The Department of Justice is on pace for a record-setting year after obtaining more than $810 million from criminal antitrust offenders during the first nine months of FY 2012. This total consists of an estimated $590 million in criminal fines and nearly $220 million in restitution, penalties, and disgorgement paid to state and federal agencies. The amount of criminal fines already exceeds the $523 million collected during FY 2011 and reflects the Department of Justice, Antitrust Division's ("DOJ" or "Antitrust Division") growing success in targeting hard-core, international cartels. Because the summer season historically has been the most active period of the year for the Antitrust Division, FY 2012 is shaping up to be one for the record books.
Monetary measures are not the only benchmark of DOJ's success in FY 2012. The Antitrust Division is securing significantly longer prison sentences than it did in FY 2011, with the average sentence increasing 65% to 28 months. The Division is also on track to secure prison sentences against more defendants than the 21 individuals sentenced during FY 2011. To date, 16 defendants have received prison sentences and many more await sentencing in the coming months. Additionally, as of the end of June, the total prison time imposed on defendants stands at 13,201 days, which already surpasses the FY 2011 total by more than 25%. We explore below the reasons for DOJ's success in securing lengthy prison sentences and discuss many of the cases in which defendants await sentencing.
The Antitrust Division also has prevailed in a series of high-profile jury trials. As we discussed in a prior Criminal Antitrust Update, the Division has had mixed success securing jury verdicts in recent years. That trend appears to be changing with DOJ's victories in three jury trials so far in FY 2012. Most importantly, the Division prevailed in its high-stakes, eight-week trial against AU Optronics, its U.S. subsidiary, and two of their executives (albeit not all five of their charged executives). This case was widely viewed as an essential test of DOJ's ability to obtain convictions against members of international cartels. The Division also secured convictions in a jury trial against three former General Electric Company executives for their roles in a bid-rigging scheme within the municipal bond market. In a third victory, DOJ convicted four individuals and three corporations for participating in a multi-million dollar kickback scheme involving the New York Presbyterian Hospital. We explore the AU Optronics and municipal bond trials in more detail below.
The European Commission ("EC") is experiencing a slower start than the Antitrust Division. The EC has levied fines totaling €268 million that, on an annualized basis, would represent a further decline from 2011's already significantly reduced totals. We believe the EC's lower fine assessments reflect its allocation of resources to large, multi-jurisdiction cartel cases, rather than a slower pace of enforcement. Additionally, the EC has a history of announcing blockbuster cases late in the year, such as the November 2008 €1.3 billion in fines against the auto glass makers and the December 2010 €648 million in fines against the LCD panel companies. Moreover, just this past June, Joaquín Almunia, Vice President of the European Commission for Competition Policy, predicted a year-over-year increase in 2012.
As a result, we believe there is a significant likelihood that the EC's year-end statistics will evidence a dramatic reversal of fortune. We explore the EC's slower year-to-date pace later in this Update, along with summaries of the investigations and policy changes undertaken by other international competition authorities.
Despite the slower first half of the year in Europe, enforcement in other parts of the world is growing. In India, the Competition Commission of India imposed staggering fines totaling Rs 6,307 crore ($1.1 billion) on 11 cement manufacturers and the Cement Manufacturers' Association ("CMA"). In Pakistan, the Competition Commission granted immunity to its first leniency applicant. In Japan and South Korea, authorities have continued their aggressive enforcement activities with investigations into the auto parts industry and the airlines industry, respectively. We discuss the global expansion of enforcement activities below.
1) Overview of U.S. Enforcement Trends in 2012
a) Criminal Fines & Other Monetary Assessments
The Antitrust Division has already secured payments totaling more than $810 million stemming from its criminal investigations in FY 2012. We believe that two considerations will propel this total beyond DOJ's all-time record by the end of FY 2012. First, the Division has active investigations into price fixing in several industries, which are beginning to yield enormous fines. In particular, DOJ has identified its investigations in the auto parts industry as the largest in its history and we expect that additional settlements will be forthcoming. Second, the summer months from June to September are traditionally DOJ's busiest of the year. Our analysis of past data shows that the criminal fines imposed by the Antitrust Division in just the final week of September during FY 2010 and FY 2011 constituted 40% and 51%, respectively, of the total criminal fines collected during the entire fiscal year.
As discussed at length in the 2011 Year-End Criminal Antitrust Update, we intend to continue assessing the Antitrust Division's performance by considering all of its available monetary sanctions, including criminal fines, restitution, disgorgement, and penalties. As DOJ embraces new prosecutorial tools, such as non-prosecution agreements and multi-agency investigations, we believe this combined metric offers a more accurate gauge of the Division's achievements.
The $590 million in criminal fines obtained or agreed upon by the Antitrust Division to date in FY 2012 already exceeds the total amount collected in FY 2011 by nearly $70 million.
The nearly $220 million in monetary assessments secured from offenders for restitution, disgorgement, and various penalties so far in FY 2012 is already the second highest figure in the Division's history--driven by settlements in the municipal bond bid-rigging cartel cases discussed below.
i) Criminal Fines
Ninety-five percent of the Antitrust Division's criminal fines in FY 2012 have resulted from five corporate plea agreements stemming from DOJ's investigations into price fixing of various auto parts, as segments of its broader set of investigations in the auto parts industry.
Criminal Fines of More than $1 Million for Sherman Act Violations
Imposed or Agreed to During FY 2012 (October 2011–June 2012)
Automotive Wire Harnesses
Automotive Electric and Heater Control Units
Automotive Wire Harnesses
Automotive Safety Devices
Sea Star Line LLC
Puerto Rico Coastal Water Freight Transportation
Danfoss Flensburg GmbH (formerly Danfoss Compressors GmbH)
G.S. Electech Inc.
Automotive Speed Sensor Wire Assemblies
ii) Other Monetary Assessments (Restitution, Disgorgement, and Penalties)
The monetary assessments resulting from the Antitrust Division's investigations so far in FY 2012 have stemmed almost entirely from its investigation into bid rigging within the municipal bond industry.
Other Monetary Assessments of More than $1 Million from
Antitrust Division Investigations During FY 2012 (October 2011–June 2012)
Total Monetary Assessments
Wells Fargo Bank
GE Funding Capital Market Services Inc.
b) Prison Sentences
There has been a sharp uptick in the average length of incarceration and the total length of prison sentences resulting from Antitrust Division investigations in FY 2012, as compared to those observed in FY 2011. Most notably, DOJ's average prison sentence so far in FY 2012 is 28 months, an increase of more than 65% from FY 2011. If the Division maintains this average, it will represent the third highest in its history.
The aggregate prison time to date for all individuals sentenced in antitrust cases is already more than 25% higher than FY 2011.
We expect that the Division will secure prison sentences for more defendants than it did in FY 2011. As noted, 16 defendants have received prison sentences to date and our analysis of pending plea agreements and trial verdicts suggests several more will be forthcoming.
2) International Cooperation
a) Bilateral and Multilateral Relationships
The Antitrust Division continues to collaborate closely with international enforcement authorities. Over the past year, this cooperation has manifested itself in a diverse range of activities, from hosting a speech at DOJ headquarters by Joaquín Almunia, Vice President of the European Commission for Competition Policy, to participating in training sessions and panel discussions with enforcement agencies from China, India, Mexico, Romania, Russia, and South Africa.
The Antitrust Division and the Indian competition authorities (the Ministry of Corporate Affairs and Competition Commission of India) have become more closely aligned in recent years, but they have yet to conclude an anticipated memorandum of understanding discussed in our prior Update. It is, however, due to be completed sometime later this year. The Antitrust Division is also currently involved in negotiating the Trans-Pacific Partnership Free Trade Agreement, which will strengthen antitrust cooperation among several nations, including Australia, New Zealand, Singapore, and Chile.
b) International Organizations
Global cooperation and investigations remain a strategic priority for DOJ. Senior officials from the Antitrust Division are involved in a number of international organizations designed to facilitate cooperation and deepen relationships among international competition authorities, including the Organization for Economic Cooperation and Development (OECD) and the International Competition Network (ICN).
The Antitrust Division remains active in the ICN, an organization it helped create in October 2001. In April 2012, the Division became a co-chair of the ICN's Cartel Working Group, a position it shares with counterparts in Germany and Japan. Senior leadership from the Division also participated in the ICN's 11th Annual Conference from April 18–20, 2012 in Rio de Janeiro. Among other contributions, Deputy Assistant Attorney General Scott D. Hammond led a panel discussion of the challenges regulators face in bid-rigging enforcement. The gathering drew 450 delegates from 123 regulators in 108 jurisdictions. DOJ, alongside its Turkish counterpart, is also leading a strategic review of the ICN's future enforcement goals, which is intended to identify ways to further enhance international enforcement cooperation. On March 27, 2012, the Antitrust Division and the FTC hosted a roundtable with the ICN's Agency Effectiveness Working Group focusing on effective enforcement and the quality of agency decision making.
