On Feb. 14, 2006, regulators from various agencies in the European Union, North America and Asia arrived unannounced on the doorsteps of airline offices around the world armed not with valentines, but with subpoenas.
The regulators raided the airline offices in search of any information related to a price-fixing conspiracy among companies in the air cargo industry. The coordinated series of raids was a wake-up call for all multinational businesses that antitrust enforcement had gone global.
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Over the past several years, the European Commission has led the
charge on the investigation of multinational cartels, with the U.S. as
its close companion. Enforcement authorities have levied significant
fines in cartel investigations that are rarely confined to domestic
borders. Of the U.S. corporate fines over $10 million, only 6% resulted
from antitrust violations that were domestic in scope. A key factor in
uncovering global cartels has been the leniency programs of the EU and
U.S. Under those programs, the first company that provides information
to authorities regarding a cartel is granted immunity.
The latest group of multinational companies to fall prey to the
U.S.'s active investigation of international cartels is the liquid
crystal display industry. In March, Japanese electronics manufacturer Hitachi Displays Ltd.
agreed to pay a $31 million fine for its involvement in a conspiracy to
fix prices for LCD display panels. Three other multinational companies
were also fined $585 million for their part in the scheme, including a
fine of $400 million for LG Group -- the second-largest fine in U.S. antitrust history.
Successful cartel investigations are not limited to the EU or U.S.
In March, Japan's competition authority reportedly fined 12
international cargo carriers $94.7 million for fixing air cargo prices.
Carrier Nippon Express Co. Ltd. received the largest fine at $26.1 million. In addition, China, which recently blocked a merger bid by Coca-Cola Co.
for a Chinese juice company, has enacted a new Anti-Monopoly Law that
permits enforcement authorities to confiscate the illegal gains of
cartels and to impose fines of 1% to 10% of sales revenue for the
previous year. Given that there are more than 100 countries with
antitrust laws, global enforcement will broaden in scope over time,
only increasing the risks for multinational companies.
These companies must also be aware of the effect global enforcement
has on private antitrust litigation. Once a government has launched an
investigation into a company or an industry, private plaintiffs are
often waiting in the wings to bring follow-on litigation. In the U.S.,
this has become the rule, especially given the active plaintiffs' bar.
The result is a marked growth in private antitrust class actions over
the past five years.
Across the Atlantic, the EU has engaged in discussions regarding the
feasibility and desirability of private litigation in Europe for
victims of cartels. In March, the European Parliament issued a
resolution supporting the commission's proposed legislation to allow
private litigation.
Today's economic instability will also contribute to the rise in
private antitrust suits. A company may be more willing to sue a larger
rival, possibly assigning blame for the company's failure. Larger
companies may become targets for smaller competitors that might not
have brought suits in an otherwise healthy economy.
Economic hardship may also lead companies to choose creative
solutions to resolve antitrust disputes. For example, an accused
cartelist recently entered into a global private settlement with the
purchasers of marine hose, a product that transfers oil between tankers
and oil storage facilities. A touted benefit of the deal is that it
puts money in the hands of claimants quicker than a traditional
class-action settlement because the private settlement avoids the need
for court involvement and approval. A wrinkle to the settlement,
however, is the settling cartelist's offer to share information with
the claimants regarding any other potential defendants' participation
in the cartel -- a new and interesting weapon in the attack on
multinational cartels.
The need for multinational companies to have a global antitrust
compliance policy has never been greater. Companies must focus on
having a consistent message regarding antitrust issues across the
company -- because who knows if tomorrow, the regulators show up on your
doorstep without an invitation.
Alan Wiseman is co-chair of the antitrust practice group at Howrey LLP. Ashley Bass is a senior associate in Howrey's antitrust practice.
