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Criminal Antitrust Fines: Trends and Recent Developments

Over the past ten years, criminal antitrust fines have increased dramatically:  they totaled only $107 million in fiscal year (“FY”) 2003, but increased to a high of $1.14 billion in FY-2012 and remained relatively steady at $1.02 billion in FY-2013.  As criminal fines increase, companies face increasing exposure for conduct that allegedly runs afoul of the U.S. antitrust laws.

What is driving the marked increase in potential penalties?  While there is no single answer that can explain the upward trend in criminal antitrust fines, there are several recent developments that should be considered:

  • Focus on International Cartels:  Many of the Antitrust Division’s recent investigations are international in scope, including the Auto Parts and benchmark investigations that have received substantial media attention.  Indeed, the Auto Parts price fixing investigation alone has resulted in over $2.3 billion in fines, 27 companies that have pleaded guilty or agreed to plead guilty, and 36 individuals who have been charged.  As international cartels gain greater attention from U.S. investigators, criminal fines will be greater as compared to the fines imposed on local or regional cartels.  Nonetheless, some have questioned whether the Antitrust Division’s focus on international cartels has resulted in a lack of effective enforcement concerning anticompetitive conduct at the local and regional level.  It remains to be seen how much emphasis the Antitrust Division will place on prosecuting regional crime and whether, to the extent the Antitrust Division declines to investigate and prosecute such crimes, state attorneys general will increase their enforcement activities.
  • Potential Revisions to Sentencing Guidelines:   In June 2014, the United States Sentencing Commission issued a notice in the Federal Register that it is conducting “a study of antitrust offenses, including examination of the fine provisions in § 2R1.1 (Bid-Rigging, Price-Fixing or Market Allocation Agreements Among Competitors).”  Public comments in response to this Federal Register notice are available here.  Most notably for corporate antitrust sentencing, the American Antitrust Institute (“AAI”) has submitted a comment arguing  that the current Guidelines recommendations are based on a presumption that illegal price-fixing increases prices by 10%, when studies have suggested that price-fixing may increase prices by 20% or more.  The AAI’s July 2014 letter follows up on the July 2013 letter it initially submitted asking the Commission to reconsider the Guideline for illegal price-fixing.  If the Guidelines range for criminal antitrust offenses increases, the volume of criminal antitrust fines will likely increase as well. Note, however, that the DOJ has taken the position that the “current § 2R1.1 fine provisions [for organizations] . . . are appropriate.” With respect to individuals, Judge Douglas H. Ginsburg (D.C. Cir.) and FTC Commissioner Joshua Wright asked the Commission “to focus its attention for now not upon increasing fines to organizations across the board, but instead upon increasing and adding penalties for the individuals responsible for the antitrust violations within offending organizations[.]”  Letters such as this one reflect the increased emphasis by enforcement and regulatory agencies on holding individuals – in addition to corporations – accountable for antitrust violations.
  • Sentencing Based on Cartel’s Aggregate Gains:  The Ninth Circuit’s recent opinion in AU Optronics also sheds light on some of the legal considerations that may increase the volume of fines collected.  The district court in that case imposed a $500 million fine on AU Optronics.  On appeal, AU Optronics raised two arguments concerning that sentence.  First, AU Optronics challenged the district court’s application of the alternative fines provision (18 U.S.C. § 3571, which increases the statutory maximum penalty to twice the defendants’ gains from the anticompetitive conduct) in a multi-defendant case.  The district court held that the maximum statutory penalty for each of the cartel participants is twice the collective gains of all defendants and co-conspirators, including those of larger corporations.  On appeal, AU Optronics argued that the maximum fine it could be sentenced to is twice its own gains.  The Ninth Circuit rejected this argument, noting that the unambiguous language of the statute permits a fine to be imposed based on the gross gains to all co-conspirators.  Second, AU Optronics argued that even if the statutory maximum for cartel participants is twice the collective gains of all conspiracy participants, the collective fine imposed on co-conspirators should not exceed that number.  The Ninth Circuit rejected that argument too, stating that there is no statutory authority or precedent to support AU Optronics’ interpretation of the alternative fine statute as requiring joint and several liability and, accordingly, a reduction of AU Optronics’s fine by the portion already paid by its co-conspirators.  The Ninth Circuit’s decision will likely influence the sentences imposed by other judges, and may also contribute to the increasing size of criminal fines imposed.