At the most recent OECD meeting in February 2012, the Antitrust Division continued to chair Working Party 3 (Enforcement and Cooperation), which conducted working groups on transparency and procedural fairness relating to competition laws and the procedures and practices of competition authorities.
3) Developments in the Antitrust Division
a) New Leadership at the Antitrust Division
President Obama nominated William J. Baer on February 6, 2012 to serve as the next Assistant Attorney General ("AAG") for the Antitrust Division. The Senate has not yet held a confirmation hearing for Baer and his nomination is at risk of a loss of momentum in the midst of an election year. Joseph Wayland, the Deputy AAG for Civil Enforcement, has been serving as the Acting Assistant Attorney General since April 5, 2012.
b) Field Office Closures
As discussed in the 2011 Year-End Criminal Antitrust Update, DOJ continues to advance a plan to close the Antitrust Division's field offices in Cleveland, Dallas, Atlanta, and Philadelphia. If the plan is implemented, the four offices will close later this year after Congress approves the 2013 federal budget. The consolidation will displace 47 attorneys, although DOJ has said all of them will be offered positions at other Division offices or nearby U.S. Attorney's offices.
4) Developments in International Cartel Investigations
a) Auto Parts
The wide-ranging investigation into cartel activity in the auto parts industry is a major focus of the Antitrust Division's enforcement efforts in 2012 and accounts for 95% of the criminal fines collected so far this fiscal year. In an April 2012 speech, former Assistant Attorney General Sharis Pozen described the Division's efforts in the auto parts industry as the "largest criminal investigation the division has ever pursued." As discussed in the 2011 Year-End Criminal Antitrust Update, several competition authorities, including DOJ, the EC, and the Japan Fair Trade Commission ("JFTC"), are investigating collusion among auto parts suppliers in various segments of the industry for sales to certain auto manufacturers. During 2011, the Antitrust Division obtained the first guilty pleas from companies and individuals in the automotive wire harness and aftermarket auto lights sectors. The investigation has grown significantly in 2012 and now, by some accounts, involves dozens of additional auto parts.
On January 30, 2012, DOJ announced that Yazaki Corporation and DENSO Corporation, along with four of Yazaki's executives, agreed to plead guilty to Sherman Act violations. Yazaki admitted to engaging in price fixing and bid rigging for automotive wire harnesses, dashboard instrument panels, and fuel tank sensors. In a separate plea agreement, DENSO admitted to similar conduct involving electronic control units and heater control panels--electrical components commonly found in today's new cars.
Under the terms of its guilty plea, Yazaki agreed to pay $470 million in criminal fines--the second-largest fine in the Antitrust Division's history. DENSO agreed to pay its own $78 million criminal fine. Initially, four Yazaki executives also agreed to prison sentences, with two agreeing to serve 15-month and two agreeing to serve 24-month sentences. A fifth Yazaki executive pleaded guilty on June 6, 2012, and agreed to serve a 14-month prison term. The 24-month sentences agreed to by two of the Yazaki executives are the longest ever voluntarily secured by the Antitrust Division from foreign national defendants. On March 26, 2012, a DENSO executive, Norihiro Imai, also pleaded guilty and agreed to serve a 12-month prison sentence. A second DENSO executive, Makoto Hattori, followed on April 26, 2012, and pleaded guilty with an agreement to serve 14 months in a U.S. prison.
DOJ ensnared another participant in the automotive wire harnesses investigation on April 23, 2012, when Fujikura Ltd. agreed to plead guilty and pay a $20 million criminal fine for its price-fixing and bid-rigging conduct.
On February 24, 2012, the Antitrust Division announced a guilty plea by Shiu-Min Hsu, the former Chairman of Depo Auto Parts Industrial Co. Ltd. Hsu admitted to participating in a price-fixing scheme involving aftermarket auto lights, a product segment that saw several guilty pleas during 2011. Under the terms of Hsu's plea agreement, DOJ is recommending a 285-day prison sentence.
The Antitrust Division uncovered collusion in several other auto parts segments as well. The first expansion occurred with the April 3, 2012 agreement to plead guilty by G.S. Electech for price fixing and bid rigging with respect to speed sensor wire assemblies used in anti-lock braking systems. G.S. Electech agreed to pay a comparatively small $2.75 million criminal fine. The Division exposed an additional product segment when it announced a plea agreement with Autoliv Inc. on June 6, 2012. Autoliv agreed to pay a $14.5 million criminal fine for its participation in price fixing for seatbelts, air bags, and steering wheels.
DOJ continues to move forward with prosecutions of those who do not cooperate in its investigations in the auto parts industry as well. In its aftermarket auto lights investigation, for example, Eagle Eyes Traffic Industrial Co., along with its subsidiary and two executives, have been indicted for their alleged roles in price fixing of aftermarket auto lights. The case against all four defendants is currently engaged in pre-trial motions and is slated for trial in San Francisco on September 24, 2012. As noted in the 2011 Year-End Criminal Antitrust Update, DOJ apprehended Eagle Eyes's Vice-Chairman in dramatic fashion during a layover at Los Angeles International Airport in July 2011.
In total, the auto parts investigation has amassed staggering results in the prior 18 months. To date, the Antitrust Division has charged ten corporations and fifteen of their executives. Eight of these corporations have already pleaded guilty and agreed to pay fines totaling more than $828 million; thirteen of their executives have entered into plea agreements requiring prison sentences, which cumulatively impose more than 5700 days of incarceration.
International antitrust enforcers also participated in the auto parts investigation. In January 2012, the Japan Fair Trade Commission ("JFTC") assessed fines against Yazaki Corp., Sumitomo Electric Industries Ltd., and Fujikura Ltd. totaling nearly ¥13.5 billion ($170 million) for participating in a bid-rigging conspiracy in the sales of automotive wire harnesses. The JFTC also issued cease-and-desist orders against Yazaki and Fujikura requiring board resolutions that affirmatively terminate the improper conduct and the implementation of training and compliance programs. The JFTC ordered the three companies to pay the surcharge penalties by April 20, 2012.
Additionally, media reports in March 2012 indicated that the JFTC searched the offices of four automotive lighting manufacturers, Koito Manufacturing Co., Stanley Electric Co., Ichikoh Industries Ltd., and Mitsuba Corp., in response to allegations that they engaged in price fixing and bid rigging at auctions for auto lighting products.
b) Thin Film Transistor-Liquid Crystal Displays ("TFT-LCD")
The Antitrust Division achieved a significant victory in its highly anticipated jury trial against AU Optronics, its U.S. subsidiary, and some of their executives for their roles in collusion as to large-sized TFT-LCDs. As we reported in the 2011 Year-End Criminal Antitrust Update, AU Optronics and its U.S. subsidiary chose to go to trial despite guilty pleas or leniency agreements negotiated by all of the other participants in the secret monthly "Crystal Meetings" between members of the TFT-LCD industry. The stakes were high for the Division because AU Optronics and its subsidiary were the first defendants in an international cartel case to seek a jury trial in more than a decade.
Following an eight-week trial, the jury convicted both companies and found that the gains from the price-fixing conspiracy exceeded $500 million. The resulting fine could be up to $1 billion. The judge's decision to apply the Apprendi doctrine and submit to the jury the finding of the gross gain from the offense appears to have been vindicated in light of the Supreme Court's recent opinion in Southern Union Co. v. United States. The jury also convicted Hsuan Bin Chen, AU Optronics' former president and current vice-chairman, and Hui Hsiung, a former executive vice-president. On June 5, 2012, the District Court denied the defendants' motion for a new trial. Sentencing is scheduled for September 14, 2012. The convicted defendants have already publicly expressed their intent to appeal. Following the guilty verdicts, Deputy Assistant Attorney General Scott Hammond predicted that the AU Optronics trial will "have a deterrent effect on international cartels" because "'any future company will have to consider AU's fate.'"
The trial was not a complete victory for DOJ, though, and may encourage the Division to exercise more caution in pursuing criminal charges against less senior employees. The jury acquitted two additional AU Optronics' executives, Lai-Juh Chen, former director of the Desktop Display Business Group, and Tsannrong Lee, a former senior manager of the Notebooks Business Group. In a media interview after the trial, one juror said the acquittal was based on the view that these employees had "less culpability" than their superiors. The court also declared a mistrial with respect to a fifth executive, Shiu Lung Leung, after the jury deadlocked 8-4 in favor of conviction. One juror said that the government failed to provide enough evidence that Leung "willingly participated in the conspiracy" and the jury felt he was "being directed by his managers." DOJ has informed the Court of its intention to seek a retrial against Leung, with a new trial scheduled to begin on October 9, 2012.
