The past year marked record-level global criminal competition law enforcement. The level of fines imposed continued its upward trajectory, with authorities in the United States, Europe, China, and India imposing record sanctions.

The U.S. Department of Justice obtained more than $1.35 billion from criminal antitrust offenders during FY 2012, its highest annual total to date.[1] That includes an estimated $1.13 billion in criminal fines and nearly $220 million in restitution, penalties, and disgorgement paid to state and federal agencies. The $1.13 billion in criminal fines exceeds the previous high of $1 billion from FY 2009 and reflects continued success by the Department of Justice, Antitrust Division ("DOJ" or "Division") in targeting hard-core international and domestic cartels.

The DOJ not only obtained record fines in FY 2012, it also reconfirmed its ability to secure convictions of corporate and individual defendants in high-profile jury trials. The Division historically had mixed results, as we discussed in our 2008 Year-End Criminal Antitrust Update, securing convictions in jury trials.[2] In FY 2012, however, the Division obtained convictions in four jury trials. It obtained another conviction after a trial in early FY 2013. Most importantly, the Division prevailed in a high-stakes case widely viewed as a test of its ability to obtain jury verdicts against foreign corporations that participate in international cartels. After an eight-week trial, the Division secured convictions against AU Optronics Corporation, its U.S. subsidiary, and two senior executives for their roles in price fixing certain TFT-LCD panels. The jury acquitted two executives and deadlocked on a third, who was later retried and convicted.[3] The AU Optronics trial was also significant because it marked the first time the Division litigated the "twice the gross gain or twice the gross loss" issue that underlies the alternative fine calculation provision of 18 U.S.C. § 3571(d).[4]

The Division also secured convictions in a jury trial against three former conglomerate executives and a jury trial against three former investment banking executives for their roles in a bid-rigging scheme relating to municipal bonds.[5] In a fourth victory, the DOJ convicted four individuals and three corporations for participating in a multi-million dollar kickback conspiracy involving the New York Presbyterian Hospital.[6] We discuss the AU Optronics-related trials and the municipal bond trials in more detail below.

In FY 2012, the trend toward both more and longer prison sentences for individuals convicted of antitrust violations continued. The Division secured prison sentences against more than 40 individual defendants in FY 2012, more than double the number in FY 2011.[7] In FY 2012, the DOJ also continued to secure longer prison sentences for foreign executives, which include a sentence of 24 months, the longest prison term imposed on a foreign national voluntarily submitting to U.S. jurisdiction for an antitrust violation.[8] We explore the reasons for this trend and discuss many of the cases in which defendants still await sentencing below.

Competition authorities other than the DOJ also achieved notable results in 2012. The European Commission imposed the largest fine in EU history, $1.94 billion (€1.47 billion), against seven companies for their participation in collusion related to cathode ray tubes used in televisions and computer monitors. The fine brought the total fines levied during 2012 to pre-financial crisis levels and more than tripled the level reached in year 2011. China's competition authorities obtained record fines for domestic violations and opened their first investigations related to global cartel activity. We expect increased enforcement activity from China following the recent execution of Memoranda of Understanding between China and both the United States and the European Union competition authorities. Additionally, the Competition Commission of India imposed a record fine of Rs 6,307 crore ($1.1 billion) on 11 cement manufacturers and the Cement Manufacturers' Association.

1) Overview of U.S. Enforcement Trends in 2012

a) Criminal Fines & Other Monetary Assessments

The Antitrust Division secured all-time record payments totaling more than $1.35 billion from its criminal investigations in FY 2012.[9] The largest fines were obtained in two of the Division's most high-profile investigations over the last decade: the TFT-LCD panel investigation and the auto-parts investigation. As discussed in more detail below, AU Optronics Corporation was fined $500 million following a closely watched eight-week trial, equaling the largest criminal antitrust fine in history. Yazaki Corporation was fined $470 million as part of the DOJ's investigation into the automotive parts industry, the third-largest criminal antitrust fine in history.[10]

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The DOJ also obtained more than $220 million in restitution, penalties, and disgorgement paid to state and federal agencies.[11] These non-fine payments represent an overall decrease year-on-year from FY 2011, but are still the second highest total non-fine recoveries obtained by the DOJ. Given the increasing role such non-fine monetary relief is playing in the DOJ's criminal enforcement efforts, see our 2011 Year-End Criminal Antitrust Update, we intend to continue assessing the Antitrust Division's portfolio of penalties by considering all monetary sanctions, including criminal fines, restitution, disgorgement, and penalties. As the DOJ embraces new prosecutorial tools, such as non-prosecution agreements and multi-agency investigations, we believe this combined data offers a better metric for gauging both the Division's achievements and the scope of criminal exposure faced by companies that violate the U.S. antitrust laws.

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i) Criminal Fines

Two fines--the $500 million fine imposed against AU Optronics Corporation and the $470 million fine imposed against Yazaki Corporation--accounted for more than 85% of the record level of fines imposed in FY 2012.

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As the above chart shows, in FY 2012, over half of the dollars imposed as criminal fines resulted from the DOJ's investigations into price-fixing in various segments of the auto parts industry. The fines imposed to date are already substantial, but given the size of the auto parts industry, and the DOJ's public statements that the auto parts investigation is its largest ever,[12] these fines may represent merely the tip of the iceberg.

The Antitrust Division has already entered into two corporate plea agreements for FY 2013, accounting for more than $22 million in criminal fines.

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 ii) Other Monetary Assessments (Restitution, Disgorgement, and Penalties)

As in FY 2011, the Antitrust Division continued to secure monetary assessments, particularly in its investigation into bid rigging within the municipal bond industry.

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b) Prison Sentences

After dropping in FY 2011, the length of the average prison sentence secured by the Antitrust Division returned in FY 2012 to 26 months.[14]

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The aggregate prison time for all individuals sentenced in antitrust cases rose dramatically from FY 2011 to a new record high. [15]

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We estimate that over forty individuals were sentenced to prison for antitrust violations, an all-time record. Our analysis of plea agreements, trial verdicts, and the DOJ's statements regarding the auto parts investigation suggest that the number of individuals sentenced to prison terms will be at or above these levels in the coming year.[16]

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2) Developments in International Cartel Investigations

a) Auto Parts

The Antitrust Division's wide-ranging investigation of the auto parts industry remained a major part of its enforcement efforts in 2012, accounting for over half of the imposed or agreed-upon criminal fines, as measured in dollars. We expect the DOJ to announce more fines in the coming years, as it warned earlier this year that the auto parts investigation was the "largest criminal investigation the Antitrust Division has ever pursued."[17]

In January,[18] the DOJ announced that Yazaki Corporation agreed to plead guilty to Sherman Act violations related to wire harnesses, instrument panel clusters, and fuel senders. Yazaki agreed to pay $470 million in criminal fines--the third-largest fine in the Division's history.[19] In addition, six former Yazaki executives have pleaded guilty and been sentenced to prison terms ranging from 14 months to 22 months. An additional Yazaki executive may still face individual prosecution. Also in January, DENSO Corporation agreed to pay a $78 million criminal fine for fixing the prices of electric and heater control panels. Two former DENSO executives have pleaded guilty and have been sentenced to prison, while another five executives may still face prosecution.[20] Since then, Fujikura Ltd. agreed to plead guilty and pay a $20 million criminal fine for its price-fixing and bid-rigging conduct relating to automotive wire harnesses.[21] Two Fujikura executives may face prosecution.[22]

