U.S. Criminal

Implications of the Change in Administration for Cartel Antitrust Enforcement

On January 20, 2017, President Trump took office as the 45th President of the United States. In the antitrust sector, many questions have arisen as to President Trump’s stance toward possible anticompetitive behavior, including criminal cartel enforcement. Both Democrats and Republicans historically have taken a hard line against bid rigging and price fixing; no noticeable changes in cartel prosecution trends have occurred since the mid-1990s when the Antitrust Division of the Department of Justice (“DOJ”) implemented its corporate leniency program, marking the modern era of enforcement. Accordingly, we do not expect that the change in administration is likely to result in significant changes in the substance or manner of cartel enforcement in the United States.

New Indictments of Capacitor Company Executives Brings Total to Nine

On December 15, 2016, a California federal grand jury indicted three executives from two different Japanese capacitor companies for alleged price fixing of circuit board components called electrolytic capacitors, which are found in various electronic items. The names of the companies have not yet been released.1 According to the DOJ, the anticompetitive activity occurred from 1997 to 2014, during which time the price-fixed parts were sold to U.S. consumers.2

The recent indictments bring the total number of individual indictments to nine; six executives from four different Japanese companies were indicted in November for conduct related to the same conspiracy.3 In addition to the individual indictments, the DOJ has charged five companies in connection with the capacitor conspiracy: NEC Tokin, Hitichai Chemical Co., Rubycon Corp., Elna Co., and Holy Stone Holdings Co. Ltd.

With respect to fines, NEC Tokin agreed to pay $13.8 million in September 2015, and Hitichai Chemical Co. agreed to a $3.8 million fine in April 2016. Furthermore, Rubycon Corp., Elna Co., and Holy Stone Holdings Co. Ltd. pled guilty in August 2016. While the parties agreed that, under the Sentencing Guidelines, the appropriate fine should be $30.7 million, the court subsequently reduced the fine to $12 million upon the government’s motion for a downward departure, given the company’s substantial cooperation with the DOJ’s investigation, and consideration into Rubycon’s inability to pay.4

DOJ Indicts Two Executives in Generic Drug Price Fixing Investigation

On December 14, 2016, the DOJ charged two former executives of Heritage Pharmaceuticals Inc. (“Heritage”) with conspiring to fix prices of an antibiotic and a diabetes treatment. The indictments, unsealed in federal court in Pennsylvania, allege that the executives rigged bids and allocated customers in connection with two price-fixing conspiracies that ran until December 2015 or later. The DOJ, who has not named the company for whom the pair worked, alleges that the conspiracy to fix the price of the antibiotic, doxycycline hyclate, began as early as April 2013, and the conspiracy to fix the price of glyburide, a drug used to treat Type 2 diabetes, began in April 2014.5 On January 9, 2017, Heritage’s former CEO Jeffrey Glazer and former president Jason Malek pled guilty to participating in the price-fixing scheme.6

In addition to the criminal indictments of the former Heritage executives, twenty states – led by Connecticut and including New York, Delaware, Florida, Pennsylvania, and Massachusetts – have filed a civil lawsuit against Heritage and five other generic drug manufacturers in federal court in Connecticut, alleging collusion in connection with the same two drugs. The defendants in that case are: Heritage; Mylan Pharmaceuticals Inc.; Teva Pharmaceuticals USA Inc.; Aurobindo Pharma USA Inc.; Citron Pharma LLC; and Mayne Pharma (USA) Inc. The complaint alleges that Heritage orchestrated the big rigging and market allocation agreements among the defendants.7

U.S. Civil

Second Circuit Dismisses In re Vitamin C and Upholds International Comity Doctrine

In the In re Vitamin C Antitrust Litigation8 decision, the Second Circuit reversed a $147.8 million jury verdict against two Chinese vitamin C manufacturers. Deferring to international comity, the appeals court held that the U.S. courts lacked jurisdiction to hear the case.9

This long-running litigation involves various U.S. vitamin C purchasers against Chinese vitamin C manufacturers Hebei Welcome Pharmaceutical Co. and North China Pharmaceutical Group Corp. Defendants argued that they had acted in accordance with Chinese vitamin C export pricing regulations; thus, they should not be held liable for any anticompetitive effects in the United States.10 The Chinese government filed an amicus curiae brief to support the defendants’ argument, claiming that it had indeed implemented the vitamin C regulations.11 The district court rejected this argument.12

The Second Circuit found that a “true conflict” existed between U.S. and foreign law because the Chinese government provided a reasonable interpretation of its law.13 Because the Chinese government actively participated in the conduct that was the subject of the litigation, the court concluded that U.S. courts lacked jurisdiction to hear the case.14

Auto Parts Litigation Update

On November 28, 2016, United States District Judge Marianne O. Battani of the Eastern District of Michigan gave final approval to $125 million in class action settlements between automobile dealership plaintiffs and ten defendants accused in a multidistrict litigation (“MDL”) of conspiring to rig the prices of automobile parts. The settlements involve twenty-six component parts that the auto-dealer plaintiffs contend were the subject of coordination, bid-rigging, and price-fixing. The settling defendants are: Sumitomo Electric Industries, Ltd. et al. (“Sumitomo); DENSO Corporation et al. (“DENSO”); NSK Ltd. et al. (“NSK”); LEONI Wiring Systems, Inc. and Leonische Holding Inc. (“LEONI”); Omron Automotive Electronics Co. Ltd. (“Omron”); Furukawa Electric Co., Ltd. and American Furukawa, Inc. (“Furukawa”); Schaeffler Group USA Inc. (“Schaeffler”); Mitsubishi Electric Corporation et al. (“MELCO”); Sumitomo Riko Co. Ltd, et al. (“Sumitomo Riko); and Valeo Japan Co., Ltd. (“Valeo”).

The largest aggregate settlement was in the wire harness systems automotive parts case, where defendants MELCO, Sumitomo, DENSO, LEONI, and Furukawa agreed to settlement amounts totaling $30.8 million. MELCO and DENSO defendants also agreed to settlement amounts totaling $21.3 million in the alternators case. Other automotive parts named in the final settlement approval order include ignition coils, air conditioning systems, starters, fuel injection systems, heater control panels, radiators, and anti-vibration rubber parts. In addition to approving the settlement amounts, the court also granted certification, for settlement purposes only, of the settlement classes set forth in the preliminary approval orders of the settlements and their respective settlement agreements.15

Cartel Fine Tracker – Q3 2016 through Present (July 21, 2016, through December 31, 2016)

Jurisdiction Fines Imposed
U.S. Department of Justice $47.4 million
European Commission €651 million
JFTC ¥0