Since beginning its TFT-LCD investigation in late 2006, DOJ has charged 22 executives and 8 companies with participating in collusion in that industry. This has resulted in cumulative fines totaling more than $890 million to date--an amount that will undoubtedly increase after AU Optronics' sentencing. Additionally, the Division has secured plea agreements from, or convictions of, 12 executives, with all receiving or agreeing to prison sentences ranging from 6 to 14 months.
c) Municipal Bonds
DOJ appears to have concluded the investigation phase of the municipal bond matter and has focused its effort during 2012 on bringing the indicted cases to completion. In the 2011 Year-End Criminal Antitrust Update, we discussed the Division's uncharacteristic use of non-prosecution agreements ("NPAs") with three major financial institutions in which they admitted to participating in the municipal bond conspiracy and agreed to pay restitution, disgorgement, and penalties totaling more than $500 million to various federal and state agencies. The Division announced two more NPAs in December 2011, which yielded an additional $218 million in monetary assessments. On December 8, 2011, Wells Fargo Bank entered a non-prosecution agreement and agreed to pay $148 million in restitution, disgorgement, and penalties for Wachovia Bank's role in the municipal bonds bid-rigging cartel. Just two weeks later, on December 23, 2011, GE Funding Capital Market Services Inc. entered into its own NPA relating to the municipal bond cartel and agreed to pay $70 million. This rare use of NPAs is discussed in more detail in the Gibson Dunn 2011 Year-End Update on Corporate Deferred Prosecution and Non-Prosecution Agreements.
The Antitrust Division scored another important trial victory on May 11, 2012, against three former General Electric executives who were accused of manipulating bids for municipal bonds. All three individuals chose to seek a jury trial although their employer entered into a Non-Prosecution Agreement with DOJ in December 2011. After a three-week trial, a jury in the Southern District of New York returned guilty verdicts against Dominick Carollo, Steven Goldberg, and Peter Grimm. Three additional defendants are slated for trial on similar charges in July 2012, but it remains unclear if the recent convictions will alter their strategy.
Rubin/Chambers, Dunhill Insurance Services (also known as CDR Financial Products) was the first and only entity charged in the municipal bond investigation when it was indicted in October 2009. Public entities hired CDR Financial Products to assist in the issuance of municipal bonds and DOJ alleged that it conspired with several financial institutions to rig the competitive bidding process for those financial instruments. On December 30, 2011, CDR Financial Products and its founder, David Rubin, agreed to plead guilty shortly before trial. After a jury was impaneled for the trial of the remaining two CDR Financial executives, Zevi Wolmark and Evan Zarefsky, both chose to plead guilty on January 6, 2012. DOJ has sought to delay sentencing of the defendants in this case until later this year due to the complexity of calculating restitution.
Since the onset of the municipal bonds investigation, DOJ has filed criminal charges against one corporation and 18 former executives of financial services companies; the corporation and 15 of the 18 executives pleaded guilty or were convicted by June 2012.
d) Air Cargo
DOJ continued to prosecute the few remaining open cases from its air cargo investigation. The investigation has secured more than $1.8 billion in criminal fines--the largest amount for a single investigation in DOJ history--along with charges against 22 airlines and 21 individuals, six of whom received prison sentences.
In the 2011 Year-End Update, we discussed the numerous twists and turns in the case against Florida Air and its executive, Rodrigo Hidalgo. In an unusual factual scenario, Hidalgo successfully argued that he was, in part, employed by a company that received amnesty from DOJ for itself and its employees. Because of that decision, the Division dismissed the final charges against Hidalgo in February 2012.
Florida West International Airways advanced a similar vicarious amnesty argument, but did not secure the dismissal of its indictment after failing to show that the amnesty agreement in question applied to non-majority-owned subsidiaries. Following that decision, the small, two-plane airline submitted a motion seeking to enter a nolo contendere plea because it could "no longer afford to mount a defense" due to alleged efforts by the government "to wear Florida West down financially." The Antitrust Division has argued strenuously against such a plea by asserting that it would be "highly inequitable" to the other 21 airlines that pleaded guilty and would "undermine the enforcement objectives of the Antitrust Division's Corporate Leniency Program that encourage self-reporting." District Judge Robert Scola will hold a hearing on July 23, 2012, to decide the motion, but has previously indicated that he is inclined to allow it.
5) Developments in Domestic Cartel Investigations
a) Real Estate Auctions
The Antitrust Division continues to pursue aggressively collusive conduct in auctions for real estate foreclosures and municipal tax liens. DOJ alleges that participants in the foreclosure auctions engaged in collusive conduct, such as by coordinating their bids to ensure a below-market price for the winning bidder, who subsequently sold it at market rate and divided the proceeds with the other conspirators. During 2012, real estate foreclosure investigations resulted in charges against 14 defendants for engaging in bid-rigging in Northern California, the San Joaquin area in Central California, and Alabama; to date, more than 40 individuals and companies have pleaded guilty. DOJ alleges that the municipal tax lien auctions involved straightforward agreements not to bid against other conspirators to ensure everyone enjoyed a higher rate of return. The tax lien investigation resulted in charges against four individuals during the first half of 2012.
b) Ready-Mix Concrete
The Antitrust Division wrapped up the prosecution and sentencing of the participants involved in a conspiracy to fix prices and rig bids for ready-mix concrete in northwest Iowa. As we reported in our 2011 Year-End Criminal Antitrust Update, Judge Mark Bennett in the District Court for the Northern District of Iowa gave notice of his inclination to reject the original "C" plea agreement for Steven VandeBrake, the owner of a ready-mix concrete company, which recommended a 19-month sentence and a $100,000 criminal fine. VandeBrake chose to convert voluntarily to a non-binding "B" plea agreement, which bound VandeBrake to plead guilty but did not bind the court to accept the recommended sentence. Judge Bennett then rejected the recommended sentence in a 108-page memorandum that imposed a 48-month prison term and criminal fine of $829,715.
VandeBrake appealed his sentence to the Eight Circuit, which issued a split decision on April 27, 2012 affirming VandeBrake's sentence. The majority opinion held that Judge Bennett's sentence was reasonable because it relied on "case-specific circumstances" and gave "cogent reasons" for his policy disagreement with the Sentencing Guideline's recommendations for antitrust violations. Chief Judge Riley also issued a short concurring opinion in which he distanced himself from Judge Bennett's "inappropriate" comments in the sentencing memorandum, which appear to take into account the defendant's wealth, race, heritage, and religion. The dissenting opinion argued that the majority applied the incorrect standard of review and that the district court made procedural errors, which required vacating the sentence. Interestingly, the dissent also noted that VandeBrake was the only antitrust defendant in the preceding 15 years to receive a prison term above the Sentencing Guidelines.
6) European Union Developments
The first half of 2012 was marked by the EC's action against six separate cartels, four of which related to the freight forwarding industry, and the EC's imposition of significant penalties on cartel participants. In the first half of the year, the Commission levied more than €268 million ($333.4 million) in fines. This sum does not, however, reflect previously-annulled penalties against Mitsubishi Electric Corporation and Toshiba Corporation that the EC re-imposed in June.
Although the level of fines represents a slowed pace from previous years, Vice President Almunia, the Commissioner responsible for competition policy, issued a strong warning in a speech this past June: "We are working on a number of major cases and our output will likely be higher this year. . . . In other words, you should not expect a more lenient enforcement in the future. I want to be extremely clear on this point. Our fight against cartels has not been and should not be affected by the crisis. Cartels can do more harm to the economy and to consumer welfare in difficult times than in periods of economic expansion; so our level of vigilance, if anything, should be even greater."
Vice President Almunia's comments echoed a theme made in a March speech by the EC's Director General for Competition, Alexander Italianer, who stated: "Precisely because cartels are so harmful by their very nature and through their mere existence, we stand firmly on our position and fine them accordingly." The Director explained that, under the EC's view, "fines should be punitive, because the offender should pay for his illegal behavior. They should also strongly deter the infringer from ever repeating the infringement. Through a fine, potential other offenders should also receive a clear message which is 'do not even think about doing that' . . . ."
b) Amended Fine Levels
The first half of 2012 was also marked by two significant alterations to previously imposed European Commission fines.
In June, the EC re-imposed fines totaling more than €131 million ($165 million) on Mitsubishi Electric and Toshiba for their participation in a cartel on the market for gas insulated switchgears ("GIS"). The European General Court had annulled the original decision fining the two companies due to a breach of the principle of equal treatment in the calculation of their fines. Nevertheless, the General Court upheld the EC's findings that Mitsubishi Electric and Toshiba violated the EU's prohibition on cartel activity. In 2007, the EC fined 20 companies more than €750 million ($946 million) for participating in the GIS cartel. In setting the level of the original fines, the EC used sales figures for a different reference year for Toshiba and Mitsubishi Electric than for the other members of the cartel because they participated in the cartel via a joint venture during its final two years. The newly-imposed penalties are €74.8 million ($94 million) on Mitsubishi Electric and €56.8 million ($71.6 million) on Toshiba.