In April, G.S. Electech Inc. agreed to plead guilty for engaging in price fixing and bid rigging with respect to speed sensor wire assemblies used in anti-lock braking systems.[23] One G.S. Electech executive may still face prosecution.[24] In June, Autoliv Inc. agreed to pay a $14.5 million criminal fine for its participation in price fixing for seatbelts, air bags, and steering wheels.[25] Three executives face potential prosecution.[26] In August, Japan-based Nippon Seiki Co., Ltd. agreed to plead guilty for conspiring to fix the prices of instrument panel clusters installed in cars sold in the United States. One executive faces potential charges.[27] Then, in late September, TRW Deutschland Holding GmbH, a German entity, became the second company to plead guilty for engaging in price fixing relating to occupant safety systems, agreeing to pay a fine of $5.1 million; only one executive in Germany was "carved out" of the agreement's individual immunity protections.[28] On October 30, 2012, the DOJ announced that Tokai Rika Co., Ltd. had agreed to plead guilty and pay $17.7 million for its role in fixing prices of heater control panels. Tokai Rika also pleaded guilty to one count of Obstruction of Justice for deleting relevant electronic and paper data after becoming aware that the FBI had executed a search warrant of Tokai's U.S. subsidiary.[29] Five executives face potential prosecution.[30]

The auto parts investigation has amassed staggering results in the prior 24 months. To date, nine companies and twelve executives have pleaded guilty or agreed to plead guilty, resulting in over $808 million in criminal fines. Eleven of the executives have entered into plea agreements requiring prison sentences that include more than 5,300 days of incarceration. The twelfth executive is awaiting sentencing.[31] An additional 19 individuals were carved out of corporate plea agreements and may face prosecution.

The DOJ's investigation into auto parts shows no signs of slowing in FY 2013.

The DOJ was not the only competition authority actively involved in the auto parts investigation in 2012. On November 22, 2012, the Japan Fair Trade Commission ("JFTC") imposed fines totaling $39.4 million (¥3,388,830,000). The JFTC issued cease and desist orders to five companies.[32]

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b) Aftermarket Auto Lights

The aftermarket auto lights investigation is notable in that, for a long time, it appeared that the defendants would opt for trial. But, in a highly unusual move, on the eve of trial, Eagle Eyes Traffic Industrial Co., Ltd., along with its subsidiary, agreed to plead guilty to all of the indicted charges without a written plea agreement.[33] Eagle Eyes' Vice Chairman also agreed to plead guilty. Eagle Eyes faced a guidelines range fine of $28 million to $56 million, but requested a $5 million fine because of its inability to pay. The DOJ did not oppose Eagle Eyes' request and the Court imposed a fine of $5 million.[34] Eagle Eyes' Vice Chairman is scheduled to be sentenced on January 22, 2013.[35]

The companies' plea agreement, however, was not without controversy. The DOJ asked the Court to impose a five-year probationary term on Eagle Eyes and its subsidiary, citing their lack of cooperation as a justification. Eagle Eyes and its subsidiary vehemently objected, noting that the government had not raised the issue during plea negotiations and arguing that such a term "constitutes a material change in the government's bargained-for sentencing position."[36] Ultimately, the Court declined to impose the requested probation. Eagle Eyes' Chairman was indicted last year and has remained a fugitive according to the DOJ.[37]

c) Thin Film Transistor-Liquid Crystal Displays ("TFT-LCD")

AU Optronics and its U.S. subsidiary became the first corporate defendants in an international cartel case to go to trial in more than a decade.[38] As things currently stand, the Antitrust Division has achieved a significant victory. It secured convictions of AU Optronics, its U.S. subsidiary, and three executives for their roles in collusion as to large-sized TFT-LCDs. But the jury acquitted two junior executives and the sentences imposed to date on both the corporations and the individuals have been less severe than the sentences the DOJ sought. After having obtained a jury finding that the gains from the price-fixing conspiracy exceeded $500 million, the DOJ requested that the maximum fine allowed under the Alternative Fines Act--twice the gains or $1 billion--be imposed on AU Optronics. After extensive post-trial briefing, Judge Illston adopted the recommendation of the probation office and sentenced AU Optronics to pay a fine of $500 million, observing that "the $1 billion fine requested by the Government, although dramatic, is simply substantially excessive to the needs of this matter."[39] The Court expressed its preference that additional sums were better paid in restitution to any victims of AU Optronics' conduct than to the government.[40] No fine was sought, or ordered, against the U.S. subsidiary. The Court also ordered that both AU Optronics and its subsidiary be placed on probation, establish an antitrust compliance program, and that each retain an independent corporate compliance monitor for three years.[41]

During the initial trial, the DOJ obtained convictions of Hsuan Bin Chen, AU Optronics' former president and current vice-chairman, and Hui Hsiung, a former executive vice-president. The Court sentenced both to pay a criminal fine of $200,000 and to serve three years in prison. The DOJ had sought the maximum punishment for each, a $1 million fine and 10 years in prison,[42] but the Court cited proportionality in rejecting the DOJ's sentencing request, as the longest prison term otherwise imposed in the investigation was 14 months.[43]

Both the DOJ and the corporate defendants are appealing the sentences imposed. AU Optronics, its U.S. subsidiary, and the individual defendants also are appealing their convictions.[44]

The DOJ's victory was not complete. The jury acquitted two more junior executives, Lai-Juh Chen, former director of the Desktop Display Business Group, and Tsannrong Lee, a former senior manager of the Notebooks Business Group. In a media interview after the trial, one juror stated that the acquittal was based on the view that these employees had "less culpability" than their superiors.[45]

In addition, the jury could not reach a verdict as to a fifth executive, Shiu Lung Leung. Leung was tried again in December, and, after three weeks of testimony was convicted of one count of price fixing. He is scheduled to be sentenced on March 29, 2013.[46]

Since beginning its TFT-LCD investigation in late 2006, the DOJ has charged 22 executives and eight companies with participating in collusion in that industry. This has resulted in fines totaling more than $1.39 billion. Additionally, 12 executives have been sentenced to serve a combined total of 4,871 days in prison.[47]

d) Municipal Bonds

This past year has also seen the DOJ continue to move the Municipal Bond investigation towards conclusion. Consistent with a trend reported in our 2012 Mid-Year Criminal Antitrust Update, the Division continued its use of non-prosecution agreements ("NPAs") to resolve its investigation into bid rigging in municipal bonds. The Division announced two NPAs in December 2011, which yielded $218 million in monetary assessments. On December 8, 2011, Wells Fargo Bank entered into an NPA and agreed to pay $148 million in restitution, disgorgement, and penalties for Wachovia Bank's[48] role in the alleged municipal bonds bid-rigging.[49] Just two weeks later, on December 23, 2011, GE Funding Capital Market Services Inc. entered into an NPA and agreed to pay $70 million.[50]

Rubin/Chambers, Dunhill Insurance Services (also known as CDR Financial Products) remains the only entity that has pleaded guilty in the municipal bond investigation. Various public entities hired CDR Financial Products to assist in the issuance of municipal bonds and the DOJ charged, in October 2009, that it conspired with several financial institutions to rig the competitive bidding process for those financial instruments. On December 30, 2011, CDR Financial Products and its founder, David Rubin, agreed to plead guilty. The remaining two CDR Financial executives, Zevi Wolmark and Evan Zarefsky, agreed to plead guilty on January 9, 2012.[51] Their sentencings are scheduled for 2013.[52]

