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 The Use of Criminal Law Remedies to
Deter and Punish Cartels and
Bid-Rigging
Donald I. Baker*

The most distinctive aspect of United States antitrust enforcement is that

those who engage in cartel activities are treated as serious criminals. Individ-
ual coconspirators are now sent to jail on a regular basis.' Moreover, some of
the largest corporate fines ever paid to the federal government are being
imposed on major antitrust violators. 2 Small companies in local markets and
local executives are also regularly prosecuted, 3 even though an indictment of
local realtors, car dealers, paving contractors, or travel agents does not at-
tract the kind of national and international attention generated by indict-
ments of world business leaders in Vitamins, Lysine, Art Auctions, or
4
Graphite Electrodes.
This enforcement scene of jail sentences and large corporate fines is not
the way it is in the rest of the world. Nor is it the way it used to be in the
United States. The current enforcement success in the United States seems
to flow from a combination of factors:
1. The expansion to antitrust of traditional criminal prosecutorial and
investigative techniques by the Antitrust Division of the U.S. Department of
5
Justice ("DOJ") and the Federal Bureau of Investigations ("FBI").
2. Some special incentives for a coconspirator to act as an informant
6
and cooperate with DOJ investigators.
3. A grand jury system that tends to strongly favor the investigators.

* Senior Partner, Baker & Miller PLLC; former Assistant Attorney General in charge of
the Antitrust Division, U.S. Department of Justice. Mr. Baker wishes to express his thanks to his
colleague Christine J. Sommer for all her hard and insightful work in helping to create this
paper.
1 See James M. Griffin, Criminal Cartel Status Reports, Remarks at the 49th Annual
Conference of the American Bar Association Meeting of the Committee on Criminal Procedure
and Enforcement (Mar. 28, 2001), http:llwww.usdoj.govlatr/publiclspeeches/8063.htm.
2 Id. For example, Hoffman-La Roche and BASF were recently fined $500 million and
$225 million for their parts in the vitamins cartel. Id. Additional examples are listed infra, at
Part IV.C.
3 See Stephen Labaton, The World Gets Tough on Price Fixers, N.Y. TirMES, June 3, 2001,
§ 3, at 1.
4 In re Vitamins Antitrust Litig., 2000-1 Trade Cas. (CCH) 72,914 (D.D.C. 2000) (Vita-
mins); United States v. Andreas, 216 F.3d 645 (7th Cir. 2000) (Lysine); In re Auction Houses
Antitrust Litig., 2001-1 Trade Cas. (CCH) 73,170 (S.D.N.Y. 2001) (Art Auctions); Ferromin
Int'l Trade v. UCAR Int'l., Inc., 153 F. Supp. 2d 700 (E.D. Pa 2001) (Graphite Electrodes); see
Labaton supra note 3.
5 This point is dramatically illustrated by a recent book documenting in detail the FBI and
DOJ investigation of Archer Daniels Midland Co. and its coconspirators in the lysine and citric
acid cartels. KURT EICHEiNivALD, THE INWoarm r (2000).
6 See generallyScott D. Hammond, When Calculating the Costs and Benefits of Applying
for Corporate Amnesty, How Do You Put a Price Tag on an Individual's Freedom?, Address

October/December 2001 Vol. 69 No. 516

 The George Washington Law Review [Vol 69:693

4. The willingness of Congress in recent decades to fund criminal anti-

trust enforcement on a substantial scale and steadily increase the criminal
7
penalties for antitrust violations.
5. The willingness of courts (prompted by the Sentencing Guidelines)
to sentence an increasing number of individuals to jail.
6. A broad political consensus that cartels are bad and Sherman Act
enforcement is good (which tends to minimize any political involvement in
8
criminal antitrust enforcement decisions).
It is too early to tell whether the United States is simply a few years
ahead of the other major countries in using criminal enforcement remedies
this way-or whether the United States has gone well beyond what most
other leading industrial countries are willing to do, at least in terms of send-
ing cartel conspirators to jail.

L A Long March (1890-2001)

A. Early Going (1890-1970)
Criminal liability for individuals and enterprises has been part of the
American antitrust system from the beginning. When Congress passed the
Sherman Act in 1890, it made violations of sections 1 and 2 misdemeanors
punishable by fines and up to a year's imprisonment.9 But the statute was
vague and the government resources committed to antitrust enforcement
were small prior to the administration of President Theodore Roosevelt
(1901-1909).10 Even so, it would take almost a half a century before the crim-
inal provisions of the Act were routinely used against business enterprises
(by Assistant Attorney General Thurman Arnold (1938-1943)) and another
twenty years or so before jail sentences for individual wrongdoers became an
attention-getting reality (such as the electrical equipment cases).
Yet the United States did not arrive at the point it has-with potential
criminal liability and jail time as serious deterrents-quickly or easily. To
start, sections 1 and 2 of the Sherman Act are drafted in very broad and
somewhat vague terms, so that a century ago there was considerable uncer-
tainty as to exactly what types of behavior were covered, and were therefore
potentially illegal, and what types of behavior were not covered. By modern

Before The Fifteenth Annual National Institute on White Collar Crime (Mar. 8, 2001), http://
www.usdoj.gov/atr/public/speeches/7647.htm.
7 See, e.g., Antitrust Procedures and Penalties Act, Pub. L. No. 93-528, § 3, 88 Stat. 1706,
1708 (1974) (current version at 15 U.S.C. §§ 1-3 (1994)). An individual defendant faces a greater
risk of jail time today than even a few years ago. As detailed by Mr. Hammond, approximately
fifty individual defendants were imprisoned for antitrust and related offenses during 1999 and
2000-this is greater than the total number of persons incarcerated in the five years previous.
Hammond, supra note 6, at 9. In addition, during 1999 and 2000, individuals served 12,246 days
in jail (as compared to 9,920 days as a total for the five years previous), which is roughly thirty-
four years of jail time and included fifteen sentences of one year or more in jail. Id.
8 Donald I. Baker, Antitrust and Politics at the Justice Department, 9 J.L. & POL. 291
(1993).
9 Sherman Act, ch. 647, 26 Stat. 209 (1890) (current version at 15 U.S.C. §§ 1-3 (1994)).
10 Robert L. Rabin, FederalRegulation in HistoricalPerspective, 38 STAN. L. REv. 1189,
1218-1220, 1225-1228 (1986).
2001] The Use of Criminal Law Remedies

standards, the Sherman Act could well have been too vague to be accepted as
constitutional on due process grounds. Over time, however, the DOJ, and
more importantly the courts, gradually developed distinguishing lines be-
tween the kinds of anticompetitive conduct that should be punished crimi-
nally and the remaining conduct, which would only be subject to civil
injunctions by the government and private damage cases by injured victims."
Thus, price-fixing, bid-rigging, and customer and market allocations came to
be regarded as criminal, while most other conduct (for example, joint venture
rules, standard setting practices, and vertical restraints) came to be regarded
2
as only suitable for civil prosecution.'
The line between the "civil" and "criminal" categories echoes, but does
not precisely follow, the line that emerged during the years between "per se
liability" and "rule of reason analysis" under section 1 of the Sherman Act:
everything that is properly regarded as criminal under section 1 is subject to a
per se rule, but not everything that is subject to a per se rule is regarded as
criminal (for example, tie-ins and vertical restraints). 13 Single firm violations
under section 2 of the Sherman Act have not generally been regarded as
suitable for criminal prosecution, even though some4
very clearly predatory
conduct might be treated under that provision.'
Although the substantive law had become much clearer through years of
judicial interpretation, the penalties for violating section I of the Sherman
Act remained fairly weak, even in the 1960s.15 The maximum corporate fine
was only $50,000, and judges rarely sentenced individuals to jail, even when
6
the DOJ recommended a jail sentence.'