The EC also reduced a fine imposed on Uralita SA after the General Court concluded that the Commission lacked evidence to support its claim that the Spanish company participated in a bleach cartel for the three-year term it had alleged. In 2008, the EC levied €79 million ($99.6 million) in fines against four groups of companies accused of fixing prices and allocating sales volumes for sodium chlorate, a bleaching agent used primarily for bleaching in the pulp and paper industry. The Commission initially fined Uralita €9.9 million ($12.5 million), an amount which the General Court subsequently set aside. In March, the EC announced the imposition of a reduced fine of €4.2 million ($5.3 million) against Uralita.
c) Major Enforcement Efforts
During the first half of 2012, the EC continued to impose significant penalties on individual companies for cartel behavior. An overview of those investigations follows below.
i) Window Manufacturers
In March, the EC fined nine window manufacturers a total of €86 million ($115 million) for engaging in a cartel to fix price increases for window mountings. The cartel behavior lasted for seven years and affected buyers across all Member States of the EU and the European Economic Area ("EEA"). Participants included Roto, Gretsch-Unitas, Siegenia, Winkhaus, Hautau, Fuhr, Strenger, Maco, and AGB. Of those, Roto received full immunity, because it was the first member to reveal the existence of the cartel. The EC reduced fines against Gretsch-Unitas and Maco, largely due to their cooperation during the investigation.
ii) Freight Forwarders
In March, the EC also imposed a €169 million ($225 million) fine on 14 freight-forwarding companies for participating in four distinct cartels designed to fix prices and other conditions for air freight-forwarding services. In the "new export cartel," participants used a code system to disguise their cartel communications. Participants in the cartel were members of a "Gardening Club" and disguised discussions of price fixing by referring to specific vegetables, such as asparagus, when actually discussing price fixing. The "currency adjustment factor" cartel used a specific Yahoo email account to coordinate communications between participants.
Deutsche Post's DHL and Excel subsidiaries received full immunity from prosecution and fines for reporting the cartel activity. The EC fined the other participants for their involvement in each cartel. The "New Export System" cartel and the "Advanced Manifest System" cartel took advantage of new regulations in the United States and United Kingdom requiring additional reporting for international imports to charge extra fees to "process" the new forms. The other two cartels, the "peak season surcharge" cartel and the "currency adjustment factor" cartel concerned imports of goods from China and Hong Kong to Europe. The largest fines were imposed against Kuehne + Nagel Management AG and Kuehne + Nagel International AG, at €53.7 million ($71 million), Panalpina Management AG and Panalpina International AG at €46.5 million ($62 million), and Schenker AG at €35 million ($43.2 million). Several companies, including Kuehne + Nagel and Panalpina, previously pleaded guilty to criminal antitrust charges filed by DOJ in September 2010.
iii) Water Management Products
In June, the EC imposed penalties on producers of water management products used in heating, cooling, and sanitation stations, for engaging in cartel behavior. For almost two years, three companies coordinated the prices for these products in Germany. In addition, for three months, Reflex and TA Hydronics Switzerland AG (Pneumatex) coordinated their prices in 13 other EU Member States. Members exchanged information regarding the amount and date of price increases, along with other sensitive market information, through bilateral contacts. Pneumatex received full immunity for being the first to provide information about the cartel to the Commission. The EC fined Reflex and Flamco €9.79 million ($12.3 million) and €3.87 million ($4.9 million), respectively. These fines reflected a 10 percent reduction, because the two companies acknowledged their participation in the cartel and their liability for wrongdoing.
d) Cases Challenging Fines
During the first half of 2012, several companies also appealed to the General Court and challenged significant EC-imposed fines. The General Court refused to reduce or otherwise adjust the fines in all three cases.
Imperial Chemical Industries Ltd. ("ICI") tried to obtain a reduction in its €91.4 million ($114 million) fine, pointing to cooperation with an EC investigation that led to a collective €344.5 million ($434 million) in fines against several companies. The EC imposed fines on ICI and four other chemical companies allegedly involved in an acrylic glass cartel following an investigation that began in 2002. The EC found that the companies had fixed prices on acrylic glass, or polymethyl-methacrylate, over a five-year period, starting in 1997. Ultimately, the General Court rejected ICI's argument and concluded that the evidence that ICI voluntarily provided to the EC did not provide "significant added value," as it merely corroborated a statement to which the Commission already had access. The General Court also dismissed ICI's argument that the Commission failed to establish sufficient evidence linking ICI to the alleged price-fixing scheme.
Coats Holding Plc., YKK Corp., and Berning & Söhne GmbH & Co. KG also lost challenges to their EC-imposed fines. In 2007, the EC imposed fines of €150 million ($187 million) against YKK, €122 million ($154 million) against Coats, and €1.1 million ($1.4 million) against Berning & Söhne for their participation in various cartels relating to zip fasteners. In upholding the Commission's fines against Coats, the General Court noted that in most cases, "the existence of an anti-competitive practice or agreement must be inferred from a number of coincidences and indicia, which, taken together, may, in the absence of another plausible explanation, constitute evidence of an infringement of the competition rules." All together, the General Court rejected Coats's arguments that the Commission had failed to prove sufficiently a violation of European antitrust laws and had incorrectly applied guidelines on the method of setting fines. The General Court similarly upheld the penalties imposed against YKK and Berning & Söhne.
Finally, it is worth noting that on June 4, the Italian firm Eni SpA filed an appeal with the General Court in an attempt to avoid the re-opening of a cartel investigation into the rubber market. The cartel investigation had concluded in 2006 with a fine of €272 million ($359 million). The General Court, however, reduced the fine to €181 million ($238 million) because the EC had failed to produce evidence proving a repeat infringement. We will continue to monitor developments as the year progresses.
e) Raids and Investigations
The EC continued to use unannounced inspections as a key investigatory tool during the first half of 2012. In February, EC officials raided companies that manage power exchanges in several Member States on suspicion that they engaged in cartel activity. The Commission did not identify the targets of the unannounced inspections. It did confirm, however, that the European Free Trade Association Surveillance Authority carried out the investigation.
In addition to conducting raids, the EC also opened certain formal antitrust proceedings to investigate suspected violations of European antitrust rules that prohibit cartels and restrictive business practices. In January, the Commission opened formal antitrust proceedings to investigate whether companies in the French water sector coordinated their behavior and pricing practices. The proceedings targeted SAUR, Suez Environment and its subsidiary Lyonnaise des Eaux, and Veolia, as well as their trade association, the Federation Professionelle des Entreprises de l'Eau ("FP2E"). The proceedings were launched after the EC conducted unannounced inspections at the premises of several French companies active in water and wastewater markets in April 2010.
In a significant development, the EC fined Energetický a průmyslový holding and EP Investment Advisors €2.5 million ($3.15 million) for obstruction during an inspection. The fine resulted from the companies' failure to properly block an email account during a November 2009 inspection, which was in violation of the companies' obligations to cooperate with EC officials and disclose all relevant documents. The failure allowed the targets of the investigation to divert incoming emails from the inspectors. This marks the first decision fining a company for obstruction related to the preservation of emails during an inspection.
f) The Pfleiderer Aftermath
On May 23, 2012, the heads of the different European Competition Authorities issued a joint resolution responding to the European Court of Justice's 2011 decision in Pfleiderer AG v. Bundeskartellamt. Pfleiderer concerned a third party's right to obtain a leniency application when seeking independent civil damages. The Court held that European law did not preclude access to such files, but ultimately left the decision to the courts of the individual Member States. In the joint statement, the competition authorities took "the joint position that leniency materials should be protected against disclosure to the extent necessary to ensure the effectiveness of leniency programmes." The statement stressed the need to protect application materials, in light of the importance of the leniency program in cartel enforcement. The competition authorities stressed that they are "determined to defend the effectiveness of leniency programmes in order to ensure a high level of anti-cartel enforcement."
g) Areas of Investigation
Responding to increasing commodities prices, the European Competition Network ("ECN") published a report in May detailing antitrust investigations into the food sector. Since 2004, European Competition Authorities have concluded approximately 120 investigations into the food sector with a finding of an infringement. Importantly, approximately 60 investigations remain open.
