US: Department of Justice
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Over the past year, antitrust enforcers in the US and throughout the Americas have continued to vigorously enforce competition laws. In the United States, the Antitrust Division of the Department of Justice (DoJ) has protected consumers and the business community by challenging mergers that were likely to harm competition, bringing legal actions against companies that engaged in anti-competitive conduct, prosecuting companies and individuals that participated in domestic and international antitrust cartels, and securing appropriate and effective settlements, remedies, fines and guilty pleas. Together, these civil and criminal enforcement efforts have helped to protect and promote competition in numerous industries that are important to the US economy and affect consumers’ day-to-day lives.
To help ensure that competition laws in the Americas are enforced in a fair, consistent, efficient and effective manner, the Antitrust Division has also continued to closely collaborate with its enforcement colleagues in the Americas and to participate in international initiatives and programmes that seek to promote competition principles and antitrust cooperation throughout the Americas.
The Antitrust Division’s civil enforcement programme achieved two significant trial victories during the past year. During a three-week trial last summer, the Antitrust Division convinced the trial court that Apple Inc had unlawfully conspired with the five largest book publishers in the US to raise the prices of electronic books (e-books). Relying on the compelling evidence presented by the Antitrust Division, the court found that Apple played a central role in facilitating and executing the conspiracy to raise the prices of e-books. The Antitrust Division achieved this trial victory, which Apple has appealed, after securing settlements from the five publishers.
After finding that Apple unlawfully conspired to raise e-books prices, the court entered a final judgment last fall designed to prevent Apple from again working with e-book publishers to increase the prices of e-books. Over Apple’s strenuous objections, the court also appointed an external monitor to ensure that Apple institutes adequate antitrust compliance policies that will deter any future anti-competitive conduct by Apple and its executives. Since the court entered its final judgment and the settlements with the publisher defendants took effect, the prices of bestselling and newly released e-books have fallen significantly.
The Antitrust Division achieved another significant trial victory when it successfully challenged Bazaarvoice Inc’s $168.2 million acquisition of PowerReviews. The Division challenged this transaction even though it had been consummated and was not required to be reported to the US antitrust agencies.
After a three-week trial, the court issued a decision earlier this year holding that the transaction was anti-competitive because it allowed Bazaarvoice – the dominant commercial supplier of internet product ratings and review platforms – to acquire its closest and only serious competitor. In April 2014, the Antitrust Division reached an agreement with Bazaarvoice on a proposed remedy. This proposed remedy, which is subject to approval by the court, requires Bazaarvoice to divest all of PowerReviews’ assets and to take certain steps that will help the acquirer of PowerReviews’ assets to compete effectively against Bazaarvoice.
In addition to its trial victories in the e-books and Bazaarvoice cases, the Antitrust Division secured settlements in various investigations that addressed its competitive concerns with mergers and prohibited companies from continuing to engage in anti-competitive conduct. For instance, after filing a lawsuit challenging the $11 billion merger between US Airways Group Inc and the parent company of American Airlines, the Antitrust Division obtained a settlement requiring that the merging airlines divest slots and gates at key constrained airports across the country to low-cost carriers. This remedy will enable low-cost carriers that acquire the divested assets to establish stronger positions at strategically important destinations – including top business markets – where it has been particularly difficult to obtain access. By doing so, the remedy will position low-cost carriers to offer more meaningful competition system-wide and force legacy airline carriers to respond to that increased competition, all of which will substantially benefit consumers.
Similarly, after filing a lawsuit challenging a ‘no poach’ hiring agreement that eBay Inc entered into with Intuit Inc, the Antitrust Division secured a settlement that prohibits eBay from entering or maintaining anti-competitive agreements relating to employee hiring and retention for five years. The Antitrust Division obtained this settlement, which is subject to approval by the court, after reaching similar settlements with Intuit, Apple, Google, Intel, Pixar, Lucasfilm and Adobe during its investigation into recruiting-related antitrust misconduct by high technology companies.
During the past year, the Antitrust Division has continued to work collaboratively with law enforcement agencies in the US, such as the FBI, and abroad in order to strengthen cartel enforcement and ensure that individuals who violate US antitrust laws are held accountable. In doing so, the Antitrust Division has remained committed to ensuring that culpable individuals serve prison sentences for violating US antitrust laws and to using all appropriate tools to find, arrest and, where necessary, extradite those charged with antitrust violations. This past spring, the Antitrust Division secured the first ever contested extradition of a foreign national to the United States on antitrust charges. Romano Pisciotti, an Italian national, was indicted in August 2010 for his involvement in a price-fixing conspiracy in the marine hose industry. In July 2013, he was arrested in Germany and subsequently extradited to the US in April 2014. After pleading guilty, Pisciotti was sentenced to a two-year prison term and required to pay a $50,000 fine.
