Survey of Recent Developments in Criminal Antitrust Law

The 2004 Act also had significant impact on the private litigation for treble damages that inevitably follows criminal antitrust investigations: It reduced to single damages the amount recoverable from a company that receives immunity by self-reporting an antitrust violation. Damages recoverable from a company that receives DOJ antitrust immunity are also limited to sales of the immunized company alone, rather than the joint and several liability that normally accompanies criminal antitrust violations because, by definition, they require agreement and sales of multiple competitors. The 2004 Act expressly extends this 'detrebling' for companies cooperating in federal antitrust investigations to claims based on state antitrust laws in state court proceedings, though the courts have yet to decide whether this attempted federal regulation of state law and state proceedings is constitutional. If upheld, this provision will make self-reporting antitrust violations to DOJ substantially more attractive to companies that have participated in a cartel.

In 2006, Congress added antitrust to the list of crimes that DOJ can investigate using court-authorized wiretaps. 18 U.S.C. ' 2516. (Recall that the antitrust laws are codified in Title 15 of the United States Code relating to 'Economy and Trade,' and not Title 18 regarding 'Crime and Criminal Procedure,' where most predicate crimes for wiretap authority are located.)

Judicial Developments

Some litigated antitrust disputes of the last several years will impact DOJ policy toward antitrust enforcement for many years to come. In Stolt-Nielsen, S.A. v. United States, 442 F.3d 177 (3d Cir. 2006), the district court dismissed the indictment of a company that had received a grant of immunity for providing the Antitrust Division with information about a cartel agreement among ocean transportation companies. The Antitrust Division argued that the company voided the immunity agreement by continuing in the cartel. But the district court, following instructions on remand from the Third Circuit, enforced the immunity agreement because the company had complied with its obligations to report a violation and cooperate with the Division's investigation and thus had provided the Division with its 'benefit of the bargain.' This was not a particularly surprising result because other divisions of the DOJ have long been held to a similar standard in non-prosecution agreements. See, e.g., United States v. Castaneda, 162 F.2d 832, 837 (5^th Cir. 1998). But it was novel for an antitrust prosecution. As a result, the Division will likely scrutinize the conduct of companies seeking leniency as the investigation of other participants proceeds.

A civil antitrust opinion by the Supreme Court in 2004 more clearly stated the limits of U.S. antitrust jurisdiction to penalize conduct outside the United States. Hoffman-LaRoche Ltd. v. Empagran S.A., 542 U.S. 155 (2004). This civil litigation followed the prosecution of vitamin producers for agreeing to raise prices and limit production globally. The Supreme Court stated that plaintiffs had to limit their claims to injury that was domestic to the United States, essentially limiting plaintiffs' claims to sales to U.S.-located customers or contracts performed in the United States. Though arising from civil litigation, the Supreme Court's decision will eliminate the DOJ's threat to seek criminal antitrust penalties based on the global commerce affected by a cartel.

Like all criminal prosecutions by the DOJ, antitrust enforcement will be significantly impacted by Blakely v. Washington, 542 U.S. 296 (2004) (requiring upward departures under the Sentencing Guidelines to be based on facts reflected in the jury verdict or admitted by the defendant), and United States v. Booker, 543 U.S. 220 (2005) (holding that the Sentencing Guidelines are advisory and not mandatory). These decisions are starting to impact DOJ criminal antitrust trials by increasing the amount of economic and financial evidence presented at trial even beyond the voluminous evidence customarily presented by antitrust prosecutors.

DOJ Enforcement Policy

Two policy decisions of the Antitrust Division and related diplomatic developments have impacted antitrust prosecution and sentencing more than any other recent policy changes: 1) an increase in international cooperation with other nations' competition law enforcement agencies; and 2) a DOJ effort to seek a prison sentence for at least one individual from each non-immunized company in a cartel agreement. These trends continue from well-known Division policies established in the 1990s to seek maximum criminal penalties rather than rely on private treble-damages lawsuits to vindicate economic harm, and to investigate aggressively conduct outside the United States that impacts prices of goods and services sold in the United States.

Relations between the Antitrust Division and other nations' enforcement agencies have progressed to the point where they continually communicate about investigations of mutual interest and frequently coordinate multinational, simultaneous search warrant executions and investigation disclosures. In an investigation of competitors in the air cargo industry begun in 2006, antitrust investigation agencies on five continents simultaneously raided company offices and issued investigation subpoenas. This contrasts to a period in the 1990s when the closest political and economic partners of the United States commonly
refused to participate in U.S. antitrust investigations or prohibited the transfer of information. An International Competition Network has formed among enforcement agencies in 88 countries, with annual meetings and frequent opportunities for coordination and communication of enforcement activities. See http://www.inter nationalcompetitionnetwork.org/. As a result, more U.S. antitrust investigations now originate from conduct occurring outside the United States than inside, and most criminal antitrust fines of the last half-decade (approximately 80%) have been paid by non-U.S. companies.

