We recently wrote about the dismissal of the plaintiffs’ antitrust claims against banks involved in the LIBOR manipulation scandal for failure to allege an antitrust injury. Since that dismissal, the court has granted plaintiffs leave to move to amend their complaints, although the court openly questioned whether the plaintiffs’ proposed amendments cured the defects in the antitrust claims.
The more interesting development, however, may be yet to come: the decision’s effect on the ongoing investigations by the Department of Justice Antitrust Division, individual states’ antitrust bureaus, the European Commission, and individual European countries’ antitrust authorities. The court downplayed the relevance of its findings to any criminal antitrust investigation: “even though a defendant might have violated the Sherman Act and thus be subject to criminal liability, it is a separate question whether Congress intended to subject the defendant as well to civil liability.” Similarly, in concluding its opinion, the court observed that “there are many requirements that a private plaintiff must satisfy, but which government agencies need not.”
Despite those observations, the court’s reasoning would cast doubt on whether defendants’ actions imposed any restraint on commerce, as required to prove a violation under Section 1 of the Sherman Act. For example, the court found that the banks do not compete with one another in setting LIBOR, nor is the process intended to be competitive. Even after LIBOR is set, it is used by all firms in the affected financial markets. Thus, according to the court, the defendants never colluded to avoid competing in any market in which they otherwise should have been in competition.
The court’s opinion comes as the DOJ’s antitrust division and state antitrust bureaus continue to investigate the scandal, presumably, for violations of Section 1 of the Sherman Act or the various state equivalents. Indeed, in 2009, the DOJ’s criminal and antitrust divisions filed a three-count criminal complaint against individual UBS traders, one count of which alleged that the defendants violated Section 1 of the Sherman Act by conspiring to restrain trade or commerce. Similarly, foreign antitrust and competition authorities, which often look to U.S. decisions as persuasive authority, launched their own investigations. For example, Joaquin Almunia, the European Commissioner responsible for Competition, expects the EC’s first decisions on the LIBOR manipulation scandal by the end of the year, and Asian competition authorities are conducting their own investigations. Targeted banks may have more bargaining power when negotiating a plea deal if the DOJ cannot credibly wield the Sherman Act as a prosecutorial cudgel.
The court’s opinion, therefore, may push both regulators and civil claimants to pursue fraud-based, rather than antitrust, theories of liability. UBS, in its plea agreement with the Department of Justice, has already pled guilty to one count of wire fraud, but not any antitrust violation. Similarly, while some plaintiffs’ antitrust claims have been dismissed, other plaintiffs who brought fraud based claims remain viable. Thus, few view the court’s opinion to mean that the banks will emerge unscathed. But future claimants, whether public agencies or private plaintiffs, must carefully consider how to frame their claims for any losses arising out of the LIBOR manipulation.