DEPARTMENT OF JUSTICE
PRESS CONFERENCE
Thursday, July 14, 1994
| Room 3107
Department of Justice 9th
& Constitution, N.W.
Washington, D.C. 11:53
a.m. |
ATTORNEY GENERAL RENO: I am here today to
announce that the Department of Justice's Antitrust
Division, in an unprecedented joint effort with the
Canadian competition authorities, has broken up an
international price fixing conspiracy in the $120 million
fax paper industry today.
A Japanese corporation, two American
subsidiaries, and a former president of one of the U.S.
subsidiaries raised the price of thermal fax paper used
primarily by small businesses and home fax owners by about
10 percent. They have all agreed to plead guilty and pay
criminal fines of more than $6 million.
This sends an important message to foreign firms
that want to do business in the United States. They must
1 | take our antitrust laws seriously and they must pay by our |
2 | rules of fair competition when they set prices to be paid |
3 | by United States consumers. |
4 | I want to thank and congratulate Anne Bingaman |
5 | and the Antitrust Division and George Addy of the Canadian |
6 | Bureau of Competition Policy for their outstanding, |
7 | cooperative efforts in bringing about this first joint |
8 | criminal antitrust case, which has resulted in successful |
9 | prosecutions in both countries. I think this partnership, |
10 | this cooperation is an example for all of us in the future |
11 | as to how we must work together to address issues that |
12 | have international impact and concern. |
13 | If international businesses engage in |
14 | conspiracies that victimize consumers in multiple |
15 | jurisdictions, the United States Government will cooperate |
16 | with foreign competition authorities to protect consumers |
17 | here and around the world. |
18 | Now I would like to ask Anne Bingaman to make a |
19 | few remarks. |
20 | MS. BINGAMAN: We are proud of this announcement |
21 | today. It is historic. It is a first. It is the result |
22 | of unprecedented shoulder-to-shoulder cooperation |
23 | throughout this investigation with George Addy and the |
24 | Canadian Bureau of Competition, that has resulted in fines |
25 | of over $6 million, a criminal information of three |
1 | corporations and an individual, including a Japanese |
2 | corporation, a subsidiary of that corporation, an American |
3 | corporation, and another corporation headquartered in |
4 | Boston. |
5 | It is the first of what we hope will be many |
6 | such efforts, and we are extremely proud of this result. |
7 | I want to tell you it came originally from a tip from the |
8 | Canadians. We initiated legal process here and, under |
9 | court order, were able to share the results of our |
10 | discovery here with the Canadians. They, similarly, |
11 | obtained documents in Canada which, because of our treaty |
12 | with them allowing for mutual assistance, they were able |
13 | to share with us. We interviewed witnesses jointly. We |
14 | took proffers from witnesses jointly. |
15 | The Canadians set up a data base of document |
16 | summaries which we shared with them. They filed an |
17 | information or indictment yesterday, or two days ago, in |
18 | Canada. The investigation is ongoing, and it is |
19 | unprecedented, but critically important, in an era when |
20 | national boundaries are less and less important that the |
21 | antitrust authorities be able to work as one, to work as a |
22 | team, a true team, to work next to each other, to share |
23 | information, and to not allow criminal price fixing |
24 | conspiracies to hide behind national borders. That's what |
25 | this is about and we're very proud of it. |
1 | It is a great honor to have George Addy, head of |
2 | the Canadian Bureau of Competition, here from Canada |
3 | today. I will ask George to speak. |
4 | MR. ADDY: Thank you. |
5 | QUESTION: Would you spell your name, sir? |
6 | MR. ADDY: A-D-D-Y. |
7 | I'd like to echo the comments that you've heard |
8 | today. This is a precedent-setting case. It's a case |
9 | that demonstrates the need for cooperation and the |
10 | benefits that can directly flow from cooperation to the |
11 | North American markets. The case itself started with a |
12 | complaint from a businessman in Toronto, which gave rise |
13 | to our investigation. We discovered information that we |
14 | passed on to Anne and her colleagues, which led to greater |
15 | cooperation and joint efforts in tracking this case down. |
16 | I don't think that either our case in Canada or |
17 | the case which Anne and Ms. Reno have just spoken of today |
18 | in the U.S. could have reached the point that they have |
19 | reached without cooperation. There was a need on both |
20 | parts, of both agencies, to secure information and |
21 | assistance from the other, and I don't think either one of |
22 | us would be where we are today without that cooperation. |
23 | I look forward to further cooperation of this |
24 | type in future cases. |
25 | Thank you. |
1 | QUESTION: Could you tell us how the conspiracy |
2 | worked? How'd they do it? |
