Annual Report

The Criminal Enforcement Program

The Antitrust Division institutes criminal enforcement of Section One of the Sherman Act, 15 U.S.C. Section 1, against hardcore cartel activity such as price-fixing, bid-rigging, and market-allocation agreements. Such conduct causes substantial harm to purchasers of goods and services.

The prosecution of such domestic cartel activity has been at the heart of the Department of Justice's antitrust enforcement efforts ever since the enactment of the Sherman Act in 1890 and continues unabated. In the last several years, however, the Antitrust Division has made the prosecution of international cartels that victimize American businesses and consumers one of its highest priorities. This strategy recognizes that in many instances international cartels pose an even greater threat to American businesses and consumers than do domestic conspiracies because they tend to be highly sophisticated and extremely broad in their impact—in terms of geographic scope, the amount of commerce affected, and the number of businesses and consumers victimized by the conspiracy.

The Antitrust Division recently has prosecuted international cartels operating in a broad spectrum of commerce, including vitamins, food and feed additives, chemicals, graphite electrodes (used in steel making), and marine construction and transportation services. Since the beginning of FY 1997, the Antitrust Division has prosecuted international cartels affecting over $10 billion in U.S. commerce. The cartel activity in these cases cost U.S. businesses and consumers many hundreds of million of dollars annually.

The Antitrust Division's strategy of concentrating its criminal resources on international cartels has led to unprecedented success in terms of cracking those cartels, securing the conviction of the major conspirators, and obtaining record-breaking fines.

Since the beginning of FY 1997, the Antitrust Division has obtained over $1.5 billion dollars in criminal fines, well over 90 percent of which were imposed in connection with the prosecution of international cartel activity. To put this fine figure into perspective, consider that the highest amount of fines obtained by the Antitrust Division in any given year prior to FY 1997 was roughly $42 million. In FY 1997, the Antitrust Division shattered that mark when it collected $205 million in criminal fines—nearly 500 percent higher than during any previous year in the Antitrust Division's history. In FY 1998, the Antitrust Division topped that number when it obtained over $265 million in criminal fines. And then, in FY 1999, the Antitrust Division thrust the new record still another 400 percent higher when it secured over $1.1 billion in criminal fines. The amount of fines obtained since FY 1997 is many multiples higher than the sum total of all criminal fines imposed for violations of the Sherman Antitrust Act dating back to the Act's inception in 1890.

The dramatic increase in fines reflects the fact that the major international cartels prosecuted over the past few years have been bigger, in terms of the volumes of affected commerce and the amount of harm caused to American businesses and consumers, than any conspiracies previously encountered by the Antitrust Division.

For example, the international vitamin cartel, which affected over $5 billion in U.S. commerce, was the most harmful and elaborate conspiracy ever uncovered by the Antitrust Division. The members of the vitamin cartel reached agreements on everything from how much product each company would produce, to how much they would charge, to which customers they would sell. The victims who purchased directly from the cartel members included companies with household names such as General Mills, Kellogg, Coca-Cola, Tyson Foods, and Proctor & Gamble. However, these companies were just the first to feel the effects of this conspiracy. In the end, for nearly a decade, every American consumer—anyone who took a vitamin, drank a glass of milk, or had a bowl of cereal—ended up paying more so that the conspirators could reap hundreds of millions of dollars in additional revenues.

To date, the vitamin investigation has resulted in convictions against Swiss, German, Canadian, and Japanese firms and over $875 million in criminal fines against the corporate defendants, including a $500 million fine imposed on F. Hoffmann-La Roche Ltd. (HLR) and a $225 million fine imposed on BASF AG. The $500 million fine imposed against HLR is the largest fine ever imposed in any Department of Justice proceeding under any statute. The Antitrust Division also has thus far prosecuted seven American and foreign executives who participated in the vitamin cartel. All of these individuals, including the foreign defendants, are either already serving time in federal prison or are awaiting sentencing and face potential jail sentences as well as heavy fines. For example, Kuno Sommer, the former director of Worldwide Marketing for Vitamins at HLR, and Roland Brönnimann, the former president of the Fine Chemical and Vitamin Division at HLR, were recently sent to prison and ordered to pay substantial fines for their roles in the vitamin cartel. Messrs. Sommer and Brönnimann are the first European nationals to serve time in a U.S. prison for engaging in cartel activity. The imposition of jail sentences against foreign nationals residing outside this country, together with the unprecedented fines obtained in this matter, sends a powerful deterrent message that the United States is committed to vigorous antitrust enforcement against international cartel activity.

The increased effectiveness of the Antitrust Division's anticartel efforts result from more effective investigation as well as good trial work. The Antitrust Division's Amnesty Program has been a major contributor to its investigative success. In August 1993, the Antitrust Division expanded its Amnesty Program to make it easier and more attractive for companies to come forward and cooperate with the Antitrust Division in exchange for a complete pass on prosecution. Today, that program is the Antitrust Division's most effective generator of large cases, and it is the Department of Justice's most successful leniency program. During the past year, the Antitrust Division has been receiving amnesty applications at the rate of approximately two per month—a more than twenty-fold increase compared to the prior Amnesty Program. Moreover, in the past year alone, the Amnesty Program has led to dozens of convictions and over $1 billion in criminal fines.

Table: Antitrust Division Criminal Fines

Table: Sherman Act Violations Yielding a Fine of $10 Million or More

This table lists Sherman Act Violations by:

• Defendant
• Fiscal year
• Product
• Fine (in millions of dollars)
• Geographic scope (domestic or international)
• Country

Violations are listed in reverse order by the size of the fine, from $500 million to $9 million.