The investigations have spanned a broad range of food items, but include cereals and cereal-based products (18% of all cases), milk and dairy (12%), fruit and vegetables (10%), and meat, poultry, and eggs (9%). In addition to investigating a variety of food items, the investigations have also spanned the full length of the supply chain. Investigations into food processing accounted for approximately 28% of investigations, followed by retail (25%) and manufacturing (16%). Primary production and grocery wholesale each accounted for just over 10% of investigations, while agricultural wholesale accounted for just over 5% of investigations.
Nearly half of the investigations (49%) focused on pure horizontal schemes, including price fixing, market and customer sharing, and exchanges of confidential information. As a result, there remain roughly 30 open investigations into potential food cartels. Given the prospect of continued instability in the food markets, we fully expect the food industry to be a focus of competition authorities across Europe in 2012 and beyond.
7) Other Significant International Investigations & Developments
In January 2012, Argentina's competition commission (National Commission for the Defense of Competition) initiated an investigation into Argentine energy companies after Argentina's transport association filed a complaint about diesel fuel price-fixing.  The complaint accuses the companies, which included Repsol-YPF SA, Petrobas Argentina SA, and local units of Exxon-Mobil Corp. and Royal Dutch Shell, of participating in a cartel to sustain artificially high diesel fuel prices. The Commission noted that diesel wholesale prices, such as those charged to the government for its bus fleet, were approximately 30% higher than diesel fuel prices at retail gas stations. Several of the energy companies denied participating in a cartel.
On June 14, 2012, the Federal Court in Sydney ordered a Malaysia Airlines affiliate, Malaysia Airlines Cargo Sdn. Bhd., to pay AUD 6 million ($6.1 million) after settling charges stemming from its air freight price-fixing conduct. The Australian Competition and Consumer Commission ("ACCC") began proceedings against Malaysia Airlines in April 2010 alleging that it conspired with other international airlines to fix surcharges and fees on air freight on routes to Indonesia. As part of the settlement, Malaysia Airlines admitted to fixing fuel surcharges between April 2002 and September 2005, security surcharges between October 2001 and October 2005, and customs fees between May 2004 and October 2005. The ACCC previously reached settlements in the air cargo investigations with eight other carriers: Korean Air Lines Co. Ltd., Japan Airlines Co. Ltd., Qantas Airways Ltd., British Airways PLC, Cargolux Airlines International SA, Martinair Holland NV, Air France SA, and KLM Royal Dutch Airlines; cases remain pending against Singapore Airlines Ltd., Cathay Pacific, Emirates, Air New Zealand Ltd., and Thai Airways international. In total, the ACCC has now secured more than AUD 58 million ($59.1 million) in fines from its air cargo investigation.
Commissioner Melanie Aitken announced in June 2012 that she plans to step down from her position at the Canadian Competition Bureau ("CCB"). She has been credited with guiding the CCB into a new era of aggressive antitrust enforcement by utilizing the enhanced provisions added to the Competition Act in 2010 and collaborating with international competition authorities on complex cartel investigations.
In January 2012, the CCB secured its first guilty pleas under the Competition Act's revised provisions, which altered the evidentiary standard in cartel cases and enhanced potential penalties. Domfoam International, Inc. and its affiliate, Valle Foam Industries, Inc., pleaded guilty to participating in a cartel to fix prices in the polyurethane foam industry for more than a decade. The companies were fined a total of CAD 12.5 million ($12.2 million). The investigation, which resulted from the cooperation of a leniency applicant, involved wiretaps, multiple search warrants, numerous witness interviews, and the seizure of thousands of documents.
The Paris Court of Appeals overturned €385 million ($518 million) in fines against ten of France's largest banks. The court concluded that the French Competition Authority (Autorite de la Concurrence) failed to prove that an agreement to implement a per-check fee on bank customers to fund a new interbank check clearing system amounted to a cartel-like violation of the country's antitrust law. In 2010, the Competition Authority fined the ten banks, which included BNP Paribas SA, HSBC France SA, Société Générale SA, BPCE SA, Banque Postale SA, Confederation Nationale du Credit Mutuel, Credit Agricole SA, Credit du Nord SA, Credit Industriel et Commercial SA, and Credit Lyonnais SA. The banks subsequently appealed to the Paris Court of Appeals.
The French Competition Authority obtained a more favorable outcome when the Paris Court of Appeals largely affirmed the fines it imposed in 2006 on 13 luxury perfume makers and 3 retailers for an alleged vertical agreement to fix prices. The court did, however, slightly reduce the total fine amount from a total of €46.2 million ($62.2 million) to €40.1 million ($54 million) because the Autorité had not assessed correctly the individual participation of each company in the infringement. The Supreme Court has already heard appeals stemming from this case on two occasions and may be destined to hear it for a third time.
The Competition Authority also fined French and German flour millers a total of €242.2 million ($312 million) for engaging in anti-competitive behavior. The 14-member Franco-German cartel was fined €95.5 million ($120 million), with the Authority concluding that the members entered into a non-compete agreement to limit imports of flour between France and Germany, limiting their respective access to each other's markets and maintaining predetermined levels of flour exports. In addition, it fined seven French milling companies €147 million ($185 million) that opted to enter two joint-venture companies, France Farine and Bach Muhle. Although French law permits joint ventures, the Authority concluded that the practical effect of the organizations was to fix prices, divide clients between the millers, and foreclose access to the entire French flour market. Both France Farine and Bach Muhle also received fines for their participation in the Franco-German cartel. A leniency application submitted by Wilh. Werhahn GmbH & Co. KG and its subsidiaries in April 2008 prompted the Authority's investigation into the flour milling industry. It granted full immunity from fines to Werhahn, which is the second largest milling company in Germany.
In addition, in another case in the food industry, the Authority broke up a price-fixing cartel between endive growers. It imposed penalties of approximately €4 million ($5.04 million) on 11 producers and 7 trade associations. Although it found that the cartel had successfully conspired to fix prices since 1998 and had influenced all endive production in France, it only imposed moderate penalties because it concluded that the cartel had limited impact and because the participants possessed limited funds.
The Bundeskartellamt, Germany's competition authority, imposed fines totaling €8.7 million ($11.7 million) on 13 companies in the chemical wholesale sector that participated in eight separate cartels within the southern portion of the country. The cartel participants allegedly agreed upon prices, supply quotas, and customer allocations with respect to certain shipments of standardized industrial chemicals. These fines follow the imposition of €15.1 million ($20 million) in fines against 12 companies in December 2010 for regional cartels in the north and west of Germany.
In March 2012, the Bundeskartellamt also imposed fines of €2.9 million (€3.9 million) on eight manufacturers of concrete pipes used for sewage systems, bringing the total fines assessed during the investigation to nearly €14 million ($19 million). The Bundeskartellamt confirmed that these fines concluded its proceedings against the cartel.
The Bundeskartellamt also assessed IVECO Maidus Brandschutztechnik GmbH with a fine of €30 million ($40 million) for participating in a cartel with other manufacturers of firefighting vehicles for at least a decade. The other three participants in the cartel settled in 2011 and agreed to pay fines totaling €20.5 million ($27.5 million). The Bundeskartellamt alleged that the cartel members allocated municipal contracts for firefighting equipment among themselves and coordinated price increases, with secret meetings at the Zurich airport to monitor compliance.
In addition, Germany's antitrust regulator opened a proceeding into whether the country's five largest oil companies took anti-competitive actions that harmed independent gas stations. The proceeding is exploring whether Deutsche BP/Aral, ExxonMobil Europe/Esso, Shell Deutschland, Total Deutschland, and ConocoPhillips Germany/Jet offered fuel to independent stations at higher prices than their respective branded stations. The Bundeskartellamt is also exploring whether the "big five" petrol companies sold fuel to their respective branded stations at below-cost prices.
The Bundeskartellamt unveiled a new investigative tool in June 2012 to assist in their fight against cartels.  The new electronic system allows anonymous tipsters to report behavior. The system is unique because it guarantees the anonymity of the informer while still allowing for ongoing dialogue with investigative staff at the Bundeskartellamt using a secure electronic mailbox.
The Competition Commission of India ('CCI") imposed staggering penalties totaling Rs 6,307 crore ($1.1 billion) on 11 cement manufacturers and the Cement Manufacturers' Association ("CMA"). The total fine is among the largest ever assessed against a single cartel by any competition authority in the world. The CCI alleges that the companies coordinated, through the CMA, with respect to the price and production of concrete, with the result being "not only detrimental to the cause of the consumers but also to the whole economy since cement is a crucial input in [the] construction and infrastructure industry." Media reports indicate that the CCI lacked direct evidence of coordination among the cement companies and, instead, relied on circumstantial evidence derived from output and capacity data, price hikes, economic growth rates, construction activity, and the companies' profit margins. The fines imposed on the cement companies equaled 50% of their profits for FY 2009–10 and FY 2010–11. Several of the companies indicated their intent to appeal the fines to the Competition Appellate Tribunal.
