GE Funding Capital Market Services Inc. Admits to Anticompetitive Conduct by Former Traders in the Municipal Bond Investments Market and Agrees to Pay $70 Million to Federal and State Agencies

WASHINGTON – GE Funding Capital Market Services Inc. entered into an agreement with the Department of Justice to resolve the company’s role in anticompetitive activity in the municipal bond investments market and agreed to pay a total of $70 million in restitution, penalties and disgorgement to federal and state agencies, the Department of Justice announced today.

 

 As part of its agreement with the department, GE Funding admits, acknowledges and accepts responsibility for illegal, anticompetitive conduct by its former traders.  According to the non-prosecution agreement, from 1999 through 2004, certain former GE Funding traders entered into unlawful agreements to manipulate the bidding process on municipal investment and related contracts, and caused GE Funding to make payments and engage in other related activities in connection with those agreements through at least 2006.  These contracts were used to invest the proceeds of, or manage the risks associated with, bond issuances by municipalities and other public entities.

 

 “GE Funding’s former traders entered into illegal agreements to manipulate the bidding process on municipal investment contracts,” said Sharis A. Pozen, Acting Assistant Attorney General in charge of the Justice Department’s Antitrust Division.  “This anticompetitive conduct harmed municipalities, as well as taxpayers.  Today’s resolution requires GE Funding to pay penalties, disgorgement and restitution to the victims of its illegal activity.  We will continue to use all the tools at our disposal to uphold our nation’s antitrust laws and ensure competition in the financial markets.”

 

Under the terms of the agreement, GE Funding agreed to pay restitution to victims of the anticompetitive conduct and to cooperate fully with the Justice Department’s Antitrust Division in its ongoing investigation into anticompetitive conduct in the municipal bond derivatives industry.  To date, the ongoing investigation has resulted in criminal charges against 18 former executives of various financial services companies and one corporation.  Nine of the 18 executives charged have pleaded guilty.   

 

The Securities and Exchange Commission (SEC), the Internal Revenue Service (IRS) and 25 state attorneys general also entered into agreements with GE Funding requiring the payment of penalties, disgorgement of profits from the illegal conduct and payment of restitution to the victims harmed by the bid manipulation by GE Funding employees, as well as other remedial measures.

 

 As a result of GE Funding’s admission of conduct; its cooperation with the Department of Justice and other enforcement and regulatory agencies; its monetary and non-monetary commitments to the SEC, IRS and state attorneys general; and its remedial efforts to address the anticompetitive conduct, the department agreed not to prosecute GE Funding for the manipulation of bidding for municipal investment and related contracts, provided that GE Funding satisfies its ongoing obligations under the agreement.

 

 JPMorgan Chase & Co., UBS AG and Wachovia Bank N.A. also reached agreements with the Department of Justice and other federal and state agencies to resolve anticompetitive conduct in the municipal bond derivatives market.  On May 4, 2011, UBS AG agreed to pay a total of $160 million in restitution, penalties and disgorgement to federal and state agencies for its participation in the anticompetitive conduct.  On July 7, 2011, JPMorgan agreed to pay a total of $228 million in restitution, penalties and disgorgement to federal and state agencies for its role in the conduct.  On Dec. 8, 2011, Wachovia Bank agreed to pay a total of $148 million in restitution, penalties and disgorgement to federal and state agencies for its participation in the anticompetitive conduct.

 

 The department’s ongoing investigation into the municipal bonds industry is being conducted by the Antitrust Division, the FBI and the IRS-Criminal Investigation.  The department is coordinating its investigation with the SEC, the Office of the Comptroller of the Currency and the Federal Reserve Bank of New York.  The department thanks the SEC, IRS and state attorneys general for their cooperation and assistance in this matter.

 

The Antitrust Division, SEC, IRS, FBI and state attorneys general are members of the Financial Fraud Enforcement Task Force.  President Obama established the interagency task force to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes.  The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources.  The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.  For more information about the task force, visit Stopfraud.gov.

Department of Justice and Federal Trade Commission Meet with Chinese Ministry of Commerce on Merger Enforcement Matters

WASHINGTON – Acting Assistant Attorney General Sharis Pozen of the Department of Justice’s Antitrust Division and Federal Trade Commission (FTC) Chairman Jon Leibowitz today met with a delegation from China’s Ministry of Commerce (MOFCOM) to discuss antitrust merger enforcement.  The delegation was led by China International Trade Representative and MOFCOM Vice Minister Gao Hucheng.  MOFCOM is responsible for handling reviews of mergers and acquisitions under China’s Antimonopoly Law.