While many of the corporate participants in the investigation have secured NPAs, the Division has pressed forward with the prosecution of individuals, resulting in notable trial successes. Following a month-long trial, on August 31, 2012, a Manhattan jury convicted three former investment banking executives for their roles in fraudulent bidding of contracts relating to the investment of municipal bond proceeds. Sentencing is set for March 13, 2013. These convictions came on the heels of jury verdicts against three then former corporate executives on May 11, 2012 on similar charges. On October 18, 2012, the Court sentenced Dominick P. Carollo and Peter S. Grimm to serve 36 months in prison and to pay $50,000 in criminal fines, and Steven E. Goldberg to serve 48 months in prison and to pay a $90,000 criminal fine.[53]

The DOJ also has continued to investigate and prosecute individuals. On July 18, 2012, Alexander W. Wright, a former JP Morgan Chase & Co. banker, pleaded guilty. As part of his cooperation agreement Wright testified in the executives' trials discussed above. He is currently awaiting sentencing. [54] On July 19, 2012, the DOJ filed a three-count indictment of Phillip D. Murphy, a former executive of Bank of America Corp., for his participation in the alleged conspiracy.[55] Most recently, on January 3, 2013, Adrian Scott-Jones, a former financial services broker for Tradition N.A., was sentenced to serve 18 months in prison for engaging in a practice known as a "last look," whereby he would provide alleged co-conspirators information regarding the prices, price levels or conditions in competitors' bids.[56]

Since the onset of the municipal bonds investigation, the DOJ has filed criminal charges against one corporation and 20 former executives of financial services companies. To date, the corporation and 19 of the 20 executives have pleaded guilty or been convicted.[57]

e) Air Cargo

The Division continued to wrap up the few remaining open cases from its air cargo investigation, which has secured more than $1.9 billion in criminal fines to date--the largest amount for a single investigation in Division history.

The saga of the Division's case against Florida Air and its executive, Rodrigo Hidalgo, discussed in our 2011 Year-End Criminal Antitrust Update, continued. In an unusual factual scenario, Hidalgo successfully moved the Court to dismiss the indictment, arguing that he was, in part, employed by a company that had previously received amnesty from the Division for itself and its employees.[58]

Florida West International Airways, Inc. attempted to advance a similar vicarious amnesty argument, but did not secure the dismissal of its indictment. The Court found that the company failed to show that the amnesty agreement in question applied to non-majority-owned subsidiaries.[59] Following the decision, the small, two-plane airline filed a motion to enter a nolo contendere plea because it could "no longer afford to mount a defense" because of alleged government efforts "to wear Florida West down financially."[60] Although the Division argued that such a plea would be "highly inequitable" to the 21 other airlines that previously had pleaded guilty and would "undermine the enforcement objectives of the Antitrust Division's Corporate Leniency Program that encourage self-reporting,"[61] the Court accepted Florida West's nolo contendere plea on July 20, 2012, the first such plea we are aware of in a criminal antitrust case in over 20 years. On November 5, 2012, the Court ordered the company to pay a criminal fine of $1 million.[62]

f) Freight Forwarding

In our 2011 Year-End Update, we reported on a series of guilty pleas related to the DOJ's investigation into freight forwarding services for air cargo shipments from Japan to the United States. In FY 2012, the DOJ announced an additional plea agreement. Yamato Global Logistics Japan Co. Ltd. agreed to pay a $2.3 million criminal fine for their role in the conspiracy. To date, 14 companies have either pleaded guilty or agreed to plead guilty to charges involving freight forwarding between various geographic regions and the U.S., resulting in over $100 million in criminal fines.[63]

3) Developments in Domestic Investigations

a) Real Estate and Tax Lien Auctions

The Division continued its pursuit of individuals and companies engaged in collusive conduct related to certain public auctions for real estate foreclosures and municipal tax liens.

The plea agreements related to real estate foreclosures describe collusive conduct in foreclosure auctions to ensure a below-market price for the winning bidder, who subsequently sold the property at market rate and divided the proceeds with the other conspirators. The collusive conduct included paying other co-conspirators to refrain from bidding and holding unofficial "knockoff" auctions amongst co-conspirators.[64] During 2012, real estate foreclosure investigations resulted in charges against at least 16 defendants for engaging in bid rigging in Northern California,[65] the San Joaquin area in Central California,[66] Alabama,[67] and North Carolina.[68] To date, more than 50 individuals and companies have agreed to plead guilty. Four individuals, Andrew B. Katakis, Donald M. Parker, Anthony B. Joachim, and W. Theodore Longley, are scheduled to stand trial in the Eastern District of California beginning on November 4, 2013.

The plea agreements related to municipal tax lien auctions describe agreements not to bid against other conspirators at certain auctions to ensure the participants enjoyed a higher rate of return. The tax lien investigation has resulted in charges against eight individuals and three companies in New Jersey to date.[69]

b) Coastal Water Freight Transportation

In our 2011 Year-End Update, we discussed plea agreements related to collusive conduct in the coastal water freight transportation industry for service to Puerto Rico. In FY 2012, the DOJ secured several additional pleas in this investigation. In November 2011, Sea Star Line LLC agreed to plead guilty and pay a $14.2 million criminal fine for its role in the conspiracy. On August 1, 2012, Crowley Liner Services Inc. agreed to plead guilty and was sentenced to pay a $17 million criminal fine for its role in conspiring to fix prices. To date, three companies and five executives have pleaded guilty resulting in criminal fines totaling more than $45 million.[70]

Frank Peake, the former president of Sea Star Line, is scheduled to stand trial in the District of Puerto Rico beginning on January 9, 2013.[71]

c) Processed Tomatoes

On March 23, 2012, Frederick S. Salyer, CEO and owner of SK Foods LP, agreed to plead guilty to charges of racketeering and price fixing. Salyer admitted to conspiring with other companies to fix the price of tomato paste sold to McCain Foods, USA, Inc. While each company had Webb-Pomerene immunity to collaborate as to exports, the charged conduct involved sales to a domestic buyer. Salyer agreed to a term of imprisonment of no less than four years and no more than seven years. He is scheduled to be sentenced on February 5, 2013.[72]

4) Developments at the Antitrust Division

a) New Leadership

The Senate confirmed William J. Baer as the next Assistant Attorney General ("AAG") for the Antitrust Division on December 30, 2012.[73] President Obama nominated Baer on February 6, 2012, and three different individuals (Renata B. Hesse, Joseph F. Wayland, and Sharis A. Pozen) served as Acting AAGs while Baer's nomination was pending.[74]

In other developments, Director of Criminal Enforcement John Terzaken left the Antitrust Division for private practice.[75] Marvin Price, who had served as the head of the Chicago Field Office, replaced Terzaken as Director of Criminal Enforcement. The Antitrust Division also created a new "Director of Litigation" position to facilitate efficient use of litigation resources.[76]

b) Field Office Closures

During 2012, the DOJ continued to proceed with plans to close four of the Antitrust Division's seven field offices: Atlanta, Cleveland, Dallas, and Philadelphia.[77] The remaining field offices are: Chicago, San Francisco, and New York. Fewer than ten employees in the field offices scheduled to close are said to be transferring to other field offices or to sections in Washington, DC, resulting in over 30 lawyers leaving the Division. Division lawyers have commented that the closings compromise its ability to investigate domestic anticompetitive conduct, especially in light of the extensive workload the auto parts investigation has generated.[78]

c) Whistleblower Protection Legislation

Our 2011 Year-End Update analyzed a July 2011 Government Accountability Office ("GAO") report on the effectiveness of the Antitrust Criminal Penalty Enhancement and Reform Act of 2004 (ACPERA) and the appropriateness of allowing qui tam proceedings or adding whistleblower protections for antitrust violations. The GAO dismissed the idea of allowing qui tam proceedings, but was supportive of new anti-retaliation provisions to protect criminal antitrust whistleblowers.[79] On July 31, 2012, Senator Patrick Leahy, along with co-sponsors Senator Chuck Grassley and Senator Herb Kohl, introduced the "Criminal Antitrust Anti-Retaliation Act," to amend ACPERA by adding whistleblower protections.[80] The bill was reported to the Senate Judiciary Committee, but no further action has been taken.[81]

