This month the US Sentencing Commission invited public comment on American antitrust offences and sentencing guidelines. The review forms part of a general consultation process aimed at reviewing sentencing issues.

The consultation, due to end on 1 May 2015, has highlighted the study of antitrust offences as one of its priority areas. It will include an examination of the corporate fine provisions contained in §2R1.1 of the antitrust sentencing guidelines, which covers bid-rigging, price-fixing and market allocation agreements among competitors.

The maximum sentence for cartel offences is currently 10 years. The length of prison sentences for antitrust offences in the US have increased significantly in recent years. In 1990 – 1999 the average prison sentence stood at 8 months, but by the period 2010 – 2013 this had increased to an average of 25 months.

The Commission will consider whether amendments to the guidelines are appropriate in light of the review and the responses it receives from the public.

On 23 April 2014, the US Department of Justice, Anti-Trust Division announced that the Showa Corporation, a Japanese car parts manufacturer, has agreed to plead guilty to US charges of price-fixing and bid-rigging, paying a $19.9 million fine. The cartel activity related to pinion-assist type electric powered steering assemblies. Showa has agreed to co-operate with the Department’s ongoing investigation.

According to the Division, between 2007 and 2012 Showa engaged in a conspiracy to suppress competition in the automotive parts industry by agreeing to rig bids for steering assemblies sold to Honda Motor Company Limited and certain of its subsidiaries. Those involved in the conspiracy kept their conduct secret by using code names and meeting in remote locations. They monitored adherence to the agreed-upon bid-rigging and price-fixing scheme, selling steering assemblies at collusive and non-competitive prices.

To date, 27 companies and 24 executives have pleaded guilty or agreed to plead guilty in the Division’s ongoing investigation into price-fixing and bid-rigging in the auto parts industry. Those involved in cartel activity have agreed to pay a total of $2.3 billion in criminal fines.

Showa stated that “in order to restore the trust and confidence of our stakeholders as well of the public, Showa has implemented functional organization changes, enhanced the business auditing system for our corporate group, re-organized executive management line-up, and ensured prevention of the recurrence of the violation by adopting more stringent and comprehensive compliance training for antitrust laws, as well as other applicable laws and regulations, to our associates.” The company’s directors and operating officers have volunteered to return part of their salaries.

Bill Baer, Assistant Attorney General in charge of the Division said that “Today’s guilty plea marks the 27th time a company has been held accountable for fixing prices on parts used to manufacture cars in the United States. The Antitrust Division and its law enforcement partners remain committed to prosecuting illegal cartels that harm US consumers and businesses.”

On 4 April 2014, the US Department of Justice announced the successful extradition from Germany of Italian, Romano Pisciotti, for the criminal cartel offence under section 1 of the Sherman Act, arising from his alleged role in the long-running global marine hose investigation. This constitutes the first ever successful extradition of a defendant on a criminal antitrust charge.

Pisciotti, a former executive with Parker ITR Srl, a marine hose manufacturer headquartered in Veniano, Italy, was arrested in Germany on 17 June 2013 and arrived in Miami on 3 April 2014. He made his initial appearance on 4 April 2014 in the U.S. District Court in Fort Lauderdale.

The marine hose investigation became public in June 2007 with the arrest of eight foreign executives, while attending the annual industry trade fair in Houston, Texas. All subsequently pleaded guilty and received varying terms of imprisonment. In 2008, the ninth defendant, a former Bridgestone manager, pleaded guilty to an FCPA violation and was sentenced to two years imprisonment.

Marine hose is a flexible rubber hose used to transfer oil between tankers and storage facilities. According to the Department of Justice, the conspiracy began at least as early as 1999 and continued until at least May 2007. Pisciotti was charged with joining and participating in the conspiracy from at least 1999 until at least November 2006. According to an indictment dated 26 August 2010, Pisciotti carried out the conspiracy by agreeing to allocate shares of the marine hose market among the conspirators. The conspiracy included an agreement not to compete for customers with other marine hose sellers, either by not submitting prices or bids or by submitting intentionally high prices or bids, all in accordance with the agreements reached among the conspiring companies.