 

 This is the first high-level MOFCOM visit to the U.S. antitrust agencies since the department and the FTC signed an antitrust memorandum of understanding (MOU) with China’s three antimonopoly agencies in July 2011, to promote communication and cooperation among the antitrust enforcement agencies in both countries.

 

 The discussion topics in today’s meeting included recent antitrust enforcement and policy developments, the role of antitrust enforcement in times of economic downturn and cooperation among the three agencies on merger enforcement issues.  The three agencies developed further guidance for cooperation on investigations when one of the U.S. antitrust agencies and MOFCOM are reviewing the same merger.

 

Department and FTC officials said that the discussions with the delegation from MOFCOM were productive, and that they look forward to continuing their cooperative relationship.

SIX JAPANESE FREIGHT FORWARDING COMPANIES AGREE TO PLEAD GUILTY TO CRIMINAL PRICE-FIXING CHARGES

Companies Agree to Pay a Total of $46.8 Million in Criminal Fines

WASHINGTON — Six Japanese freight forwarders have agreed to plead guilty and to pay criminal fines totaling $46.8 million for their roles in a conspiracy to fix certain fees in connection with the provision of freight forwarding services for air cargo shipments from Japan to the United States, the Department of Justice announced today. These are the second round of charges filed as a result of the department's antitrust investigation of the freight forwarding industry.

According to charges filed separately today in U.S. District Court for the District of Columbia, six companies - Kintetsu World Express Inc.; Hankyu Hanshin Express Co. Ltd.; Nippon Express Co. Ltd.; Nissin Corporation; Nishi-Nippon Railroad Co. Ltd.; and Vantec Corporation - engaged in a conspiracy to fix and impose certain freight forwarding service fees, including fuel surcharges and various security fees, charged to customers for services provided in connection with air freight forwarding shipments of cargo shipped by air from Japan to the United States from about September 2002 until at least November 2007.

Under the plea agreements, which are subject to court approval, the six companies have agreed to pay the following criminal fines: Kintetsu World Express, $10,465,677; Hankyu Hanshin Express, $4,522,065; Nippon Express, $21,115,396; Nissin Corporation, $2,644,779; Nishi-Nippon Railroad, $4,673,114; and Vantec Corporation, $3,339,648. Each company has also agreed to cooperate with the department's ongoing antitrust investigation.

"Including today's charges, 12 companies have agreed to plead guilty and nearly $100 million in criminal fines have been obtained as a result of the Antitrust Division's ongoing freight forwarding investigation," said Sharis A. Pozen, Acting Assistant Attorney General in charge of the Department of Justice's Antitrust Division. "Prosecuting these kinds of global price fixing conspiracies, that are harmful to the economy and consumers, has been and will continue to be a top priority of the Antitrust Division."

Freight forwarders manage the domestic and international delivery of cargo for customers by receiving, packaging, preparing and warehousing cargo freight, arranging for cargo shipment through transportation providers such as air carriers, preparing shipment documentation, and providing related ancillary services.

According to the charges, the companies carried out the conspiracy by, among other things, agreeing during meetings and discussions to coordinate and impose certain freight forwarding service fees and charges on customers purchasing freight forwarding services for cargo shipped by air from Japan to the United States. The department said that the companies levied freight forwarding service fees in accordance with the agreements reached and engaged in meetings and discussions for the purpose of monitoring and enforcing adherence to the agreed-upon freight forwarding service fees.

As a result of the department's investigation into the freight forwarding industry, on Sept. 30, 2010, six international freight forwarders - EGL Inc.; Kühne + Nagel International AG; Geologistics International Management (Bermuda) Limited; Panalpina World Transport (Holding) Ltd.; Schenker AG; and BAX Global Inc. - agreed to plead guilty and to pay criminal fines totaling $50.27 million for their roles in several conspiracies to impose certain charges or fees on customers purchasing international freight forwarding services for cargo freight destined for air shipment to the United States during various periods between 2002 and 2007.

Each company is charged with price fixing in violation of the Sherman Act, which carries a maximum $100 million fine for corporations. The maximum fine may be increased to twice the gain derived from the crime or twice the loss suffered by the victims of the crime, if either of those amounts is greater than the statutory maximum fine.

Today's charges are the result of a joint investigation into the freight forwarding industry being conducted by the Antitrust Division's National Criminal Enforcement Section, the FBI's Washington Field Office and the Department of Commerce's Office of Inspector General. Anyone with information concerning the price fixing or other anticompetitive conduct in the freight forwarding industry is urged to call the Antitrust Division's National Criminal Enforcement Section at 202-307-6694 or visit www.justice.gov/atr/contract/newcase.htm or call the FBI's Washington Field Office at 202-278-2000.

