Plaintiffs in the case of In re Packaged Ice Antitrust Litigation have convinced the court that tape recordings of conversations from a criminal investigation into alleged price fixing of packaged ice sold in retail stores and gas stations should not remain on ice.

Judge Paul Borman of the U.S. District Court for the Eastern District of Michigan has ordered the Department of Justice (“DOJ”) to produce tape recordings and transcripts in response to the direct purchaser plaintiffs’ motion to compel.  The production will be reviewed in camera by the judge to see whether there is any need for protection. 

The plaintiffs are purchasers of packaged ice from defendants, including Reddy Ice, Arctic Glacier, and Home City Ice, three major players in the packaged ice industry.

The tape recordings and transcripts at issue allegedly involve former employees of the defendant ice manufacturers and allegedly incriminate a number of potential witnesses in the direct purchaser plaintiffs’ civil antitrust case.

The tapes and transcripts were collected during the DOJ’s criminal antitrust investigation of the defendants.  As part of its investigation, the DOJ collected the tapes and documents at issue by recruiting individuals to record conversations with people integral to the alleged conspiracy – a common practice to investigate conspiratorial activities.  The criminal investigation ultimately led to guilty pleas from Arctic Glacier and Home City, as well as three former Arctic Glacier employees.

Two of the three original defendants to the civil action, Arctic Glacier and Home City, have already settled with the direct purchaser plaintiffs or are seeking settlement confirmation.  Reddy Ice remains an active defendant. 

The direct purchaser plaintiffs subpoenaed the DOJ and asked for the tapes and transcripts.  The DOJ objected to the subpoena on the grounds of sovereign immunity and lack of jurisdiction, investigatory files privilege, law enforcement privilege, and work product protection. 

Judge Borman found that the court had proper jurisdiction and that sovereign immunity did not bar the court’s review of the dispute.  On the substance, the court held that the privileges and work product protection invoked by the DOJ did not justify shielding discovery by the direct purchaser plaintiffs.  The judge seemed particularly persuaded by the argument that since the defendants’ counsel had access to the tapes and transcripts during the prior criminal investigation, denying the direct purchaser plaintiffs access would “significantly prejudice” plaintiffs’ discovery efforts.

The European Commission is engaging in a little spring cleaning as it opens the window on how the European Union calculates fines, and cleans up a price-fixing cartel of laundry detergent producers.

The EU’s drive for greater transparency in how it sets fines was announced by Competition Commissioner Joaquin Almunia, who revealed that the Commission will be adding a section on fines in its Statement of Objections, which is sent to companies under investigation.  This new section will “indicate … the elements for the calculation of the fine such as the value of the cartelized sales – which is a critical factor – but also, for example, an indication of the gravity” and whether they have breached rules previously, he said.

The announcement comes in the wake of criticism from businesses that the fines are too high, especially in difficult economic times.  Almunia said the change should “open a channel for dialogue with the parties and will give them a better idea, at an early stage, of the size of the fines” they are facing. 

“In the last few years, we have been refining our fining guidelines to achieve optimal deterrence – which is our ultimate goal – and we will continue do to so,” he said.  Almunia defended the high fines by saying, “Our fines must remain large, because companies need to understand that cartels do not pay.”

The announcement came a day after the Commission fined two household products companies – US-based Procter & Gamble Co. and British-Dutch company Unilever NV – a total of $456 million as part of a settlement for fixing prices of laundry detergent powder in eight European Union countries.

Germany’s Henkel AG, one of the leading producers of laundry detergent in Europe, blew the whistle on the cartel in 2008 when it detected the conduct during an internal audit.  Henkel got immunity and was not fined because it informed regulators of the price fixing. 

In a press conference, Almunia said the cartel began when the companies, through a trade association, began an environmental initiative which focused on methods to reduce the weight of detergent powders and reduce packaging waste.  “They agreed to protect their respective market shares, they agreed also not to decrease prices when decreasing the size of the packages, and afterwards they even agreed on a price increase,” Almunia said.

The cartel operated from January 2002 until March 2005, and affected the price of laundry detergents in supermarkets in Belgium, France, Germany, Greece, Italy, the Netherlands, Portugal and Spain. 

As part of the Settlement, both Unilever and Procter & Gamble admitted that they participated in the cartel in exchange for a 10 percent reduction in fines.  The fines were also reduced as part of the Commission’s leniency program because both companies cooperated with the investigation.

The European Commission, which can fine companies as much as 10 percent of global yearly sales, imposed 12 billion Euros in fines from 2005 to 2010.  In 2010 alone, the Commission imposed fines of 3 billion Euros in the seven cartel decisions it made.  The Commission is currently investigating more than 25 cartel cases.

A consortium of 130 financial institutions operating the leading interbank network in France is offering to lower most interbank fees for card transactions in order to resolve a price-fixing investigation by the French Competition Authority.

Groupement des Cartes Bancaires (“CB Group”), whose network accounts for more than two thirds of all card transactions in France, are offering to lower the fees to settle the Authority’s investigation into allegations that the fees were the result of anticompetitive price-fixing between member banks.  The investigation was triggered by complaints lodged with the French competition agency in 2009 and 2010 by two leading trade associations representing France’s retail industry.

