[authors: John M. Nannes, Steven C. Sunshine, Tara L. Reinhart]
On September 20, Judge Susan Illston of the Northern District of California handed down sentences to AU Optronics Corporation and two company executives, following their convictions in March for participating in a global price-fixing conspiracy involving LCD screens used in computers and televisions. Judge Illston sentenced AU Optronics to a fine of $500 million, matching the largest corporate fine ever imposed for a price-fixing violation, but declined to impose the $1 billion fine sought by federal prosecutors. She also imposed three-year prison terms and $200,000 fines on the executives. The trial and sentencing of AU Optronics has established precedent on several issues and will impact the decision making and negotiating positions of both defendants and the Antitrust Division of the U.S. Department of Justice going forward.
First, the Division’s success in obtaining convictions against AU Optronics and two senior executives through a jury trial provides a boost to the Division’s litigation posture and underscores the risks for defendants in contesting liability. Indeed, speaking just last week, Antitrust Division head Joseph Wayland called the case a “major victory for the division” and stated that “[w]hen companies in the future are facing the difficult decision whether to accept responsibility or plead guilty, they will have to consider that AUO endured an eight-week trial that exposed how its top executives harmed Dell, HP, Apple and every other customer that had its prices fixed.” The trial was not a complete success for the Division — the jury acquitted two subordinate executives and deadlocked on a third — but it nonetheless underscores that the Division is committed to bringing price-fixing cases to trial when it believes it has the evidence to show a violation.
Second, the Division invoked the alternative fine statute — 18 U.S.C. § 3571, which permits fines up to twice the gain or twice the loss caused by the violation, exceeding the Sherman Act statutory maximum penalty of $100 million — in a trial for the first time since the U.S. Supreme Court ruled in Apprendi v. New Jersey, 530 U.S. 466, 490 (2000), that “any fact that increases the penalty for a crime beyond the prescribed statutory maximum must be submitted to a jury, and proved beyond a reasonable doubt.” Judge Illston concluded that Apprendi required the Division to prove the “gain” or “loss” described in the alternative fine statute to a jury beyond a reasonable doubt. In a victory for the Division, the jury agreed with the Division’s economic testimony and returned a verdict finding that the conspiracy provided the conspirators with a gain of at least $500 million. The Division also obtained a significant legal ruling when, in another issue of first impression, Judge Illston ruled that in antitrust cases the alternative fine statute authorizes penalties against an individual corporate defendant up to twice the gain or twice the loss stemming from the entire conspiracy — not just the gain or loss caused by that defendant.
The jury’s finding of gain would have permitted a fine against AU Optronics of up to $1 billion, but Judge Illston limited the fine to $500 million. She did so despite the Division arguing that the company’s recommended fine calculated under the U.S. Sentencing Guidelines would range from $936 million to more than $1.8 billion. AU Optronics’ co-conspirators, which had pleaded guilty rather than go to trial, paid fines ranging from $30 million to $400 million. Most of those companies had received fines beneath their recommended Guidelines’ ranges, but they had agreed to accept responsibility and cooperate without trials. In its sentencing brief, the Division argued that it would be inequitable to provide AU Optronics the same benefit because the company insisted on trying its case. Judge Illston nevertheless balked at imposing a fine on AU Optronics that would have exceeded the combined fine totals of all the other participants in the LCD cartel and would have doubled the largest Sherman Act penalty ever imposed.
As a result, under the Division’s calculations, AU Optronics received a fine that was nearly 50 percent beneath the Guidelines’ recommended range, a significant discount typically afforded only to companies that agree to plead guilty and provide cooperation. AU Optronics’ fine nevertheless is more substantial than the fines of any of its co-conspirators. As a result of litigating through trial, the Division was able to compile more data on the volume of commerce affected by the conspiracy than it had at the time it accepted the plea agreements of AU Optronics’ co-conspirators. By going to trial, AU Optronics faced a significantly higher fine based on a larger volume of commerce than it would have faced had it pleaded guilty like its co-conspirators.
The AU Optronics case underscores the risks that companies must evaluate when deciding how to resolve a criminal antitrust investigation. The Division will not hesitate to go to trial when the evidence warrants, which means that companies must promptly evaluate their exposure to determine an appropriate course of action. At the same time, the penalty phase of an antitrust case — whether in plea negotiations or after trial — is more of an art than a science, despite the structure provided by the Sentencing Guidelines. In future cases, the Division will trumpet its success in invoking the “twice the gain” alternative fine statute, but the case leaves room for companies to continue to negotiate resolutions based on the many factors that bear on a final penalty — from the level of affected commerce to mitigating circumstances and proportionality in sentencing.