Bringing Light to the DOJ’s Cartel Fine Methodology with the Auto Parts Plea Agreements

• Author: Mary Beth Savio,Michelle Burtis,Daniel K. Oakes
• Date: 01 December 2018
• DOI: 10.1177/0003603X18807803
• Published date: 01 December 2018

Article

Bringing Light to the DOJ’s

Cartel Fine Methodology with

the Auto Parts Plea Agreements

Michelle Burtis*, Daniel K. Oakes**, and Mary Beth Savio***

Abstract

It has been acknowledged by both practitioners and the government that transparency in the

calculation of criminal antitrust fines by the U.S. Department of Justice (DOJ) is important for the

continued success of criminal antitrust policy. Recent auto parts investigations provide a large and

diverse set of plea agreement observations that are compared to gain a better understanding of

DOJ’s criminal fining policy for corporations and to assess whether the sentencing outcomes are

consistent, both across the investigations and with DOJ’s stated policies. The analysis shows that

with regard to certain inputs into the fine calculations, the DOJ provided additional transparency

in the auto parts plea agreements, although in other areas the methods used to determine inputs

remain opaque.

Keywords

criminal antitrust fines, indirect commerce, cooperation discount

I. Introduction

After more than eight years, the U.S. Department of Justice’s (DOJ’s) international criminal inves-

tigations into collusion in the auto parts industry appear to have largely concluded. Beginning in

February 2010 when authorities conducted dawn raids of several auto parts manufacturers in Detroit,

the investigations quickly expanded into “the largest criminal investigation the Antitrust Division

has ever pursued, both in terms of its scope and the potential volume of commerce affected by the

alleged illegal conduct.”

1

Overall, the DOJ charged forty-eight companies and sixty-five executives

with price fixing, bid rigging and other anticompetitive conduct across more than fifty different

*Charles River Associates, Washington, D.C., USA

**Axinn, Veltrop and Harkrider LLP, Washington, D.C., USA

***Charles River Associates, Boston, MA, USA

Corresponding Author:

Michelle Burtis, Charles River Associates, 1201 F Street, NW, Suite 800, Washington, D.C. 20004-1229, USA.

Email: mburtis@crai.com

1. U.S. DEP’TOFJUSTICE,CRIMINAL PROGRAM UPDATE 2012 (Spring 2012), https://www.justice.gov/atr/criminal-program-update-

2012.

The Antitrust Bulletin

2018, Vol. 63(4) 379-398

ªThe Author(s) 2018

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DOI: 10.1177/0003603X18807803

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automotive parts.

2

Among that group, forty-six companies—the majority being Japanese component

parts manufacturers—entered plea agreements, who all together agreed to pay more than $2.9 billion

in criminal fines.

The auto parts investigations provide a large set of plea agreement observations that may be

compared to gain a better understanding of DOJ’s criminal fining policy for corporations.

3

The plea

agreements are not only numerous but diverse, including elements of “Amnesty Plus,” “Penalty Plus,”

obstruction of the investigation, inability to pay, as well as other characteristics.

4

The data are worthy

of examination, particularly regarding whether the sentencing outcomes are consistent, both across the

investigation and with DOJ’s stated policies.

Transparency and guidance are arguably most necessary regarding the calculation of criminal fines.

At least conceptually, cartel fines levied by the DOJ (in both the negotiated and the charged contexts)

should be predictable because they are based on the formulaic approach set forth in the U.S. Senten-

cing Commission Guidelines (USSG or Guidelines).

5

However, while the USSG approach is clearly

outlined, the inputs into its formulas are not described in the same detail and, historically, the DOJ has

not fully explained how it determines the inputs.

In this article, we compare and analyze the auto parts plea agreements to gain insight into the DOJ’s

cartel fine methodology and its determination of inputs into the methodology. We find that with regard

to certain inputs the DOJ provided additional transparency in the auto parts plea agreements, although

in other areas the methods used to determine inputs remain opaque. In particular, the method used to

account for “indirect commerce” was, for what appears to be the first time, explicit ly set out in

formulaic terms in the auto parts plea agreements. However, downward adjustments for cooperation

are not highly correlated with observable factors, a pattern that may reflect the need for additional

clarity in explaining how cooperation benefits strike a balance between predictability and situation-

specific considerations. Finally, certain plea agreements give some insight into the DOJ’s approach to

assessing fines on those companies who demonstrate an inability to pay a fine based on the USSG.

II. The DOJ Methodology Used to Determine Cartel Fine Amounts

The DOJ’s methodology for determining criminal cartel fines is based on the framework established by

the United States Sentencing Commission for sentencing of organizations and is commonly illustrated

in filed plea agreements and associated sentencing memoranda.

6

The initial input driving the calculation of criminal antitrust fines is the volume of affected com-

merce (VOC).

7

The VOC plays an important role in the fine determination because, under USSG §

2. Press Release, U.S. Dep’t of Justice, Antitrust Div., Kiekert AG to Plead Guilty to Bid Rigging Involving Auto Parts (Mar.

7, 2017), https://www.justice.gov/opa/pr/kiekert-ag-plead-guilty-bid-rigging-involving-auto-parts.

3. This article is related to corporate antitrust fines and does not discuss the treatment of individuals charged in the auto parts’

investigations.

4. Although not relevant to an analysis of fines negotiated with the DOJ, the investigation has even produced a relative rarity: a

criminal trial. In November 2017, Tokai Kogyo Co., Ltd. and Green Tokai Company Co. Ltd. were found not guilty of

violating Section 1 of the Sherman Act after a three-week jury trial. See Verdict Form, United States v. Tokai Kogyo Co.

Ltd., No. 1:16-cr-00063-TSB (S.D. Ohio Nov. 29, 2017), ECF No. 234.

5. Scott D. Hammond, Deputy Assistant Att’y Gen., U.S. Dep’t of Justice, Antitrust Div., Antitrust Sentencing in the Post-

Booker Era: Risks Remain High for Non-Cooperating Defendants (Mar. 30, 2005), https://www.justice.gov/atr/speech/

antitrust-sentencing-post-booker-era-risks-remain-high-non-cooperating-defendants.

6. See,e.g., Sentencing Memorandum at 4, United States v. INOAC Corp., No. 2:15-cr-00052 (E.D. Ky. Feb. 6, 2017), ECF

No. 40 (hereinafter “INOAC Sentencing Memo”).

7. U.S. SENTENCING COMM’N,U.S.SENTENCING GUIDELINES MANUAL § 2R1.1(d)(1) (2016) (hereinafter USSG). See John Buretta

& John Terzaken, United States,in THE CARTELS AND LENIENCY REVIEW 346, 370 (John Buretta & John Terzaken eds., 6th ed.

2018) (“The volume of commerce affected is the most important variable in determining the recommended sentence for

cartel participants under the Sentencing Guidelines. The sentencing calculation differs between individuals and

380 The Antitrust Bulletin 63(4)