5) International Cooperation

International cooperation on global antitrust investigations has been central to the Antitrust Division for well over a decade. Our 2011 Year-End Criminal Antitrust Update reported that 96% of the $6.1 billion obtained in criminal antitrust fines between FY 1997 and FY 2010 stemmed from prosecutions of international cartels. The trend continued in FY 2011; 97% of the $6.4 billion in criminal antitrust fines received between FY 1997 and FY 2011 were imposed in connection with the prosecution of international cartel activity.[82] As another sign that investigations continue to feature international efforts, the percentage of grand juries opened that were associated with subjects or targets located in foreign countries increased from 25% in FY 2010 to 35% in FY 2011.[83]

The Antitrust Division has recently reiterated its commitment to facilitating direct engagement with enforcers in other countries as well as its ongoing significant involvement in international organizations promoting cooperation and communication among competition officials worldwide. In so doing, the Division stressed seven guiding principles for international cooperation:

  • Increased transparency and accountability of government actions;
  • Expanded and deeper cooperation between U.S. and overseas competition enforcement authorities;
  • Greater convergence of competition regimes;
  • Mindfulness of other jurisdictions' interests;
  • Respect for other jurisdictions' legal, political and economic cultures;
  • Trust in each other's actions; and
  • Ongoing dialogue on all aspects of international competition policy and enforcement.[84]

These efforts may achieve increased coordination as well as greater comity through recognition of parallel foreign enforcement actions.

a) Bilateral and Multilateral Relationships

The Division has not only continued to strengthen existing relationships,[85] but also has made significant strides in newly formed relationships. Senior Division officials met with their counterparts from China's three antitrust agencies for the first time since the agencies signed an antitrust Memorandum of Understanding ("MOU") on July 27, 2011.[86] Just two days later, the DOJ and FTC signed an MOU with the Indian competition authorities (the India Ministry of Corporate Affairs and Competition Commission of India), a project that was anticipated in both our 2011 Year-End Criminal Antitrust Update and our 2012 Mid-Year Criminal Antitrust Update.[87] The MOU "establishes a framework for technical cooperation," and provides that the U.S. and Indian antitrust authorities will "keep each other informed of significant competition policy and enforcement developments."[88] Additionally, the MOU furthers communication through "periodic meetings among officials to exchange information on policy and enforcement priorities."[89]

Our 2012 Mid-Year Criminal Antitrust Update also described the Division's involvement in negotiating the Trans-Pacific Partnership Free Trade Agreement. Two more rounds of negotiation have occurred since then, most recently from December 3-12, 2012 in Auckland, New Zealand.[90] We will continue to monitor the progress of negotiations and will provide an update on key developments in 2013.

Finally, the Division has continued to cement its global relationships with the Visiting International Enforcer Program ("VIEP") established in 2011. Thus far, VIEP has resulted in two senior career DOJ staff working in the European Commission's Competition Directorate (DG Comp), while DG Comp officials similarly were assigned to the Division. Such exchanges, the DOJ recognizes, assist in "formulating sound policies and practices on which to base enforcement decisions."[91] The Division has expressed interest in expanding the program in the future.[92] These exchanges signal not only increased coordination but also continued convergence in global cartel enforcement.

b) International Organizations

The Division continues its longstanding active involvement in international organizations committed to strengthening competition enforcement. This includes the International Competition Network ("ICN"), where it serves as co-chair of the ICN's Cartel Working Group along with Germany and Japan.[93] The Division also continues to chair Working Party No. 3 (Co-operation and Enforcement) of the Organisation for Economic Co-operation and Development ("OECD"), which recently released a summary of three roundtable discussions on transparency and procedural fairness.[94]

Both organizations continue to push global competition enforcement forward. On July 17, 2012, the OECD Council adopted a recommendation on fighting bid rigging in public procurement, which "calls for governments to assess their public procurement laws and practices at all levels of government in order to promote more effective procurement and reduce the risk of bid rigging in public tenders."[95] And the OECD and ICN have agreed for the first time to collaborate closely on their respective projects to ensure their efforts are complementary.[96]

6) Significant State Antitrust Prosecutions

In an unusual development, on December 18, 2012, Ohio Attorney General Michael DeWine announced the guilty plea of Quattro Inc. and company executive Timothy O'Brien for their involvement in the rigging of bids submitted to the Ohio Department of Transportation for traffic control devices. The prosecution marked the first criminal prosecution under the state's antitrust act, the Valentine Act, in over thirty years.[97] Reports indicate that the investigation spanned nine companies, although it is currently unclear whether the Attorney General and local prosecutors will charge additional companies and individuals.

7) European Union Developments

a) Fines

The European Commission ("EC" or "Commission") achieved record results in 2012, a year that saw action in five separate cartel cases covering various industries. As discussed in our 2012 Mid-Year Criminal Antitrust Update, the EC was extremely active in the first half of the year. Between January and August, the EC imposed fines for infringement of Article 101 in the window mountings, freight forwarding, and water management products industries. In addition, the EC re-imposed previously annulled penalties against Mitsubishi Electric Corporation and Toshiba Corporation for infringements with respect to their alleged participation in a gas insulated switch gear cartel.

While the second half of the year saw a decline in the number of enforcement decisions, it brought the largest fine the Commission has ever imposed. This fine, amounting to approximately $1.94 billion (€1.47 billion), was imposed in December against seven companies for their participation in an infringement of Article 101 related to cathode ray tubes used in televisions and computer monitors during the period from 1996 until 2006.[98]

This fine brought the total amount of fines levied during 2012 to pre-financial crisis levels and more than tripled the level reached in year 2011.

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A similar phenomenon occurred in relation to the average fine per case and per company fined. Such fines have steadily increased over time, as shown below.

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In total, in 2012 the Commission fined 37 companies approximately $2.48 billion (€1.88 billion) for infringements in the sectors of window manufacturing, gas-insulated gear, freight forwarding, water management, and cathode ray tubes.[99]

Not all of these fines were the result of contested proceedings. The proceedings concerning water management products resulted in a settlement between the Commission and the companies involved (Flamco, Reflex, and Pneumatex), making it the sixth settlement since the EC adopted the cartel settlements procedure. Flamco and Reflex were fined a total of approximately $17 million (€13.66 million) while Pneumatex received full immunity under the Commission's leniency program.[100]

Finally, as mentioned above, the last and largest fine in 2012--and in the EC's history--was imposed in early December against seven companies for operating what the EC described as two cartels in the sector of cathode ray tubes. That activity allegedly spanned the better part of a decade. The EC described these as being "among the most organised cartels that the Commission has investigated."[101] The fines imposed in the cathode ray tubes matter were as follows:

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b) Major Enforcement Efforts: Increased Importance of Negotiated Procedures

Enforcement activities in 2012 confirm that anti-cartel activity remains a strong focus for the EC. Commission Vice President in charge of competition policy, Joaquín Almunia, sent a clear message in June stating that cartels are unacceptable.[102] Throughout 2012, the EC imposed significant fines on individual companies for cartel behavior, accepted legally binding commitments from seven companies to alleviate concerns of cartel activity, opened three proceedings against at least 16 companies, and sent several Statements of Objections in ongoing investigations. An overview of those investigations follows.

