Criminal Antitrust Update - January 2013

    15 January 2013



    An executive of AU Optronics Corp. (“AUO”) was convicted of price-fixing in the LCD flat screen markets in a re-trial. Steven Leung was involved in the sale of LCD screens to large U.S.-based companies like Dell Inc. and Hewlett-Packard (“HP”). During the previous trial, a jury convicted AUO’s president and a vice-president, could not reach a decision regarding Mr. Leung, and acquitted two other AUO executives, one of whom is the company’s current CEO. The executives who were convicted last year received three-year prison sentences, which they have appealed. In Asia, Chinese competition authorities imposed more than $56 million in fines for LCD price-fixing in the Chinese market, in a case that mirrored earlier plea bargains in the U.S.

    Google Inc. weathered a significant storm as it emerged largely unscathed by the Federal Trade Commission’s (FTC) investigation of allegations that Google used search engine results in an anticompetitive manner. One FTC commissioner characterized the settlement as “promising an elephant” but instead going public with “a couple of mice.” Competitors have accused Google of promoting its own services at the expense of competitors in the way it displayed search engine results. Google maintained that it reconfigured search results to improve its product rather than to stamp out competition. The Commission agreed, relying in part on observations about the way other search engines display results that might also be considered self-referrals. Google has agreed to change some elements of its advertising policies to address concerns that Google hindered custumers’ ability to advertise with rival search engines. European regulators have not yet resolved similar investigations and could, due to Europe’s broader constraints against market-dominant players, still cause significant problems for Google. 

    Samsung Electronics Co. Ltd. may face antitrust enforcement in Europe arising from its patent litigation with Apple. Regulators may view efforts to enjoin Apple as anticompetitive under applicable antitrust standards in Europe. The patent litigation concerns features of Samsung’s wireless patents that may be considered industry standards, and may therefore give Samsung a highly dominant position in the way data is transferred wirelessly. The patents have been the subject of extensive civil litigation in the U.S. and several other jurisdictions in Apple and Samsung’s ongoing and epic struggle for dominance in mobile telecommunications. 


    Penguin Group USA followed the lead of several other e-book industry players, announcing a settlement with the DOJ of claims that publishers conspired with Apple to fix the price of electronic books. Similar to prior e-book settlements, Penguin will extinguish its existing agreements with Apple and be barred from certain types of agreement terms (among the terms is a constraint against entering into agreements that limit the ability to discount e-books) for the next two years. Penguin’s rumored merger/joint venture with Random House, which was not a party to the e-book lawsuit, likely created compelling business reasons that favored settlement. Penguin representatives noted that the “proposed Penguin Random House Company should begin life with a clean sheet of paper.” 

    Freight Forwarding

    In follow-on resolutions to the DOJ’s lengthy investigation of the freight forwarding and logistics industry, four forwarders were fined by Switzerland’s competition authorities in late December, with fines collectively totaling slightly less than seven million dollars. Swiss authorities revealed that a fifth forwarder escaped liability by obtaining full immunity. Like the freight forwarding allegations that led to earlier resolutions with the DOJ, the case concerned price-fixing of fees and surcharges common to many freight forwarders. 

    A Japanese freight forwarder pleaded guilty to antitrust charges in the U.S. Kintetsu World Express Inc. will pay more than $10 million to resolve allegations that it fixed fuel surcharges and security fees on cargo shipped to the United States.


    A municipal bond broker was sentenced to 18 months in prison following his conviction for bid-rigging and fraud in connection with municipal bond investment auctions. Brokers in the municipal bond auction business allegedly divvied up the market and shared information prior to bidding, or submitting intentionally low bids designed to drive up prices for competitors – in exchange for similar behavior on other contracts. Virtually all of the individuals charged in the municipal bond bid-rigging case based in New York have pleaded guilty or were found guilty at trial. 


    In late December, the DOJ announced that criminal antitrust fines levied during the year exceeded one billion dollars, a record amount. These fines reflect a few “big hits” that do not necessarily help project where the DOJ may turn in 2013.

    Virtually all of the fine amounts imposed came from three corporate prosecutions. Auto parts manufacturer Yazaki Corporation agreed to a $470 million fine early in the year and co-defendant Denso Corporation agreed to a $78 million fine. In addition to the auto parts antitrust investigation, which may well yield significant criminal fines in the future, AU Optronics Inc. (“AUO”) received a $500 million fine following a jury verdict. Most of AUO’s co-defendants entered guilty pleas and received fines prior to 2012, and the verdict is currently on appeal. The auto parts antitrust investigation has already shown signs of extending into multiple types of parts and markets in Asia; that investigation could yield significant penalties in 2013 and will probably be a very active investigation for a number of years. Several corporate executives agreed to plea bargains and jail time for their role in auto parts price fixing, and the trend of seeking increasing jail time for an increasing number of individuals in antitrust prosecutions will likely continue, as it has for the past few years. 

    The LIBOR rate-rigging investigation could be very active in 2013. Some banks have already agreed to massive fines arising from rigging interbank rates in ways that may have inflated the banks’ apparent financial strength during the 2008 economic crisis and beyond. Royal Bank of Scotland recently announced that is has reserved more than $800 million to address fines and penalties associated with the LIBOR matter. Last year, UBS AG paid roughly $1.5 billion to settle allegations it conspired to rig lending rates, and Barclays paid $450 million in fines. The breadth of the LIBOR investigation and the recent news from RBS suggest that the investigation is far from over, and that this investigation will also yield significant prosecutions of individuals – UBS reportedly terminated nearly 20 employees in the wake of resolving its criminal LIBOR issues. Due to the mix of government regulators involved in the LIBOR problems, including the U.S. Commodity Futures Trading Commission (CFTC), the majority of the fines imposed from that investigation will not be attributed solely to the efforts of the Antitrust Division of the DOJ. LIBOR-related problems may also spread to other jurisdictions, as Hong Kong’s Monetary Authority has apparently been investigating whether participants in the LIBOR rate-fixing matter may have engaged in similar conduct for the HIBOR, the Hong Kong Interbank Offered Rate. 

    Paradoxically, though, the DOJ filed meaningfully less new criminal antitrust actions in 2012 than it did in 2011. It is too early to call this a trend, and the number of indictments should increase as more (and smaller) companies become entities of interest in the large pending investigations.