International cartel enforcement throughout 2012 was characterised by record levels of fines, lengthening prison sentences and continued cooperation among antitrust authorities across jurisdictions. Multinational companies must simultaneously defend their business activities on multiple fronts, taking a global perspective when responding to investigative queries.
In the ongoing auto parts investigation, for example, diverse competition authorities, including those from Canada, the European Union, Japan, South Korea and the United States, have worked together, with significant results. To date, this investigation has generated charges against nine companies and 12 individuals, more than US$809 million in criminal fines, including the third largest criminal antitrust fine ever imposed in the United States (US$470 million), and the longest jail sentence ever imposed on a foreign national by the United States (24 months).
With this globalisation of cartel enforcement, and the local challenges showing no signs of abating, the stakes are higher. Recent examples from the United States, the European Union and China are prime illustrations of the aggressive direction of modern international cartel enforcement.
The United States
The US Department of Justice (DOJ) Antitrust Division places a high priority on antitrust enforcement against international cartels affecting US commerce. Between fiscal years 1997 and 2012, 97 per cent of the US$7.8 billion in criminal antitrust fines obtained by the DOJ were for international cartel activity. In fiscal year 2012 alone, total fines resulting from criminal antitrust enforcement actions reached a record US$1.14 billion, which included two of the largest ever fines for violations of US antitrust laws: US$500 million and US$470 million.
The number of foreign subjects and targets also increased. Of the grand juries the DOJ opened in fiscal year 2012, approximately 67 per cent involved subjects or targets located in foreign countries, compared with 35 per cent in fiscal year 2011. Prison sentences increased as well. Approximately 65 foreign defendants in DOJ cartel actions have served or have been sentenced to serve sentences in the United States compared to 51 and 48 foreign defendants in fiscal years 2013 and 2012, respectively. "No jail" for foreign individual defendants as a bargaining tool is no longer an option.
The DOJ actively engages in international cooperation efforts to boost its detection and prosecution of international cartels. It has antitrust cooperative agreements with 12 foreign governments (Australia, Brazil,
Canada, Chile, China, the European Union, Germany, India, Israel, Japan, Mexico and Russia), and participates in the International Competition Network (ICN) and the Organisation for Economic Co-operation and Development, both of which promote international cartel enforcement cooperation. The ICN is a good example of increased international cooperation. When it started in 2001, the DOJ and the US Federal Trade Commission joined just 13 other jurisdictions in the network. The ICN now includes 126 member agencies from 111 jurisdictions. The DOJ also utilises other international tools including border watches, INTERPOL Red Notices and extradition requests.
International cooperation yields results for US authorities. In the marine hose investigation, for example, the DOJ and antitrust enforcement authorities in the United Kingdom and Europe coordinated searches in the United States and Europe on the same day. The DOJ and the United Kingdom also coordinated the sentencing of three British nationals. Given these results, it is highly likely the United States will continue to support international cooperation in cartel enforcement actions.
In 2012, the European Commission imposed fines of €1.9 billion in total. While this is lower than the total fines it levied in 2010 (€2.9 billion) and 2008 (€2.23 billion), this does not signal a change in the Commission’s priorities, nor a more lenient approach towards cartel enforcement.
Fines were levied on 37 undertakings/ associations in 2012 in connection with cartel cases, which is more than twice the number of undertakings or associations fined in 2011. With five cartel cases, 2012 corresponds with the average of the last five years, but several records were reached. These include the highest European cartel fine for one case (€1.47 billion) and the second and third highest European cartel fines per undertaking, levied against the TV and computer monitor tubes cartel, which lasted nearly a decade. The high fines can be explained, in part, not only by the long duration of the practices but also by the fact that the Commission took into account both direct sales in the European Economic Area (EEA) and direct sales in the EEA through transformed products. The Commission considered these fines fair because such cartels are "textbook cartels: they feature all the worst kinds of anticompetitive behaviour that are strictly forbidden to companies doing business in Europe".
The Commission also took into account the size of the group of the infringing companies when making its assessments, with the effect of substantially increasing the fines imposed. In the freight forwarding case, for example, the Commission applied a deterrent multiplier of 1.1 to 1.2 to the basic amount of the fine imposed. In contrast, in the mountings for windows and window doors case, where the total fine amounted to €86 million, the fines were capped and reduced because, for most of the companies involved, mountings for windows constituted a large proportion of their turnovers. Exceptionally, the Commission exercised its discretion, applying 0.37 of the guidelines on the method of setting fines in reducing the fines in order to take into account the mono-product nature of the companies.
China’s Anti-Monopoly Law regulates cartels in China and has been in place since August 2008. China’s cartel enforcement authorities, the National Development and Reform Commission (NDRC) and the State Administration for Industry and Commerce (SAIC), may impose fines of up to 10 per cent of a company’s annual turnover and confiscate any illegal profits of the cartel.
As in other jurisdictions, there is a leniency program whereby a whistleblower may receive complete immunity from fines for voluntarily reporting cartel activity. So far, no companies have submitted a leniency application. Companies have instead only provided information once a cartel investigation was underway, which provides for only partial immunity. Private parties may also bring an action for damage caused by the cartel, although there have been few successful cases so far.
It was not until 2010 that the first fines were imposed on members of a price-fixing cartel, which was in the rice noodle sector. Since then, investigations and fines on cartels in China and private actions against cartel members have increased dramatically. In 2011, fines were imposed on concrete cartels in Jiangsu and Liaoning Provinces and on a paper manufacturers’ association that organised a cartel in Zhejiang Province. In 2012, fines were imposed on a sea sand mining cartel in Guangdong Province and on a second-hand vehicle cartel in Henan Province. In many of these cases, the enforcement agency also confiscated illegal profits of the cartel members.
The end of 2012 saw the first fines imposed on a cartel involving foreign companies, with an exponential increase in the level of fines. In December 2012, the NDRC imposed fines of more than RMB 350 million on four Taiwanese and two Korean companies for participation in a liquid crystal display cartel. This is the same cartel the Commission fined more than €600 million in 2010.
Enforcement activity continues into 2013. In March, it was reported that the NDRC sent 30 teams to investigate various cement producers in northeast China. The NDRC and SAIC are also investigating a number of provincial cities’ auto insurance markets after imposing fines of RMB 3.89 million on a group of auto insurers in Hunan province in January 2013.