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.”