Bridgestone Corporation Agrees to Plead Guilty to Participating in Conspiracies to Rig Bids and Bribe Foreign Government Officials

Company Agrees to Pay $28 Million Criminal Fine

WASHINGTON — Bridgestone Corporation has agreed to plead guilty and to pay a $28 million criminal fine for its role in conspiracies to rig bids and to make corrupt payments to foreign government officials in Latin America related to the sale of marine hose and other industrial products manufactured by the company and sold throughout the world, announced Acting Assistant Attorney General Sharis A. Pozen of the Department of Justice’s Antitrust Division and Assistant Attorney General Lanny A. Breuer of the Department of Justice’s Criminal Division.

A two-count criminal information was filed today in U.S. District Court in Houston against Bridgestone, a Tokyo-headquartered manufacturer of marine hose and other industrial products, charging the company with conspiring to violate the Sherman Act and the Foreign Corrupt Practices Act (FCPA).  According to the court document, Bridgestone conspired to rig bids, fix prices and allocate market shares of marine hose in the United States and elsewhere and, separately, conspired to make corrupt payments to government officials in various Latin American countries to obtain and retain business.  The department said Bridgestone participated in the conspiracies from as early as January 1999, and continuing until as late as May 2007.

Under the terms of the plea agreement, which is subject to court approval, Bridgestone has also agreed to cooperate fully in the department’s ongoing investigations.

Marine hose is a flexible rubber hose used to transfer oil between tankers and storage facilities.  During the bid rigging conspiracy, according to the court document, the cartel affected prices for hundreds of millions of dollars worth of marine hose and related products sold worldwide.

According to the antitrust charge, Bridgestone and its co-conspirators agreed to allocate shares of the marine hose market and to use a price list for marine hose in order to implement the conspiracy.  Bridgestone and its co-conspirators agreed not to compete for one another’s customers either by not submitting prices or bids, or by submitting intentionally high prices or bids to certain customers.  As part of the conspiracy, Bridgestone and its co-conspirators provided information received from customers in the United States and elsewhere about upcoming marine hose jobs to a co-conspirator who served as the coordinator of the conspiracy.  Bridgestone received marine hose prices for customers in the United States and elsewhere from the coordinator of the conspiracy and then sold the marine hose to those customers at collusive and noncompetitive prices and then concealed the conspiracy through various means, including code names, private email accounts and telephone numbers.

The department also charged that, in order to secure sales of marine hose in Latin America, Bridgestone authorized and approved corrupt payments to foreign government officials employed at state-owned entities.  Bridgestone’s local sales agents agreed to pay employees of state-owned customers a percentage of the total value of proposed sales.  When Bridgestone secured a sale, it would pay the local sales agent a “commission” consisting of not only the local sales agent’s actual commission but also the corrupt payments to be made to employees of the state-owned customer.  The local sales agent then was responsible for passing the agreed-upon corrupt payment to the employees of the customer.

Bridgestone is the fifth company to be charged in the Antitrust Division’s bid rigging investigation.  To date, nine individuals have been convicted and sentenced to a total of 4,557 days in prison for their involvement in the marine hose conspiracy, including Misao Hioki, the former general manager of Bridgestone’s international engineered products department, who was sentenced to two years in prison on Dec. 10, 2008.  Hioki also pleaded guilty and was sentenced for his role in the FCPA conspiracy.

Bridgestone is charged with conspiring to violate the Sherman Act, which carries a maximum $100 million criminal fine for corporations.  Bridgestone is also charged with conspiring to violate the FCPA, which carries a maximum $500,000 fine for corporations.  The maximum fine for each count may be increased to twice the gain derived from the crime or twice the loss suffered by the victims of the crime, if either of those amounts is greater than the statutory maximum fine.

Under t he plea agreement, the department recognized Bridgestone’s cooperation with the investigations, including conducting a worldwide internal investigation, voluntarily making employees available for interviews, and collecting, analyzing and providing to the department voluminous evidence and information.  In addition, the plea agreement acknowledges Bridgestone’s extensive remediation, including restructuring the relevant part of its business, terminating many of its third-party agents and taking remedial actions with respect to employees responsible for many of the corrupt payments.  Under the terms of the plea agreement, Bridgestone has committed to continuing to enhance its compliance program and internal controls.  As a result of these mitigating factors, the department agreed to recommend a substantially reduced fine.