To date, five companies, including Parker ITR; Bridgestone Corp. of Japan; Manuli SPa of Italy’s Florida subsidiary; Trelleborg of France; and Dunlop Marine and Oil Ltd, have pleaded guilty in the US.

Assistant Attorney General Bill Baer of the Department of Justice’s Antitrust Division said that “This first of its kind extradition on an antitrust charge allows the department to bring an alleged price fixer to the United States to face charges of participating in a worldwide conspiracy. This marks a significant step forward in our ongoing efforts to work with our international antitrust colleagues to ensure that those who seek to subvert U.S. law are brought to justice.”

Previously, the most high profile attempt at extraditing on an antitrust charge had been the US request for UK national, Iain Norris. In March 2008, the House of Lords ruled that the alleged conduct from 1989-2000, did not amount to a criminal offence in the UK at that time as the UK did not introduce the cartel offence until 2003.

On Friday 6^th December 2013 Judge Daniel R. Dominguez of the US District Court of Puerto Rico in San Juan handed down the longest sentence in US history for a single antitrust charge.  Frank Peake, the former president of Sea Star Line LLC, was sentenced to serve five years in prison and to pay a $25,000 criminal fine for his participation in what the indictment described as a conspiracy to fix rates and surcharges for freight transported by water between the continental United States and Puerto Rico.

The prison sentence was far shorter than the 87 months sought by prosecutors from the Antitrust Division of the US Department of Justice.  The prosecuting attorney in the case was reported to have said that the record sentence was intended to “get the attention of companies and executives around the world.”

Reports have quoted the Department of Justice as asserting that Peake and his co-conspirators conspired to fix, stabilise and maintain rates and surcharges for Puerto Rico freight services, to allocate customers between them and to rig bids submitted to customers.  Peake was involved in the conspiracy from at least late 2005 until at least April 2008.

As a result of an ongoing Department of Justice investigation, the three largest water freight carriers serving routes between the continental United States and Puerto Rico, including Peake’s former employer Sea Star, have pleaded guilty and been ordered to pay more than $46 million in criminal fines for their roles in the conspiracy.  Sea Star pleaded guilty on 20^th December 2011, and was sentenced by Judge Dominguez to pay a $14.2 million criminal fine.  Sea Star transports a variety of cargo shipments, such as heavy equipment, perishable food items, medicines and consumer goods, on scheduled ocean voyages between the continental United States and Puerto Rico.

Custodial sentences have been handed down to five other individuals.  Additionally, Thomas Farmer, the former vice president of price and yield management of Crowley Liner Services, was indicted in March 2013 for his role in the conspiracy and is scheduled to go to trial in May 2014.

On 4^th November 2013, the US Senate unanimously passed legislation to extend whistleblower protection for employees providing information to the Department of Justice relating to criminal antitrust violations.

The Criminal Antitrust Anti-Retaliation Act was jointly introduced by Senator Patrick Leahy (Democrat, Vermont) and Senator Chuck Grassley (Republican, Iowa), chairman and ranking member of the Senate Judiciary Committee.  The Senators were the authors of previous whistleblower provisions within the 2002 Sarbanes-Oxley Act, passed in the aftermath of the collapse of Enron.  Senator Grassley was reported as commenting that “Too often whistleblowers who risk their careers to expose waste, fraud and abuse are treated like second-class citizens.”

The recent Bill was based on a report released in July 2011 by the US Government Accountability Office.  It adds a civil remedy for those who have been fired, or otherwise discriminated against, after blowing the whistle on criminal antitrust activity.  Employees who believe they are victims of retaliation may file complaints with the Secretary of Labor.  The new Act provides for those employees to be reinstated to their former status if the Secretary of Labor finds in their favor.  Senator Leahy commented that “The Criminal Antitrust Anti-Retaliation Act does not provide employees with an economic incentive to report violations. The legislation simply makes whole employees who have been fired or discriminated against for blowing the whistle on criminal conduct.”  Critics of the measure have pointed to the absence of an economic incentive as an obstacle to the effectiveness of the legislation.