Across these efforts, the importance of negotiated procedures, whether settlement[103] or commitments decisions, became clear: they are now a key tool for enforcing competition policy in the European Union. For example, on June 18, 2012, the EC accepted legally binding commitments Siemens and Areva proposed to alleviate concerns that a non-competition clause in their agreement to establish joint venture Areva NP restricted competition in nuclear technology markets. The EC found the clause was excessive as it prohibited Siemens from competing against Areva NP's non-core and core products and services for at least three years after Siemens withdrew from the company.[104] The EC accepted the companies' commitments that substantially reduced the product scope and duration of the non-compete obligation.

c) Raids and Investigations

The EC continued to engage in robust enforcement of competition laws. For instance, 13 unspecified companies received Statements of Objections with respect to CD and DVD drives.[105] In the financial sector, the EC continued its investigations into market-information providers as well as the LIBOR, EUROR, and TIBOR benchmark rates. The EC considers these investigations to be of a high priority as they related to products "of high significance to the financial sector and the European economy as a whole."[106] Vice President Almunia issued a strong warning in September 2012: "the banking sector needs a change of culture, and competition control . . . can help it happen."[107]

In the water sector, the EC opened proceedings against SAUR, Suez Environnement, Lyonnaise des Eaux, Veolia, and trade association Fédération Professionelle des Entreprises de l'Eau for suspected collusion in the French market.[108]

In the transport sector, the EC opened a probe into the transatlantic joint venture between Air France-KLM, Alitalia, and Delta to coordinate their transatlantic operations. The EC raised concerns that such deep cooperation may harm customers on several EU-US routes.[109] The EC investigated a similar transatlantic joint venture among the members of Star Alliance. The EC also conducted unannounced inspections in relation to cars' thermal systems and maritime sea-liners.[110]

The food sector has been under scrutiny for many years, with approximately 120 national investigations finding an infringement of competition law. Vice President Almunia indicated that the food sector will remain on the EC's work program for the coming years and in fact, in January 2012, set up a task force dedicated to the food markets. Later in the year, 13 unspecified companies active in the production and/or distribution of retail food packaging received Statements of Objections concerning alleged bid rigging, price fixing, market sharing, customer allocation, and exchange of commercially sensitive information.[111] In addition, four unspecified traders of North Sea shrimps received a Statement of Objections concerning possible collusion to fix prices and allocate customers in at least the Netherlands, Germany, France, and Belgium.[112]

d) Cases Challenging Commission Decisions

Throughout 2012, several companies appealed EC-imposed fines to the General Court or Court of Justice ("ECJ"). While the EC faced some reversals, on the whole, the General Court upheld the decisions in question.

In addition to the appeals discussed in our 2012 Mid-Year Criminal Antitrust Update, the second half of 2012 saw the courts confirm key principles such as parental liability and inability to pay. In relation to the latter, Novácke Chemické Závody, Ecka Granulate, and Almamet challenged an approximately $80 million (€61 million) fine arguing that the EC had failed to take into account their inability to pay as a mitigating circumstance. The General Court dismissed the appeals and confirmed that a "company cannot simply rely on the risk that they might be declared bankrupt" to prove that a fine is disproportionate.[113]

In February 2012, the General Court upheld the EC's broad view of parental liability, holding that Dow Chemical and El DuPont were jointly liable for the conduct of their 50/50 owned subsidiary, DDE, in the rubber cartel of 2007. The Court held that both parents were to be attributed the behavior of the joint venture even if none of them had the ability, individually, to impose decisions on DDE. The "veto rights" that the two owners held on the joint venture seem to have been essential for the Court to reach its conclusion.[114]

Guardian Industries filed an appeal at the ECJ, continuing its fight against a Commission decision that imposed an approximately $195 million (€148 million) fine for participating in a cartel on the market for construction glass, claiming that the EC vastly overstated its market position and discriminated between participants in the calculation of the fines. The General Court upheld the Commission decision on September 27, 2012.[115]

e) Legislative Efforts

Finally, 2012 saw an important step in terms of transparency for the EC. In March, the Commission published a non-confidential version of its "Antitrust Manual of Procedures" ("ManProc"), a comprehensive 277-page document setting out the internal rules governing antitrust investigations.[116] Private practitioners have highly praised the disclosure of the ManProc. Also in March 2012, the European Commission published its "Informal Guidance Paper on Confidentiality Claims" in an attempt to make it easier for companies and their lawyers to assess which kind of information may be regarded as being effectively confidential.[117]

2012 also saw additional guidance in relation to the ECJ's 2011 Pfleiderer ruling. As explained in our 2011 Year-End Criminal Antitrust Update, the ECJ ruled in June 2011 that it was for national courts to decide whether leniency applications could be disclosed to third parties seeking damages in cartel cases. Since then, a number of national courts and authorities have spoken against such disclosures insofar as they could undermine leniency programs. On August 22, 2012, the Higher Regional Court of Düsseldorf, Germany, ruled that the denial of third-party access to the leniency applications of cartel participants was also valid in court proceedings. Leniency applicants in Germany--the country where the Pfleiderer saga began--can therefore also rely on their applications being kept confidential, not only by the Bundeskartellamt but also in court proceedings.[118]

8) Global Developments

a) Argentina

Throughout 2012, Argentina made headlines for the hostile approach taken vis-à-vis foreign companies operating in strategic sectors of the economy. This included the investigation opened by the Argentinian Competition Authority in January into energy companies after Argentina's transport association filed a complaint about diesel fuel price fixing. Also, in June an Argentinian court upheld the fines imposed in 2005 on cement manufacturers. The fines, totaling more than ARS 300 million (approx. $61 million), were imposed for exchanging "competitively sensitive information."[119]

b) Australia

In 2012, Australia continued its enforcement actions related to the global air cargo investigation. The Federal Court in Sydney ordered Malaysia Airlines Cargo Sdn. Bhd. (a Malaysia Airlines affiliate) and Thai Airways to pay AUD 6 million (approx. $6.1 million) and AUD 7.5 million (approx. $7.7 million), respectively, after settling charges stemming from air freight price-fixing conduct.[120]

The Australian Competition and Consumer Commission ("ACCC") began proceedings against several airlines alleging that they had reached and given effect to price-fixing understandings related to fuel and security surcharges as well as customs fees for the carriage of freight. While trials against Air New Zealand and Garuda Indonesia are ongoing in the Federal Court in Sydney, the penalties already ordered against 13 airlines totaled around AUD 100 million (approx. $105 million), the highest total penalties resulting from a single ACCC investigation.

In August 2012, the ACCC instituted proceedings in the Federal Court in Sydney against Renegade Gas Pty Ltd and Speed-E-Gas (NSW) Pty Ltd. The ACCC alleged that these companies, through their senior executives and sales staff, gave effect to an anti-competitive arrangement, which included not supplying liquid petroleum gas cylinders for forklifts to each other's customers.[121]

The ACCC also launched an enhanced cooperation system with the New Zealand Commerce Commission following the entry into force of the International Cooperation Act, designed to improve cooperation on competition, consumer, and telecommunications issues.[122]

c) Brazil

In May 2012, the Brazilian Competition Act ("the Act") entered into force and implemented significant changes for the country's competition regime. Under the new law, the Administrative Council for Economic Defense ("CADE") is in charge of merger analysis and antitrust investigations.