B. Modern Momentum (1970-2001)

The political momentum for stronger criminal antitrust enforcement
evolved largely as a result of the OPEC oil cartel and public frustration with
inflation. In 1974, after very little public debate, Congress made Sherman
Act offenses felonies, raised the maximum corporate fine twentyfold (from
$50,000 to $1 million) and increased maximum jail sentences for individuals
from one to three years. 17 Enforcement budgets were greatly increased (thus

11 See Donald I. Baker, To Indict or Not to Indict: ProsecutorialDiscretionin Sherman Act

Enforcement, 63 CORNELL L. Rnv. 405 (1978).
12 Assistant Attorney General Sandford M. Litvack did bring one criminal case for vertical
price-fixing, but I, along with many other in the antitrust community regard this as an aberration.
See United States v. Cuisinart, Inc., 1981-1 Trade Cas. (CCH) 63,979 (D. Conn. 1981) (consent
decree).
13 See Baker, supra note 11, at 407-09.
14 The last time, I believe, that the DOJ tried to bring a criminal section 2 violation was a
quarter of a century ago in Empire Gas Co. United States v. Empire Gas Co., 537 F.2d 296 (8th
Cir. 1976). The defendant was charged with various reprehensible kinds of conduct such as
blowing up competitors' trucks. Id. Even so, the government lost on the ground that it failed to
show a dangerous probability that the defendant would succeed in monopolizing the relevant
markets. Id.
15 See Stephen Calkins, An Enforcement Official's Reflections on Antitrust Class Actions,
39 ARiz. L. Rlv. 413, 428 (1997).
16 See id.
17 Antitrust Procedures and Penalties Act, Pub. L. No. 93-528, § 3, 88 Stat. 1706, 1708
(1974) (current version at 15 U.S.C. §§ 1-3 (1994)).
 The George Washington Law Review [Vol 69:693

increasing the culprit's chance of being caught and punished). Under the
1991 Sentencing Guidelines, sentencing became more uniform, and now indi-
viduals are regularly sent to jail for antitrust violations. Meanwhile, the max-
imum corporate Sherman Act fine was increased in 1990 to $10 million' 8 and
a new "alternative fine" based on twice the culprit's gain or twice society's
loss had been introduced in 1987.19 A successful amnesty program has
helped the DOJ generate some landmark cases-with very high fines-in the
1990s. Thus, the New York Times recently reported, with only modest
overstatement:
The antitrust division, once a small and sleepy backwater of the Jus-
tice Department, has become a power center against white-collar
crime. It has filed some of the government's biggest criminal cases
and shaken up a diverse range of industries as it reveals a seamy
20
side of globalization-international cartels.

C. Looking Back
In the balance of this article, we still look at how the idea of punishing
individuals, as well as enterprises, has worked in fact and why it is so central
to modern U.S. antitrust enforcement.
Viewed comparatively, the original Sherman Act idea of making both
enterprises and individuals liable for antitrust violations has turned out to be
the most unique-and quite possibly the most important-contribution of
the United States to the world's consumers. Other countries have widely
followed subsequent U.S. antitrust inventions (for example, merger control
under section 7 of the Clayton Act, originally enacted in 1914), and now, well
over fifty countries have antitrust statutes of some sort.21 Yet, only seven
other countries (Austria, Canada, Ireland, Israel, Japan, Korea, and Norway)
have provided criminal liability for both individuals and enterprises, 22 and
only three individuals (a Canadian and two Israelis) have ever served jail
23
time in any of those countries for violating antitrust laws.

18 Antitrust Amendments Act of 1990, Pub. L. No. 101-588, § 4, 104 Stat. 2879, 2880
(1990) (codified at 15 U.S.C. §§ 1-3 (1994)).
19 18 U.S.C. § 3571(d) (1994).
20 Labaton, supra note 3. I do not recall the Antitrust Division as being either "small" or
"sleepy" when I was there (1966-1977), but it certainly has been more successful in developing
big international cartel cases since introducing an effective amnesty program in the early 1990s.
21 See INTERNATIONAL MERGERS-THE ANTITRusT PROCESS, at I-1 to 1-9 (J. William
Rowley & Donald I. Baker eds., 3rd ed. 2001) (detailing the merger control systems in 59
counties).
22 ORGANIZATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT, REPORT ON
HARD CORE CARTELS 46 n.13 (2000) [hereinafter OECD REPORT]. This source also explains
that three other countries (France, Greece, and Switzerland) have criminal liability for antitrust
violations by individuals, but not enterprises. Id. In addition to those listed in the OECD RE-
PORT, it now appears that at least two other countries have some relevant criminal provisions
directed at individuals; these include Israel and Germany (for bid-rigging only).
23 In Israel, the sentences (of 100 and 150 days) were part of plea bargains in which the
individuals and companies agreed to plead guilty to charges of fixing prices, dividing markets
and setting output quotas in floor covering materials (tiles, etc.); the plea bargains were entered
in December 2000 and February 2001.
2001] The Use of Criminal Law Remedies

II. The Critical Issue of Deterrence

The principal reason for having criminal liability against those who com-
mit antitrust violations is to deter similar conduct by others. As a conse-
quence, in the United States, where we have had a criminal enforcement
system in effect for several decades, we do not tend to see serial violators
(those individuals who repeat the same offense after having been caught
once). 24 Rather, we see different individuals and enterprises violating the
law because they think they can get away with it, and they see substantial
economic advantage in trying to do so.
Any system that is based on deterrence-and fairness-must have clear
rules. Ordinary business actors must be able to understand the difference
between right and wrong, and their lawyers must be able to give unequivocal
legal advice. The anticartel rules are apt candidates for such treatments.
Cartels involve several different variations:
a Agreements not to compete for any customers on price or some ele-
ment of price (for example, credit terms).
* Agreements not to poach each other's existing customers.
* Agreements not to compete for any customers, old or new, in each
other's agreed geographic markets.
( Agreements on who is to be the winning bidder in a bidding situation
(with the other participants often putting in so-called "complementary
bids").
* Agreements to limit output.
Each of these examples is capable of being seen and understood by a busi-
ness executive or salesperson as illegal before she takes any action to enter
into or implement such an agreement. Thus, there is still a mens rea
requirement.
Effective deterrence also requires that those who might otherwise be
tempted to take illegal action believe that there is some reasonable
probability of their being caught and that the consequences are grave. The
presence of criminal remedies-and particularly criminal remedies for indi-
viduals-has proven to be an important part of achieving the level of deter-
rence we now seem to have in the United States.25 Risk of conviction and
imprisonment provides a powerful inducement for one coconspirator to in-
form on her other coconspirators. In addition, the United States has pro-
vided a fairly high level of funding for antitrust criminal enforcement by the
DOJ and a uniquely advantageous prosecutorial system of grand jury investi-
gation, both of which increase the government's chance of catching antitrust
violators. Having more DOJ staff armed with a secretive process favoring
the prosecutors clearly raises the stakes for those rationally contemplating
price-fixing or other cartel activities.

24 The same point may be less true for enterprises-particularly those used to operate in
international environments where cartelization may have been common. Both Hoffman-La
Roche and ADM have been indicted several times by the United States for engaging in different
cartels in different markets.
25 See Griffin, supra note 1.
 The George Washington Law Review [Vol 69:693

Of course, to be socially useful, deterrence must be based on a rational

set of legal rules. I explore the issues surrounding the rules and their ration-
ality in the next two parts-the first part involves individuals and the second
part focuses on enterprises.