This case is being prosecuted by the Antitrust Division’s National Criminal Enforcement Section and the Criminal Division’s Fraud Section.  In addition to the Antitrust and Criminal Divisions, the ongoing investigation is being conducted by the Defense Criminal Investigative Service (DCIS) of the Department of Defense’s Office of Inspector General, the U.S. Navy Criminal Investigative Service and the FBI.  Law enforcement agencies from multiple foreign jurisdictions are also investigating or assisting in the ongoing matter.

Anyone with information concerning bid rigging or other anticompetitive conduct in the marine products industry is urged to call the Antitrust Division’s National Criminal Enforcement Section at 202-307-6694, visit www.justice.gov/atr/contact/newcase.htm or the Long Beach, Calif., Resident Agency of the DCIS at 562-256-2501.  Anyone with information concerning corrupt payments to foreign officials is urged to e-mail the Criminal Division’s Fraud Section at FCPA.Fraud@usdoj.gov or to call 202-514-7023.  To learn more about the department’s ongoing FCPA enforcement efforts, go to www.justice.gov/criminal/fraud/fcpa.

JUSTICE DEPARTMENT FILES ANTITRUST LAWSUIT TO BLOCK AT&T’S ACQUISITION OF T-MOBILE

Transaction Would Reduce Competition in Mobile Wireless Telecommunications Services, Resulting in Higher Prices, Poorer Quality Services, Fewer Choices and Fewer Innovative Products for Millions of American Consumers

WASHINGTON — The Department of Justice today filed a civil antitrust lawsuit to block AT&T Inc.’s proposed acquisition of T-Mobile USA Inc.  The department said that the proposed $39 billion transaction would substantially lessen competition for mobile wireless telecommunications services across the United States, resulting in higher prices, poorer quality services, fewer choices and fewer innovative products for the millions of American consumers who rely on mobile wireless services in their everyday lives.

The department’s lawsuit, filed in U.S. District Court for the District of Columbia, seeks to prevent AT&T from acquiring T-Mobile from Deutsche Telekom AG.

“The combination of AT&T and T-Mobile would result in tens of millions of consumers all across the United States facing higher prices, fewer choices and lower quality products for mobile wireless services,” said Deputy Attorney General James M. Cole.  “Consumers across the country, including those in rural areas and those with lower incomes, benefit from competition among the nation’s wireless carriers, particularly the four remaining national carriers.  This lawsuit seeks to ensure that everyone can continue to receive the benefits of that competition.”

“T-Mobile has been an important source of competition among the national carriers, including through innovation and quality enhancements such as the roll-out of the first nationwide high-speed data network,” said Sharis A. Pozen, Acting Assistant Attorney General in charge of the Department of Justice’s Antitrust Division.  “Unless this merger is blocked, competition and innovation will be reduced, and consumers will suffer.” 

Mobile wireless telecommunications services play a critical role in the way Americans live and work, with more than 300 million feature phones, smart phones, data cards, tablets and other mobile wireless devices in service today.  Four nationwide providers of these services – AT&T, T-Mobile, Sprint and Verizon – account for more than 90 percent of mobile wireless connections.  The proposed acquisition would combine two of those four, eliminating from the market T-Mobile, a firm that historically has been a value provider, offering particularly aggressive pricing. 

According to the complaint, AT&T and T-Mobile compete head to head nationwide, including in 97 of the nation’s largest 100 cellular marketing areas.  They also compete nationwide to attract business and government customers.  AT&T’s acquisition of T-Mobile would eliminate a company that has been a disruptive force through low pricing and innovation by competing aggressively in the mobile wireless telecommunications services marketplace. 

The complaint cites a T-Mobile document in which T-Mobile explains that it has been responsible for a number of significant “firsts” in the U.S. mobile wireless industry, including the first handset using the Android operating system, Blackberry wireless email, the Sidekick, national Wi-Fi “hotspot” access, and a variety of unlimited service plans.  T-Mobile was also the first company to roll out a nationwide high-speed data network based on advanced HSPA+ (High-Speed Packet Access) technology.  The complaint states that by January 2011, an AT&T employee was observing that “[T-Mobile] was first to have HSPA+ devices in their portfolio…we added them in reaction to potential loss of speed claims.”

The complaint details other ways that AT&T felt competitive pressure from T-Mobile.  The complaint quotes T-Mobile documents describing the company’s important role in the market:

T-Mobile sees itself as “the No. 1 value challenger of the established big guys in the market and as well positioned in a consolidated 4-player national market”; and

T-Mobile’s strategy is to “attack incumbents and find innovative ways to overcome scale disadvantages.  [T-Mobile] will be faster, more agile, and scrappy, with diligence on decisions and costs both big and small.  Our approach to market will not be conventional, and we will push to the boundaries where possible. . . . [T-Mobile] will champion the customer and break down industry barriers with innovations. . . .”