In April 2012, the CCI also fined ten explosives companies a total of Rs 600 million ($10.7 million). The explosives companies, which accounted for 75 percent of the explosives market, were alleged to have agreed to boycott a reverse auction by state-owned Coal India Limited ("CIL"). Because of the boycott, CIL was forced to cancel the auction, restricting the ability of CIL to purchase explosives through a competitive process. The CCI also noted that there was evidence that the companies engaged in anti-competitive behavior by submitting identical or nearly identical prices for multiple CIL auctions between 2004 and 2009, but this behavior could not be penalized because it preceded enactment of India's Competition Act in May 2009.
In March 2012, the Autorità Garante della Concorrenza e del Mercato (Antitrust Authority) assessed €4 million ($5.4 million) in fines against a cartel of shipping agents operating at the Port of Genoa. The fines target 15 companies and 2 trade associations that are alleged to have participated in the cartel from February 2004 to December 2009. The Antitrust Authority granted clemency to a participant that came forward to expose and provide evidence of the cartel's existence. A second company received a 50% fine reduction for its cooperation.
Additionally, in January 2012, the Antitrust Authority opened an investigation into alleged price fixing of diesel and gasoline in Sicily. The Antitrust Authority launched the investigation after receiving a complaint from Sicilian regional councilor Gaetano Armao regarding the high prices of diesel and gasoline in Sicily, compared to the rest of Italy.
In June 2012, the JFTC brought criminal charges against three industrial machinery and automotive bearing manufacturers, along with seven of their employees, accusing them of violating Japan's Antimonopoly Act. The JFTC charged NSK Ltd., NTN Corporation, and Nachi-Fujikoshi Corporation with conspiring to raise prices for their products. NSK Ltd. and NTN Corp. allegedly conspired with respect to both industrial machinery bearings and automotive bearings. The third defendant, Nachi-Fujikoshi, is only alleged to have participated in the industrial machinery bearings cartel.
In June 2012, the Netherlands Competition Authority (NMa) fined two agricultural cartels €23 million ($28.9 million) for price fixing and dividing the market. NMa fined three red pepper cooperatives €14 million ($17.6 million) for inflating prices after learning of the cartel from a leniency applicant; the cooperatives plan to appeal the decision. NMa separately assessed fines totaling €9 million ($11.3 million) against five pearl onion growers, which controlled 70 percent of the market, for agreeing to limit production and purchasing the assets of shrinking companies to prevent entry of other competitors into the industry. The investigations reflect the NMa's heightened focus on anti-competitive behavior in the food sector, which it announced in 2009, regarding seven especially problematic products--including the red pepper and pearl onion products.
The Competition Commission of Pakistan ("CCP") achieved a key milestone in the first half of 2012 when it granted immunity to its first leniency applicant. In September 2011, the CCP initiated two cases and issued show-cause notices to 25 entities for allegations of price fixing and bid rigging on public procurement tenders in the power distribution industry. Subsequently, Siemens Pakistan submitted a leniency application, along with 223 supporting documents, in which it admitted to participating in a cartel. In April 2012, after a thorough review of the leniency application and supporting evidence, the CCP granted Siemens a 100 percent reduction in its penalty. At the time, Siemens Pakistan represented the dominant supplier of transformers and switchgears to the country's power sector, with a 29.3 percent market share. It was also allegedly the largest player in the cartel, which was comprised of members from the Pakistan Electrical Power Equipment Manufacturers Association.
The CCP also renewed its interest in the concrete industry after receiving information from an informant. In 2009, the CCP imposed a fine of 6.3 billion rupees ($6.67 million) on the All Pakistan Cement Manufacturers Association ("APCMA") and its members for engaging in collusive behavior. The defendants challenged the fine in court and the case is pending. In January 2012, the CCP conducted a search and inspection of the premises of the APCMA and Kohat Cement to obtain evidence of renewed cartelization in the cement sector. An informant notified the CCP that members of the APCMA allegedly monitored cement dispatches at cement production units, which constituted a key element of a previous collusive arrangement among the cement manufacturers. The CCP further pointed to a rapid increase in the price of concrete during 2010, despite the lack of an apparent external catalyst, and the lack of price reductions since 2010 following adoption of significant sales tax and excise duty reductions.
k) South Africa
On March 26, 2012, South African Airways ("SAA") and Singapore Airlines agreed to pay a combined ZAR 43 million ($5.8 million) in fines to settle allegations that they fixed prices for flights between Johannesburg and Hong Kong. The investigation began in January 2008, when Cathay Pacific came forward with information on the price-fixing scheme in exchange for leniency. SAA agreed to pay ZAR 18 million ($2.5 million) and Singapore Airlines will pay ZAR 25 million ($3.3 million).
In March 2012, the Competition Commission fined Lafarge Industries South Africa, a cement company, ZAR 149 million ($18.2 million) for participating in an industry-wide price-fixing conspiracy with three other concrete producers. Lafarge admitted to entering into agreements and arrangements with Pretoria Portland Cement Company and AfriSam Ltd. to allocate market shares and indirectly fix prices. The conspiracy ultimately extended to Natal Portland Cement Cimpor Ltd. ("NPC-Cimpor"). The Commission initiated an investigation in 2008 and raided all four companies in 2009. This prompted Pretoria Portland to seek leniency and admit to the illegal agreement between the companies. The Commission concluded a settlement with Afrisam in November 2011 for ZAR 125 million ($15.5 million). The Commission's case against NPC-Cimpor remains pending.
Additionally, two oil companies reached settlement agreements in February 2012 following their involvement in bitumen price-fixing arrangements. In March 2010, the Commission referred its findings against the Southern Africa Bitumen Association ("SABITA") and seven major oil companies to the Competition Tribunal. Two of those oil companies, Engen Petroleum and Shell South Africa, agreed to settle for ZAR 28.8 million ($3.5 million) and ZAR 26.3 million ($3.2 million), respectively. In settling, the two companies admitted to collectively determining and agreeing on pricing principles for bitumen with other oil companies. The Commission previously settled with two other participants, Masana and Sabita, in 2010 and 2011. The Commission did not seek fines from Sasol or its subsidiary, Tosas, which received conditional immunity after filing a leniency application.
In April 2012, the Competition Commission referred to the Tribunal a collusion case against ArcelorMittal South Africa Ltd and Highveld Steel and Vanadium Corporation Ltd. The Commission's investigation alleges that the companies had engaged in price fixing and market allocation with respect to flat steel products. It also alleges that they maintained this conduct through information exchanges on sales volumes, which allowed them to monitor and maintain market share and prices through the South African Iron and Steel Institute ("SAISI"). The Commission is requesting a penalty equal to 10 percent of annual turnover from each company.
l) South Korea
South Korea continued its aggressive antitrust enforcement during the first half of 2012. In January 2012, the Seoul High Court affirmed the Korea Fair Trade Commission's ("KFTC") KRW 2.1 billion ($1.8 million) penalty against Thai Airways International. In November 2010, the KFTC cumulatively fined Thai Airways and 15 other air cargo carriers approximately KRW 120 billion ($104 million). It accused the airlines of fixing airfares by introducing or raising fuel surcharges. Thai Airways appealed the imposition of the penalties, but the High Court rejected its demand that the KFTC withdraw the fine.
In May 2012, the KFTC fined outdoor products distributor Goldwin Korea KWR 5.2 billion ($4.5 million) for requiring retailers to sell "North Face" brand products at predetermined prices. Goldwin is the sole distributor of The North Face brand in Korea. The KFTC concluded that between 1997 and 2012 the company required 151 retailers to agree to contractual terms obligating the stores to sell North Face products at their full retail price. Japan-based Goldwin also prohibited retailers from selling the North Face products online. When retailers refused to comply, Goldwin suspended supplies, cancelled contracts, required security deposit, or issued warnings. The fine represents the highest that the KFTC has ever imposed for resale price maintenance.
South Korea's legislature also passed several amendments to the country's competition law in March 2012, including criminalizing certain types of interference with antitrust investigations, changing the statute of limitations for the KFTC to investigate anti-competitive conduct, and increasing the maximum penalties for trade associations implicated in cartel probes. The amendments extended the statute of limitations to seven years after the end of anti-competitive behavior, if the KFTC has not opened an investigation. If it has, the statute of limitations runs for five years after the KFTC initiates the probe. The amendments also clarify how fines apply if a company splits off from its former parent company after violating antitrust laws. Pursuant to the amendments, the KFTC can now fine the original company, the offshoot company, or newly established entities. The amendments are slated to take effect three months after their adoption.