The Act provides for fines for cartel practices ranging from 0.1% to 20% of turnover in the sector of the economic activity concerned. Fines previously could reach up to 30%, and were calculated on the basis of the total company turnover. In line with previous Brazilian court decisions, under the new law the turnover calculation will be limited to that in Brazil. Notwithstanding these changes, confusion remains about how CADE will calculate antitrust fines.[123]

Additionally, on December 14, 2012, CADE proposed a new regulation for settlement procedures in antitrust investigations. This procedure, if adopted, would provide companies that agree to cooperate after the initial leniency applicant the opportunity to better anticipate the value of that cooperation decision. Although the public consultation on the regulation remains open, the proposed procedure calls for a commission of CADE officials to negotiate the settlement agreement and then present it to a tribunal for approval. The new draft regulation also provides for the possibility to request confidentiality of the negotiations and extends the requirement of admission of anticompetitive practices and the duty to cooperate from leniency procedures to all settlement procedures in cartel investigations. Under the proposed rules, fines imposed for cartel infringements may be reduced depending on the parties' cooperation with CADE and the moment of execution of the settlement. The first settlement would reduce the estimated fine between 30% and 50%, the second settlement between 25% and 40%, and all other settlements up to 25%. If the investigation has already been completed, and the case is pending before a tribunal, the settlement would reduce the estimated fine up to 15%.

Since early September 2012, CADE has carried out unannounced inspections in the salt, silicates, and school uniforms sectors. CADE also made significant progress in an investigation into an international refrigeration compressors cartel and recommended in December 2012 that the Tribunal charge three executives. CADE also recommended that the tribunal close probes into Danfoss, ACC, and Panasonic, thereby clarifying that those cartel members whose involvement had no impact on the Brazilian market will not be charged.[124]

d) Canada

As reported in our 2012 Mid-Year Criminal Antitrust Update, Melanie Aitken stepped down from her position as Commissioner of Competition at the Canadian Competition Bureau ("CCB"). Aitken is credited with guiding the CCB into a new era of aggressive antitrust enforcement that utilizes the enhanced provisions contained in the Competition Act (2010). John Pecman was appointed as interim Commissioner for up to a one-year term. Prior to his appointment, Pecman was in charge of the ongoing retail gasoline cartel investigations in Ontario and Quebec where, as of the end of 2012, 39 individuals and 15 companies had been charged with criminal price fixing. Of the 27 individuals who had pleaded guilty, six were sentenced to serve terms totaling 54 months, which was allowed to be served in the community.

These were not the only significant guilty pleas obtained under the Competition Act's revised provisions in 2012.

Colmatec, Inc., and its operations director, Rénald Drouin, pleaded guilty for their roles in a conspiracy to rig bids to obtain municipal contracts for specialized sewer services in Quebec. Colmatec agreed to pay a fine of CAD 50,000 (approx. $50,700). Rénald Drouin agreed to perform 100 hours of community service and to probation for a period of two years. This followed criminal charges laid by the Director of Public Prosecutions on November 22, 2011 against six companies and five individuals accused of rigging bids for 37 municipal and provincial sewer services calls for tender worth over CAD 3 million (approx. $3 million).[125]

In June, the anticorruption unit of the Sûreté du Québec and the CCB released the details of a joint operation that resulted in a total of 77 charges laid against 11 individuals and nine companies in the construction industry, in connection with a collusion scheme in the Saint-Jean-sur-Richelieu region. The arrests included two municipal officials.[126]

On July 30, 2012, the CCB announced that the Corporate Research Group Ltd. had pleaded guilty to a criminal charge of bid rigging for federal government contracts for real estate advisory services in Canada, and was fined CAD 125,000 (approx. $126,000).[127]

The CCB also continued proceedings related to air cargo, announcing in July that Korean Air had pleaded guilty to conspiracy under the Competition Act and was fined CAD 5.5 million (approx. $5.6 million). Korean Air brought to seven the number of convictions obtained in the CCB's air cargo investigation with fines exceeding CAD 22.6 million (approx. $22.9 million).[128]

e) China

China's Competition Authorities--the Ministry of Commerce ("MOFCOM"), National Development and Reform Commission ("NDRC"), and State Administration for Industry and Commerce ("SAIC")--continued their aggressive enforcement of competition laws. This included record fines for domestic violations, and the first investigation related to global cartel activity.

2012 saw the largest fine so far on a cartel ringleader. The fine of RMB 10.12 million (approx. $1.6 million) was imposed on Hubei Yihua Group LLC, the largest global manufacturer of sodium hydrosulphite (used for industrial dies). In August 2012, SAIC fined 11 used car distributors for market sharing and price fixing. The NDRC also sanctioned the members of a sea sand cartel more than RMB 750,000 (approx. $120,000). The cartel involved more than 20 companies that had been coordinating the price of construction material. Guangdong Baohai Sand and Stone Ltd. (Baohai), a ringleader of the cartel, received a 50% reduction in its fine for reporting the conduct in a leniency application.[129]

Additionally, China launched its first investigation into extraterritorial conduct this past year, examining meetings by TFT-LCD manufacturers from 2001 to 2006. The investigation was notable as it marked the first time the country had prosecuted global conduct. The investigation also brought record fines. On January 4, 2013, NRDC fined LCD manufacturers a total of RMB 353 million (approx. $56.7 million), by far the agency's largest antitrust penalty. The fines imposed were reduced in light of each company's cooperation. Because the prosecuted behavior had concluded in 2006, the cases were brought under China's Price Law rather than the 2008 Antimonopoly Law, which likely would have resulted in higher fines.

As described above, in 2011 China entered an MOU with U.S. enforcement agencies to facilitate greater coordination. Similarly, in September 2012, the European Commission signed an MOU to increase cooperation in antitrust matters with China's antitrust authorities. The MOU creates a dedicated framework to strengthen cooperation and coordination and allows, among other things, for the exchange of non-confidential information on competition investigations. This agreement came on top of the 2004 agreement between the European Commission and China's Ministry of Commerce, which is responsible for merger reviews. These developments, coupled with the introduction of investigations into extraterritorial conduct, may mark a new period of aggressive enforcement of global cartel activity.

f) France

Following the already reported fines imposed on luxury perfume makers and retailers, flour millers, and endive growers, the French Competition Authority ("Autorité de la concurrence") imposed a total fine of approximately $46.5 million (€35.32 million) on Nestlé, Mars Inc., and others for alleged anticompetitive behavior in the markets for dry dog and cat food. The French Competition Authority claimed that Nestlé and Royal Canin (a subsidiary of Mars Inc.) had allegedly engaged in concerted practices that restricted competition between their wholesalers. The French authority found that the alleged practices of imposing resale prices, prohibiting passive sales, and imposing territorial, supply and clientele exclusivities caused significant damage to the economy, particularly in a market that was said to be vulnerable to brand loyalty. Both companies offered commitments and waived their right to challenge the charges in exchange for a penalty reduction. The Autorité de la concurrence imposed fines of $25 million (€19 million) and $15.3 million (€11.6 million), respectively. The Autorité also fined another company $6.03 million (€4.6 million) for its conduct in imposing territorial exclusivity.[130]

g) Germany

2012 was not a sweet year for German candy makers. The Bundeskartellamt fell hard on Haribo, imposing approx. $3.34 million (€2.4 million) in sanctions for anti-competitive exchanges of information. The proceedings against the candy manufacturer were triggered when Mars Inc., the successful leniency applicant, disclosed "four party talks" whereby the companies involved gained knowledge of demands from the retail trade for rebates from the other confectionery manufacturers as well as information about the manufacturers' reaction to these demands.[131]