The complaint also states that regional providers face significant competitive limitations, largely stemming from their lack of national networks, and are therefore limited in their ability to compete with the four national carriers.  And, the department said that any potential entry from a new mobile wireless telecommunications services provider would be unable to offset the transaction’s anticompetitive effects because it would be difficult, time-consuming and expensive, requiring spectrum licenses and the construction of a network.

The department said that it gave serious consideration to the efficiencies that the merging parties claim would result from the transaction.  The department concluded AT&T had not demonstrated that the proposed transaction promised any efficiencies that would be sufficient to outweigh the transaction’s substantial adverse impact on competition and consumers.  Moreover, the department said that AT&T could obtain substantially the same network enhancements that it claims will come from the transaction if it simply invested in its own network without eliminating a close competitor.

AT&T is a Delaware corporation headquartered in Dallas.  AT&T is one of the world’s largest providers of communications services, and is the second largest mobile wireless telecommunications services provider in the United States as measured by subscribers.  It serves approximately 98.6 million connections to wireless devices.  In 2010, AT&T earned mobile wireless telecommunications services revenues of $53.5 billion, and its total revenues were in excess of $124 billion.

T-Mobile, is a Delaware corporation headquartered in Bellevue, Wash.  T-Mobile is the fourth-largest mobile wireless telecommunications services provider in the United States as measured by subscribers, and serves approximately 33.6 million wireless connections to wireless devices.  In 2010, T-Mobile earned mobile wireless telecommunications services revenues of $18.7 billion.  T-Mobile is a wholly-owned subsidiary of Deutsche Telekom AG.

Deutsche Telekom AG is a German corporation headquartered in Bonn, Germany.  It is the largest telecommunications operator in Europe with wireline and wireless interests in numerous countries and total annual revenues in 2010 of €62.4 billion.

JUSTICE DEPARTMENT REQUIRES DIVESTITURES IN ORDER FOR REGAL BELOIT CORPORATION TO PROCEED WITH ITS ACQUISITION OF A.O. SMITH CORPORATION'S ELECTRIC MOTOR BUSINESS

Divestitures Will Preserve Competition for Electric Motors for Pool and Spa Pumps and Draft Inducers for High-Efficiency Furnaces

WASHINGTON — The Department of Justice announced today that it has reached a settlement that will require Regal Beloit Corporation (RBC) to divest its U.S. business for electric motors for pool and spa pumps to SNTech Inc. and to divest A.O. Smith Corporation's (AOS) development work and related assets for draft inducers for high-efficiency furnaces to Revcor Inc., in order to proceed with RBC's acquisition of AOS's electric motor business. The department said that without the divestitures the acquisition would lead to higher prices, lower quality products, less customer service and less innovation in each of these markets.

The department said that the acquisition, as originally proposed, would combine two of the three leading suppliers of electric motors for pool and spa pumps in the United States. The acquisition also would have eliminated the most likely entrant into the market for draft inducers for furnaces with a thermal efficiency of 90 percent or greater (90+ draft inducers), a market in which RBC has a near monopoly.

The Department of Justice's Antitrust Division filed a civil antitrust lawsuit today in U.S. District Court for the District of Columbia to block the proposed acquisition. At the same time, the department filed a proposed settlement that, if approved by the court, would resolve the competitive concerns alleged in the lawsuit.

"The acquisition as originally proposed would have lessened the vigorous competition that currently exists among manufacturers of electric motors for pool and spa pumps resulting in higher prices and lower quality products," said Sharis A. Pozen, Acting Assistant Attorney General in charge of the Department of Justice's Antitrust Division. "The acquisition also would have eliminated the firm best positioned to challenge Regal Beloit Corporation's dominance in the market for draft inducers for high-efficiency furnaces."

The department's complaint alleges that the proposed acquisition would eliminate the significant competition between RBC and AOS in the already highly concentrated markets for electric motors for pool and spa pumps in the United States. The complaint also alleges that the proposed acquisition would eliminate the potential competition from AOS in the 90+ draft inducer market, in which RBC has a near monopoly.

The proposed settlement requires RBC to divest the assets used to design, manufacture and sell RBC motors used in pool and spa pump applications. The department has concluded that SNTech will integrate the divestiture assets into its current operations to create a viable competitor in the markets for electric motors for pool and spa pumps. The proposed settlement also requires that RBC divest the assets necessary to continue the design and development of AOS's 90+ draft inducers. The department concluded that Revcor will integrate the divestiture assets into its current operations and replace the potential competition lost by RBC's acquisition of AOS's electric motor business. The divestitures to SNTech and Revcor will remedy the competitive concerns alleged in the complaint.