Following these amendments, the KFTC limited the conditions under which the second company to seek leniency could reduce its fine. Under the change, which took effect in mid-June 2012, the second entity in a two-party cartel must pay the full penalty--as opposed to having its fine cut in half. In addition, if the second company waits longer than two years after the first entity submits its leniency application, it will not receive any penalty reduction. Under the previous policy, second filers could have their fines cut in half, regardless of the number of companies in the cartel or how long it took them to submit a leniency application.
In February 2012, the Spanish Government released a controversial draft bill proposing to merge the National Competition Commission ("CNC") with seven other regulatory entities into a newly created National Markets and Competition Commission. This announcement has already triggered criticism by both the European Commission and the CNC. We will continue to track the status of the proposed bill and report on its fate in a future update.
On January 12, 2012, the CNC imposed penalties on five companies in the concrete, cement, and mortar markets in Northern Spain for participating in a cartel. The aggregate fines totaled more than €11 million ($13.9 million), and came after a two-year investigation that the CNC initiated in December 2009 into allegations that the companies agreed to fix and progressively increase prices for concrete, fines, and mortar, as well as to divide up the market for those products. The cement companies fined were Cementos Portland Valderribas S.A. (€5.7 million or $7.2 million), Hormigones Beriain S.A. (€2.5 million or $3.15 million), Canteras de Echauri y Tiebas S.A. (€1.4 million or $1.8 million), Canteras y Hormigones Vre S.A. (€959,277 or $1.2 million), and Cemex España (€502, 283 or $633,000). On June 4, 2012, the CNC imposed an addition €1.3 million ($1.6 million) fine on Cementos Portland Valderribas S.A. for providing "incomplete, incorrect, misleading, or false information" during the investigation into the suspected cartel.
On January 25, 2012, the CNC raided the offices of companies producing elastomeric and polyurethane foam insulation. The unannounced inspections occurred amid allegations that the manufacturers were engaging in anti-competitive practices, including price fixing. The CNC did not release the names of the companies involved in the investigation. The raids marked the second recent investigation into anti-competitive behavior by manufacturers and distributors of polyurethane foam. In February 2011, the CNC initiated an investigation into an alleged cartel in the same industry, which included ten companies and the Spanish Polyurethane Association. The polyurethane foam industry has also been investigated by the EC and the U.S. Department of Justice.
On February 27, 2012, the CNC imposed fines totaling more than €54 million ($73 million) on maritime transport companies operating in the Balearic Islands for participating in a cartel involving transport lines for cargo and passengers. The CNC imposed fines of €36 million ($48.4 million) on Compañía Trasmediterránea, S.A.; €15 million ($20.2 million) on Balearia Eurolíneas Marítimas; S.A., €495,826 ($667,111) on Isleña Marítima de Contenedores, S.A.; €1.1 million ($1.5 million) on Servicios y Concesiones Marítimas Ibicencas, S.A. (Sercomisa); and €402,453 ($541.428) on Mediterránea Pitiusa, S.L.
On June 26, 2012 the CNC announced an investigation into alleged price fixing in the carbon dioxide markets by affiliates of Heineken International BV, Praxair Technology Inc., and Air Products and Chemicals Inc. The regulator opened the investigation after receiving a complaint from the Spanish Association of Carbon Dioxide Producers ("AEDCO") that the companies had violated the Spanish Competition Act. Both Heineken and Praxair denied that they engaged in anti-competitive practices.
n) United Kingdom
Earlier this year, the U.K. government announced a significant plan to overhaul the country's antitrust regulatory structure. On March 15, 2012, the government publicized its intention to merge the competition functions of the Office of Fair Trading ("OFT") and the Competition Commission, to create the Competition and Markets Authority ("CMA"). The CMA will be a single, independent entity accountable directly to Parliament. The CMA is expected to be fully functional by April 2014 and will be responsible for reviewing mergers, conducting market investigations, and investigating cartel and abuse of dominance cases. The proposed overhaul also includes several reforms to strengthen the enforcement regime. Among these changes is an alteration to the criminal cartel offense to make it easier for the government to prosecute criminal cartel cases by eliminating the existing "dishonesty" requirement. This provision, which is notoriously difficult to establish in commercial cases, requires the OFT to prove that the individual knowingly participated in cartel conduct and acted dishonestly.
The OFT reduced the penalty it imposed against British Airways PLC in 2007 for its participation in a scheme with Virgin Atlantic Airways Ltd. to fix prices on plane tickets. It cut the £121 million ($194.3 million) fine--one of the largest fines the OFT had ever imposed--to £58.5 million ($94 million) due to British Airways's cooperation with the investigation and admission of wrongdoing. The OFT originally opened the investigation in March 2006 based on claims that British Airways and Virgin Atlantic agreed to fix prices for passenger fuel surcharges for long-haul flights to combat rising oil prices. Because Virgin Atlantic came forward under the OFT's leniency program and received immunity, it did not face fines from the OFT.
In June 2012, the OFT decided to close its civil probe into a possible cartel among truck manufacturers after earlier announcing its intent to drop its criminal investigation into similar conduct. The OFT conducted its investigations in parallel with an EC inquiry opened in January 2011 into the same industry. Ultimately, the OFT determined that the EC is "particularly well placed" to proceed against the potentially larger cartel throughout Europe. Although antitrust regulators closed the U.K.-based probe, they reserved the right to reopen the investigation later based on new information or changed circumstances.
 DOJ's fiscal year runs from October 1 through September 30.
 See also F. Joseph Warin, David P. Burns & John W.F. Chesley, "To Plead or Not to Plead? Reviewing a Decade of Criminal Antitrust Trials", The Antitrust Source 1 (July 2006) (determining that between FY 1996 and FY 2005, the Antitrust Division prevailed in fewer than 50% of its criminal jury trials).
 See United States v. AU Optronics Corp., No. 3:09-cr-00110-SI (N.D. Cal. Mar. 13, 2012); see also Press Release, U.S. Dep't of Justice, Taiwan-Based AU Optronics Corporation, Its Houston-Based Subsidiary and Former Top Executives Convicted for Role in LCD Price-Fixing Conspiracy (Mar. 13, 2012), available at http://www.justice.gov/opa/pr/2012/March/12-at-313.html.
 See United States v. Carollo, No. 1:10-cr-00654-HB (S.D.N.Y. May 11, 2012).
 See United States v. Yaron, No. 1:10-cr-00363-GBD-GWG (S.D.N.Y. Feb. 2, 2012).
 Unlike DOJ, the EC relies on calendar year reporting for its annual case statistics.
 Joaquin Almunia, Vice President, European Comm'n, Higher Duty for Competition Enforcers, Speech Before the International Bar Association Antitrust Conference (June 15, 2012), available at http://europa.eu/rapid/pressReleasesAction.do?reference=SPEECH/12/453 ("Our activity slowed down a bit last year . . . with respect to 2010 . . . . But this fact does not imply at all a change in our priorities. I can tell you that we are working on a number of major cases and our output will likely be higher this year.").
 The total criminal fines for FY 2012 is an estimate based on our review of plea agreements announced by the Antitrust Division and court-imposed criminal fines during the fiscal year.
 The chart reflects court-imposed restitution, disgorgement, and penalties during the respective fiscal year stemming from an Antitrust Division investigation. The amounts reflected for FY 2000–2010 reflect only court-imposed restitution reported by the Antitrust Division, insofar as we are unaware of any disgorgement and penalties resulting from an Antitrust Division criminal investigation prior to the municipal bond settlements in FY 2011. See U.S. Dep't of Justice, Antitrust Div., Antitrust Division Workload Statistics, FY 2001 – 2010 [hereinafter FY 2001–2010 Workload Statistics], available at http://www.justice.gov/atr/public/workload-statistics.pdf; U.S. Dep't of Justice, Antitrust Div., Antitrust Division Workload Statistics, FY 2000 – 2009 [hereinafter FY 2000–2009 Workload Statistics].
 We tabulated the average prison sentence using publicly available data reflecting the total prison days sentenced and total number of defendants receiving prison sentences during each fiscal year. The underlying data for the years prior to FY 2011 can be found at FY 2000–2009 Workload Statistics, supra note 9, and FY 2001–2010 Workload Statistics, supra note 9.
 The underlying data for the years prior to FY 2011 can be found at FY 2000–2009 Workload Statistics, supra note 9, and FY 2001–2010 Workload Statistics, supra note 9.
 The underlying data for the years prior to FY 2011 can be found at FY 2000–2009 Workload Statistics, supra note 9, and FY 2001–2010 Workload Statistics, supra note 9.
 Rachel Brandenburger, Antitrust Div., U.S. Dep't of Justice, Intensification of International Cooperation: The Antitrust Division's Recent Efforts, Remarks for the American Chamber of Commerce 19–20 (Feb. 17, 2012), available at http://www.justice.gov/atr/public/speeches/281609.pdf; see also Joaquín Almunia, Vice President of the European Comm'n for Competition Policy, Competition Policy for the Post-Crisis Era, Lewis Bernstein Memorial Lecture (Mar. 30, 2012), available at http://europa.eu/rapid/pressReleasesAction.do?reference=SPEECH/12/249&format=HTML&aged=0&language=EN&guiLanguage=en.
