2. INDUSTRY SCORECARD
Technology: 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.
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3. E-books: 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.
Financial: 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.
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4. THE LONG ARM OF THE JUSTICE DEPARTMENT IN 2012 – BUT WHAT
ABOUT 2013?
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.
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5. 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.
f bankruptcy as a result of a large criminal fine, as bankruptcy can certainly enhance the perception
that a company could fail if the Division refuses to consider compromise regarding criminal fines.
Outside expertise can also help the Division understand how a company’s financial situation could
lead to other highly
damaging consequences like efforts by lenders to limit their own exposure to a potentially failing
company.
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 protect where the DOJ may turn in 2013.
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