Electric motors sold for use in pool and spa pumps must be uniquely engineered and assembled to meet the size and performance specifications of the individual pump. In addition to size and energy efficiency, specification variables include the capacity of the impeller, speed, current/voltage, whether the motor is operated continually or sporadically, and whether the pump has more than one speed of operation.

Furnace draft inducers are specialized blowers for the movement of air and the expulsion of hot combustion gases produced by gas-fired furnaces. They perform an important safety function by extracting harmful combustion gases and venting those gases outside. Furnaces are classified according to their thermal efficiency, which is the percentage of energy used to heat the air and that is not lost with the vented combustion gases. Draft inducers are designed for the specific thermal efficiency of each furnace. More modern furnaces with higher thermal efficiency, typically referred to as 90 percent thermal efficiency or 90+, use draft inducers based on more advanced technology.

RBC, headquartered in Beloit, Wis., manufactures mechanical and electrical motion control and power generation products. RBC had revenues of approximately $2.2 billion in 2010.

AOS, headquartered in Milwaukee, is made up of two operating units: the water products business and the electric motor business. AOS is one of North America's largest manufacturers of electric motors for residential and commercial applications. In 2010, AOS had revenues of approximately $1.5 billion, with approximately $700 million of that amount from electric motors and related products.

SNTech, headquartered in Phoenix, manufactures low-cost smart electric motors used in air moving applications.

Revcor, headquartered in Carpentersville, Ill., manufactures air moving products, including blowers and fans.

As required by the Tunney Act, the proposed settlement, along with a competitive impact statement, will be published in the Federal Register. Any person may submit written comments concerning the proposed settlement during a 60-day comment period to Maribeth Petrizzi, Chief, Litigation II Section, Antitrust Division, U.S. Department of Justice, 450 Fifth Street, N.W., Suite 8700, Washington, D.C. 20530. At the conclusion of the 60-day comment period, the U.S. District Court for the District of Columbia may approve the proposed settlement upon finding it is in the public interest.

VIGOROUSLY ENFORCING THE ANTITRUST LAWS IN THE OBAMA ADMINISTRATION

Good afternoon. More than two years have passed since I gave my first public remarks as the Assistant Attorney General (AAG) for Antitrust here at the Center for American Progress. I am pleased to be back, not only to examine our accomplishments, but also to consider what there is still to do.

The Division has had significant success on a variety of fronts. Civil merger and non-merger enforcement is healthy and active. We have renewed international cooperation. We have fostered unprecedented competition advocacy, infusing competitive analysis into far-ranging, important public policy endeavors. Our criminal program is focused on prosecuting cartel activity, a particularly pernicious problem in ever-increasing global markets.

There are also areas where we have, up to now, had fewer opportunities to facilitate competitive marketplaces that would benefit the American consumer. I recognize that there are limits to what we can accomplish within the confines of the antitrust laws, but the antitrust laws remain an essential element in preserving competition. Some have confused recent court precedent to suggest that the antitrust laws are minimized in industries when we find other governing regulatory regimes. I strongly believe that is a misreading of the law, and the Division has demonstrated through our vigorous enforcement efforts—and sought through reasoned court filings— that the antitrust laws remain fully vibrant. As AAG, I have sought to ensure that vibrancy through steadfast and pragmatic enforcement of the antitrust laws. (Read on)

IOWA COMPANY PLEADS GUILTY TO PARTICIPATING IN READY-MIX

WASHINGTON — An Iowa-based company pleaded guilty today to participating in a price-fixing conspiracy for the sales of ready-mix concrete, the Department of Justice announced.

According to a one-count felony charge filed on June 24, 2011, in U.S. District Court in Sioux City, Iowa, VS Holding Co., which formerly operated as Alliance Concrete Inc., a producer of ready-mix concrete with headquarters in Orange City, Iowa, participated in a conspiracy with another ready-mix concrete company to fix prices for ready-mix concrete sold in the northern district of Iowa. The department said the company participated in the conspiracy beginning at least as early as January 2006 and continuing until as late as January 2008.

Ready-mix concrete is a product comprised of cement, aggregate (sand and gravel), water and other additives. The concrete generally is produced in a concrete plant and is transported by concrete-mixer trucks to work sites, where it is used in various types of construction projects, including buildings and roads.

