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What Price Cooperation? The Ever Increasing Cost of Global Antitrust Cases

November 18, 2010

By Jeremy P. Evans and Andrew R. Booth

The past few months have seen considerable activity in the long-running air cargo price-fixing investigations. More than four and a half years after the worldwide raids of Valentine's Day 2006, the Department of Justice's Antitrust Division (the Division) secured guilty pleas within the past month from its 17th and 18th air carriers, Polar Air and China Air, and an additional $57.4 million in criminal fines. In total, the guilty pleas have yielded fines to the Division in excess of $1.6 billion, making the air cargo cartel its most lucrative prosecution to date.

Guilty pleas and enforcement fines have not been limited to the U.S. alone, with competition authorities from Australia to South Korea to the United Kingdom meeting out follow-on sanctions to many of the companies that previously agreed to plead guilty. The European Commission is expected to announce substantial fines to a number of companies next month. Civil plaintiffs too have obtained settlement agreements from a number of companies in connection with U.S. class action litigation, while simultaneously pursuing lawsuits in civil courts in Europe and elsewhere.

The events of the air cargo investigation bring into sharp focus one of the underlying premises of the Division's Leniency Program: that a company benefits by confessing wrongdoing, admitting antitrust liability, and cooperating with the government's investigation. The benefits to the "first-in" company are well-known in that the company escapes criminal prosecution, but the Division also encourages others to confess and cooperate with the promise of more favorable treatment in terms of fines and limits of individual executives targeted for prosecution. The success of the policy -- and the financial rewards the U.S. Treasury has reaped from it -- has led to an increasing number of global enforcement agencies adopting similar policies. These days, however, a company with worldwide operations must carefully consider whether to embark on the road of cooperation with the Division. Once made, that decision inevitably compels a company to trot around the globe reaching settlements with a multitude of enforcement agencies, each eager to claim its financial penalty. And given the increasing aggressiveness of plaintiffs' lawyers seeking U.S.-style class action redress in overseas jurisdictions, admissions to liability to criminal violations significantly hamper a company's ability to defend against accompanying civil litigation both in the U.S. and overseas. In such a situation, a company may bery well ask the question: What price cooperation?