3 | MR. ADDY: It was a conspiracy whereby the |
4 | manufacturers of the products, of the thermofax paper, met |
5 | at various locations. As you will see from the |
6 | documentation that has been filed, there were some |
7 | meetings in the U.S. And if you can obtain the |
8 | information which has been filed in the public record in |
9 | Canada, it will also disclose that there were meetings |
10 | abroad, in Japan, to discuss the conspiracy and the |
11 | agreement to fix prices in the market. |
12 | QUESTION: Could you elaborate? |
13 | QUESTION: Do you know how much this cost |
14 | consumers, and is that reflected in the fines? |
15 | MR. ADDY: The fine, from a Canadian |
16 | perspective, and Anne will obviously speak for the |
17 | situation here, but the fine to date, and it is an ongoing |
18 | matter --we have indicted and had a plea by one of the |
19 | conspirators, Kanzaki, on Tuesday in the Federal Court of |
20 | Canada, in Toronto -- the fine in that case is precedent- |
21 | setting from the perspective that it's the highest |
22 | percentage of sales that's been reflected in a fine. The |
23 | fine was $950,000 that was imposed by the court on |
24 | Tuesday, and that accused a share of sales in Canada are |
25 | such that the fine represents almost 20 percent of what |
1 | those sales are. So it's a very high percentage. |
2 | We have had absolute dollar fines of higher |
3 | levels, but as a percentage, it's higher. |
4 | Do you know, Anne, for here? |
5 | QUESTION: Do you know how much it cost |
6 | consumers in total? |
7 | MS. BINGAMAN: The market is $120 million a |
8 | year. The conspiracy set forth in the information lasted |
9 | somewhere between half a year and a year, as alleged in |
10 | the information. The investigation is ongoing as to the |
11 | duration and other aspects. |
12 | The total amount of the fines in the United |
13 | States is almost $6.5 million, something just under that - |
14 | - $6-plus million. |
15 | QUESTION: If you were dealing with a 10 percent |
16 | markup and it was a $120 million a year business, for half |
17 | a year you come out to roughly $6 million. For the entire |
18 | year, it would be $12 million. So if this conspiracy were |
19 | going on for a full year, aren't they making a $6 million |
20 | profit out of it, even if they do have to pay a fine? |
21 | MS. BINGAMAN: We are continuing this. There |
22 | are other possible violators. The case is not over yet. |
23 | We secured the fines that we did, which are high. $6- |
24 | plus million is a large fine by any standard, and the |
25 | investigation is ongoing. So this is not over yet. |
1 | QUESTION: Is anybody going to jail? |
2 | MS. BINGAMAN: We have three corporations of the |
3 | four named in the information and one individual, who has |
4 | pled guilty. But we are not recommending jail time for |
5 | this individual. |
6 | QUESTION: When you had your joint press |
7 | conference with Senator Metzenbaum and some others some |
8 | time ago, you mentioned about 10 price fixing or other |
9 | conspiracies around the world that you were looking into. |
10 | Is this the first of those, and what can we be looking for |
11 | next? |
12 | MS. BINGAMAN: This is indicative of the kind of |
13 | thing that goes on. I did not have this specifically in |
14 | mind, in all honesty. But it is exactly the kind of |
15 | thing. |
16 | You have, typically, in these kinds of |
17 | conspiracies simple products that are fungible, that are |
18 | not manufactured products. That is, in a sense they are |
19 | basic inputs, usually, to other processes. There are |
20 | usually a handful of companies making the product. And |
21 | so, it's easy for foreign companies and one or two U.S. |
22 | companies to allocate, and divide, and fix prices in the |
23 | entire world market, or certainly the part of the market |
24 | we're concerned with, which is the United States. |
25 | So this is typical in the sense of the fact |
1 | pattern involved. And yes, there are other such cases |
2 | that we're working on. |
3 | QUESTION: Should we run out and report that |
4 | consumers should now expect to pay less for fax paper, or |
5 | am I being naive? |
6 | MS. BINGAMAN: I think consumers will pay less |
7 | for fax paper. Exactly how much less, I can't tell you. |
8 | What we are about is that in the market, competition sets |
9 | the price for fax paper and not price fixing conspiracies. |
10 | So the market for fax paper should be left to function as |
11 | a market does through competition and prices should drop. |
12 | Yes. |
13 | QUESTION: Well, wouldn't you expect these |
14 | companies, which, by your own account, have about half of |
15 | the market, will build these legal costs into their |
16 | overhead and charge us more anyway? |
17 | MS. BINGAMAN: The legal costs are nothing like |
18 | --do you mean the $6 million in fines? |
19 | QUESTION: Sure. |
20 | MS. BINGAMAN: The market should take care of |
21 | that. If competition works and they are competing with |
22 | each other, they should not be able to build costs in. |
23 | No. That should not happen. |
