In recent months, we have seen a significant increase in antitrust enforcement against international cartels. This increased activity in international cartel enforcement is worth noting since it reflects a greater emphasis on eradicating price-fixing cartels by enforcement agencies worldwide. The following recent examples are discussed here: (1) the imposition of the highest fine against a cartel ever, where the European Commission fined car glass producers more than €1.3 billion for a market sharing cartel; (2) LG, Sharp and Chunghwa’s agreement to plead guilty and pay a total of $585 million in fines for participating in price-fixing conspiracies; and (3) the Eastern District of New York’s refusal to dismiss a class action against various Chinese Vitamin C manufacturers.
The European Commission’s Imposition of the Highest Fine Ever
On Nov. 12, 2008, the European Commission imposed fines totaling €1,383,896,000 again Asahi Glass, Pilkington, Saint-Gobain and Soliver for illegal market sharing and exchange of commercially sensitive information regarding deliveries of car glass in the European Economic Area (“EEA”), in violation of the EC Treaty’s and the EEA Agreement’s ban on cartels and restrictive business practices. Asahi, Pilkington and Saint-Gobain are the three major players in Europe’s car glass manufacturing industry. Between early 1998 and early 2003, these companies discussed target prices, market sharing and customer allocation through a series of meetings and other illicit contacts. The Belgian company Solivar also took part in these discussions. These four companies controlled about 90 percent of the glass used in the EEA in new cars and for original branded replacement glass for cars, a market worth about €2 billion in the last full year of the infringement. The Commission started the cartel investigation on its own initiative following a tip from an anonymous source. The Commission increased the fines against Saint-Gobain by 60 percent because it was a repeat offender. Asahi provided additional information to help expose the infringement, and its fine was reduced by 50 percent under the Leniency Notice. These are the highest cartel fines the Commission has ever imposed, both for an individual company (€896 million against Saint-Gobain) and for a cartel as a whole.
The fines in this case are based on the 2006 Guidelines on Fines. Under these Guidelines, fines reflect the overall economic significance of the infringement as well as the share of each company involved. The cartel constitutes a very serious infringement of the EC Treaty’s antitrust rules. In setting the fines, the Commission took into account the respective affected sales of the companies involved, as well as the combined market share and the geographical scope of the cartel agreements.
Practice Tip: Similar to the United States, the concepts of amnesty and leniency are important factors in the Commission’s determination of the amount of the fines imposed. Here, Asahi’s cooperation reduced its original fine by 50 percent from €227 million to €113.5 million. The Commission’s imposition of the highest fine ever against a cartel is reflective of its increasing emphasis on disbanding price-fixing cartels, and highlights the importance of a defendant’s early cooperation.
Second-Highest Criminal Fine Ever Imposed by the Department of Justice’s Antitrust Division
Three leading electronics manufacturers—LG Display Co. Ltd., Sharp Corp. and Chunghwa Picture Tubes Ltd.—have agreed to plead guilty and pay a total of $585 million in criminal fines for their roles in conspiracies to fix prices in the sale of liquid crystal display (“LCD”) panels. Of the $585 million in fines, LG, a South Korean corporation, will pay $400 million, the second-highest criminal fine ever imposed by the Department’s Antitrust Division. Sharp Corp., a Japanese consumer electronics manufacturer, has agreed to pay a $120 million fine for its participation in separate conspiracies to fix prices for LCD panels sold to Dell Inc., Motorola Inc. and Apple Computer Inc. Chunghwa, a Taiwanese LCD manufacturer, has agreed to pay a $65 million fine for its participation with LG and others in a price-fixing conspiracy.
The three companies, which were charged with violating the Sherman Antitrust Act, allegedly held “crystal” meetings and engaged in communications about setting prices on the LCD displays. They agreed to charge predetermined prices for the displays, issued price quotas based on those agreements, and exchanged sales information on the display panels, in order to monitor and enforce the agreement.
Practice Tip: This is yet another example of antitrust enforcement agencies clamping down on international cartels. The fine imposed on LG is significant as it is the second-highest ever imposed by the Antitrust Division, and puts into perspective the crippling effect such a fine could have on a violating entity.
Antitrust Suit Proceeds Against Chinese Vitamin C Manufacturers
Despite an amicus brief submitted by the Chinese Ministry of Commerce, Eastern District of New York Judge David Trager rejected a motion to dismiss and allowed an antitrust action to proceed against Chinese Vitamin C makers. The Chinese companies, Hebei Welcome, Jiangsu Jiangshan, Northeast Pharmaceutical Group and Weisheng Pharmaceutical Co., claim they were compelled by their government to fix the price of vitamin C in violation of U.S. law. The plaintiffs, Ranis Co. and Animal Science Research Inc., are American manufacturers who alleged in their complaint that the formation of the alleged cartel led to an increase in the price of vitamin C in the United States from $2.50 per kilogram to $7 per kilogram between December 2001 and December 2002. In their motion to dismiss, the defendants did not deny the allegations, but invoked the “acts of state,” “foreign sovereign compulsion” and “international comity” doctrines. Here, Judge Trager concluded that there was not enough evidence to determine that any of these doctrines applied to the defendant’s price-fixing action, despite the arguments made by the Chinese government. The Chinese Ministry of Commerce in its brief identified the “trade association” that allegedly facilitated the cartel as the Chamber of Commerce of Medicines and Health Products Importers & Exporters. The brief argued that such chambers, in contrast to their voluntary nongovernmental U.S. cousins, have played a central role in China’s shift from a command economy to a market economy. Although the ministry noted that it did not decide the specific prices, the defendants and the ministry insisted the companies could not have exported vitamin C without conforming to the agreed-upon price. Judge Trager said the Chinese position was owed deference but was not conclusive. Further, he said it was contradicted by other documents in the case, which suggested a “complex interplay” between the defendants and the Chamber that made it difficult to determine the degree of defendants’ independence in setting prices. Judge Trager denied defendants’ motion to dismiss and has allowed the antitrust suit to proceed.
Practice Tip: This case is indicative of the fact that U.S. courts are taking a more stringent stance against international cartels. Even despite the arguments asserted by a foreign government, U.S. courts appear poised to enforce U.S. antitrust violations by foreign cartels.