On 29 January 2013 Prime Minister John Key, in his opening statement to Parliament for 2013, set out that negotiators have been asked to conclude the broad outline of an agreement on the Trans-Pacific Partnership ("TPP") free trade agreement by October this year. The TPP is proposed to be a far reaching agreement, with the issues being negotiated beyond the scope of most existing free trade agreements - including negotiations on competition policy. With both the USA's Department of Justice ("DOJ") Antitrust Division and Federal Trade Commission ("FTC") actively involved in the negotiation of the TPP's competition policy, it is anticipated that the TPP, if implemented, could lead to a convergence of competition policy across the region and a far greater degree of co-operation, consultation and information exchange between the US regulators and the New Zealand Commerce Commission ("NZCC").
In this context, and with criminal sanctions for cartel conduct expected to be introduced in New Zealand during 2013, which raises the possibility of New Zealanders being extradited to the US for cartel offences, it is instructive to explore the developments in the DOJ's enforcement of antitrust laws against non-US nationals during 2012 - a year that saw the DOJ obtain record payments from antitrust offenders and record total prison sentences for individuals.
The TPP's Competition Policy
Following the 13th round of TPP negotiations in San Diego in August 2012, the US's Chief Negotiator Barbara Weisel announced that TPP partners made “important progress”, including, in particular, in the area of competition policy.1 It is understood that the TPP's competition policy is intended to include "commitments on the establishment and maintenance of competition laws and authorities, procedural fairness in competition law enforcement, transparency, consumer protection, private rights of action and technical co-operation."2
Given New Zealand, unlike some proposed members of the TPP, already has a competition law regime in place (including the likely introduction of criminal sanctions during 2013), the main effect for New Zealand of the TPP's competition policy would likely be a shift towards greater co-operation, information exchange and consultation between the US regulators and the NZCC.3
While it has been possible for the NZCC to formalise a bilateral co-operation agreement with the US regulators, particularly given the recent enactment of the Commerce (International Co-operation, and Fees) Amendment Act 2012,4 the fact an agreement has not been formalised to date indicates that a co-operation agreement with the NZCC is not currently high on the US regulators' priority list. Indeed, the DOJ's Antitrust Division is currently focussed on "developing new and deeper relationships with emerging economies ... particularly the BRICS countries" of Brazil, Russia, India, China and South Africa.5
The multilateral TPP may be the catalyst necessary to facilitate more formalised co-operation between the NZCC and US regulators, which the NZCC would regard as a welcome addition to its collection of co-operation agreements with regulators in Australia, Canada, the United Kingdom and Taiwan.
DOJ enforcement during 2012
With greater co-operation with US regulators a possibility, coupled with the expected introduction in New Zealand of criminal sanctions for cartel conduct which raises the possibility of New Zealanders being extradited to the US for cartel offences, it is interesting to explore the DOJ's recent cartel enforcement activities against non-US nationals.
By all measures, the 2012 fiscal year was an extremely active and successful year for the DOJ.6 According to analysis by Gibson Dunn,7 the year saw the DOJ obtain an all-time high of payments of more than US$1.35 billion from antitrust offenders, including an estimated US$1.13 billion in criminal fines.8 This figure almost trebles the US$524 million awarded in 2011.
Furthermore, the length of the average prison sentence, the total number of individuals sentenced, and aggregated prison time for antitrust offences rose to record highs.
The DOJ's enforcement activity included investigations and sanctions against non-US nationals in the following industries:
- Auto parts: The "largest criminal investigation the Antitrust Division has ever pursued"9 saw a number of companies plead guilty for engaging in price fixing and bid rigging conduct in the auto parts industry, including Japanese company Yazaki Corporation, which was fined US$470 million, the third-largest criminal fine in the DOJ's history. Four Yazaki executives, all Japanese nationals, have also agreed to plead guilty and to serve prison time in the United States ranging from 15 months to two years. So far, US$808 million in criminal fines have been imposed as a result of the auto parts investigation, and the investigation shows "no sign of slowing" in FY 2013.10
- Aftermarket auto lights: The DOJ's investigation into aftermarket auto lights resulted in an "unusual" guilty plea without a written plea agreement by Taiwanese auto lights manufacturer Eagle Eyes Traffic Industrial Co. Ltd on the eve of the trial.11 The Court imposed a fine of US$5 million on Eagle Eyes for its role in the international conspiracy to fix prices. Homy Hong-Ming Hsu, the vice chairman of Eagle Eyes, was sentenced on 22 January this year to 14 months in prison for his participation in the conspiracy.12
- Thin Film Transistor-Liquid Crystal Displays ("TFT-LCDs"): In September 2012 the DOJ obtained convictions against Taiwan based AU Optronics, its US subsidiary, and three executives for colluding to fix the prices of large-sized TFT-LCDs.13 The DOJ sought a penalty of US$1 billion, however, the Court found the sum of US$1 billion to be "substantially excessive" and instead imposed a fine of US$500 million, noting its preference that any additional sums were better paid in restitution to any victims. H.B. Chen and Hui Hsiung, senior AU Optronics executives during the period of the conspiracy, were each sentenced to three years in prison. The three-year prison terms are the longest ever imposed in the US against foreign nationals for an antitrust violation.14
- Air Cargo. The DOJ's air cargo investigation has resulted in more than US$1.9 billion in criminal fines to date, including against a number of non-US airlines such as Cargolux Airlines International SA, Japan Airlines International Co. Ltd, Singapore Airlines Cargo Pte Ltd and China Airlines Ltd.15 Of particular note during 2012 was the Court's acceptance, despite DOJ opposition, of the plea of nolo contendere (a plea accepting conviction without admitting guilt) made by Florida West International Airways Inc., who argued that it could "no longer afford to mount a defence" because of alleged government efforts to wear it down financially.16 It is believed to be the first such plea in a criminal antitrust case in over 20 years.
- Freight Forwarding. The DOJ announced a further plea agreement by a non-US company in their freight forwarding investigation. Japanese freight forwarder, Yamato Global Logistics Japan Co. Ltd, agreed to pay a US$2.3 million criminal fine for its role in the price-fixing conspiracy, meaning that 14 companies, including a number of non-US firms, have now pleaded, or agreed to plead, guilty to charges involving freight forwarding. To date, the investigation has resulted in over US$100 million in criminal fines.17
Implications for New Zealand businesses
The escalating level of fines and prison sentences in the US, particularly against non-US nationals, illustrate the investigative sophistication of the DOJ and the continuing escalation of sanctions for cartel conduct in the US. The expected introduction of criminal sanctions in New Zealand, which raises the prospect of New Zealanders being extradited to the US for cartel offences, as well as the possibility of greater co-operation between the NZCC and US regulators serves as a timely reminder that all New Zealand businesses that trade in the US should be aware of their US antitrust obligations.