According to the court documents, Steven VandeBrake, the former president of VS Holding Co., participated in the conspiracy by engaging in discussions and reaching agreements regarding the conspirators' prices for ready-mix concrete sold in the northern district of Iowa. VS Holding Co. then accepted payment for those sales at collusive and noncompetitive prices, the department said.

VS Holding Co. is charged with violating the Sherman Act, which carries a maximum fine of $100 million for corporations. The maximum fine may be increased to twice the gain derived from the crime or twice the loss suffered by the victims of the crime, if either of those amounts is greater than the statutory maximum fine.

Today's plea is the result of an ongoing federal antitrust investigation of the ready-mix concrete industry in Iowa and its surrounding states. As a result of the investigation, three individuals have been convicted and sentenced to serve prison time, and, including VS Holding Co., three ready-mix concrete companies have pleaded guilty and are awaiting sentencing.

The investigation is being conducted by the Antitrust Division's Chicago Field Office, the FBI's Sioux City Resident Agency and the Department of Transportation's Office of the Inspector General, with the assistance of the U.S. Attorney's Office in Sioux City. Anyone with information concerning bid rigging, price fixing or territorial allocation related to the ready-mix concrete industry in Iowa and its surrounding states should contact the Antitrust Division's Chicago Field Office at 312-353-7530 or visit justice.gov/atr/contact/newcase.htm.

JPMorgan Chase Admits to Anticompetitive Conduct by Former Employees in the Municipal Bond Investments Market and Agrees to Pay $228 Million to Federal and State Agencies

WASHINGTON – JPMorgan Chase & Co. has entered into an agreement with the Department of Justice to resolve the company’s role in anticompetitive activity in the municipal bond investments market and has agreed to pay a total of $228 million in restitution, penalties and disgorgement to federal and state agencies, the Department of Justice announced today.

As part of its agreement with the department, JPMorgan admits, acknowledges and accepts responsibility for illegal, anticompetitive conduct by its former employees.   According to the non-prosecution agreement, from 2001 through 2006, certain former JPMorgan employees at its municipal derivatives desk, entered into unlawful agreements to manipulate the bidding process and rig bids on municipal investment and related contracts. These contracts were used to invest the proceeds of, or manage the risks associated with, bond issuances by municipalities and other public entities.

“By entering into illegal agreements to rig bids on certain investment contracts, JPMorgan and its former executives deprived municipalities of the competitive process to which they were entitled,” said Assistant Attorney General Christine Varney in charge of the Department of Justice’s Antitrust Division.   “Today’s agreements ensure that JPMorgan will pay restitution to the municipalities harmed by its anticompetitive conduct, disgorge its profits from the illegal activity and pay penalties for the criminal conduct.   We are committed to rooting out anticompetitive activity in the financial markets and our investigation into the municipal bond derivatives industry, which has led to criminal charges against 18 former executives, remains active and ongoing.”

Under the terms of the agreement, JPMorgan agrees to pay restitution to victims of the anticompetitive conduct and to cooperate fully with the Justice Department’s Antitrust Division in its ongoing investigation into anticompetitive conduct in the municipal bond derivatives industry.   To date, the ongoing investigation has resulted in criminal charges against 18 former executives of various financial services companies and one corporation.   One of these charged executives, James Hertz, is a former JPMorgan employee.   Nine of the 18 executives charged have pleaded guilty, including Hertz.     

The Securities and Exchange Commission (SEC), the Internal Revenue Service (IRS), the Office of the Comptroller of the Currency (OCC), the Federal Reserve Board (Fed) and 25 state attorneys general also entered into agreements with JPMorgan requiring the payment of penalties, disgorgement of profits from the illegal conduct and payment of restitution to the victims harmed by the manipulation and bid rigging by JPMorgan employees, as well as other remedial measures.

As a result of JPMorgan’s admission of conduct; its cooperation with the Department of Justice and other enforcement and regulatory agencies; its monetary and non-monetary commitments to the SEC, IRS, OCC, Fed and state attorneys general; and its remedial efforts to address the anticompetitive conduct, the department agreed not to prosecute JPMorgan for the manipulation and bid rigging of municipal investment and related contracts, provided that JPMorgan satisfies its ongoing obligations under the agreement.

In May 2011, UBS AG agreed to pay a total of $160 million in restitution, penalties and disgorgement to federal and state agencies for its participation in anticompetitive conduct in the municipal bond derivatives market.  

The department’s ongoing investigation into the municipal bonds industry is being conducted by the Antitrust Division, the FBI and the IRS-Criminal Investigation.   The department is coordinating its investigation with the SEC, the OCC and the Federal Reserve Bank of New York.   The department thanks the SEC, IRS, OCC, Fed and state attorneys general for their cooperation and assistance in this matter.