IIL PunishingIndividuals: The United States as Unique

Punishment of enterprises for cartel violations has become increasingly
common around the world, yet only a very few countries have followed the
United States in treating individual cartel participants as criminals. 26 The
case for punishing individuals for antitrust wrongdoing has been much less
accepted in the world. Fewer than ten countries impose criminal sanctions
on individuals for cartel violations.2 7 The case for punishing individual
wrongdoers seems relatively strong, which makes the reluctance to do so par-
ticularly puzzling.28 First, illegal conspiracies do not exist in the abstract; ac-
tive participation by particular individuals is essential to the success of any
conspiracy. Second, the participating individuals (and probably those who
supervise them) presumably anticipate higher compensation (such as salary,
bonuses, or commission) based on better cartel-generated economic perform-
ance, or, at the least, expect corporate advancement if the cartel efforts are
successful in enhancing the revenues and profits to the relevant businesses.
It is interesting that the rationale for punishing individuals has been
much more widely accepted in other white-collar crime areas, especially
where the guilty individuals are involved in defrauding their employers or the
government. Perhaps, it is just because the enterprise benefits from cartel
violations, which helps to explain why so many countries are content to limit
criminal remedies to heavy administrative fines against the enterprise whose
employees misbehave. Additionally, in a case involving major embezzlement
or fraud, the amount of public loss may be a lot more obvious than when a
cartel manipulates markets.
This failure to place individual actors personally at risk seriously affects
the ability of antitrust enforcers to obtain evidence against enterprises (as
explained in Part V below). Individuals have information; if they can be of-
fered immunity from prosecution in return for cooperation, they can be en-
couraged to provide evidence against enterprises participating in a suspected
cartel. Absent such evidence, leading antitrust enforcers (such as the Euro-
pean Community) are forced to rely almost entirely on documentary evi-
dence to prove the existence of the cartel.
At least twenty countries provide for a significant economic penalty for
enterprises that are caught engaging in a cartel.2 9 The European Union is a
prominent example-with a history of cartel prosecution and the possibility

26 See OECD REPORT, supra note 22, at 46 n.13.

27 See id.
28 During the 1990s, firms in over thirty-one countries were convicted of price-fixing by
either United States or European Union enforcement authorities. See Simon J. Evenett et al.,
InternationalCartel Enforcement: Lessons from the 1990s, 24 WORLD ECON. 1221, 1225 table 1
(2001).
29 See OECD REPORT, supra note 22, Annex A, at 49-53.
2001] The Use of CriminalLaw Remedies

(not yet realized) of imposing fines that run up to ten percent of the world-
wide turnover (gross revenue) of the defendant in its most recent accounting
year.30 The case for punishing enterprises is fairly clear: the enterprise prof-
its from antitrust wrongdoing and the management of the enterprise may set
a tone that encourages, rewards, condones, or at least tolerates antitrust
wrongdoing by its employees. If the fines are set high enough and recurring
prosecutions are undertaken, then fines should have a significant deterrent
31
effect.

IV. PunishingEnterprises: Using an Economic Stick

Enterprises can only be punished in economic ways. This being the case,
many civil law countries (and the European Union) have subjected enter-
prises to substantial monetary penalties for violating anticartel laws without
treating the violations as "criminal" or subjecting the enterprise to normal
32
criminal processes.
In the United States, the DOJ's choice of criminal enforcement may
have important procedural consequences. It gives the government the ad-
vantage of the nonpublic grand jury process that highly favors the govern-
ment at the investigational stage because testimony is taken in secret and
witnesses or targets do not have lawyers present in the grand jury room.
Once an indictment is returned, however, the choice of criminal enforcement
means that the government has to prove guilt beyond a reasonable doubt (as
opposed to proof by a preponderance of the evidence in a civil trial). The
United States process relies heavily on oral testimony before the grand jury,
while the European Union's enforcement is more document based.

A. Low Sherman Act Fines Priorto 1974

Historically, the criminal fines for antitrust violations in the United

States were relatively small as compared to the actual benefits of running a
successful cartel. When the Sherman Act was enacted in 1890, the offense

30 Council Regulation 17/62, art. 15(2), 1958-1962 O.J. SPEC. ED. 87, 91-92.
31 I do not share Professor Bruce Yamanaga's concern about over-deterrence where
straight cartel violations are involved with clandestine meetings and communications. These
violations are often too profitable to participants and too hard to detect for me to want to
change the risk-reward calculation in the "reward" direction.
32 Interestingly, in the European Union some of the largest penalties have been levied for
single-firm abuse of dominance violations under Article 86 (now Article 82). Koen Lenaerts &
Ignace Maselis, European Community Competition Law: ProceduralRights and Issues in the
Enforcement of Articles 81 and 82 of the EC Treaty, 24 FORDI-AxM INT'L LJ. 1615 (2001); see
TREATY EsTABaLISHNG Tm EUROPEAN CoMMuNIrry, Feb. 7,1992, OJ. 224/1, art. 82. The DOJ
meanwhile has focused on civil injunctive remedies (rather than criminal prosecution) in modem
Sherman Act section 2 cases against such defendants as AT&T, IBM, Microsoft, and American
Airlines. See United States v. AT&T Corp., 2000-2 Trade Cas. (CCH) 73,096 (D.D.C. 2000)
(consent decree); United States v. Int'l Bus. Machs. Corp., 1998-1 Trade Cas. (CCH) 72,105
(D.D.C. 1998) (consent decree); United States v. Microsoft Corp., 1995-2 Trade Cas. (CCH)
71,096 (D.D.C. 1995) (consent decree); United States v. Airline Tariff Publ'g Co., 1994-2 Trade
Cas. (CCH) 70,687 (D.D.C. 1994) (consent decree).
 The George Washington Law Review [Vol 69:693

was a misdemeanor and the maximum fine was only $5,000; 33 in 1973, the
offense was still a misdemeanor and the maximum fine was $50,000. 34
Because of this disparity between benefits and risks to the wrongdoer,
meaningful deterrence was largely achieved by depending on the strength of
civil remedies available to the victims of a cartel. Under the Clayton Act, a
conviction in a government case or a guilty plea extracted by the government
was treated as prima facie evidence of antitrust violations in subsequent civil
cases. 35 Moreover, the successful private plaintiff is entitled to receive treble
damages; 36 in other words, the plaintiff could recover three times the proven
overcharge under a system that accords plaintiffs a fair degree of latitude in
reconstructing what the "but for" competitive market would have been if
there was no antitrust violation. This issue came to the forefront in the 1960s
when hundreds of large antitrust cases were filed against General Electric,
Westinghouse, and others in the wake of the government's successful prose-
cution of the defendants for price-fixing and bid-rigging on turbine genera-
tors, transformers, switch gear, and other electrical equipment.

B. Very Large Increases in Statutory Fine Limits (1974-1990)

The old world of minimal corporate fines ended in 1974 when Sherman
Act violations were elevated to felony status, and the maximum fine for a
violation was increased to $1 million. 37 The maximum fine was increased to
$10 million in 1990.38 More important, however, was the enactment in 1987
of an alternative sentencing provision which allowed for the recovery of fines
in excess of the statutory maximum-up to twice the gain by the defendant
39
or its coconspirators or twice the loss sustained by the injured parties.