The Bundeskartellamt also settled two cases during the second half of 2012. The investigations targeted automatic door systems and rail equipment. The fines in the rail matter amounted to almost $174 million (€125 million), while the fine imposed for door systems conduct totaled approximately $3.34 million (€2.4 million) for eight manufacturers, as well as one senior member of staff. The fines were imposed on four rail manufacturers and suppliers for concluding anticompetitive agreements to the detriment of the German rail incumbent, Deutsche Bahn AG. Fines were served on ThyssenKrupp (approx. $143.37 million or €103 million), Stahlberg Roensch (approx. $180.1 million or €13 million), TSTG Schienen Technik (approx. $6.26 million or (€13 million), and voestalpine (approx. $5.57 million or (€13 million). Investigations into further companies were ongoing. An application for leniency filed by the Austrian company voestalpine AG triggered the proceedings.[132]

These fines came on top of those reported in our 2012 Mid-Year Criminal Antitrust Update imposed in the chemical wholesale sector (approx. $11.7 million or €8.7 million), against manufacturers of concrete pipes for sewage systems (approx. $3.9 million or €2.9 million) and on manufacturers of firefighting vehicles (approx. $40 million or €30 million).

Additionally, in 2012, the Bundeskartellamt unveiled a new investigative tool guaranteeing the anonymity of the informant who identified the alleged infringement.[133]

h) Hong Kong

In June 2012, Hong Kong enacted its long-awaited Competition Ordinance and joined the ranks of Asian countries with antitrust law enforcement.[134] The Ordinance, expected to come into force in 2014, sets up a Competition Commission and a Commission Tribunal.[135] The antitrust regime contains two broad prohibitions for companies conducting business in Hong Kong and sanctions anti-competitive agreements as well as abuses of dominant position. Although it is too early to assess how the rules will be applied in practice, most observers expect that Hong Kong Competition rules will follow an approach similar to that of the EU.

i) India

The Competition Commission of India ("CCI") imposed a record fine of Rs 6,307 crore (approx. $1.1 billion) on 11 cement manufacturers and the Cement Manufacturers' Association ("CMA").[136] The CCI alleged that the companies coordinated, through the CMA, with respect to the price and production of concrete, with the result being "not only detrimental to the cause of the consumers but also to the whole economy since cement is a crucial input in [the] construction and infrastructure industry."[137] Media reports indicate that the CCI lacked direct evidence of coordination among the cement companies and, instead, relied on circumstantial evidence derived from output and capacity data, price hikes, economic growth rates, construction activity, and the companies' profit margins.[138] The fines imposed on the cement companies equaled 50% of their profits for FY 2009–2010 and FY 2010–2011.[139] Several of the companies indicated their intent to appeal the fines to the Competition Appellate Tribunal.[140] During 2012, the CCI also fined ten explosives companies a total of approximately $10.7 million (Rs 600 million)[141] and opened cartel investigations against car manufacturers.[142]

j) Israel

During 2012, the Israeli Antitrust Authority began criminal proceedings in relation to the alleged price fixing of bread. The Authority initiated the proceedings at the Jerusalem District Court against several bread producers--including the three largest producers, who control 90% of the market--as well as 11 of their executives. The Authority alleges that the executives colluded at a series of joint meetings held throughout 2010.[143]

k) Italy

In Italy, the markets in the process of liberalization saw increased enforcement of competition laws in 2012. The Italian Antitrust Authority ("AGCM") imposed fines of roughly $5.4 million (€4 million) against a cartel of shipping agents operating at the Port of Genoa,[144] as well as two fines of $417,000 (€300,000) on energy companies.[145] The Antitrust Authority also launched an investigation into the tariffs reintroduced by the Notary Councils of Milan and Bari.[146] The AGCM also launched several investigations including one into alleged price fixing of diesel and gasoline in Sicily[147] and another into the alleged bid-rigging behavior of two construction companies.

l) Japan

In June 2012, the JFTC brought criminal charges against three industrial machinery and automotive bearing manufacturers, along with seven of their employees, accusing them of violating Japan's Antimonopoly Act.[148] The JFTC charged NSK Ltd., NTN Corporation, and Nachi-Fujikoshi Corporation with conspiring to raise prices for their products. NSK Ltd. and NTN Corp. allegedly conspired with respect to both industrial machinery bearings and automotive bearings. The third defendant, Nachi-Fujikoshi, was alleged to have participated only as to industrial machinery bearings.

The JFTC also brought two administrative cases of bid rigging in the sectors of automotive parts[149] and poly-styrol blocks[150] and imposed fines totaling respectively $40 million (¥3.3 billion) and $2.4 million (¥202 million).

In September 2012, JFTC Chairman Kazuhiko Takeshima, known for his leadership of the JFTC as it expanded enforcement of the Antimonopoly Act against international cartels, stepped down due to the expiration of his term of service. Ms. Michiyo Hamada, one of the Commissioners of the JFTC, will be the Acting Chairperson until a replacement for Mr. Takeshima is chosen.

m) Netherlands

The Dutch Competition Authority ("NMa") marked its last year as a stand-alone authority. From January 1, 2013 onwards, the Authority for Consumers and Markets (Autoriteit Consument en Markt or "ACM") will replace the NMa, as well as the Telecoms and Post regulator (OPTA) and the Consumers Authority.

In June 2012, the NMa fined two agricultural cartels $28.9 million (€23 million) for price fixing and dividing the market.[151] It is also worth highlighting that in July 2012, the NMa imposed personal fines on two former Greenchoice executives.[152] The fines, each amounting to roughly $626,400 (€450,000), were imposed as a follow-up action to the antitrust fine imposed in 2011 to their former employer Greenchoice, which was sanctioned approximately $10.02 million (€7.2 million).

n) Pakistan

In August 2012, the Competition Commission of Pakistan ("CCP") found that 1-Link (Guarantee) Ltd. and its 28 member banks had engaged in collusive behavior prohibited by Section 4 of the Competition Act, 2010. Specifically, the banks were found to have imposed uniform customer charges for Off-us ATM cash withdrawal transactions. The CCP imposed a total fine of PKR 770 million (approx. $8.32 million).[153]

In December, the CCP also carried out unannounced inspections of the premises of three compressed natural gas trade associations: All Pakistan CNG Association, CNG Dealers Association, and CNG Station Owner Association of Pakistan. The CCP is conducting an investigation into allegations of collusive practices.[154]

o) Portugal

In May 2012, Portugal adopted a new competition law that implements significant changes for competition control. The new law aims to improve the efficiency and effectiveness of the country's competition regime and bring it more in line with the EU regime. The law also strengthens the investigative powers of the Portuguese Competition Authority and introduces the possibility of commitment decisions to conclude investigations. The law provides for individual sanctions on managers and staff who were aware of infringements and made no efforts to put an end to anti-competitive practices. Finally, the law creates a specialized court with full judicial review on fines imposed for antitrust infringements.[155]

p) Singapore

Singapore also continued to expand the enforcement of its competition laws. In 2012, the Competition Commission of Singapore sanctioned two ferry operators for exchanging confidential information, including prices for tickets sold to companies and travel agencies. The fine, the first one imposed in Singapore for an information exchange, amounted to S$287,000 (approx. $235,000).[156]

q) South Africa

During the second half of 2012, the Competition Commission of South-Africa ("CCSA") reached settlements in several ongoing investigations. In November 2012, the CCSA reached an agreement with Astral Operations regarding its involvement in collusive practices with competitors to fix prices in the poultry market and Astral agreed to pay a penalty amounting to R16.7 million (approx. $2.3 million). In a settlement in December 2012, Foodcorp admitted to participating in a pricing cartel in the milling sector and agreed to pay R88.5 million (approx. $12.2 million). The CCSA had already reached settlements with other participants including Premier Foods, Tiger Brands, and Pioneer Foods.[157]

In October, the CCSA referred to the Competition Tribunal a case against Chevron SA (PTY) Ltd., Engen Ltd., Shell SA (PTY) Ltd., Total SA (PTY) Ltd., Sasol Ltd., BP SA ltd., and South African Petroleum Industry Association ("SAPIA") concerning alleged collusion regarding the production, marketing and distribution of diesel in its various grades. The CCSA has requested that the Tribunal levy an administrative penalty amounting to 10% of total turnover of imports and exports from South Africa in the preceding financial year. The CCSA considered the oil companies under investigation to have engaged in collusive conduct through extensive exchanges of commercially sensitive information going back as far as the late 1980s. CCSA alleges that SAPIA facilitated the exchanges.