Over the years, the Antitrust Division has taken an ever harsher view of what punishment is appropriate for individual violators. Through the 1980s, it considered that minimal corporate fines were enough to enforce the antitrust laws. Through the early 1990s, it allowed non-U.S. citizens to avoid incarceration in almost all prosecutions. Now the Division has adopted an aggressive policy towards seeking a sentence of incarceration for at least one individual from each non-immunized company that does not provide prompt cooperation in an antitrust investigation. The DOJ's enforcement policy has focused, particularly over the past half-decade, on seeking individual incarceration as a primary means to alter corporate behavior regardless of the citizenship of a company officer who actively furthers a cartel that impacts the U.S. economy.

Conclusion

Viewed together, these developments have produced some striking statistics in U.S. criminal antitrust enforcement.

First, corporate fines have increased dramatically. In several recent years, for example 2001, the corporate antitrust fines collected in a single year exceeded the total antitrust fines collected in the first 100 years after the enactment of U.S. antitrust laws in 1890.

Second, the percentage of individual defendants sentenced to jail has skyrocketed. In 2007, 87% of all defendants in antitrust prosecutions received some period of incarceration, either at a litigated sentencing hearing or by plea agreement.

Third, the period of incarceration has increased from an average of about eight months in the 1990s to around 30 months in 2007.

Fourth, average prison sentence served by non-U.S. citizens increased to nearly a year in 2007.

The increasing aggressiveness of international antitrust enforcement and the increased penalties for corporations and individuals require companies to keep apace by increasing their vigilance to comply with global antitrust laws, identifying and correcting situations before they become problems.

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David J. Laing ([email protected]), a member of the Board of Editors of this newsletter, is a partner in Baker & McKenzie's Global Antitrust Practice Group in their Washington office. He is a former Trial Attorney with the Antitrust Division of the U.S. Department of Justice.

There have been numerous developments in U.S. criminal antitrust law over the last half-decade ' in legislation, judicial opinions, and the publicly stated enforcement policy of the Antitrust Division of the Department of Justice (DOJ). While none have been watershed events individually, in the aggregate they fundamentally impact representation of companies or individuals under investigation for antitrust violations. This article outlines the cumulative effect of these developments and indicates how representation of companies under antitrust investigation has changed over this period.

Legislative Developments

The most significant legislative change in criminal antitrust law during this period was the Antitrust Criminal Penalty Enhancement and Reform Act of 2004, which increased the maximum criminal antitrust fine for corporations to $100 million, increased the maximum fine for individuals to $1 million, and increased the maximum term of imprisonment to 10 years. The increase for corporate fines to $100 million is not ground-breaking, as the DOJ has already obtained numerous fines in plea agreements substantially exceeding $100 million, utilizing the alternative 'twice gain/twice loss' provisions of 28 U.S.C. ' 3571(d). The increase in the statutory maximum will allow the DOJ to push more aggressively for fines up to the current $100 million maximum without any need to demonstrate the amount of gain or loss from an antitrust violation. The increase in an individual sentence from three to 10 years places incarceration for an antitrust violation in the same range as for traditional major frauds.

The 2004 Act also had significant impact on the private litigation for treble damages that inevitably follows criminal antitrust investigations: It reduced to single damages the amount recoverable from a company that receives immunity by self-reporting an antitrust violation. Damages recoverable from a company that receives DOJ antitrust immunity are also limited to sales of the immunized company alone, rather than the joint and several liability that normally accompanies criminal antitrust violations because, by definition, they require agreement and sales of multiple competitors. The 2004 Act expressly extends this 'detrebling' for companies cooperating in federal antitrust investigations to claims based on state antitrust laws in state court proceedings, though the courts have yet to decide whether this attempted federal regulation of state law and state proceedings is constitutional. If upheld, this provision will make self-reporting antitrust violations to DOJ substantially more attractive to companies that have participated in a cartel.

In 2006, Congress added antitrust to the list of crimes that DOJ can investigate using court-authorized wiretaps. 18 U.S.C. ' 2516. (Recall that the antitrust laws are codified in Title 15 of the United States Code relating to 'Economy and Trade,' and not Title 18 regarding 'Crime and Criminal Procedure,' where most predicate crimes for wiretap authority are located.)

Judicial Developments

Some litigated antitrust disputes of the last several years will impact DOJ policy toward antitrust enforcement for many years to come. In Stolt-Nielsen, S.A. v. United States , 442 F.3d 177 (3d Cir. 2006), the district court dismissed the indictment of a company that had received a grant of immunity for providing the Antitrust Division with information about a cartel agreement among ocean transportation companies. The Antitrust Division argued that the company voided the immunity agreement by continuing in the cartel. But the district court, following instructions on remand from the Third Circuit, enforced the immunity agreement because the company had complied with its obligations to report a violation and cooperate with the Division's investigation and thus had provided the Division with its 'benefit of the bargain.' This was not a particularly surprising result because other divisions of the DOJ have long been held to a similar standard in non-prosecution agreements. See, e.g. , United States v. Castaneda , 162 F.2d 832, 837 (5 th Cir. 1998). But it was novel for an antitrust prosecution. As a result, the Division will likely scrutinize the conduct of companies seeking leniency as the investigation of other participants proceeds.