Commentators have pointed to the case of Marty McNulty as exemplifying the kind of injustice that Leahy and Grassley’s Bill is intended to eliminate.  In 2005, McNulty claimed to have discovered that his employer, Arctic Glacier International, had agreed with Home City Ice to keep the prices of its packaged ice artificially high.  He repeated the allegation to the FBI.  Both companies were ordered to pay $9 million in fines.  McNulty was fired and claimed to have been blackballed within the industry.  Supporters of the new measure point out that McNulty would have both kept his job and been able to claim for damages suffered in the process.

On 10^th October 2013, a jury in San Francisco acquitted former AU Optronics executive Richard Bai of criminal price fixing charges. After a two-and-a-half week trial in the Northern District of California, the jury reached its verdict after just over a day’s deliberation.

In 2009, the US Department of Justice Antitrust Division indicted Mr Bai and five other AU Optronics executives for allegedly conspiring with LG, Samsung, Chi Mei Optoelectronics and Chunghwa Picture Tubes to fix and stablilise the price of LCD panels to customers such as Hewlett-Packard, Dell and Apple. As reported here on 30^th April 2013 (see below blog post), AU Optronics executive Shiu Lung Leung was sentenced in California to two years imprisonment and a fine of $50,000 for his involvement in a criminal conspiracy to fix the prices of liquid crystal displays used in computer screens and televisions.

Against Bai, a former head of the company’s Notebook Sales division, the Department of Justice alleged that he had implemented the price fixing conspiracy through his own conduct and by directing his subordinates to co-ordinate pricing with competitors. Prosecutors further alleged that Bai had acted as the company’s point of contact for co-conspirators seeking to fix the price of screens for notebook computers.

Persuaded by Bai’s legal representatives Shearman & Sterling and trial lawyer Brian Getz, the jury rejected the Department of Justice’s allegations, concluding that, although Bai took part in a meeting with LCD rivals, there was insufficient evidence that he conspired at those meetings. Getz commented that “No-one who came to testify could say that they price-fixed with him. They admitted that they colluded with executives above him, but not with Bai himself, and I think this is what swayed the jury.”

The US Justice Department announced on 19 September 2013 that a federal grand jury had returned indictments against two executives at Fujikura Ltd, for their role in a conspiracy to fix prices in the car manufacturing sector.

Ryoji Fukudome and Toshihiko Nagashima, both Japanese citizens, are accused of attending meetings to agree to rig bids and allocate the supply of automotive wire harnesses sold to Fuji Heavy Industries for use in electrical systems in its Subaru cars sold in the US, in violation of the Sherman Act. It is alleged that these meetings were followed up with further communications to monitor and enforce the collusive agreements. Fujikara pleaded guilty to its role in the conspiracy in June 2012 and paid a USD20 million criminal fine.

The charges are the latest in the Department of Justice’s ongoing investigation into the automotive sector and follow the indictment entered against G. S Electech executive Shingo Okuda earlier in September 2013 (see previous blog post). The investigation has so far seen 12 companies and 15 executives plead guilty and has cost the auto industry more than USD874 million in fines and resulted in prison sentences of between a year and a day and two years. Substantial fines have also been imposed in parallel investigations in Europe, Australia, Korea, Japan and Canada. An investigation in China is expected to be opened in the coming months.

Scott Hammond, the deputy assistant attorney general of the antitrust division’s criminal enforcement programme, pledged that the Department of Justice would continue to protect US businesses and consumers by “working closely with competition enforcers abroad to ensure that there are no safe harbors for executives who engage in international cartel crimes.”