The South African Appeals Court revived the CCSA price-fixing case against SABMiller and its resellers and annulled the Tribunal's decision to dismiss the case. The Court clarified that for the CCSA to bring a competition case and refer it to the Tribunal, the case need only be logically linked to the original third-party complaint that led the watchdog to investigate.[158]

r) South Korea

As previously reported, the Korea Fair Trade Commission ("KFTC") had a very active year. The Seoul High Court affirmed KRW 2.1 billion fine (approx. $2 million) imposed by KFTC in 2010 against Thai Airways International for the air cargo cartel.[159]

Legislative initiatives included several amendments to Korea's competition law in March 2012, including criminalizing certain types of interference with antitrust investigations, changing the statute of limitations for the KFTC to investigate anti-competitive conduct, and increasing the maximum penalties for trade associations implicated in cartel probes.[160]

r) Spain

On December 20, 2012, the Spanish Parliament gave the first approval to a controversial bill proposing to merge the National Competition Commission ("CNC") with seven other sector-based regulatory entities into a newly created National Commission for Markets and Competition ("Comisión Nacional de los Mercados y la Competencia" or "CNMC"). A second approval, expected in March 2013, is needed to put the project into place. The new Authority, which was justified by the Government on grounds of cost-rationalization (savings of around $37 million (€28 million) are expected), has faced fierce opposition from the opposition parties in Parliament and triggered criticism from both the European Commission and most of the authorities to be merged.[161]

The first half of 2012 saw the Spanish imposition of fines on concrete manufacturers (approx. $13.9 million or €11 million) and maritime transport companies operating between the peninsula and the Balearic Islands (approx. $73 million €54 million). During the second half of the year, the CNC imposed fines of over $123 million (€88.5 million) on maritime transport companies operating between the peninsula and Morocco.[162] The CNC also imposed fines on manufacturers of paper envelopes (over $4 million or €3.7 million), archive materials (more than $11 million or €9 million), and the national association of canned fish and seafood. The latter was fined more than $2.6 million (€2 million) for fixing the purchasing conduct of its members in relation to Galician mussels.

Additionally, the CNC opened several investigations into the pharmaceutical, refrigerated road transport, fire prevention, raw cotton, and football broadcasting sectors.

Finally, on December 14 and 18, 2012, the Spanish High Court (Audiencia Nacional) annulled a $150 million (€120 million) CNC fine against various insurance companies. The fine, which was the highest the CNC had imposed, was quashed on the grounds that the exchange of risk information did not constitute an infringement of Spanish competition law insofar as it did not amount to price fixing. An appeal may be filed before the Spanish Supreme Court.[163]

s) Switzerland

The Swiss Wettbewerbskommission ("WEKO") continued its strong antitrust enforcement this past year. WEKO opened proceedings against Steinway & Sons and its distributors in Switzerland, alleging cartel practices.[164] WEKO also initiated an antitrust investigation into bidding practices in the markets for roadworks, civil engineering and construction.[165]

WEKO reached a settlement with four freight forwarders--Agility Logistics, Deutsche Bahn AG/Schenker, Kühne + Nagel International AG and Panalpina Welttransport--bringing to a close its investigation into price fixing. The settlement imposed a fine, totaling $6.7 million (CHF 6.2 million). Deutsche Post AG/DHL received full immunity under the Swiss leniency program.[166]

t) United Kingdom

In March 2012, the UK government announced its proposals to reform the country's competition regime. The central feature of the reform is the merger of the two existing competition authorities, the Office of Fair Trading (OFT) and the Competition Council (CC), into a single Competition and Markets Authority (CMA), with the aim of simplifying and strengthening the competition regime. It is currently expected that the CMA will be operational by April 2014. The CMA's primary duty will be to promote effective competition in UK markets for the benefit of consumers. This means the CMA will be responsible for merger regulation, market investigations, and cartel and antitrust cases, as well as a number of functions with respect to the regulated utilities. Another key proposal concerns the criminal cartel offense. The government intends to simplify the prosecution of criminal cartel cases by eliminating the existing dishonesty requirement.[167]

The OFT has also strengthened its criminal enforcement efforts by creating a new lead investigator and enforcer role to investigate and prosecute cartel and criminal consumer offenses. Assistant criminal enforcement director Lee Craddock was appointed to be the first director of Investigation and Criminal Enforcement, operating in the OFT's Cartels and Criminal Enforcement Group.[168]

As reported in our 2012 Mid-Year Criminal Antitrust Update, the OFT found that the pricing practices regarding passenger fuel surcharges of British Airways (BA) and Virgin Atlantic Airways (VAA) constituted an infringement of competition law. VAA received full immunity under the leniency program. The OFT reduced the penalty it imposed against BA in 2007 from approximately $195 million to $93 million (£121 million to £58.5 million) due to BA's cooperation with the investigation and admission of wrongdoing.

During the second half of the year, the OFT issued Statements of Objections to Booking.com, Expedia Inc., and InterContinental Hotels Group for allegedly restricting the online travel agent's ability to discount the price of hotel rooms. The OFT characterized such agreements as anti-competitive by nature as they allegedly limit price competition between online travel agents and increase barriers to entry and expansions. Additionally, on June 28, 2012, the OFT issued a press release stating that it is investigating a major multinational automobile company and a number of its dealers.[169]

The OFT also confirmed that, as with the EC, settlement procedures are a key tool for competition enforcement. The OFT accepted legally binding commitments offered by the three largest electrical retailers Dixons, Comet, and Argos to improve the way the extended warranties market works, following a market study that raised several competition concerns. In addition, eight NHS Hospital Trusts gave voluntary assurances that they will no longer exchange commercially sensitive information about Private Patient Unit prices to ensure compliance with competition law.

Additionally, during 2012 the OFT referred several industries to the Competition Commission (CC), including private motor insurance[170] and private health care.[171] The CC was also performing market investigations into movies on pay TV, statutory audit services, aggregates, cement and ready-mix concrete.[172]

Finally, in an interesting twist, the Competition Appeal Tribunal (CAT) overturned much of a 2011 decision in which the OFT imposed an approximately $79 million (£49.51 million) fine against four supermarkets and five dairy processors for manipulating the prices of cheese products. While all other parties admitted liability and paid their portion of the fines, Tesco filed an appeal, claiming that "indirect" contacts through cheese suppliers did not amount to collusion and that certain contacts concerned only wholesale prices. The CAT found that the OFT had insufficient evidence to support parts of its case relating to years 2003 and portions of 2002, but confirmed that indirect contact between competitors via a common supplier constitutes a concerted practice in the form of a hub-and-spoke cartel.[173]