A civil antitrust opinion by the Supreme Court in 2004 more clearly stated the limits of U.S. antitrust jurisdiction to penalize conduct outside the United States. Hoffman-LaRoche Ltd. v. Empagran S.A. , 542 U.S. 155 (2004). This civil litigation followed the prosecution of vitamin producers for agreeing to raise prices and limit production globally. The Supreme Court stated that plaintiffs had to limit their claims to injury that was domestic to the United States, essentially limiting plaintiffs' claims to sales to U.S.-located customers or contracts performed in the United States. Though arising from civil litigation, the Supreme Court's decision will eliminate the DOJ's threat to seek criminal antitrust penalties based on the global commerce affected by a cartel.

Like all criminal prosecutions by the DOJ, antitrust enforcement will be significantly impacted by Blakely v. Washington , 542 U.S. 296 (2004) (requiring upward departures under the Sentencing Guidelines to be based on facts reflected in the jury verdict or admitted by the defendant), and United States v. Booker , 543 U.S. 220 (2005) (holding that the Sentencing Guidelines are advisory and not mandatory). These decisions are starting to impact DOJ criminal antitrust trials by increasing the amount of economic and financial evidence presented at trial even beyond the voluminous evidence customarily presented by antitrust prosecutors.

DOJ Enforcement Policy

Two policy decisions of the Antitrust Division and related diplomatic developments have impacted antitrust prosecution and sentencing more than any other recent policy changes: 1) an increase in international cooperation with other nations' competition law enforcement agencies; and 2) a DOJ effort to seek a prison sentence for at least one individual from each non-immunized company in a cartel agreement. These trends continue from well-known Division policies established in the 1990s to seek maximum criminal penalties rather than rely on private treble-damages lawsuits to vindicate economic harm, and to investigate aggressively conduct outside the United States that impacts prices of goods and services sold in the United States.

Relations between the Antitrust Division and other nations' enforcement agencies have progressed to the point where they continually communicate about investigations of mutual interest and frequently coordinate multinational, simultaneous search warrant executions and investigation disclosures. In an investigation of competitors in the air cargo industry begun in 2006, antitrust investigation agencies on five continents simultaneously raided company offices and issued investigation subpoenas. This contrasts to a period in the 1990s when the closest political and economic partners of the United States commonly
refused to participate in U.S. antitrust investigations or prohibited the transfer of information. An International Competition Network has formed among enforcement agencies in 88 countries, with annual meetings and frequent opportunities for coordination and communication of enforcement activities. See http://www.inter nationalcompetitionnetwork.org/. As a result, more U.S. antitrust investigations now originate from conduct occurring outside the United States than inside, and most criminal antitrust fines of the last half-decade (approximately 80%) have been paid by non-U.S. companies.

Over the years, the Antitrust Division has taken an ever harsher view of what punishment is appropriate for individual violators. Through the 1980s, it considered that minimal corporate fines were enough to enforce the antitrust laws. Through the early 1990s, it allowed non-U.S. citizens to avoid incarceration in almost all prosecutions. Now the Division has adopted an aggressive policy towards seeking a sentence of incarceration for at least one individual from each non-immunized company that does not provide prompt cooperation in an antitrust investigation. The DOJ's enforcement policy has focused, particularly over the past half-decade, on seeking individual incarceration as a primary means to alter corporate behavior regardless of the citizenship of a company officer who actively furthers a cartel that impacts the U.S. economy.

Conclusion

Viewed together, these developments have produced some striking statistics in U.S. criminal antitrust enforcement.

First, corporate fines have increased dramatically. In several recent years, for example 2001, the corporate antitrust fines collected in a single year exceeded the total antitrust fines collected in the first 100 years after the enactment of U.S. antitrust laws in 1890.

Second, the percentage of individual defendants sentenced to jail has skyrocketed. In 2007, 87% of all defendants in antitrust prosecutions received some period of incarceration, either at a litigated sentencing hearing or by plea agreement.

Third, the period of incarceration has increased from an average of about eight months in the 1990s to around 30 months in 2007.

Fourth, average prison sentence served by non-U.S. citizens increased to nearly a year in 2007.

The increasing aggressiveness of international antitrust enforcement and the increased penalties for corporations and individuals require companies to keep apace by increasing their vigilance to comply with global antitrust laws, identifying and correcting situations before they become problems.

[IMGCAP(1)]

[IMGCAP(2)]

[IMGCAP(3)]

[IMGCAP(4)]

David J. Laing ([email protected]), a member of the Board of Editors of this newsletter, is a partner in Baker & McKenzie's Global Antitrust Practice Group in their Washington office. He is a former Trial Attorney with the Antitrust Division of the U.S. Department of Justice.