C. High CorporateFines Improved (1995-Present)

The alternative sentencing provision has enabled the DOJ to recover
fines in the $100-500 million range against the international cartel members
prosecuted in the late 1990s. 40 The 1991 Sentencing Guidelines facilitate the
DOJ's current success in attacking corporate criminal behavior by assuring
reasonably stiff penalties upon successful antitrust wrongdoers via a flexible
point system.4 1 In other words, a base penalty level is imposed for the of-

33 Sherman Act, ch. 647, 26 Stat. 209 (1890) (current version at 15 U.S.C. §§ 1-3 (1994))
(This number was clearly much more significant in 1890 than it was sixty years later, when the
maximum fine was still only $5,000.)
34 Act of July 7, 1955, Pub. L. No. 84-135, 69 Stat. 282 (current version at 15 U.S.C. §§ 1-3
(1994)) (increasing maximum to $50,000).
35 Clayton Act, ch. 323, § 7, 38 Stat. 730 (1914) (current version at 15 U.S.C. § 16(a)
(1994)).
36 Id. § 4. Interestingly, this provision (first enacted in 1890 as § 7 of the original Sherman
Act) was borrowed from the English Statute of Monopolies of 1620.
37 Antitrust Procedures and Penalties Act, Pub. L. No. 93-528, § 3, 88 Stat. 1706, 1708
(1974) (current version at 15 U.S.C. §§ 1-3 (1994)).
38 Antitrust Amendments Act of 1990, Pub. L. No. 101-588, § 4, 104 Stat. 2879, 2880
(1990) (codified at 15 U.S.C. §§ 1-3 (1994)).
39 18 U.S.C. § 3571(d) (1994).
40 See Griffin, supra note 1.
41 The application of these guidelines is discussed in Donald C. Klawiter's paper: After the
2001] The Use of Criminal Law Remedies

fense generally, then "additional factors" incorporated by the guidelines and

weighed by the court will either increase or decrease "points" which can af-
fect the offense level, and thus, the penalty imposed. The current antitrust
sentencing guidelines establish a base offense level of ten, but if, for example,
the defendant's actions involve bid-rigging, then the specific offense adjust-
ments allow that number to be increased to eleven. Standing alone, this rat-
ing would result in a relatively low penalty. 42 The fine level, however, can be
greatly increased when based on the "volume of commerce" affected by the
defendant's actions or by the weighing of any other "relevant" factors by the
court. 43 In addition, once the offense level is calculated, multiple adjustments
(such as the importance of the defendant's role in the offense, multiple con-
victions, criminal history, etc.) are used to augment or decrease the offense
level, which can ultimately result in a greatly heightened fine or corporate
probation.4
Prior to the usage of the 1991 guidelines, the average corporate fine im-
posed in 1992 was just below $500,000. 45 Since 1995, fines over $10 million
have become increasingly commonplace. 46 This change is reflected in the en-
suing tables; however, it is worth noting the largest corporate fines in a single
case:
* $500 million fine against Hoffman-La Roche for price-fixing and allo-
cating market shares for vitamins in 1999.
* $225 million fine against BASF for price-fixing and allocating market
shares for vitamins in 1999.
* $135 million fine against SGL Carbon AG for price-fixing and allo-
cating market shares for graphic electrodes in 1999.
* $72 million fine against Takeda Chemical Industries, Ltd. for price-
fixing and allocating territories for vitamins in 1999.
* $110 million fine against UCAR International, Inc. for price-fixing
and allocating market shares for graphite electrodes in 1998.
* $100 million fine against Archer-Daniels-Midland Co. ("ADM") for
conspiring to fix prices of lysine, a feed additive, and citric acid in 1997.
* $50 million fine against Haarmann & Reimer Corp., U.S.-based sub-
sidiary of Germany-based Bayer AG, for conspiring to fix prices and allocate
sales in the citric acid market in 1997.
It becomes quite interesting when these fines are aggregated by year.
They show an enormous rate of increase in the late 1990s:

Deluge: The Powerful Effect of SubstantialCriminal Fines, Imprisonment,and other Penalties in

the Age of InternationalCartel Enforcement, 69 GEO. WASH. L. REv. 745 (2001).
42 U.S. SENTENCING GUIDELINES IMuANUAL § 2R1.1 (2000). A level ten corporate fine can
be as low as $20,000 for a general offense. Id. However, the antitrust sentencing guidelines
approach is to impose a fine of fifteen percent of the violations aggregate turnover as a minimum
penalty for corporate antitrust fines. Id.
43 Id. § 2R1.l(b)-(d).
44 Id.
45 SENTENCING GUIDELINES IN ANTrRusr. A PRACrITIONER'S HANDBooK, app. A at 95
(Robert E. Hauberg, Jr., et al. eds., 1999).
46 See id. at 95-96.
 The George Washington Law Review [Vol 69:693

ANNUAL TOTALS OF FINES

Sherman Act Violations Yielding a Fine of $10 Million or
More by the Antitrust Division
Year Fine Total ($ millions)
1995 $10
1996 $45
1997 $185
1998 $248
1999 $1,074
2000 $110

The year 1999 proved extraordinary because of the Vitamins fines, which at-
tracted so much publicity. 47
It must be emphasized how international U.S. enforcement has come to
be. Foreign corporations have generally led the major cartels that were
fined, and when the Sentencing Guidelines standards have been applied to
them, these corporations have paid the highest fines. Based on the national-
ity of the defendant (or its parent or both), the table of defendants incurring
the greatest fines looks as follows:
GEOGRAPHIC TOTALS OF FINES
Sherman Act Violations Yielding a Fine of $10 Million or
More by the Antitrust Division
Nationality of Violator Fine ($ Millions)
Switzerland $536
Germany $503
Japan $284
United States $251
Belgium $15
Norway $15
Great Britain $10
Netherlands $10
The above table certainly suggests that U.S. antitrust deterrence must be
looked at globally; U.S. fines and punishments should be set at a high enough
level to get the attention of those in Zurich, Frankfurt and Osaka, even if the
fines may be higher than necessary to send a message to those in New Jersey,
Texas, or Illinois.48

D. CollateralPenalties for Guilty Corporate Defendants

The United States has imposed a number of collateral penalties on those
found guilty of antitrust violations. For enterprises, these penalties include
(1) disqualification for bidding on various federal government contracts; 49 (2)

47 See In re Vitamins Antitrust Litig., 2000-1 Trade Cas. (CCH) 72,914 (D.D.C. 2000).
48 See supra note 31 (commenting on Professor Yamanaga's concern about over-deter-
rence). Even if one were so concerned, effective enforcement would require U.S. corporate
antitrust fines to be high enough to deter the foreigners who often seem to lead the major inter-
national cartels and to be less sensitive to U.S. antitrust law than they should be.
49 Stephen J. Squeri, Government Investigation and Enforcement. Antitrust Division and
the FederalTrade Commission, 42 P.L.I. ANTrrRuST LAw INSTrrUTE 689, 803 (2001).
2001] The Use of Criminal Law Remedies

forfeiture of broadcast licenses under the Federal Communications Act; and

rather humorously, (3) denial of the use of the Panama Canal.50 The first two
remedies have important practical consequences for those whose business in-
cludes bidding on government contracts or holding broadcast licenses. In ad-
dition, being found guilty of a federal felony is likely to cause disqualification
under state law in various jurisdictions.
In most cases, the private recovery of treble damages under the Clayton
Act continues to be an even bigger economic threat to a corporation than the
amount of the Sherman Act fine. If the DOJ can show twice the gains of the
defendants or losses to consumers in order to get a high alternative fine, pri-
vate plaintiffs-including class action plaintiffs-can frequently recover three
times the loss suffered by the plaintiffs.51 Thus, the all-wise potential wrong-
doing enterprise might be looking at a fivefold recovery of the gain that it
might hope to achieve from the (hypothetical) cartel violation. Indeed, the
civil side is even worse than that: under the Clayton Act, because there is
joint and several liability, each conspirator may be held liable for the losses
52
imposed by all conspirators and their customers.
The situation in the European Union and Canada is worth emphasizing
as well. The European Union has prosecuted quite a number of cartels under
its essentially civil law system in which the European Commission itself,
based on the investigation of its staff and a recommendation of the Commis-
sioner for Competition, finds guilt and imposes fines on enterprises. These
fines could be very large because a fine can range up to ten percent of the
turnover (gross revenues) of the affected enterprises. 53 In practice, however,
fines have been more modest than the U.S. fines for cartel violations (some
of the larger fines have been levied for distribution restraints and monopolis-
tic abuses that would not be regarded as criminal in the United States).
Some of the larger European Union fines include the following:
a Almost $105.4 million fined against ADM, Anjimomoto and three
other companies for operation of a global price-fixing cartel for lysine (June
2000).
* $70 million fined against ABB and others for a cartel in preinsulated
pipes (1999).

