Industry: Financial Services
A new book was recently released about the events surrounding the alleged LIBOR fixing conspiracy. Authored by Wall Street Journal reporter David Enrich, The Spider Network: The Wild Story of a Math Genius, a Gang of Backstabbing Bankers, and One of the Greatest Scams in Financial History tackles the issues from a unique perspective, focusing on one of the main bankers involved, Tom Hayes. Hayes, formerly a trader at UBS and Citigroup, was prosecuted by the U.K. Serious Fraud Office in 2015. He was convicted of conspiracy to defraud for his role in fixing LIBOR and is serving an 11-year prison sentence.
Second Circuit Issues Blockbuster Ruling in Amex, Holding Anti-Steering Rules Do Not Violate Antitrust Law
Last week the U.S. Court of Appeals for the Second Circuit issued a major win for American Express in a landmark decision in United States v. American Express Co. In that case the government filed an antitrust suit against American Express challenging Amex’s nondiscriminatory provisions (“NDPs,” or “anti-steering” rules), which bar merchants from offering discounts or incentives to customers to encourage them to use non-Amex credit cards.
After Favorable LIBOR Ruling from the Second Circuit, Investors Now Allege Anticompetitive SIBOR Manipulation
On July 5, 2016, investors filed a federal class action [add link to pdf] in the Southern District of New York alleging defendant banks had manipulated the Singapore Interbank Offered Rate (SIBOR) “and/or” Singapore Swap Offer Rate (SOR) market, forcing investors to pay artificial prices for financial derivative transactions based on these benchmarks. This lawsuit follows on the heels of the Second Circuit’s decision in In re: LIBOR-Based Financial Instruments Antitrust Litigation, which allowed the case to proceed.
Procompetitive Effects of Business Associations in the Balance?: Business Association Membership and the Sufficiency of Sherman Act Allegations
What facts beyond mere membership in a trade association trigger Sherman Act liability? Next term, the Supreme Court will hear an antitrust case testing the requirements for pleading the conspiracy element of a claim brought under the Sherman Act—namely, whether the allegation that defendants belong to an association is sufficient for a Section 1 claim.
On May 23, 2016, the Second Circuit issued a long-awaited decision in the In re: LIBOR‐Based Financial Instruments Antitrust Litigation, vacating the District Court’s (Buchwald, J.) prior decision dismissing one case in this consolidated action.
SDNY Dismisses Silver Monopolization Lawsuit but Leaves Door Open for Future Antitrust Suits Concerning Manipulations in the Commodities Markets
On January 12, 2016, Judge Engelmayer of the Southern District of New York dismissed a lawsuit against JP Morgan which alleged the bank (and some of its subsidiaries) monopolized silver futures spread trading in late 2010 and early 2011.
Our Antitrust practice group recently co-authored a series of articles in Inside Counsel discussing major antitrust issues facing in-house counsel today. Our articles expand on topics that we have covered in this blog, including the Actavis litigation, the change in the competition landscape across the globe and antitrust reforms in Europe and Asia, antitrust enforcement in e-commerce, the implications of the Supreme Court’s decision in North Carolina State Board of Dental Examiners on antitrust liability for professional boards, and the Department of Justice’s recent guidance on antitrust compliance programs.
Earlier today the U.S. Court of Appeals for the Second Circuit issued an order denying American Express’s motion for a stay of an injunction requiring AmEx to modify its rules prohibiting merchants from steering customers to other credit cards.
Last Thursday, American Express appealed the District Court for the Eastern District of New York’s February ruling that its anti-steering rules violated Section 1 of the Sherman Act. The court entered a permanent injunction in April requiring American Express to change its anti-steering rules and allow merchants to steer customers to use other credit cards or other forms of payment.
Court Rules Against American Express Based on Both Direct and Indirect Evidence of Harm to Competition
On February 19, 2015, the District Court for the Eastern District of New York issued its ruling on liability in United States v. American Express. Following a seven-week trial, the Court found that American Express violated Section 1 of the Sherman Act by imposing certain restrictions on merchants that prevent the merchants from offering their customers incentives to use competing credit cards with lower retail charges.
This is the first in what we expect to be a series of updates on DOJ criminal actions in the cartel area. Here, we look at highlights over the last six months in the DOJ’s investigations of the auto parts industry, LIBOR, and municipal real estate auctions.
In re Credit Default Swaps Antitrust Litigation: Big Banks Still Must Face Section 1 Sherman Act Claim
In a decision upholding most of the class action antitrust claims against 12 of the world’s largest financial institutions, Judge Cote of the Southern District of New York held that the plaintiffs had standing and alleged sufficient facts to satisfy their Section 1 claim under the Sherman Act. While Judge Cote denied plaintiffs’ conspiracy to monopolize claim under Section 2 of the Sherman Act, she did suggest two ways antitrust plaintiffs could bring a conspiracy to monopolize claim even where an oligopoly, not a monopoly, is present.
The long trial in United States v. American Express has come to an end: on September 18, 2014, the parties exchanged post-trial briefing and on October 9, 2014, the court held oral argument. News reports suggest that the Court (Judge Garaufis in the Eastern District of New York) was looking for ways to avoid court intervention (including urging the parties to settle) and suggest that, if it did find an antitrust violation, the Court would consider holding additional proceedings to determine the appropriate remedies.
Direct Evidence of Patent Holder’s Pricing Power Doesn’t Lead to Summary Judgment on Existence of Monopoly Power
We wrote earlier about the DOJ’s efforts to use direct evidence to show that the rules Amex imposes on merchants harm competition. The district court’s decision denying summary judgment to the plaintiff in Apotex v. Cephalon presents an apparently novel attempt to use direct evidence of market power to prove an antitrust case at the summary judgment stage and avoid tricky issues of market definition.
As we noted earlier this month, one factor that may contribute to the increase in criminal antitrust fines over the past ten years is the Antitrust Division’s focus on anticompetitive conduct that is international in scope. Indeed, the Antitrust Division’s chart listing Sherman Act violations yielding a corporate fine of $10 million or more shows that nearly all of the investigations resulting in fines greater than $10 million are international.
The DOJ’s ongoing civil trial challenging American Express’s merchant rules as a violation of Section 1 of the Sherman Antitrust Act may clarify the significance of market share calculations.
At issue in the case are Amex’s rules barring merchants from steering consumers to cards that charge lower merchant processing fees.
Over the past ten years, criminal antitrust fines have increased dramatically: they totaled only $107 million in fiscal year (“FY”) 2003, but increased to a high of $1.14 billion in FY-2012 and remained relatively steady at $1.02 billion in FY-2013. As criminal fines increase, companies face increasing exposure for conduct that allegedly runs afoul of the U.S. antitrust laws. What is driving the marked increase in potential penalties?
Further to our previous post, The Principles of Federal Prosecution of Business Organizations, by contrast, which the Criminal Division and the various United States Attorney’s offices employ to assess corporate liability and determine an appropriate resolution, speak more generally about corporate cooperation with respect to securing the cooperation of corporate executives.
On May 19, 2014, I participated on a panel entitled “Cross-Border Investigations Involving Multiple Agencies” at the New York City Bar Association’s Third Annual White Collar Crime Institute. The moderator of the panel was Bruce Yannett from Debevoise & Plimpton and my co-panelists were Denis J. McInerney, the former chief of the Fraud Section at DOJ; David Meister, the former Director of Enforcement at the Commodity Futures Trading Commission; and Aaron R. Marcu of Freshfields.