The Antitrust Division, SEC, IRS, FBI, state attorneys general, OCC and Fed are members of the Financial Fraud Enforcement Task Force.   President Obama established the interagency task force to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes.  The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources.   The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.   For more information about the task force, visit stopfraud.gov.

DOJ, FTC ANNOUNCE CHANGES TO STREAMLINE THE PREMERGER NOTIFICATION FORM

Revisions Are Part of Ongoing Regulatory Review Efforts to Ensure Rules Are Effective and Not Unduly Burdensome

WASHINGTON — Following a public comment period, the Department of Justice and the Federal Trade Commission (FTC) have made changes to reduce the filing burden and streamline the form parties must file when seeking antitrust clearance of proposed mergers and acquisitions under the Hart-Scott-Rodino (HSR) Act and the Premerger Notification Rules.

The revisions are part of ongoing efforts by the department and the FTC to review their regulations, ensure that the rules are necessary and up-to-date, and eliminate unnecessary or potentially overly burdensome reporting requirements for business. The changes will make the HSR form easier to complete, reduce the burden for most filers and make the premerger notification review program more effective for both agencies.

The revised HSR form deletes several categories of information that over time have proven unnecessary in a preliminary merger review. For example, HSR filers will no longer be required to provide copies of documents – whether in hard copy or via electronic link – filed with the Securities and Exchange Commission, report economic code “base year” data or give a detailed breakdown of all the voting securities to be acquired. The new form also will require filers to provide the department and the FTC with narrowly focused additional documents that will help expedite the merger review process.

The revised form changes certain kinds of required reporting, such as revenue information by the North American Industry Classification System (NAICS) code, and the identity of holders and holdings of the entities making a filing. In addition, new concepts are introduced that are designed to expedite the antitrust review, including reporting information about “associates” of the acquiring person. Changes also include minor revisions to the HSR Rules to address omissions from the 2005 Rule changes involving unincorporated entities.

The Revision Process

Last August the department and the FTC sought public comments on the proposed changes. The agencies worked together to modify the original proposal in response to these comments to clarify the proposed amendments and to ensure that they accurately reflect both agencies’ interests in streamlining the HSR form. This will reduce burdens on businesses while still enabling the department and the FTC to obtain the information and documents they need in their merger review process.

ANTITRUST DIVISION ISSUES UPDATED MERGER REMEDIES GUIDE

Updated Guide Recognizes Change in Merger Landscape

WASHINGTON — The Department of Justice today released an updated version of the Antitrust Division’s Policy Guide to Merger Remedies. The policy guide is a tool for Antitrust Division staff to use in analyzing proposed remedies in its merger matters. It also provides transparency into the division’s approach to merger remedies for the business community, the antitrust bar and the broader public.

Although the updated policy guide reflects changes in the merger landscape, the goal of the Antitrust Division remains the same – to provide an effective remedy to eliminate the anticompetitive effects of a proposed transaction, the department said.

“In every case, the Antitrust Division focuses on the specific facts of the proposed transaction. We are prepared to clear a merger, block a merger or accept a remedy that maintains efficiencies as long as the result eliminates any competitive harm,” said Assistant Attorney General Christine Varney of the Department of Justice’s Antitrust Division. “In the current environment of increasing transnational mergers and complex vertical transactions, the Antitrust Division must be ever nimble in its efforts to ensure that any remedies effectively preserve competition, promote innovation and protect consumers. The updated policy guide takes into account these changes.”

The updated policy guide highlights the role of the Antitrust Division’s recently created Office of the General Counsel, which will be principally responsible for enforcing division consent decrees. The updated policy guide also reflects the changes in the merger landscape and the lessons the division has learned from the remedies it has entered into since the issuance of the original guide in 2004, ensuring that it accurately details the division’s merger remedy practices.

The policy guide states that effective merger remedies typically include structural or conduct provisions, or a combination. In horizontal merger matters, the division continues to rely predominantly on structural remedies, sometimes in combination with conduct remedies. However, the division has found that in many vertical transactions tailored conduct relief can prevent competitive harm while allowing the merger’s efficiencies to be realized.

The key principles the Antitrust Division applies in analyzing merger remedies remain the same:

Effectively preserving competition is the key to an appropriate merger remedy;

Remedies should focus on preserving competition, not protecting individual competitors; and

A remedy must be based on careful application of legal and economic principles to the particular facts of a specific case.

A copy of the Policy Guide is available on the Department of Justice’s website: justice.gov/atr/public/guidelines/272350.pdf.