Antitrust Lawyer Blog Commentary on Current Developments

Antitrust Division Ends the Year with Second-Highest Level of Criminal Fines

On December 21, the DOJ announced that in 2006 the Antitrust Division marked its second highest level of criminal fines obtained in Division history. The Division also experienced increases in merger filings and entered into more merger settlements than the previous two years combined. Further, the Division supported initiatives to improve the analysis of civil non-merger conduct, both in the United States and internationally, and participated in several U.S. Supreme Court cases important to the continuing refinement of the antitrust laws.
On December 21, the DOJ announced that in 2006 the Antitrust Division marked its second highest level of criminal fines obtained in Division history. The Division also experienced increases in merger filings and entered into more merger settlements than the previous two years combined. Further, the Division supported initiatives to improve the analysis of civil non-merger conduct, both in the United States and internationally, and participated in several U.S. Supreme Court cases important to the continuing refinement of the antitrust laws.

Cartel Enforcement

Anticompetitive conduct by criminal cartels ¬such as price fixing, bid rigging, and procurement fraud remains the highest enforcement priority of the Antitrust Division. For the fiscal year ending on September 30, 2006, the Division obtained criminal fines totaling $473,445,600, representing a 40 percent increase over FY 2005, and filed 33 criminal cases, many involving multiple defendants.

Fiscal Year 2006 yielded 5,383 jail days imposed for price fixing, bid rigging, obstruction, fraud and related anticompetitive conduct. As of December 15, 2006, only a few months into FY 2007, the Division obtained sentences totaling 9,135 days of jail time.

The Division continues to investigate and prosecute the international cartel that fixed prices for high-tech dynamic random access memory (“DRAM”). Early in FY 2006, the Division obtained a $300 million fine against Samsung Electronics Company and its U.S. subsidiary, Samsung Semiconductor Inc., the second largest criminal antitrust fine in U.S. history. In FY 2006, the Division obtained an $84 million fine against Japanese manufacturer Elpida Memory Inc., and secured guilty pleas from four executives of Hynix Semiconductor Inc. and four executives of Samsung Electronics Co. Ltd., both Korean manufacturers of DRAM. Over the full course of the investigation, this matter has yielded charges against four companies and 18 individuals, of whom 11 are foreign nationals who have served or agreed to serve time in U.S. prisons. The Division has obtained more than $732 million in criminal fines and courts imposed 2,460 days of prison time for individuals as a result of this investigation.

In 2006, the Division continued to investigate price fixing in the ready-mixed concrete industry in the Midwest. In total, five companies and 10 executives pled guilty, or were convicted for conspiring to fix the price of ready-mixed concrete. The Division obtained almost $35 million in fines, including a $29.2 million fine,¬ the largest fine ever obtained in a domestic cartel investigation ¬ against Irving Materials Inc., an Indiana ready-mixed concrete producer. Additionally, each of the six executives sentenced will serve between five and 14 months of incarceration.

The Division obtained guilty pleas or convictions against price-fixing cartels and bid-rigging conspiracies in many other industries in 2006, including rubber chemicals, hydrogen peroxide and sodium perborates, gas pipeline construction, marine fenders supplied to the U.S. Navy and Coast Guard, and freight forwarding services offered to the U.S. military.

The Division continued its nationwide investigation of bid rigging and fraud in the E-Rate program, which Congress created to help needy schools and libraries connect to the Internet. In 2006, the DOJ imposed more than $4 million in criminal fines and restitution as a result of this investigation. In total, the Division charged 14 individuals and 12 companies in connection with schemes to defraud the E-Rate program and schools across the country. Defendants have been sentenced to 4,380 days in prison and agreed to pay criminal fines and restitution totaling more than $40 million.

Merger Enforcement

Merger and acquisition activity continued to increase in 2006 in terms of transaction activity. For the fiscal year ending September 2006, premerger transaction filings under the Hart-Scott-Rodino (“HSR”) Act increased 8.9 percent over FY 2005 to 1860, and parties notified an additional 458 transactions between October 1 and December 15. The Division initiated ten merger enforcement actions, and an additional six transactions were restructured by the parties in response to a Division investigation. At the same time, the Division continued to improve its efficiency in the review of HSR transactions: the percentage of HSR transactions resulting in a second request dropped from 1.5 percent to one percent, and the duration of the average second request investigation continued to decline.

The Division obtained divestitures or other relief to prevent harm to competition in numerous industries. For example, the Division obtained a settlement in its challenge to DFA’s consummated acquisition of a partial ownership interest in Southern Belle. The settlement required DFA to divest all of its ownership interest in Southern Belle, protecting competition for school milk sales in a total of 100 school districts in Kentucky and Tennessee.

The Division obtained a consent decree under which Mittal Steel Company N.V. will divest one of the three North American tin mills it will own as the result of acquiring Arcelor S.A. The divestiture agreement seeks to preserve competition in the market for tin mill products, which are finely rolled steel sheets (normally coated with tin or chrome) used in many consumer-product applications.

In connection with the newspaper merger of The McClatchy Company and Knight-Ridder Inc., the Division obtained the divestiture of the St. Paul Pioneer Press, a Minneapolis/St. Paul newspaper, to preserve competition in the local market for readers and advertisers.

In another matter, the Division obtained a consent decree requiring Exelon Corporation and Public Service Enterprise Group Inc. to divest six electricity generating plants in order to preserve competition in the wholesale electricity market in the Mid-Atlantic region. The deal was never consummated as the state of New Jersey refused to settle with the parties because New Jersey believed that the relief obtained by the DOJ was insufficient to protect competition.

Authored by

Andre P. Barlow
202-589-1838
abarlow@dbmlawgroup.com