David Balto is an antitrust attorney in Washington, D.C. Mr. Balto has over 20 years of experience as an antitrust attorney in the private sector, the Antitrust Division of the Department of Justice, and the Federal Trade Commission, where he was the policy director of the Bureau of Competition and attorney adviser to Chairman Robert Pitofsky.
Presidential campaigns are often marked by efforts to compare and contrast administrations, particularly in a year like this one when the incumbent president is seeking to associate his opponent with his unpopular predecessor. One prominent area in which there are key distinctions between President Barack Obama and the Bush administration before him is the enforcement of the nation's antitrust laws.
Antitrust enforcement is critical because the competition it protects is vital to the health of our free market economy. Strong competition and rivalry lower prices and increase output, and promote innovation and job growth, goals that are all the more crucial in a period of economic recovery. In a series of three posts, we will review the differences between the Obama and Bush attitudes on antitrust enforcement, as reflected by the level of activity of the Antitrust Divisions of their Departments of Justice.
We will begin by focusing on criminal prosecution, the crown jewel of the Antitrust Division's enforcement activities. Collusive price-fixing by illegal cartels is the most pernicious activity that illicitly extracts money from the market, and has a great and detrimental impact at all levels of the economy. This is especially true for consumers, who are all too often sold lower quality products at high, unfair prices.
The Obama Antitrust Division has vigorously pursued cartels and anti-competitive behavior, conducting multiple high profile investigations over the last three and a half years with immense returns. As recently as September 20, Taiwanese LCD screen producer AU Optronics was fined $500 million for conspiring with several other screen manufacturers to artificially inflate prices. The fine is tied for the largest ever levied in an American antitrust case, and is a portion of the more than $1.4 billion the Antitrust Division has collected in an investigation that has targeted several other LCD producers and resulted in fines and multiple years of jail time for top executives, including three years for two of AU Optronics' leaders. The Division under President Obama has also investigated and successfully ended a price-fixing and bid-rigging conspiracy among three Japanese auto parts manufacturers that produced over $748 million in fines and jail time for eight executives, as well as a bid-rigging agreement in the municipal bond investment market that yielded a total of $525 million in penalties from JPMorgan Chase, UBS AG, and Bank of America.
The importance of the DOJ Antitrust Division's criminal enforcement activity in cases like this cannot be overstated. This is particularly true in the case of LCD panels, which are used in devices from laptops and cell phones to computer monitors and televisions, meaning that nearly every American consumer was impacted by the illegal price-fixing scheme. It is critical that we have a strong enforcement system to step in when firms are conspiring to fix prices like this, particularly when the market for those products is so immense and the impact so widespread (the LCD business is valued at over $70 billion annually, and there are more than 300 million cell phone owners in the United States).
Thus it is encouraging to see that the Obama administration has substantially increased activity on the criminal enforcement front over the previous administration. The Obama administration has stepped up enforcement on every metric, including average yearly fines collected ($661.5 million per year, compared to $334.5 million under Bush), average number of cases filed (74 to 40 per year) and average jail days assigned (20,995 to 12,030). The Obama administration has also incarcerated numerous foreign nationals for their roles in price-fixing cartels for an average of 10 months, compared to 6.4 months under Bush.
While the criminal antitrust enforcement activity of the Obama administration is laudable and a clear improvement over its predecessor, the increase in the Division's efforts also reflect the fact that the kind of egregious anti-competitive behavior demonstrated by targeted cartels is showing no signs of abating. Although the trend of increasing fines may be acting as a deterrent to a certain extent, it is crucial that we sustain a powerful enforcement system to punish this type of conduct and ensure that there are clear and powerful consequences, regardless of which party controls the White House in January.