US antitrust prosecutors finish out 2017 with mixed court record, ambitious new cases

29 December 2017. By Joshua Sisco.

The US Department of Justice's results in criminal antitrust cases in 2017 were decidedly mixed.

Fine totals for fiscal 2017 dropped precipitously from the previous year, and prosecutors suffered several setbacks in court. Some potentially blockbuster investigations, however, are just getting started.

However, the antitrust division brought its first charges in several cases, and also opened ambitious new probes, including an investigation of global container ship companies that could test the industry’s antitrust immunity, as well as its first public investigation of Chinese companies.

Prosecutors racked up just $107.8 million in fines, down from $396.5 million the year before. About $46.6 million from the past year’s fine total is awaiting final court approval. The 2016 numbers were also down drastically, dropping from $3.6 billion in fiscal 2015.

Antitrust authorities are always quick to point out that measuring enforcement from fines alone is a poor metric. Some existing cases, such as the auto parts probes, wound down in 2017, and several new ones are in early stages.

The Justice Department filed charges against Bumble Bee Foods — the well-known US tuna company — which became the first company to plead guilty in the division’s investigation into canned tuna price-fixing. The company was sentenced to pay a $25 million fine earlier this year.

Prosecutors also touted their first case to involve encrypted communications when Houston-area Zaappaaz was charged with price-fixing of promotional products like wristbands and lanyards sold online.That case is expected to expand into other branded promotional products — a multi-billion dollar market.

Most charges filed in 2017 emerged from existing cases.

Norway’s Hoegh Autoliners was sentenced in December to pay $21 million for fixing prices on cars, trucks and other roll-on, roll-off cargo, while Nichicon and Matsuo Electric agreed to pay $42 million and $4.2 million respectively in the capacitors case. Two car parts companies also paid about $13 million in fines.

Courtroom troubles

Antitrust prosecutors suffered several setbacks in the courtroom this year. After securing guilty pleas from over 50 car parts makers and dozen of their executives, the DOJ first car parts case to head to trial ended in an acquittal.

After a two-week trial in November, an Ohio federal jury found Japanese auto parts manufacturer Tokai Kogyo and its US subsidiary, Green Tokai, not guilty of conspiring to rig bids and fix the prices of automotive body sealing products.

The companies were accused of conspiring with Nishikawa Rubber and its US unit to rig bids on parts sold to Honda. Nishikawa pleaded guilty and paid a $130 million fine and several of its executives testified at the trial.

Maruyasu, a Japanese maker of automotive steel tubes, is scheduled for trial in a similar price-fixing case in January at the same court, though before a different judge.

This summer, a Utah federal court dismissed an indictment against heir locator firm Kemp & Associates, who was accused of allocating markets with a rival. Kemp & Associates and its president successfully argued the case should be subject to the rule of reason — a balancing test that takes into account the benefits and drawbacks of particular conduct — and under that test, its conduct wouldn't be automatically illegal. Kemp’s co-conspirator pleaded guilty. The DOJ is appealing.

The long-running capacitor case also neared its conclusion, but not without difficulty.

Prosecutors haven't had an easy time in sentencing capacitor defendants who agreed to plead guilty. After reluctantly sentencing three companies — NEC Tokin, Hitachi Chemical and Rubycon — to fines he viewed as too lenient, US District Judge James Donato pushed back against proposed fines for other alleged conspirators Matsuo Electric, Holy Stone and Elna. Donato rejected two plea agreements. Instead, Holy Stone and Elna must give Donato full discretion over the fine imposed, a riskier proposition as the company doesn't know going in how high the penalty might be.

Most recently, prosecutors indicted Japan's Nippon Chemi-con for a 17-year conspiracy to fix capacitor prices. Numerous executives from the alleged co-conspirator will likely testify to NCC’s participation, but, as Tokai Kogyo discovered, testimony from co-conspirators doesn’t always win the day. No trial date is currently scheduled.

Individuals not spared

The DOJ’s biggest case against individuals in 2017 involved the January indictments of three foreign exchange traders. Richard Usher, Rohan Ramchandani, and Christopher Ashton — former traders at Royal Bank of Scotland, Citicorp and Barclays, respectively — are tentatively scheduled for trial in the summer of 2018. But the three men will argue for dismissal of the indictment in January.

The forex case is the antitrust division’s highest profile criminal investigation, resulting in billions in fines against major US banks. The trial of the three key traders, who are accused of manipulating US dollar-euro exchange rates, will likely be watched closely.

Prosecutors also continued their cases in the real estate market. Following the convictions of four Northern California real estate investors in late 2016, five more individual were convicted at trial this year. A sixth — viewed by the jury as having too minor a role to be culpable — was acquitted. Dozens of other investors who pleaded guilty were sentenced and sometimes forced to pay hundreds of thousands of dollars in fines.

The division continues to police the home foreclosure market, indicting three individuals in Florida in November, this time for auctions taking place online.

2018

The antitrust division faces litigation in its cases against the forex traders, NCC and Maruyasu.

But also highly anticipated are charges in the DOJ's generic drug case. So far, the agency has only charged two executives — Jeffrey Glazer and Jason Malek, the former CEO and president of Heritage Pharmaceuticals, respectively — with fixing prices of the antibiotic doxycycline hyclate and glyburide, a diabetes drug. But as a complaint recently filed by state attorneys general suggests, lots more charges on a variety of drugs may be in the works.

A pair of new cases launched this year are also likely to be an important test of the division’s reach. In March, the DOJ began an investigation of the container shipping industry. Container shippers have long operated in alliances and benefit from far-reaching immunity from US antitrust law. Explicit price-fixing, however, is illegal, and proving that conduct among mostly foreign companies will be a challenge.

Prosecutors have also ventured into China for the first time, sending subpoenas to the US operations of several Chinese air cargo carriers. How the government uses US law against foreign companies in a centralized economy will be closely watched.