 See Brandenburger, supra note 13, at 20.
 Rachel Brandenburger, Antitrust Div., U.S. Dep't of Justice, The Many Facets of International Cooperation at the Antitrust Division, Remarks for the International Bar Association Midyear Conference 8 (June 15, 2012), available at http://www.justice.gov/atr/public/speeches/284239.pdf.
 Brandenburger, supra note 13, at 17.
 Plea Agreement, United States v. Hsu, No. 3:12-cr-00121-RS (N.D. Cal. Mar. 13, 2012).
 United States v. Hsu, No. 3:11-cr-00488-RS (N.D. Cal. filed July 12, 2011).
 See Jason Brown et al., Restraining Liberty Before a Verdict Is in Sight, Global Competition Review, May 2011, at 36.
 See Southern Union Co. v. United States, No. 11-94 (U.S. June 21, 2012).
 United States v. AU Optronics Corp., No. 09-cv-0110 SI (N.D. Cal. June 5, 2012).
 Order for Pretrial Preparation, United States v. AU Optronics Corp., No. 3:09-cr-00110-SI, (N.D. Cal. June 4, 2012).
 Press Release, Dep't of Justice, GE Funding Capital Market Services Inc. Admits to Anticompetitive Conduct by Former Traders in the Municipal Bond Investments Market and Agrees to Pay $70 Million to Federal and State Agencies (Dec. 23, 2011), available at http://www.justice.gov/atr/public/press_releases/2011/278581.htm.
 See United States v. Carollo, No. 1:10-cr-00654-HB (S.D.N.Y. May 11, 2012). Although the three executives were accused of conspiring to manipulate the bidding process, they were charged with wire fraud, rather than Sherman Act violations.
 United States v. Ghavami, No. 1:10-cr-01217-KMW (S.D.N.Y. filed Sept. 16, 2010).
 See Plea Agreement, United States v. Wolmark, No. 1:09-cr-01058-VM-3 (S.D.N.Y. Jan. 6, 2011); Plea Agreement, United States v. Zarefsky, No. 1:09-cr-01058-VM-4 (S.D.N.Y. Jan. 6, 2011).
 See Dep't of Justice Letter to Judge Victor Marrero, No. 1:09-cr-01058-VM (S.D.N.Y. May 30, 2012), ECF No. 397.
 United States v. Fla. W. Int'l Airways, Inc., No. 1:10-cr-20864-RNS, (S.D. Fla. Feb. 13, 2012) (dismissing count against Hidalgo).
 Defendant Florida West's Motion for Consent to Enter Plea of Nolo Contendere, United States v. Fla. W. Int'l Airways, Inc., No. 1:10-cr-20864-RNS, (S.D. Fla. Apr. 27, 2012), ECF No. 249.
 Government's Opposition to Defendant Florida West's Motion to Enter a Plea of Nolo Contendere, United States v. Fla. W. Int'l Airways, Inc., No. 1:10-cr-20864-RNS, (S.D. Fla. May 10, 2012), ECF No. 250.
 Press Release, Dep't of Justice, Three Northern California Real Estate Investors Agree to Plead Guilty to Bid Rigging at Public Foreclosure Auctions (Feb. 9, 2012), available at http://www.justice.gov/atr/public/press_releases/2012/280076.pdf; Press Release, Dep't of Justice, Two Northern California Real Estate Investors Agree to Plead Guilty to Bid Rigging at Public Foreclosure Auctions (Apr. 26, 2012), available at http://www.justice.gov/atr/public/press_releases/2012/282658.pdf; Press Release, Dep't of Justice, Two Northern California Real Estate Investors Agree to Plead Guilty to Bid Rigging at Public Foreclosure Auctions (June 7, 2012), available at http://www.justice.gov/atr/public/press_releases/2012/284045.pdf.
 Press Release, Dep't of Justice, Alabama Real Estate Investor Agrees to Plead Guilty to Conspiracies to Rig Bids and Commit Mail Fraud for the Purchase of Real Estate at Public Foreclosure Auctions (Apr. 20, 2012), available at http://www.justice.gov/atr/public/press_releases/2012/282481.pdf; Press Release, Dep't of Justice, Alabama Real Estate Investor Agrees to Plead Guilty to Conspiracies to Rig Bids and Commit Mail Fraud for the Purchase of Real Estate at Public Foreclosure Auctions (Apr. 27, 2012), available at http://www.justice.gov/atr/public/press_releases/2012/282703.pdf; Press Release, Dep't of Justice, Two Alabama Real Estate Investors and Their Company Indicted for Conspiracies to Rig Bids and Commit Mail Fraud for the Purchase of Real Estate at Public Foreclosure Auctions (June 28, 2012), available at http://www.justice.gov/atr/public/press_releases/2012/284693.pdf.
 Press Release, Dep't of Justice, Two Financial Investors Plead Guilty to Bid Rigging at Municipal Tax Lien Auctions in New Jersey (Feb. 23, 2012), available at http://www.justice.gov/atr/public/press_releases/2012/280451.pdf; Press Release, Dep't of Justice, New York Financial Investor Pleads Guilty to Bid Rigging at Municipal Tax Lien Auctions in New Jersey (Mar. 27, 2012), available at http://www.justice.gov/atr/public/press_releases/2012/281630.pdf; Press Release, Dep't of Justice, Former Executive of New York-Based Tax Liens Company Pleads Guilty to Bid Rigging at Municipal Tax Lien Auctions in New Jersey (Apr. 17, 2012), available at http://www.justice.gov/atr/public/press_releases/2012/282315.pdf; Press Release, Dep't of Justice, New Jersey Financial Investor and His Company Plead Guilty to Bid Rigging at Municipal Tax Lien Auctions (Apr. 23, 2012), available at http://www.justice.gov/atr/public/press_releases/2012/282510.pdf.
 United States v. VandeBrake, No. 11-1390 (8th Cir. Apr. 27, 2012).
 Summary of Commission Decision of 27 March 2012 Relating to a Proceeding Under Article 101 of the Treaty on the Functioning of the European Union and Article 53 of the EEA Agreement, 2012 O.J. (C 162).
 Case T-214/06, Imperial Chemical Indust. Ltd. v. Comm'n (2012).
 Case T-439/07, Coats Holdings Ltd. v. Comm'n (2012).
 Case T-448/07, YKK & Others v. Comm'n, (2012).
 Case T-445/07, Berning & Söhne v. Comm'n (2012).
 Case T-240/12, Eni v. Comm'n (2012).
 Case T-39/07, Eni v. Comm'n (2012).
 La Société Beauté Prestige International, S.A. v. L'Autorité de la Concurrence, Cour d'appel [CA] [regional court of appeal] Paris, 5e ch., Jan. 26, 2012, No. 2010/23945 (Fr.); see also Stefano Berra, Paris Court Third Ruling Upholds Perfume Decision, Global Competition Review (Jan. 27, 2012), available at http://www.globalcompetitionreview.com/news/article/31299/%20paris-court-third-ruling-upholds-perfume-decision/.
 Press Release, Competition Comm'n of India, supra note 102.
 See Faaez Samadi, India Hits Cement Cartel with "Gargantuan" Record Fine, Global Competition Review (June 22, 2012), http://www.globalcompetitionreview.com/news/article/32000/india-hits-cement-cartel-gargantuan-record-fine/; Cement Makers Like Ambuja, Ultratech & Others Deny Price Cartel, May Move to Tribunal, Economic Times (June 21, 2012), http://articles.economictimes.indiatimes.com/2012-06-21/news/32352212_1_cement-makers-cci-cement-companies; Cement Cos to Appeal Against CCI's Order, Times of India (June 22, 2012), http://timesofindia.indiatimes.com/business/india-business/Cement-cos-to-appeal-against-CCIs-order/articleshow/14327827.cms.
 Press Release, Korea Fair Trade Comm'n, Hidden Story About the High-Priced North Face Outdoor Products Selling at Discounted Prices Controlled and Restricted (May 7, 2012), available at http://eng.ftc.go.kr/bbs.do.
 Council Recommendation on Spain's 2012 National Reform Programme and Delivering a Council Opinion on Spain's Updated Stability Programme, 2012-2015, at 22–23, COM (2012) 310 final (May 30, 2012), available at http://ec.europa.eu/europe2020/pdf/nd/swd2012_spain_en.pdf (commenting that the proposed merger "does not guarantee that it will carry out its regulatory activity in an effective and independent way").
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