The Antitrust Division has also continued to vigorously prosecute international cartels and to hold repeat corporate offenders accountable for their wrongful conduct. For instance, Bridgestone Corp recently agreed to plead guilty and pay a $425 million criminal fine for its role in a price-fixing conspiracy involving anti-vibration rubber parts installed in automobiles. Bridgestone had previously pleaded guilty to price-fixing violations in the marine hose industry, but did not disclose at that time that it had also participated in the anti-vibration rubber parts conspiracy. Bridgestone’s failure to disclose its participation in the second conspiracy was treated as an aggravating factor in the calculation of its criminal fine and added more than $100 million to that fine, which is the fourth-largest criminal antitrust fine ever imposed in the United States.
Bridgestone’s plea is one of the 27 corporate guilty pleas that have been entered to date in connection with the Antitrust Division’s ongoing investigation of the auto parts industry. These guilty pleas have resulted in the imposition of more than $2.3 billion of corporate criminal fines. In addition, the Antitrust Division’s auto parts investigation has thus far resulted in criminal charges against 36 individuals – 24 of whom have pleaded guilty. Twenty-two of the individuals who have pleaded guilty have been sentenced to prison terms ranging from one year to two years.
The Antitrust Division has also continued to investigate and prosecute cartels operating within the United States. For instance, the Antitrust Division’s ongoing investigations into collusion and fraud affecting real estate foreclosure auctions in Northern California and the Southeastern United States have thus far led to over 70 guilty pleas and convictions, including the recent convictions of two real estate investors found guilty after a five-week jury trial in Sacramento, California. In addition, the Antitrust Division has continued to prosecute individuals involved in fixing the price of shipments between the US and Puerto Rico, which has already resulted in key conspirators receiving the longest ever sentences (48 and 60 months) for a Sherman Act violation.
Recognising that price fixing and collusion are not limited to tangible goods, the Antitrust Division has remained an active participant in the Financial Fraud Enforcement Task Force. As part of its efforts to prevent anti-competitive conduct related to financial products and markets, the Antitrust Division has continued to obtain convictions in conspiracies involving bid rigging at auctions for the sale of public tax liens. To date, more than 15 individuals and entities have been prosecuted in connection with this investigation.
In its Libor/Euribor investigation, the Antitrust Division, in conjunction with the Criminal Division of the DoJ, obtained a conviction this past fall against Rabobank, which agreed to pay $325 million in criminal penalties. The Antitrust Division also filed criminal complaints against three former ICAP brokers and five former UBS and Rabobank traders for their roles in manipulating Libor and Euribor benchmark interest rates. To date, this ongoing investigation has resulted in the imposition of $475 million in criminal fines and penalties by US enforcement authorities, and the total global criminal and regulatory fines, penalties and disgorgement obtained by enforcement authorities is over $3.7 billion.
As with many of its criminal investigations, the Antitrust Division’s Libor/Euribor and auto parts investigations have greatly benefited from collaboration among international enforcement agencies.
Antitrust developments and international cooperation in the Americas
Like the Antitrust Division, the Canadian Competition Bureau (CCB) had a busy year with a number of notable successes. The CCB brought criminal charges related to cartel conduct in a variety of industries, including the ocean freight, auto parts, government information technology services and domestic infrastructure projects industries. The CCB also reached consent agreements to ensure that a number of acquisitions – including the acquisition of Canada’s largest drugstore chain and the acquisition of numerous community newspapers – did not result in a substantial lessening or prevention of competition.
In Mexico, a number of constitutional reforms were instituted as part of a wide-ranging pro-competition programme. This programme includes a new and autonomous antitrust agency with enhanced investigatory powers, a new specialised tribunal for economic regulatory issues, and various substantive and procedural amendments to Mexico’s antitrust law. Mexico’s new antitrust agency, COFECE, has published an ambitious strategic plan for the next three years that focuses on priority sectors of Mexico’s economy and seeks to produce up to eight sets of guidelines on competition matters.
With respect to international cooperation, antitrust enforcers in the Americas continued to collaborate closely on investigations and to strengthen their relationships by participating in various pro-competition initiatives and programs. In March 2014, for example, the Antitrust Division, Federal Trade Commission (FTC) and CCB jointly issued best practices for cooperation on the investigations of mergers that affect both the US and Canada. Consistent with these best practices, the Antitrust Division and CCB successfully coordinated their respective investigations of Louisiana-Pacific Corporation’s proposed acquisition of Ainsworth Lumber Co Ltd, which Louisiana-Pacific abandoned last month after the Antitrust Division and CCB expressed their independent concerns about the transaction’s potential competitive effects in the US and Canada. Similarly, the Antitrust Division’s criminal enforcement efforts continued to benefit from the valuable assistance provided by antitrust enforcers in the Americas and throughout the world.
In February 2014, the Antitrust Division, FTC, CCB and Mexican Federal Economic Competition Commission participated in a trilateral meeting to discuss mutual efforts to ensure continued effective antitrust enforcement cooperation in the three countries’ inter-connected markets. The discussions at this meeting covered a number of important topics concerning antitrust enforcement, including recent enforcement developments, cooperation, and priority setting and efficiency in a resource-constrained environment. The Antitrust Division also participated in conferences and workshops with other antitrust agencies in the Americas, as well as in technical assistance programs with countries in the Americas, which allow the Antitrust Division to provide its antitrust enforcement colleagues practical advice on a variety of subjects.