50 Panama Canal Act of 1912, 15 U.S.C. § 31 (1994). On March 14, 2001, the House of
Representatives passed a bill that would repeal § 31 for cases filed after the date of enactment.
H.R. 809, 107th Cong. § 2(b) (2001).
51 There is one important qualification here: the so-called Illinois Brick doctrine limits
price-fixing recovery to the initial purchaser, even though the loss may have been passed onto
the subsequent purchasers in the chain who might be more inclined to sue. Ill. Brick Co. v.
Illinois, 431 U.S. 720, 734-35 (1977). However, some seventeen states have in turn passed stat-
utes that allow indirect purchasers to recover for federal price-fixing violations in state courts.
52 Clayton Act, 15 U.S.C. § 15 (1994); see, e.g., Tex. Indus., Inc. v. Radcliffe Materials, Inc.,
451 U.S. 630, 646-47 (1981) (denying claims for contribution among conspiracy defendants). The
United States has declined to follow the approach widely used by other countries, which is to
prevent the antitrust culprit from recovering payments due it under contracts that contain a
provision that violates the antitrust laws. In other words, in the United States, the victimized
consumer may not resist paying for purchases on the ground that the purchase price was set by
agreements among members of a cartel. See, e.g., Kelly v. Kosuga, 358 U.S. 516, 518-21 (1959).
53 Council Regulation 17/62, art. 15(2), 1958-1962 O.J. SPEc. ED. 87, 91-92.
 The George Washington Law Review [Vol 69:693

* $31.5 million fined against TACA and others for concerted practices
and abuse of dominant position in maritime services (container shipping)
(March 22, 1999).
* $27.3 million against six stainless steel producers for cartel activity
(January 1998).
e $248 million against forty-one cement companies for price-fixing
(November 1994).
* $132.1 million against nineteen companies for participation in a car-
ton board cartel (July 1994).
A Commission decision on both liability and fine level is subject to re-
view by the Court of First Instance in Luxembourg. If the case involves im-
portant legal principles, it may also be reviewed by the European Court of
Justice. The Court of First Instance has substantially reduced Commission-
set fines in a number of cases.
Canada uses a traditional common law criminal enforcement system
with prosecution by the Crown (for example, Attorney General of Canada)
in the regular courts. When a plea is entered, as is frequently the case, it is
accompanied by a detailed "agreed" statement of facts spelling out the viola-
tion. Larger antitrust fines in Canada include the following:
0 C$50.9 million fined against Hoffman-La Roche for conspiracy to fix
prices and allocate markets in vitamins (September 22, 1999).
o C$19 million fined against BASF for conspiracy to fix prices and allo-
cate markets in vitamins (September 22, 1999).
0 C$16 million fined against ADM for conspiring to fix prices and allo-
cate markets in lysine (May 27, 1998).
* C$14 million against Rh6ne-Poulenc S.A. for conspiring to fix prices
and allocate vitamins markets (September 22, 1999).
* C$12.5 million against SGL Carbon AG conspiring to fix prices in
graphite electrodes (July 18, 2000).
• C$11 million against UCAR, Inc. for conspiring to fix prices in
graphite electrodes (May 18, 1999).
These all flow from quite successful cooperation agreements between
Canada and the United States, and generally it seems that the violation was
first discovered in the United States. The largest Canadian fine collected in
connection with a cartel not also prosecuted by the United States was $2.5
million against Canada Pipe Company for conspiracy.
Interestingly, the Canadian antitrust statute, enacted the year before the
Sherman Act, was criminal from the very beginning. It was not until modern
times, however, that substantial criminal fines were secured against enter-
prises. For example, as noted above, the maximum fine levied against an
enterprise was C$51 million against Hoffman-La Roche in 1999 for price-
fixing in the vitamins market (for the same violation that the company paid
the record $500 million to the U.S. Treasury).5 4

54 Press Release, Competition Bureau (Canada), Federal Court Imposes Fines Totalling
$88.4 Million For International Vitamin Conspiracies (Sept. 22, 1999), http://strategis.ic.gc.ca/
SSG/ctO1581e.html.
2001] The Use of Criminal Law Remedies

Other countries-including Australia, Germany, and Japan-have

brought criminal-type cases against enterprises for cartel violations.5 5

V. Using Traditional CriminalRemedies Against Individuals as a

Critical Partof the United States Antitrust Enforcement Scheme

Subjecting individual wrongdoers to criminal liability was a feature in

the original Sherman Act, but it would not become very important for almost
seventy years. The original statute, making antitrust violations misdemean-
ors, imposed a maximum jail time of one year and a maximum fine of
$5,000.56 Today, the violations are felonies and an individual can be sub-
jected to a fine of $350,000 and three years in jail.57 In addition, an antitrust
felon may be disqualified from holding various licenses, voting, or holding
various offices. The great breakthrough on criminal liability for individuals
came with the ElectricalEquipment indictments and pleas in the late 1950s.
It was an extraordinarily broad set of conspiracies that resulted in electrical
utilities paying hundreds of millions of dollars too much for equipment and
consumers ultimately paying even more for electricity purchased from rate-
base regulated utilities. The size of the conspiracy and the prominence of the
companies involved caught the public attention. A number of individual par-
ticipants-executives of some of America's most prominent manufacturing
companies-were publicly dispatched to federal penitentiaries based on
guilty pleas. The business press widely covered the whole process, and, for
the first time, potential price fixers perceived themselves as being at risk of
going to jail.
This perceived risk of incarceration is critical. As one very senior corpo-
rate executive (who was a personal friend and a supporter of effective anti-
trust enforcement) once told me: "as long as you are only talking about
money, the company can at the end of the day take care of me in the late
1970s-but once you begin talking about taking away my liberty, there is
nothing that the company can do for me."
In the mid-1970s, with the passage of the 1974 felony statute, 58 the DOJ
placed an increasing emphasis on indicting individuals and seeking jail
sentences, for the very purpose of emphasizing to wrongdoers and potential
wrongdoers that they were seriously at risk.

55 For example, Charles James, Assistant Attorney General for the Antitrust Division, re-
cently cited international cooperation as a driving force behind the recent Vitamins cartel convic-
tions. See Charles A. James, International Antitrust in the Bush Administration, Address
Before the Canadian Bar Association Annual Fall Conference on Competition Law (Sept. 21,
2001), http://www.usdoj.gov/atr/public/speeches/9100.htm.
56 Sherman Act, ch. 647, 26 Stat. 209 (1890) (current version at 15 U.S.C. §§ 1-3 (1994)).
57 15 U.S.C. §§ 1-2 (1994). In 1974, the violations were elevated to felonies and the maxi-
mum individual fine was increased to $100,000. Antitrust Procedures and Penalties Act, Pub. L.
No. 93-528, § 3, 88 Stat. 1706, 1708 (1974) (current version at 15 U.S.C. §§ 1-3 (1994)). In 1990,
the maximum individual fine was increased to $350,000. Antitrust Amendment Act of 1990,
Pub. L. No. 101-588, § 4, 104 Stat. 2879, 2880 (1990) (codified at 15 U.S.C. §§ 1-3 (1994)).
58 Antitrust Procedures and Penalties Act, Pub. L. No. 93-528, § 3, 88 Stat. 1706, 1708
(1974) (current version at 15 U.S.C. §§ 1-3 (1994)).
 The George Washington Law Review [Vol 69:693

