In this issue of Cartel Watch, we continue our U.S. and international coverage of select notable developments in cartel enforcement and follow-on civil antitrust class action lawsuits.


Deputy Assistant Attorney General Indicates DOJ Might Target More Remote Foreign Cartels

To date, the U.S. Department of Justice has only challenged foreign cartels that involve at least some direct imports into the country.  However, at the New York State Bar Association Antitrust Law Section’s annual meeting on January 29, 2015, Deputy Assistant Attorney General Brent Snyder indicated that the DOJ would be willing to pursue cases involving solely indirect sales in the future.  The Foreign Trade Antitrust Improvements Act (FTAIA), which limits the extraterritorial application of U.S. antitrust laws, has not applied to the cases brought by the DOJ in the past, because the statute exempts import commerce.  “That said, even where there are no sales of the price-fixed product in or for delivery to the U.S. and the FTAIA does apply, the statute would permit us to bring cases purely on the sale of those component parts,” Snyder said, as reported in the trade press.  “And we would certainly consider bringing cases on that basis alone.”  Snyder further pointed out that the FTAIA did not amend the sentencing guidelines or in any way alter the DOJ’s ability to calculate fines based on global sales.  In practice, the Antitrust Division has used its discretion in considering the same types of factors invoked by the FTAIA when calculating penalties, and it has never based prior fines on worldwide sales.  Nevertheless, Snyder informed that, once the Division has used the relevant sales to establish a fine range under the sentencing guidelines, it will then look to global sales to determine the appropriate fine within that range.  This calculation metric, however, has happened only in situations which presented a risk that the ultimate penalty might “significantly understate the harm to U.S. consumers,” Snyder added.

Additional Auto Parts Guilty Pleas and Indictments

  • Sanden Corp. Agrees to Plead Guilty to Price Fixing Compressors Installed in U.S. Cars
    • In the ongoing U.S. auto parts cartel investigations, the DOJ announced on January 27, 2015 that Japanese auto parts maker Sanden Corp. has agreed to plead guilty to criminal charges that it conspired to bid-rig and fix the prices of compressors used in air conditioning systems sold to Nissan North America, Inc. Sanden Corp. will pay a $3.2 million criminal fine.  The DOJ filed a one-count felony charge in Michigan federal court after Sanden agreed to cooperate in the investigation.  The information alleges that Sanden’s participation in the scheme began as early as August 2008 and continued through at least April 2009.  The department noted that it has charged 33 companies and 50 individuals as a part of its investigation into price-fixing and bid-rigging in the auto parts industry.  All 33 companies have or will plead guilty, and, collectively, they will pay more than $2.4 billion in fines.  S. v. Sanden Corp., No. 2:15-cr-20033 (E.D. Mich.).
  • Another Former Executive Agrees to Plead Guilty in DOJ’s Auto Parts Investigation
    • On January 6, 2015, a former executive at Toyoda Gosei Co. Ltd, a Japanese auto parts maker, agreed to plead guilty for his role in a scheme to fix the price of automotive hoses. Makoto Horie, a former sales executive at Toyoda, will serve one year and one day in jail, pay a $20,000 criminal fine, and cooperate with the department’s ongoing investigation into the cartel.  The information alleges that, from as early as March 2007 and lasting until at least September 2010, Horie actively participated in meetings and exchanged competitively sensitive information in order to fix prices and rig bids for automotive hoses.  “The division’s ongoing investigation has resulted in more than two dozen executives serving prison time for their participation in illegal conspiracies involving auto parts,” stated the DOJ’s press release.  The plea agreement with Horie comes in the wake of Toyoda Gosei’s own guilty plea in September 2014, under which it has agreed to pay $26 million in criminal fines for its role in the conspiracy to fix the price of steering wheels, airbags, and auto hoses.  S. v. Horie, No. 3:15-cr-00003 (N.D. Ohio).

Japanese Freight Forwarding Firm Agrees to Plead Guilty to Cartel Effecting Ocean Shipping Services

Nippon Yusen Kabushiki Kaisha (NYK), a Japanese freight forwarding firm, has agreed to plead guilty to a conspiracy to fix prices for international ocean shipping services.  As part of its plea agreement, the company will pay a $59.4 million criminal fine and cooperate with the DOJ’s ongoing investigation into the industry.  The agreement, reached on December 29, 2014, alleges that NYK participated in a scheme to fix prices, allocate customers, and rig bids for roll-on, roll-off cargo shipping of items into the U.S. that lasted over 15 years.  This makes the DOJ’s second charge from its investigation into the international ocean shipping industry.  U.S. v. Nippon Yusen Kabushiki Kaisha, No. 1:14-cr-00612 (D. Md).


Supreme Court Rules Second Circuit Must Hear Antitrust Appeal From Multi-District Litigation

The Supreme Court unanimously ruled on January 21, 2015 that investors whose sole antitrust claim was dismissed from an ongoing multidistrict litigation (MDL) had the right to an immediate appeal.  The antitrust claim at issue concerned the alleged manipulation of the global benchmark interest rate known as Libor.  The Court’s decision, authored by Justice Ginsberg, overturned the Second Circuit’s refusal to hear the case.  The decision clarified that the petitioners’ right to an appeal ripened when the district court dismissed their case, notwithstanding the fact that a variety of other claims are still proceeding in the wide-reaching MDL.  “The district court’s order dismissing the Gelboim-Zacher complaint for lack of antitrust injury, without leave to amend, had the hallmarks of a final decision,” wrote Justice Ginsberg.  “As is ordinarily the case, the [MDL] consolidation offered convenience for the parties and promoted efficient judicial administration, but did not meld the Gelboim-Zacher action and others in the MDL into a single unit.”  MDL defendants should take this ruling into consideration when raising issues in motions to dismiss – close-call issues might go up for appeal rather quickly, and negative results could affect the rest of the MDL proceedings.  For more information, please see an in-depth discussion of the decision and its implications on our blog, available hereGelboim et al. v. Bank of America Corp. et al., No. 13-1174 (S. Ct.).

