and distressed homeowners from getting fair market prices for their properties. To date, the initiative has resulted in convictions of more than 40 individuals and one corporation around the country.
Similarly, in the civil context, the Antitrust Division has engaged in significant cooperation with international counterparts on a number of recent matters. In our previously mentioned investigation of the electronic books industry, the Division cooperated closely with the European Commission (EC). Both staff and senior officials at the Division and DG Comp were in regular contact during the pendency of this investigation. The Division also engaged in international cooperation in investigations involving intellectual property and standard essential patents, including investigations of the acquisition by Google of Motorola Mobility Holdings Inc, and the acquisitions by Apple Inc, Microsoft Corp and Research in Motion Ltd of certain Nortel Networks Corp patents. During the investigation of the Google/Motorola Mobility transaction, the Division cooperated closely with the EC and had discussions with competition agencies in Australia, Canada, Israel and Korea. In connection with the investigation related to the Nortel patent assets, the Division worked closely with the Canadian Competition Bureau. And in our investigation of the proposed combination of Deutsche Börse and NYSE, the Division also cooperated closely with the EC on our respective investigations. While the Division and the EC arrived at different outcomes in this matter, there was no conflict. Indeed, this is an example of how it is useful for agencies to work closely together even when market conditions differ among jurisdictions, so that each agency can understand, and anticipate, the outcome of other agencies’ investigations.
The Division has also expanded its international outreach through two new pacts: a July 2011 memorandum of understanding among the Division, the FTC and the three Chinese antimonopoly agencies (the People’s Republic of China National Development and Reform Commission, the Ministry of Commerce, and the State Administration for Industry and Commerce); and a March 2011 antitrust cooperation agreement among the Division, the FTC and Chile’s Office of the National Economic Prosecutor.
Looking more broadly at antitrust enforcement across the Americas, it is worth reflecting on a number of recent developments in enforcement regimes that, collectively, demonstrate a broad, international consensus on the harm inflicted by antitrust offences, as well as recognition that severe penalties are a necessary tool to combat and deter this conduct. For instance, in 2010, Canada revised the criminal portions of its Competition Act to address cartel behavior.1 The former ‘partial rule of reason’ approach was replaced with a stricter per se rule for cartel conduct.2 The maximum fines were raised to C$25 million, and there is a new maximum sentence of 14 years for conspiracy offences, one of the highest in the world.3
Similarly, in 2011, Brazil passed a revamped competition law that consolidated competition oversight authority in the Administrative Council for Economic Defence (CADE).4 CADE now encompasses the Administrative Tribunal of Economic Defence (TADE), whose seven commissioners remain responsible for decision-making. The Secretariat for Economic Monitoring (SEAE), outside of CADE in the Ministry of Finance, is still responsible for competition policy. Commensurate with the new law, maximum prison sentences for conspirators have been raised from two years to five years.5 Brazil now has four specialised criminal anti-cartel units.6 In recent years, CADE has engaged in a robust and highly publicised leniency programme that has directly resulted in major investigations and prosecutions.7
In 2009, Chile likewise changed its antitrust law to grant new functions to its antitrust agency, the National Economic Prosecutor (FNE) and reorganised its structure.8 Chile has a robust administrative sanctions regime for cartel activity, and the Chilean Congress is currently considering a new bill that would set a maximum sentence of 10 years.9 Colombia also revised its antitrust laws in 2009 and 2010, increasing by 50-fold the maximum size of the fines that could be imposed in cartel matters.10 Since 2008, Colombia’s competition agency, Superintendency of Industry and Commerce (SIC), has proactively addressed cartel behavior in a wide variety of industries, including chocolate, cement, sugar, television and health care.
Finally, Mexico criminalised serious cartel offences in 2011, and the revised law allows for prison sentences of up to 10 years.11 Other recent changes include a new leniency programme and an ongoing reorganisation of Mexico’s court system so that antitrust matters will be appealed to specialised courts, although criminal cartel issues will be heard in criminal courts.12 Mexico’s antitrust agency, the Federal Competition Commission (CFC), has also issued large fines in recent years for cartel violations, including a $1 billion fine against a dominant telecommunications company.13 The CFC is currently handling 20 cases in various stages of investigation.
These developments illustrate what an exciting time we live in with respect to antitrust enforcement in the Americas. They also foreshadow the ever-increasing role that vigorous antitrust enforcement will continue to play in promoting and protecting competition for businesses and consumers throughout the Americas.
- www.cade.gov.br/Default.aspx?b689996f869b70b346f34ce379 (in Portuguese).
- www.cade.gov.br/upload/ABA_April%202010_Brazil.pdf (slide 8).
- www.senado.cl/prontus_galeria_noticias/site/artic/20111205/pags/20111205114939.html (in Spanish).
- web.presidencia.gov.co/leyes/2009/julio/ley134024072009.pdf (in Spanish).
- www.cfc.gob.mx/images/stories/Noticias/Comunicados2011/decretoreformaslfce.pdf (in Spanish).