Energy: Recent hikes in gasoline prices have sparked concerns in the Obama Administration. Attorney General Eric Holder has created an Oil and Gas Price Fraud Working Group to monitor oil and gas markets in an attempt to safeguard consumers and identify potential violations of criminal or civil laws, including the federal antitrust laws. Reportedly, the working group will specifically look for evidence of illegal activity resulting in increased higher gas prices for consumers, such as manipulation, collusion or misrepresentations of oil and gas prices. The group will also evaluate developments in commodities markets regarding investor practices, supply and demand factors, and the role of speculators and index traders in oil futures markets.
Technology: In April, the U.S. Department of Justice (DOJ) approved Google’s acquisition of ITA Software Inc., a flight information software company, despite numerous objections from the business community. ITA licenses software that enables companies such as Orbitz and Bing Travel, to offer flight comparative search information. Other players had objected, claiming that the deal would effectively cede control over ITA access to Google and interfere with fair competition in the travel industry. Consequently, DOJ required Google to ensure competition in the online airfare market as a condition for approving the ITA deal. For example, Google must fund flight search software research and license travel software at a fair price.
Though many companies still worry that as a result of the acquisition, Google will monopolize the travel software market, the DOJ’s approval indicates that concerns by competing businesses were insufficient to stop the merger. In an unrelated matter, Google recently set aside $500 million for a separate DOJ investigation, reportedly related to Google’s online advertising practices and preferred customers.
Banking Industry: The EU is investigating sixteen investment banks involved in the credit default swap (CDS) market for violations of EU competition law. According to the EU, the investigation will focus on whether the banks conspired to hinder access to CDS transaction data and make CDS transactions less transparent. Among the banks being investigated are: JPMorgan Chase & Co., Goldman Sachs Group Inc., UBS AG and Citigroup Inc. In a separate investigation, UBS AG received a non-prosecution agreement from DOJ in which the bank acknowledged responsibility for illegal conduct by former employees. According to the non-prosecution agreement, from 2001 through 2006, UBS employees entered into unlawful agreements to manipulate the bidding process for rig bids on municipal investment contracts. UBS avoided criminal charges by cooperating with the DOJ investigation and paying restitution.
COMPLIANCE TIP: THE FOREIGN CORRUPT PRACTICES ACT
The Foreign Corrupt Practices Act, 15 U.S.C. §§ 78dd-1, et seq. (FCPA), prohibits companies from making payments to foreign government officials in order to obtain or retain business. Specifically, the anti-bribery provisions of the FCPA prescribe any offer, payment, promise to pay or authorization of the payment of money or anything of value to any person, while knowing that all or a portion of such money or object of value will be offered, given or promised, directly or indirectly, to a foreign official in an attempt to influence the official in his or her official capacity. This includes payments made to persuade the official to do commit or omit to do an act in violation of his or her lawful duty, or to secure an improper advantage from the official. As is the case with the Sherman Antitrust Act, FCPA violations can also result in severe criminal penalties as well as imprisonment.
It is becoming increasingly common for DOJ antitrust investigations to cross over into FCPA space where the alleged price-fixing cartels have international reach. Executives have been prosecuted for violations of both statutes in recent investigations. Sophisticated compliance programs should already take an integrated approach to antitrust and FCPA training. Further, internal investigations of alleged price-fixing or bid-rigging should evaluate and pursue FCPA-related issues if red flags emerge. A thorough compliance program should include a clearly articulated policy against FCPA violations; a system by which employees may report and/or seek counsel regarding a payment to a third party; due diligence requirements relating to an employee’s ability to make payments to third parties; and periodic audits to ensure compliance and understanding of company policies. Payments to intermediaries or third-parties who may deal with foreign government officials are often a focus of DOJ investigations and merit special attention in any compliance program.
COMMENT: DEFENDING A GLOBAL INVESTIGATION-PENALTY PHASE
Over the past decade, DOJ investigations of international price-fixing conspiracies have yielded numerous plea agreements and, increasingly, large corporate fines. The U.S. Sentencing Guidelines are an excellent foil for this modus operandi because they allow enormous “volumes of commerce” to serve as the basis for corporate fines. Because antitrust sentencing issues are so infrequently litigated, there are opportunities to challenge assumptions about antitrust sentencing and advocate for more reasonable fines.
For example, some of the commerce supposedly affected by alleged international price-fixing conspiracies has little or no impact on U.S. markets, and most U.S. courts have not yet considered in the context of fully-litigated proceedings whether such commerce can support antitrust fines in the U.S. In practice, corporations that are conscious of this issue would be well advised to contest it in plea negotiations. In relatively recent criminal matters, the DOJ has “agreed to disagree” on this issue but excluded certain foreign-based commerce from its agreed fine calculations.
DOJ Fine Calculation Process: U.S.-Based Commerce
The U.S. Sentencing Guidelines (USSG) state that in determining the base fine amount, the starting point is “20 percent of the volume of affected commerce.” USSG § 2R1.1(d)(1). The USSG do not define “volume of affected commerce.” Defendants have argued that the USSG envision fines based only on U.S. domestic commerce, as acknowledged by the DOJ in past publications or statements.1 Recent plea agreements confirm the DOJ will at times “agree to disagree” but will ultimately accept this approach as evidenced in the following instances:
- In the recent air cargo carrier antitrust investigation, some plea agreements used export commerce as the basis for the “volume of commerce” justifying a fine calculation – cargo shipments that originated in the U.S., but not shipments from foreign nations to the U.S.2 It is worth noting that most air cargo carriers are paid at the point of origin for their services.