The stakes went up even further with the passage of the Sentencing
Guidelines in 1987. One of the problems that the DOJ had (and I was very
aware of it while I was there) was that federal judges were reluctant to sen-
tence price fixers to jail and tended to attempt to come up with alternative
"public service" type sentences. 59 The reason for this reluctance was that
antitrust price fixers were often pillars of the community, supporters of char-
ity, and posed no physical danger to other members of society. Moreover,
once caught, they tended to be very contrite and were not perceived by
judges (or for that matter prosecutors) as likely to repeat the offense. Thus,
imposing a jail sentence rested entirely on a theory of deterrence, which
many judges were unwilling to accept. It was the unevenness of sentences in
this area, and many others, that ultimately resulted in the Sentencing
Guidelines.
The Sentencing Guidelines treated antitrust felonies as very serious of-
fenses. Based on the same "point system" used to punish corporate criminal
behavior, the Guidelines make imprisonment an immediate remedy for the
sentencing court. For example, as with the corporate defendant, the current
antitrust guidelines establish a base offense level of ten for individuals con-
victed of antitrust violations. This level allows for up to six months incarcera-
tion and a fine based on a minimum of one to five percent of the volume of
commerce-but not less than $20,000.60 As with the corporate defendant,
different factors may affect the fine or the number of months (or years) that
the defendant is sentenced. 61 Multiple adjustments (such as importance of
the defendant's role in the offense, multiple counts of conviction, criminal
history, and other adjustments) are used to augment or decrease the offense
level, which can ultimately result in a greatly heightened fine, imprisonment,
or both.62
The statistics on the level of prison sentences imposed and served for
antitrust violations are impressive. The number of people sentenced to jail
and the amount of time served has continued to increase. It has always
seemed to me, however, that it is more important that the potential defen-
dant know to some degree of certainty that.she was likely to be sentenced to
jail than that long sentences be imposed. In any event, the statistical story
63
looks about as follows:

59 See Donald I. Baker & Barbara A. Reeves, The Paper Label Sentences: Critiques, 86
YALE L.J. 619, 623 (1977).
60 U.S. SENTENcING GUIDELINES MANUAL ch. 5, pt. A, sentencing table (2000).
61 Id. § 2R1.1(b)-(d).
62 id.
63 Scott Hammond, the DOJ's Director of Criminal Enforcement, gave these statistics in a
recent speech, emphasizing that the use of jail is growing dramatically in the very recent period.
Hammond, supra note 6, at 9.
2001] The Use of Criminal Law Remedies 707

Form of Enforcement Statistics

Convictions of Foreign Convictions against executives in Germany, Belgium, the
Executives Netherlands, England, France,
64 Switzerland, Italy, Canada,
Mexico, Japan, and Korea.
Number of Individuals Jailed Fifty individuals were imprisoned for antitrust and related
offenses in fiscal years 1999 and 2000.
Total Jail Days In 1999 and 2000 individual defendants were sentenced to
12,246 days of incarceration (approximately thirty-four
years), including fifteen sentences of twelve months or
more.
Foreign Nationals Jailed In fiscal years 1999 and 2000, six foreign nationals were sen-
tenced to serve time in U.S. prisons for antitrust offenses.
Early in 2001, the United States entered a plea agreement
in which, for the first time ever, a Japanese executive has
agreed to face a possible jail sentence for a violation of U.S.
antitrust law.

Meanwhile, in the rest of world, there have been very few prosecutions
of individuals. As far as I know, only one Canadian and two Israelis have
been sentenced to jail for price-fixing under a foreign law. In a recent case
on which I worked, an American employee of a Canadian company was sen-
tenced to one year in jail after a plea-bargain guilty plea with the United
States, while his Canadian counterpart was sentenced to one year of home
detention after a Canadian guilty plea.
The United States has tried hard to raise the stakes for foreign execu-
tives residing outside of the United States. Thus, as part of the plea bargains
in the Vitamins cartel cases, three Swiss executives of one company and three
German executives of another leading company agreed to serve short
sentences in U.S. penitentiaries. 65 More recently, a Japanese executive
agreed to face a possible jail sentence in the United States.66 There are ap-
parently a number of other foreign executives who have been sentenced to
jail for Sherman Act violations and are now fugitives hiding abroad.
The fines levied against individual violators have also been increasing.
The largest fine ever imposed on an individual was for $10 million against
Robert J. Koehler, a German chief executive, in the Graphite Electrodes
67
cases.

VI. The PracticalImportance of Imposing CriminalLiability Upon

Individuals in the InvestigationalProcess
Price-fixing, bid-rigging, and other cartel understandings are covert ac-
tivities, which, if successful, will often be highly profitable to the coconspira-
tors. Such an undertaking is not likely to be discovered unless somebody
"blows the whistle" to the government. The system of imposing criminal lia-

64 Some of these individuals have served prison terms and some are fugitives from the
United States, Mr. Hammond explained. Id. at 10.
65 Id. (describing the Vitamins sentences).
66 Press Release, U.S. Dep't of Justice, Executive and U.S. Subsidiary of Japanese Manu-
facturer Agree to Plead Guilty to International Price-Fixing Conspiracy Charges (Feb. 14, 2001),
http://www.usdoj.gov/atr/public/pressjreleases/2001/7476.htm.
67 Ferromin Int'l Trade v. UCAR Int'l., Inc., 153 F. Supp. 2d 700 (E.D. Pa 2001); Labaton,
supra note 3.
 The George Washington Law Review [Vol'69:693

bility on individuals generates two different kinds of incentives to encourage

whistle blowing. One is fear, and the other is the desire for revenge.
Fear may cause an individual (concerned that the illegal conspiracy may
be soon discovered) to expose the cartel to the government in turn for immu-
nity. This scenario also fits into the corporate amnesty program (discussed
infra), where a participating corporation may obtain amnesty for both 68
itself
and its employees in return for exposing a cartel to the government.
The desire for revenge is more picturesque, but it is still very much pre-
sent. In mny experience, disgruntled current employees, fired employees, for-
mer trade association officials, and even ex-spouses and ex-lovers may 69
be
anxious to finger the individuals who they think have done them in.
Once somebody has tipped off the DOJ and it has impaneled a grand
jury, a lot of potential targets are immediately at risk. The grand jury process
is secretive, and hence, only the government lawyers know exactly what in-
formation they have and from whom it came, and what information they still
need to make a case-or to make a stronger or broader case. Individuals,
but not enterprises, have the right to remain silent under the Fifth Amend-
ment for fear of incriminating themselves. The government's response is to
grant immunity for those individuals who come forward with evidence that
investigators believe will make or strengthen their cases against others.
Within an enterprise, the DOJ investigators will always be interested in try-
ing to indict the highest ranking officials who participated in, authorized, or
even just condoned the conspiracy. Thus, immunity will be handed out to
lower level employees and even those who participated in illegal cartel meet-
ings in return for testimony implicating their superiors. This is definitely a
"dog eat dog" environment and the prosecutors love it. Where should one
go? This is simply a generalization about a nonpublic process.
The same process works between individuals at different companies in-
volved in the suspected conspiracy. There certainly have been cases where
an individual was indicted for a one-on-one conversation with someone who
worked for a competitor and who then turned the defendant in.70 Of course,
as we saw with the Lysine cartel, an individual who turns herself in to the
government may become a government informant and continue to partici-
pate in conspiracy meetings, armed with recording devices in order to entrap
71
the other conspiracy members.
This scene is further complicated by the fact that each potential target of
the grand jury investigation has to be represented by a separate lawyer. The

