The detection, prosecution and deterrence of international cartel offenses are of the highest priority to the United States Department of Justice’s Antitrust Division. The Antitrust Division’s cooperation and coordination with foreign anti-cartel enforcement agencies, which currently spans five continents, strengthens the Division’s ability to investigate and prosecute international cartel activity. Coordinated execution of searches across multiple continents is now a regular occurrence. The risk of detection is increasing, safe havens from prosecution are diminishing and penalties imposed are rising.
The Antitrust Division’s international enforcement efforts resulted in a record year in 2007. The Division statistics show a record number of jail days imposed. The defendants prosecuted by the Antitrust Division in 2007 were sentenced to serve 31,391 jail days.1 That figure represents the highest total number of jail days imposed in the Antitrust Division’s history. It more than doubles the previous high of 13,157 jail days. Sixty percent of the defendants indicted were sentenced to jail time. In 2007, the number of jail sentences for foreign nationals hit a record high and included defendants from France, Germany, Japan, Korea, Norway, The Netherlands, Sweden, Switzerland and the United Kingdom. At the close of 2007, the Antitrust Division had 135 pending grand jury investigations, including over 50 investigations of suspected international cartel activity.2 This represents the most grand jury investigations since 1992. The Division also boasts its second highest year for total fines imposed. The Division obtained over $630 million in criminal fines in 2007.3
Courts are likely to impose even more substantial penalties in the future because many of the defendants sentenced in 2007 were sentenced under the old antitrust sentencing laws. The Antitrust Criminal Penalty Enhancement and Reform Act of 2004 significantly increased the maximum jail term for Sherman Act offenses from three to 10 years. The increased Sherman Act 10-year statutory maximum applies to cartel activity that began or continued on or after June 22, 2004. After the Antitrust Criminal Penalty Enhancement and Reform Act became law, the U.S. Sentencing Commission then promulgated revised Antitrust Guidelines to provide for the imposition of stiffer sentences in accordance with the new statutory maximum. The revised Antitrust Sentencing Guidelines generally apply only to conduct that began or continued on or after November 1, 2005.
The new law also increased the maximum Sherman Act corporate fine to $100 million and the maximum individual fine to $1 million. Fines in excess of the statutory maximum may be imposed pursuant to 18 U.S.C. 3571(d), which provides for a fine of up to twice the gross gain derived from the crime or twice the gross loss of the victims of the crime. The increase in fines is particularly important when the Division is investigating international cartels because the government may allege that massive volumes of commerce are affected by a charged price fixing scheme, thereby greatly increasing the amount of the fines that corporations will pay.
Perhaps the most prominent example of international cooperation in investigating cartels involves the air transport industry. On August 1, 2007, the Division charged British Airways with conspiring to fix international air cargo rates and international passenger fuel surcharges. British Airways pled guilty and was sentenced to pay $300 million in fines. Also on August 1, 2007, the United Kingdom’s Office of Fair Trading (“OFT”) announced that it would fine British Airways 121.5 million pounds (approximately $250 million) for collusion on the price of passenger fuel surcharges. This was the first time that the Division and OFT brought parallel prosecutions.
As a result of the same airline transport industry investigation, several other major airlines pled guilty to violations of the U.S. antitrust laws. In August 2007, Korean Air Lines pled guilty to conspiring to fix international air cargo rates as well as passenger fares for flights from the U.S. to Korea, and was sentenced to pay $300 million in fines. In January 2008, Qantas Airways Limited pled guilty to price fixing charges and was sentenced to pay $61 million, and in May 2008, Japan Airlines also pled guilty to price fixing charges and was sentenced to pay a $110 million fine. Then, in June 2008, Air France-KLM, Cathay Pacific Airways, Martinair Holland and Scandinavian Airlines Systems each agreed to plead guilty and were sentenced to pay criminal fines totaling $504 million for participating in a cartel fixing prices for air cargo rates. As part of the $504 million in fines, Air France-KLM was sentenced pay $350 million, which is the second highest fine ever imposed in a criminal antitrust cartel prosecution. The total fines imposed in the Antitrust Division’s investigation into the air transportation industry, which dates back to 2001, was more than $1.27 billion, marking one of the highest total amount of fines ever imposed in a criminal antitrust investigation. Not only did the corporations plead guilty, but also, on May 15, 2008, a former high-ranking Qantas executive employed in the United States pled guilty and agreed to serve eight months in jail and pay a criminal fine.
The Antitrust Division’s investigation of the marine hose industry is another recent example of cooperative international cartel investigations. On May 2, 2007, the Division arrested eight foreign executives from the United Kingdom, France, Italy and Japan in Houston and San Francisco. The foreign nationals had entered the United States to attend an industry trade show. On the same day that the arrests took place in the U.S., the U.K. and the European authorities searched locations in Europe. The Japan Fair Trade Commission later searched locations in Japan. The Division’s work with the United Kingdom’s OFT and the European Commission resulted in plea agreements with the three British nationals that allowed for the possibility of concurrent jail sentences in the United Kingdom and the United States. The British nationals pled guilty to fixing prices in the United States, and the three defendants agreed to serve record-breaking jail sentences of 30, 24 and 20 months. After these three defendants entered guilty pleas in U.S. District Court, the defendants were escorted to London to face charges for fixing prices in the United Kingdom. On June 11, 2008, the U.K. Crown Court sentenced two of the defendants to serve 36 months in jail each and the remaining defendant to serve 30 months in jail. The charges brought against the three British defendants are the first criminal cartel offenses charged under the U.K.’s Enterprise Act since it came into force in 2003.
With a global economy and cooperation among international enforcers at an all-time high, both U.S. corporations and corporations in other nations, regardless of their location, must rededicate themselves to vigorous antitrust compliance programs.