Seventh Circuit Denies Motorola’s Request for a Full-Panel Rehearing of Its Claims Dismissed on FTAIA Grounds

In a one-page order entered on January 12, 2015, the Seventh Circuit declined Motorola Mobility LLC’s request for an en banc rehearing of an appellate panel’s second ruling that the Foreign Trade Antitrust Improvements Act (FTAIA) barred the vast majority of Motorola’s claims in its $3.5 billion price-fixing case against manufacturers of liquid crystal display (LCD) panels.  Motorola asked for the rehearing in December, after a three-judge panel held that 99% of Motorola’s LCD purchases extended beyond the reach of U.S. antitrust law because the LCD panels at issue were purchased abroad by Motorola’s foreign subsidiaries, incorporated into cell phones manufactured abroad, and only later sold in the U.S. (see our report in Cartel Watch Vol. 2, Issue 5).  “All the judges on the original panel have voted to deny the petition, and none of the active judges has requested a vote on the petition for rehearing en banc,” stated the order, noting that Circuit Judge Joel M. Flaum did not participate in the decision.  It will be interesting to see if the Supreme Court grants certiorari, should Motorola appeal the decision.  Motorola Mobility LLC v. AU Optronics Corp. et al., No. 14-8003 (7th Cir. Jan. 12, 2015).


Japanese Court Convicted Bearing Manufacturer and Former Executives

Though it is rare to see a criminal price-fixing case to go to trial in Japan, on February 4, 2015, the Tokyo District Court convicted NTN Corporation, a Japanese bearing manufacturer, and two of its former executives for violations of the Anti-Monopoly Act of Japan in connection with alleged participation in a cartel to fix prices for the domestic sales of bearings.  The court imposed a 400 million yen (approximately $3.4 million) criminal fine on NTN, and the company’s former executives were sentenced to 18 months and 12 months in prison, respectively.  However, both sentences were stayed pending a three-year probationary period.  After a raid by the Japan Fair Trade Commission in 2011, NTN and the two executives were indicted for their alleged participation in the cartel in June 2012.  The company has filed an appeal with the Tokyo High Court.

Dutch Authority for Consumers and Markets Joins the Trend of Holding Investment Firms Liable for Infringement by Their Portfolio Companies

A decision by the Dutch Authority for Consumers and Markets (ACM) has put private equity firms across Europe on guard.  On December 30, 2014, the ACM held that the conduct of flour producer Meneba could be attributed to its investment firms due to their role as controlling shareholders.  The ACM fined two investment firms – CVC Capital Partners and Bencis Capital Partners BV – between €900,000 and €1.5 million ($1.07 million and $1.79 million) for the role their investment company played in a flour cartel that operated from 2001 to 2007.  Meneba was one of 14 flour producers in three countries that were collectively fined nearly €82 million in late 2010 for participating in a cartel to allocate the flour market in the Netherlands.  The Dutch regulator relied on the concept of the “undertaking” to establish the parent companies’ liability – it reiterated that the behavior of a company may be attributed to its parent company when the parent has controlling influence over the subsidiary, irrespective of the level of shareholding.  If a parent exerts decisive control over its subsidiary, the two entities form one economic unit and therefore a single “undertaking.”  The ACM’s action follows a growing trend across Europe to hold parent companies liable for competition concerns involving their subsidiaries.

ECJ Rules on Impact of Intra-Group Transfers on Liability for Infringement by Predecessor Companies

On December 18, 2014, the European Court of Justice (ECJ), the European Union’s highest court, overturned a decision by the General Court which had reduced the fine against Parker ITR Srl (owned by Parker Hannifin Corp.) by more than 75% – from €25.61 million ($31.32 million) to €6.4 million ($7.3 million) – for its involvement in the marine hose cartel.   The ECJ held that, as the marine hose business had been transferred to Parker ITR as part of an intra-group transfer, the General Court was wrong to exclude the possibility that Parker ITR might be held liable as the economic successor to the various transferor entities that had previously participated in the cartel.  The lower court had ruled that there was no economic continuity between Saiag SpA and its subsidiary ITR SpA and Parker-Hannifin Corp.  However, the ECJ criticized the lower court for failing to consider that ITR had first transferred its marine hose business to a subsidiary, in anticipation of a sale to third party Parker.  “The court has never indicated that those links must subsist until the adoption of the decision penalising the infringement,” the court wrote.  “Whilst there must, on that date, be structural links between the transferor and the transferee on the basis of which it may be considered … that the two entities form a single undertaking, those links need not, in view of the purpose of the principle of economic continuity, subsist throughout the rest of the infringement period or until the adoption of a decision penalising the infringement.”  The ECJ set aside the General Court’s judgment on the issue and remitted the case to the General Court for reconsideration.  For our previous coverage of the case, see our reports in Cartel Watch available here, here, and here.  Case C-434/13 P Parker ITR Srl and Parker-Hannifin Corp. v. Commission (European Court of Justice).