68 U.S. DEP'T OF JUSTICE, CORPORATE LENIENCY POLICY (1993).

69 The seekers of revenge may not be too focused on precisely what the illegal activity is.
When I was in the DOJ, there was a case in which the disgruntled complainant (a former trade
association official) made a lot of tapes and took them to the Internal Revenue Service-which,
not finding tax fraud, still had the wits to pass the evidence on to the Antitrust Division.
70 A particularly celebrated example occurred when the president of one Braniff Airline
turned in the president of American Airlines for a telephone call in which the latter suggested
that they fix prices. United States v. Am. Airlines, Inc., 743 F.2d 1114, 1116 (5th Cir. 1984)
(prosecuted as a civil, section 2 attempt to monopolize case because Braniff's president declined
the invitation revealed in the tape recording).
71 See EICHENWALD, supra note 5.
20011 The Use of Criminal Law Remedies

reason for separate counsel is the fundamental conflict that exists under this
"dog eat dog" system: the employee may gain immunity by testifying against
the company or his colleagues, and counsel for the company is not an appro-
priate party to advise her on whether to take this course. Thus, lawyers for
different individuals are jockeying vis-a-vis each other and the government
making "hypothetical" offers of proof, perhaps seeking immunity (or at least
72
a reduced sentence) in return for cooperation with the government.
The situation appears very different in countries that only punish enter-
prises for cartel violations. The involved individuals have little incentive to
work hard to recall awkward facts about meetings and understandings; they,
like their employers, hope that the whole thing blows over. This basic reality
helps explain why the DOJ investigators are generally in a better position to
piece together the details of a conspiracy in situations involving very little
documentary evidence of what transpired and when. By contrast, the Euro-
pean Commission seems to require considerably more by way of incriminat-
ing documents (for example, meeting agendas or memoranda that describe
meetings) than the United States would need in order to open a full grand
jury investigation. Better incentives for informants and cooperating wit-
nesses may help explain why the big international cartel investigations (in-
volving citric acid, lysine, carbon rods, and vitamins) all commenced in the
United States and only later were taken up by other authorities. The United
States has also developed a quite successful corporate amnesty program
under which a company may obtain immunity for itself and its employees by
revealing a conspiracy and cooperating with the government in its prosecu-
tion.73 A variation on this (called "amnesty plus") allows a company, under
investigation for one cartel, to potentially gain substantial leniency as to that
cartel if it blows the whistle on a second cartel for which it will receive com-
plete amnesty. 74 Under these programs, it is not only the company but all the
individual officers and employees of the company who get immunity. The
extent to which the immunity for individuals is an important part of most
companies' decision to seek amnesty may be an open question, but the DOJ
strongly emphasizes it as a key part of the program. It seems fairly clear to
me that the corporate amnesty program would probably be somewhat less
successful if corporate executives themselves did not face the risk of prosecu-
tion and jail.
I have stressed immunity as a vital incentive for cooperation with the
government, but the story goes much farther. Once a grand jury investiga-
tion is under way and the DOJ has a reasonable version of the story, it may
still offer knowledgeable participants a recommendation for a reduced sen-

72 The DOJ investigators may even suggest, "we'll give you a pass if you can give us good
evidence against X."
73 U.S. DEP'T oF JusTicE, supra note 68. See generally Hammond, supra note 6; Scott D.
Hammond, Lessons Common to Detecting and Deterring Cartel Activity, Remarks at the 3rd
Nordic Competition Policy Conference (Sept. 12, 2000), http:/Iwww.usdoj.gov/atr/publicl
speeches/6487.htm.
74 Gary R. Spratling, Making Companies an Offer They Shouldn't Refuse, Presentation at
the Bar Association of the District of Columbia's 35th Annual Symposium on Associations and
Antitrust (Feb. 16, 1999), http'/www.usdoj.gov/atr/publiclspeeches/2247.htm.
 The George Washington Law Review [Vol 69:693

tence in return for more evidence against others. Indeed, a good many in-
dictments and information against individuals are resolved by pleas in which
the individual is allowed to get a below-guidelines sentence because of gov-
ernment representations to the court attesting to cooperation in its
investigations.
The lack of these features and incentives may help explain why Euro-
pean cartel enforcement has continued to lag behind the United States. The
European Union has had no amnesty program comparable to the United
States to encourage whistleblowers, 75 and the Commission has had to depend
on documents rather than testimony in most cases. The European Commis-
sion seems to have recognized this deficiency in announcing a program of
complete amnesty for the first company to call the Commission's attention to
a cartel. 76

VII. The United States' Willingness to Subject IndividualAntitrust

Wrongdoers to Criminal Liability and Imprisonment Differentiates
the United States Anticartel Enforcement System
Well over ninety-nine percent of all prison time served by antitrust viola-
tors worldwide has been served in U.S. prisons for Sherman Act section 1
violations. Many of the global cartels recently uncovered have been led by
foreigners who may well have been less sensitive to antitrust risks than many
of their American counterparts might have been.
As previously noted, only seven countries other than the United States
provide criminal liability to both enterprises and individuals-Austria, Ca-
nada, Ireland, Israel, Japan, Korea, and Norway. 77 Three others provide
criminal sanctions to individuals but not enterprises-France, Greece, and
Switzerland. 78 There has been no history of major prosecution for numerous
cartel cases and almost no use of jail sentences against individuals.
The Organization of Economic Cooperation and Development (OECD)
has recently pushed through a cooperation arrangement to try to help differ-

75 The European Union has a fine reduction program aimed at enterprises, not individuals;
it provides for significant fine reduction to the first enterprise that comes in with evidence. Com-
mission Notice on the Non-Imposition or Reduction of Fines in Cartel Cases, 1996 O.J. (C 207).
However, the complaining enterprise will not know until the case is decided how much the fine is
to be reduced.
76 Press Release, European Commission, Commission adopts new leniency policy for com-
panies which give information on cartels (Feb. 13, 2002). According to the release,
[t]he commission will grant complete immunity from fines: to the first member of
the cartel to inform the Commission of an undetected cartel by providing sufficient
information to allow the Commission to launch an inspection on the premises of
the suspected companies; or to the first member of the cartel to provide evidence
that enables the Commission to establish an infringement, when the Commission is
already in possession of enough information to launch an inspection, but not to
establish an infringement. This type of immunity is available only in cases where
no other cartel member has qualified for immunity under the first scenario.
Id.
77 See OECD REPORT, supra note 22, at 46 n.13.
78 See id.
2001] The Use of Criminal Law Remedies

ent national authorities to work together on cross-border cartels. 79 In con-

nection with this important undertaking, the OECD issued an interesting and
quite extensive report on anticartel enforcement around the world. The re-
port contains a particularly insightful section under the title "Overcoming of
the Knowledge Gap Concerning the Harm Done By Hard Core Cartels,"
which includes the following discussion:
[R]ecent hard core cartel cases indicate that even competition law
enforcement officials have often underestimated the harm done by
hard core cartels. Outside the competition law enforcement area,
there continues to be a significant underestimation of the nature
and extent of that harm. This knowledge gap may have many
causes. In the first part of this century cartels were encouraged in
some countries, while some others adopted the approach-recom-
mended by the 1930 London Interparliamentary Union-that coun-
tries should permit but regulate cartels, since prohibiting them
would be futile. More recently, and especially during the 1980's
[sic], a prominent "school" of economics took essentially the oppo-
site position-that hard core cartels were harmful in theory, but
were inherently so unstable that they could not often be a serious
problem. Public misunderstanding created by these shifting views is
aggravated by occasional examples of policy inconsistency, when in-
dividuals and governments that generally denounce hard core car-
tels choose to ignore their harm in particular cases. Moreover,
variations in competition authorities' enforcement policies and ter-
minology, both over time and among countries, also complicate
what might be a simple and powerful message-that hard core car-
tels are deliberate, knowingly illegal, and all-to-often successful
means of extracting monopoly profits from unsuspecting enterprises
and individuals.
Whatever the precise origins of this knowledge gap ... it is not
merely a theoretical problem but a real and serious impediment to
effective action against hard core cartels. For example, Canada's
recent competition legislation was substantially delayed because the
investigatory tools the Competition Commissioner was seeking-al-
though common in Canada for investigations of legally comparable
conduct-were at first regarded by the legal and business communi-
ties as more powerful than necessary in a competition case, even for
secret conspiracies to fix prices. Similarly, in some [OECD] Mem-
ber countries underestimation of the seriousness of hard core cartels
leads legislatures and/or courts to set fines that cannot possibly de-
ter such cartels because they are too low to make the cartels unprof-
itable. And in seeking public assistance in fighting hard core cartels,
competition authorities sometimes encounter the attitude that it