The Authority stated in a press release that it was not necessarily illegal for the CB Group to collectively set interbank fees for card transactions within its network.  However, the level of these fees must be based on objective justifications, such as security or interoperability requirements.  The competition watchdog noted that the Group had not provided sufficient data to justify the fees’ current levels, and that some of the fees had remained unchanged for over two decades, in spite of changes to the competitive landscape and a vast increase in the use of payment cards over that period of time.

Details of the Group’s proposed commitments have been posted on the Competition Authority’s website to allow interested parties to submit comments, pursuant the so-called “market testing” procedure, which will close on May 5, 2011.  Under the plan, interbank fees for card payments would be cut by 25%, while the fees for withholding cards would be reduced by 50%.  ATM withdrawal interbank fees, however, would remain at their current level.  If accepted by the Authority, the commitments will remain in force for a 5-year period.

The United States Court of Appeals for the Third Circuit has upheld an 18-month prison sentence in U.S. v. Norris for former Morgan Crucible Co. PLC CEO Ian Norris, who was found guilty last December of conspiring to obstruct justice in a price-fixing investigation of the carbon products industry.

Norris was sentenced to 18 months in prison, three years of probation, and a $25,000 fine after a federal jury in Pennsylvania found him guilty of conspiring to obstruct justice during a grand jury investigation into Morgan’s alleged anti-competitive conduct.  According to prosecutors, Norris drafted false scripts for Morgan employees to follow if questioned and instructed executives to destroy incriminating documents and lie about alleged price-fixing meetings with competitors.

Currently in prison, Norris argued on appeal that there was no evidence he conspired to interfere with the grand jury investigation, that the jury was improperly instructed on the meaning of “corruptly persuades,” and that the district court’s decision to allow Sutton Keany, Morgan’s defense counsel, to testify for the government violated attorney-client privilege because Keany also represented Norris in his personal capacity.  But the Third Circuit pointed to evidence that Norris discussed the grand jury subpoena with other Morgan employees and agreed to draft false scripts for them to use if questioned.  The court also dismissed Norris’ arguments that the jury received improper instructions, and found “no clear error” in the trial court’s ruling allowing Keany to testify.

The U.S. Supreme Court has told manufacturers engaged in resale price maintenance that they can continue to rely on its controversial 2007 opinion in PSKS Inc. v. Leegin Creative Leather Products, which struck down the Court’s long-standing precedent that such vertical price restraints are per se illegal.

After nearly four years of additional proceedings, the Supreme Court’s original Leegin decision has now proved fatal to the plaintiff’s antitrust complaint, which challenged a manufacturer’s resale price maintenance policy.  The Supreme Court has denied certiorari to the decision of the Fifth Circuit Court of Appeals affirming the dismissal of the Leegin complaint, which underwent a lingering death as the Supreme Court remanded the case to the lower courts, which dismissed the plaintiff’s claim under the more lenient rule of reason standard endorsed by the high court.

In its initial 2007 opinion, a fractured Supreme Court held that the practice of vertical resale price maintenance was not per se illegal under antitrust laws.  That decision overturned the nearly century-old precedent set by Dr. Miles Medical Co. v. John D. Park & Sons, which held that the practice automatically violated Section 1 of the Sherman Act.  Now, such activity must be examined under the rule of reason, a more lengthy and costly inquiry that examines procompetitive benefits of a specific policy and the context surrounding it. 

Both the Dr. Miles precedent – which had been heavily criticized by some antitrust commentators – and the 5-4 decision overturning it, over a vigorous dissent, were controversial.  Some antitrust commentators, economists, and judges had argued that there are valid justifications for resale price maintenance, such as maintaining the image of a particular brand.  The majority concluded in 2007 that “respected authorities in the economics literature suggest that the per se rule is inappropriate, and there is now widespread agreement that resale price maintenance can have procompetitive effects.”  However, the dissent authored by Justice Stephen Breyer, which was joined by Justice Ruth Bader Ginsburg and then-Justices John Paul Stevens and David Souter, emphasized the pro-consumer, low price effects of such a rule and argued for the importance of respecting precedent under the doctrine of stare decisis.  But the Court overturned the lower court ruling adhering to the Dr. Miles precedent and remanded the case to where it originated in the Fifth Circuit.

After the Supreme Court rejected the per se standard for vertical price fixing in its 2007 decision, the case returned to the lower courts, which considered the plaintiff’s antitrust claims under the more defendant-friendly rule of reason.  A Texas retailer, Kay’s Kloset, which was operated by PSKS, had attempted to price the goods of Brighton, Inc., which makes handbags and other goods, at a price lower than the manufacturer demanded.  The manufacturer argued that a higher price for its good at the retail level would enable the retailer to spend more money on promoting the brand in the store and educating the customers about its products.  The Fifth Circuit Court of Appeals affirmed the dismissal of the Kay’s Kloset’s case against Leegin in 2010, and the Supreme Court has now declined to grant certiorari.