PRACTICE AREA / CONFIDENTIAL

U.S. Cartel Enforcement

Brian Byrne
November 25, 2010

© 2010 Cleary Gottlieb Steen & Hamilton LLP. All rights reserved.
U.S. Cartel Fines Increasing

Source: DOJ

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 Elpida Memory
Samsung Electronics
DRAM

Hynix Semiconductors
Infineon Technologies
Northwest Airlines LLC
Asiana Airlines
Nippon Cargo Airlines
Fines in Recent Major U.S. Cartel Cases

Cargolux Airlines Int'l

EL AL Israel Airlines…
LAN Cargo/ABSA

Air Cargo
Japan Airlines
Qantas Airways
Korean Air Lines
British Airways
Air France-KLM
Cathay Pacific Airways
Martinair Holland N.V.
SAS Cargo Group A/S
Chi Mei
Epson

LCD Panel
Hitachi Displays
Chunghwa Picture…
Sharp
LG Display

$0.0
$450.0

$400.0

$350.0

$300.0

$250.0

$200.0

$150.0

$100.0

$50.0
Fine Amount in Millions

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Recent U.S. Cartel Cases: Facts & Figures

Air
Cargo*
19 corporate defendants

$1.78 billion in fines

17 individuals indicted

4 individuals sentenced to jail

LCD
Panel*
30 months total jail time
DRAM
8 corporate defendants 4 corporate defendants

$892 million in fines $729 million in fines

21 individuals indicted 18 individuals indicted

10 individuals sentenced to jail 15 individuals sentenced to jail

89 months total jail time 106 months total jail time

*DOJ’s investigations into the LCD Panel and Air Cargo industries remain ongoing

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AUO: A Case to Watch
 In the DOJ’s LCD panel case so far, seven companies have pled guilty to fixing prices and
paid over $890 million in fines; 17 executives have been indicted
 AU Optronics Corp. (“AUO”) is a Taiwanese LCD panel manufacturer with an $8.5B market
capitalization
– AUO sold products to Asian customers that in turn supplied U.S. customers
 In June 2010, AUO and six of its executives were indicted for conspiring to fix prices on TFT-
LCD flat panels
 AUO counsel has stated publicly that the company does not intend to settle and in
November 2010, AUO filed a motion to dismiss DOJ’s indictment
 The AUO case has the potential to be a rare corporate price-fixing trial
– If AUO is found guilty, affected U.S. commerce will be a key issue – both in terms of extent to which foreign
activities can be the basis for DOJ prosecution and for how foreign sales can figure into U.S. criminal
antitrust penalties if AUO is convicted
 AUO case also illustrates risk to foreign executives
– In August 2010, 3 Taiwanese AUO executives appeared in court in the U.S. for arraignment in order to
plead not guilty
– Court initially agreed to release them on $10 million bail after the company and Taiwanese government
guaranteed their appearance at trial, but changed its position and ordered the individuals to remain in the
US until trial after DOJ argued they posed a serious flight risk

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NEW YORK

WASHINGTON

PARIS

BRUSSELS

LONDON

MOSCOW

FRANKFURT

COLOGNE

ROME

MILAN

HONG KONG

BEIJING

www.clearygottlieb.com
Basics of U.S. Criminal Antitrust Procedures
Process General information

Potential Penalty: Maximum fines under

Grand Jury convened federal law for corporations
(Issues subpoenas for documents, data, testimony)

DOJ conducts investigation • Greater of:

(Based upon subpoenaed documents and information
and seeks cooperating witnesses, • $100 million per offense or
e.g., by offering immunity) • Double the gain to the defendant or
the loss to the victims
DOJ decides whether to ask grand jury to
indict one or more defendants
Case can be resolved at any point during
If no, case ends
process either by DOJ deciding not to
Pre-trial motions pursue the case or by the party under
(Including possible motions to dismiss indictment)
If motion granted,
investigation entering into a plea
case might end agreement (a contract of sorts) with DOJ
Trial: Guilt or innocence
(Decided by jury in federal district court) • If plea agreement, court must
If not guilty,
case ends approve the agreement, including
If guilty, sentencing hearing the amount of the fine
(Judge decides on a fine or imprisonment) • Most cases are resolved through
plea agreement.
Defendant has right to appeal
(Conviction, amount of fine, and imprisonment)

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Criminal Fines: How Fines are Determined
Amount of
U.S. commerce X 20% “Base Fine”
affected

Multiplier Guidelines
“Base Fine” X
Likely 1.6 to 3.2 for Range
large corp

After a Trial: In Plea Bargain Context:

Judge will set the exact fine, Guidelines Range may be
starting from Guidelines starting point for DOJ
Range, but discounts are negotiations, but process can
allowed and common vary widely

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 20%: “Base
32%: Typical bottom of

fine”

Elpida Memory
Guidelines range

Samsung Electronics
DRAM

Hynix Semiconductors
Infineon Technologies
Northwest Airlines
Asiana Airlines
Cartel Fines as a % of “Volume of Commerce”

Nippon Cargo Airlines

Cargolux Airlines Int'l
EL AL Israel Airlines Ltd.
LAN Cargo/ABSA Air Cargo
Japan Airlines
Qantas Airways
Korean Air Lines
British Airways
Air France-KLM
Cathay Pacific Airways
Martinair Holland N.V.
SAS Cargo Group A/S
Parker ITR

Marine Hose
Dunlop
Manuli Rubber
Trelleborg Industrie
(As Cited in Plea Agreements)

HannStar
Chi Mei
Epson

LCD Panel
Hitachi Displays
Chunghwa Picture Tubes
Sharp
LG Display

Comp.
Panasonic
Embraco N.A.

50.0%

45.0%

40.0%

35.0%
30.0%

25.0%
20.0%

15.0%
10.0%

5.0%
0.0%
Percent of Volume of Commerce

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 Elpida Memory
DRAM

Samsung Electronics
Hynix Semiconductors
Infineon Technologies
Northwest Airlines
Asiana Airlines
Nippon Cargo Airlines
Cargolux Airlines Int'l
EL AL Israel Airlines Ltd.
Fines Compared to Guideline Ranges

LAN Cargo/ABSA

*LG excluded for reasons of scale; Guidelines range was $800 million to $1.6 billion; fine was $400 million.
Air Cargo
Japan Airlines
Qantas Airways
Korean Air Lines
British Airways
Air France-KLM
Cathay Pacific Airways
Martinair Holland N.V.
SAS Cargo Group A/S
HannStar
Guidelines Range

Chi Mei

LCD Panel
Epson
Hitachi Displays
Fine
Chunghwa Picture Tubes
Sharp

Comp.
Panasonic
Embraco N.A.

$0.0
$900.0

$800.0

$700.0

$600.0

$500.0

$400.0

$300.0

$200.0

$100.0
Millions

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Prosecution of Individuals: Ian Norris

 Foreign executives who come to the U.S. subject themselves to a risk of

criminal prosecution for antitrust violations.

 Even for those who stay abroad, DOJ can seek

extradition, sometimes on subsidiary charges.

 Consider the example of Ian Norris:

– Norris is former CEO of British firm Morgan Crucible.
– In 2002, Morgan Crucible pled guilty to price-fixing, but Norris
was among four executives carved out from the plea.
– U.S. sought to extradite him, but the House of Lords said he could not be as price-
fixing not a criminal offense in the U.K. at the time.
– But Norris was also charged with obstruction of justice, and after several appeals
were rejected, Norris was extradited in March 2010.
– In July 2010, a jury convicted Norris for conspiring to obstruct justice.

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