- In the DRAM (computer memory) investigation, the volume of affected commerce was measured by a defendant's sales to original equipment manufacturers in the U.S.3
- Similarly, in the Hydrogen Peroxide investigation, volume of commerce was based on sales within the U.S.4
The Foreign Trade Antitrust Improvement Act
The Foreign Trade Antitrust Improvement Act (FTAIA), which governs the jurisdictional reach of the federal antitrust laws, is one of the key statutory provisions underlying the argument that criminal fines in the U.S. should be based on U.S. – based commerce. The FTAIA states that antitrust allegations in the U.S. must articulate a “direct, substantial, and reasonably foreseeable” effect on U.S. markets. If potentially unlawful conduct occurred outside the U.S., was not implemented in the U.S., and/or had no meaningful impact in the U.S., corporations could and should contend that the conduct did not violate antitrust laws in the U.S. On a more practical level, there is some inherent appeal to the argument that overbroad interpretations of the FTAIA interfere with foreign competition regulations and stretch U.S. antitrust jurisdiction beyond its boundaries. The same logic applies to fining companies in the U.S. based on alleged conduct that occurs offshore.
The foundation for using the FTAIA to craft arguments in defending criminal investigations was laid years ago in litigation surrounding a civil dispute. The Supreme Court's opinion in F. Hoffman-LaRoche Ltd., v. Empagran S.A. arguably supports the view that foreign-based commerce should not be included in any fine calculation (see F. Hoffman-LaRoche Ltd. Empagran S.A., 542 U.S. 155 (2004)). While the Empagran case dealt with an antitrust class action brought by a class of foreign purchasers, the Supreme Court held that the FTAIA precludes foreign purchasers from bringing suit in U.S. courts under the Sherman Act where their foreign injuries are “independent of any adverse domestic effect.” There is no precedent that holds this reasoning inapplicable to criminal antitrust fines.
Recent Plea Agreements Based on U.S. Commerce Only
An example of the “agree to disagree” approach to foreign commerce occurred in British Airways’ (BA) plea agreement for air cargo price-fixing. DOJ acknowledged that BA objected to including the sales of cargo services outside the U.S. in the volume of affected commerce calculation for a U.S. – based antitrust fine.5 While DOJ stated that it did not agree with BA’s position, the primary basis for the fine levied on BA was U.S. – based commerce. The plea agreement stated:
Notwithstanding the early cooperation and substantial assistance provided by the defendant in this matter, the parties recognize the complexity of litigating the issues set forth in Paragraph 8(c) and the resulting burden on judicial and party resources, and agree that the appropriate resolution of this issue is to impose, for the cargo portion of the recommended sentence, a fine above what would be the bottom of the Guidelines sentencing range for the cargo conspiracy in order to reflect [foreign] commerce . . . .
In our view, the size of the volume of commerce influenced this result; BA still paid a massive fine as a result of the air cargo plea. However, both DOJ and BA must have recognized the risk of setting a bad precedent for limiting fines, on one hand, and risking even larger fines if BA litigated and lost this issue in court. While the issue of whether foreign commerce is included in the volume of commerce for purposes of calculating a criminal fine remains unresolved, defendants in global conspiracy cases should be mindful of the uncertainty and be prepared to take advantage of it.
 See Gary R. Spratling, Negotiating the Waters of International Cartel Prosecutions: Antitrust Division Policies Relating to Plea Agreements in International Cases, Speech Before the 13th Annual National Institute on White Collar Crime 18 (Mar. 4, 1999), available at, http://www.usdoj.gov/atr/public/speeches/2275.pdf; Amicus Brief filed by US, Statoil ASA v. Heeremac V.O.F., No. 00-1842, 2002 WL 32157022 (Jan. 3, 2002) (“[i]t is the policy of the United States to calculate the Base Fine by using only the domestic commerce affected by the illegal scheme, and in all but two of the dozens of international cartel cases prosecuted, fines obtained by the government were based solely on domestic commerce”).
 See, e.g., United States v. Qantas Airways Limited, Plea Agreement, available at, http://www.justice.gov/atr/cases/f229200/229266.htm.
 See, e.g., United States v. Samsung Electronics Co., Ltd., Joint Sentencing Memorandum, available at, http://www.justice.gov/atr/cases/f213400/213416.htm.
 See, e.g., United States v. Solvay S.A., Joint Sentencing Memorandum, available at, http://www.justice.gov/atr/cases/f216100/216144.htm; United States v. Akzo Nobel Chemicals Int’l B.V., Joint Sentencing Memorandum, available at, http://www.justice.gov/atr/cases/f216100/216122.htm.
 See, e.g., United States v. British Airways PLC, Plea Agreement, available at, http://www.justice.gov/atr/cases/f225500/225523.htm.