Global investigations by competition authorities into the alleged manipulation of Libor helped push total cartel penalties in 2013 around the world to record highs.
Despite a slow first half to 2013, antitrust regulators in seven key regions levied a total of €3.1bn on companies for price-fixing in the year, a 10.5 per cent rise on 2012’s record levels, according to new data.
The bulk of the total was because of a flurry of enforcement action in the last few weeks of the year, with the European Union’s antitrust authority fining six financial institutions a total of €1.7bn last month for attempting to rig Libor, or the London Interbank Offered Rate. Its system of immunity in price-fixing probes was also highlighted, with UBS avoiding a fine of €2.5bn by giving the European Commission key information on a cartel that allegedly manipulated yen Libor.
While the total amount of fines around the world has risen, the number of investigations has fallen. Legal experts forecast that the trend of fewer, larger and slower probes that are global in nature and which would lead to heftier fines would continue in 2014, with the financial-services industry particularly targeted.
“Multiple agencies in scores of countries are more frequently pursuing and punishing the same basic conduct, but under different laws,” said John Terzaken, an antitrust partner at Allen & Overy, the law firm that compiled the research. “The resource constraints born of the global financial crisis will continue to slow the pace of new investigations, as well as impact the depth of the investigations authorities are able to pursue in any one sector.”
While some of the world’s biggest financial institutions have paid a total of $5.8bn in fines and settlements as a result of the sprawling probe into whether Libor, a key borrowing rate, was rigged, similar investigations have been sparked into whether other benchmark rates including Forex and ISDAfix have been manipulated, meaning high fines could be likely this year too.
It was not just financial institutions targeted by competition regulators around the world in 2013: parallel investigations into price-fixing allegations in the auto parts industry led the US Department of Justice’s antitrust division to levy $740m in the final days of its fiscal year; the rump of its $1.1bn meted out in 2013. The EU also fined wire-harness suppliers €142m in July as part of its auto parts probe; and Canada fined a record $28.5m against Yazaki as part of its parallel investigation.
Emerging economies started to become active in cartel enforcement in 2013 and signed an accord in November to co-operate more and share expertise, A&O said. Brazil’s total fines more than tripled, from $69m in 2012 to $213m in 2013 – largely because of a $123m fine for air cargo companies – while South Africa’s probe into collusion in the construction industry meant its cartel fines leapt from $58m to $149m.
Penalties for individuals also became harsher in 2013: a US court imposed a five-year sentence for price-fixing last month, the longest jail sentence in US history for an antitrust offence. Brazilian prosecutors also called for the maximum sentence for cartelists to double to 10 years, according to A&O.