79 ORGANIZATION FOR ECONOMIC Co-oPERATIoN AND DEVELOPMENT, RECOMMENDA-

TION CONCERNING EFFEcInE ACTION AGAINST HARD CORE CARTELS, ORGANIZATION FOR
ECONOMIC CO-OPERATION AND DEVELOPmENT (1998), http://www.oecd.org/daf/clp/Recommen-
dations/Rec9com.htm.
 The George Washington Law Review [Vol 69:693

would not be appropriate for an employee to "blow the whistle" on

8
hard core cartel activity since it is not a serious violation. 1
This is a crucial-and very insightful-indictment of the political
processes around the developed world. The losses to the public imposed by
cartels are often very large. Yet, they are much less visible than those im-
posed by other economic crimes ranging from securities and financial fraud
to old fashioned bank robbery and piracy. Not only are the criminal activities
themselves less visible in cartel cases, but also the culprits are often reasona-
bly well heeled-the kind of people that any of us (or even a judge) might
play golf with or have a beer with. Thus, we see a situation in which many
OECD countries impose serious criminal liability on fraudulent actors (such
as the celebrated Nick Leeson who bankrupted Barings Bank in 1995 and
was sentenced to many years imprisonment) and yet they do not impose simi-
lar penalties in jail on serious antitrust violators.
Whether this reluctance to punish antitrust law-breakers will change
over time is an interesting subject. It took a very long time for the United
States (where antitrust has enjoyed more political support for a longer time
than in almost any other country) to get serious about prosecuting individuals
and sending them to jail. Most of the foreign antitrust regimes are either
entirely new or recently invigorated after a somewhat dormant past. As the
OECD report suggests, it seems possible that the hugely successful, but often
foreign-led, international cartels (usually exposed by the United States) will
persuade other countries to up the stakes for would be violators, including
the individuals. 8' Nevertheless, as long as cartel participants regard their ille-
gal activity as "reasonable risk-taking" on a cost-benefit basis, many will con-
tinue to carry it out for the same reasons that people invest in trendy stocks
and slow horses. If the individual is not personally at risk-and there is no
sense of moral turpitude for being involved in this kind of activity-the in-
centive to gamble is simply increased. Success is likely to mean higher pay, a
bigger bonus, or some other reward-which the company may not even real-
ize is a reward for an illegal activity.
Quite a few foreign executives seem to recognize that U.S. antitrust en-
forcement is a practical risk, but they discount the significance of their own
regimes back home. Thus, it has not been uncommon to find cartel partici-
pants (including even some Americans) who think that as long as they do not
hold cartel meetings on U.S. territory, then they are fine.82 This assumption,
of course, is totally wrong: the DOJ does not care where the meeting or
communication takes place so long as it has some direct, foreseeable impact
on U.S. imports or international markets in which U.S. enterprises and con-
sumers make purchases. Yet, this comforting sense that there are no U.S.
antitrust problems with foreign meetings, combined with more tolerant cul-
tures towards cartels, may help explain why nearly all of the largest Sherman

80 OECD REPORT, supra note 22, at 20.

81 Id. at 21-23. The OECD Report suggests that the lysine, citric acid, and vitamins cartels
were so large and successful and so seriously punished by the United States that they may affect
public perceptions outside the United States. See id.; see also Klawiter, supra note 41.
82 See EICHENWALD, supra note 5.
2001] The Use of Criminal Law Remedies

Act fines paid by corporate defendants have involved foreign corporations

participating in global cartels. In trying to break this perception, the DOJ
has been urging, in plea negotiations with major foreign enterprises, that
some of their executives agree to be brought to the United States and serve
jail time. This is apparently what happened in the Vitamins cartel investiga-
tion where three Hoffman-La Roche executives from Switzerland and three
BASF executives from Germany have been sentenced to jail in the United
83
States.

VIII. Conclusion
The use of criminal law processes and penalties against individual
wrongdoers has been one of the most successful and important features of
U.S. antitrust enforcement of the past three decades 4 I am convinced that it
has raised the perceptions of risk to individuals within companies and given
teeth to corporate compliance programs. Fear of being prosecuted for
wrongdoing has made individuals more willing to cooperate with the govern-
ment and, where possible, to seek complete immunity for prosecution. The
United States' effectiveness in this area has been increased significantly by,
first, the willingness of the U.S. Congress to increase penalties substantially
and to fund anticartel enforcement on a reasonable basis; second, the ability
of prosecutors to use the secret grand jury process to play one target against
another; and third, a growing network of cooperation arrangements with
other antitrust enforcers abroad.
In a more open investigative system, the threat to individual liability
might be a less potent tool in favor of the prosecutors than it is in the United
States. On the other hand, there remains an enormous difference between
only punishing the enterprise and punishing both the enterprise and the indi-
vidual decision makers or actors who have caused the enterprise to violate
the law.
I also remain convinced that deterrence is the critical issue in prosecut-
ing those who participate in highly profitable covert activities that are clearly
illegal. Deterrence is created by a combination of the prospect of being sub-
ject to reasonable predictable (and unpleasant) penalties and the serious like-
lihood of being caught while engaged in the illegal activity. Imposing liability
on individuals bears on both of these functions. Imposing criminal liability
only on the enterprise may have some of the same effects, but they are likely

83 Plea Agreement, United States v. Sommer, No. 3:99-CR-201-R (N.D. Tex. May 20,
1999); Press Release, U.S. Dep't of Justice, Four Foreign Executives of Leading European Vita-
min Firms Agree to Plead Guilty to Participating in International Vitamin Cartel (Apr. 6,2000),
http:lhvww.usdoj.govlatrlpublicpress~releases200014494.htm; Press Release, U.S. Dep't of Jus-
tice, Former F. Hoffman-La Roche Executive Agrees to Plead Guilty for Participating in Inter-
national Vitamin Cartel (Aug. 19, 1999), http'J/www.justice.gov/atr/publiclpress-releases/1999/
2626.htm; Press Release, U.S. Dep't of Justice, F. Hoffmann-La Roche and BASF Agree to Pay
Record Criminal Fines for Participating in International Vitamin Cartel (May 20, 1999), http://
www.usdoj.gov/atrlpubliclpress-releases/19992450.htm. However, there are counter examples:
when the former chief executive of Christie's, an art auction house, was indicted, he made clear
that he would rely on the absence of a U.S.-U.K. extradition treaty covering antitrust crimes,
rather than plead or stand trial in the United States.
84 See Labaton, supra note 3.
714 The George Washington Law Review [Vol 69:693

to be diluted. In most cases, the threat of civil liability (for example, treble
damage claims in the United States) are more significant for the enterprise
than for the individual wrongdoer because the individual wrongdoer may not
be worth enough for the plaintiff to bother suing.
When all is said and done, criminal liability ought to reflect the culture
and values of the people of a country. The United States has a long tradition
of fairly broad and sometimes noisy support of antitrust law and enforce-
ment. After all, this is what created the Sherman Act in 1890 and the felony
statute in 1974. Robber barons and cartel conspirators are bad people in the
American popular lexicon. When caught, they have been punished by the
United States to a degree far greater than any other country. It is too early
to tell whether this public psychology or political culture will be replicated
elsewhere in the world over time. Regardless of what happens in other coun-
tries, I see little chance of the Umted States abandoning the enforcement of
antitrust felony prohibitions against cartels large and small.