24 | QUESTION: Are consumers going to get any of |
25 | that money back? I mean, what will happen to the fines? |
1 | MS. BINGAMAN: Under the U.S. system, the fines |
2 | go into the Federal Treasury. They are criminal |
3 | penalties. They went to $10 million only a couple of |
4 | years ago. It used to be $1 million was a maximum. This |
5 | is a substantial improvement. |
6 | The money, under the U.S. system, does not go to |
7 | consumers, ever. The way Congress has set this up, the |
8 | Justice Department, in criminal cases, which this is, |
9 | collects fines, as set by the court, ultimately. There is |
10 | the possibility of private action, if consumers choose to |
11 | bring that, in which they collect damages if they prove |
12 | them and follow on private cases, which are not criminal, |
13 | but civil. |
14 | Under the U.S. system, the Justice Department |
15 | has never, and does not now, collect damages directly for |
16 | consumers. Consumers do that themselves through private |
17 | actions. |
18 | QUESTION: Well, on that subject, will you be |
19 | looking at today's -- |
20 | MS. BINGAMAN: At the what? I can't hear you. |
21 | QUESTION: Will you be looking at today's |
22 | Federated-Macy's merger? |
23 | MS. BINGAMAN: That isn't decided yet, to the |
24 | best of my knowledge. |
25 | QUESTION: Whether you'll be looking at it? |
1 | MS. BINGAMAN: Yes. Right. |
2 | QUESTION: Of the $6 million in fines, will |
3 | about $5 million go to the U.S.? |
4 | MS. BINGAMAN: No. We have $6-plus million to |
5 | the U.S., plus the additional amount to Canada. |
6 | MR. ADDY: One should not lose sight of the fact |
7 | that this is ongoing and there will be further fines on |
8 | this, as this case advances. |
9 | QUESTION: So it is a separate $950,000 to |
10 | Canada so far? |
11 | MR. ADDY: That's right. That's right. |
12 | QUESTION: It's a $7.5 million total, roughly, |
13 | so far. |
14 | MR. ADDY: Yes, so far. |
15 | I think, just to follow up on one of Anne's |
16 | comments, the efforts and the cooperation in this case |
17 | were housed, or took place within an agreement that's |
18 | called a Mutual Legal Assistance Treaty, which has been in |
19 | place a relatively short period of time, since 1991, I |
20 | think. It's directed at criminal activities, as well. |
21 | But, from our perspective, this is a very good signal of |
22 | the benefits that can happen and be benefits for both |
23 | Canadian and U.S. consumers if the agencies are allowed to |
24 | cooperate fully in pursuing these type of activities. |
25 | QUESTION: Sir, can you get back to these |
1 | meetings? Who was there? What did they talk about? How |
2 | did it work on the ground? |
3 | MR. ADDY: There is some material that has been |
4 | filed in -- |
5 | QUESTION: The camera can't read. I'm sorry. |
6 | I'm barely literate myself. |
7 | MR. ADDY: Well, I'm sorry. The matter's |
8 | ongoing and I don't want to go transgress what's on the |
9 | public record already. So I commend to you the material |
10 | that has been filed in the Federal Court, and it's public |
11 | information. |
12 | MS. BINGAMAN: The Canadians -- let me speak to |
13 | that -- have a very different procedural system than we |
14 | do. There is an extensive statement of facts, which was |
15 | filed in Canada. I had not seen it until this morning, |
16 | myself. But it was filed in open court in Canada two days |
17 | ago and, as a convenience to the press, the press in |
18 | Canada has had this. It is a public document in Canada |
19 | and I understand it will be available here later. But |
20 | it's quite comprehensive. |
21 | It is not the procedure we use in this country. |
22 | QUESTION: Sir, how did you find out what went |
23 | on in those meetings? |
24 | MR. ADDY: Well, we used the powers under the |
25 | act and we cooperated with Anne's groups. We had search |
1 | warrants executed. There was a coordination of use of |
2 | compulsory powers in the U.S. and Canada, simultaneous |
3 | execution of search warrants. There were discussions |
4 | between investigative officers in both agencies, joint |
5 | interviews of informants and potential accused. It was |
6 | the usual process, if you will, from the enforcement |
7 | perspective with the unusual and, I think, remarkable |
8 | additional flavor of the cooperation between the two |
9 | agencies. |
10 | QUESTION: So these guys kept minutes? |
11 | MR. ADDY: Well, there were documents seized in |
12 | the search warrants, et cetera. |
13 | QUESTION: Is this the first time the U.S. and |
14 | Canada have cooperated on a big antitrust case? |
15 | MR. ADDY: That's why I mentioned the treaty. |
16 | There is other work ongoing now under that treaty. This |
17 | is the first case that has resulted in a conviction in |
18 | Canada. |
19 | MS. BINGAMAN: We have other cases we're working |
20 | on them with. But this is historic because, one, in all |
21 | likelihood we never would have heard of this but for the |
22 | tip to the Canadian authorities from a complainant in |
23 | Canada which they then passed on to us. We were then |
24 | able, on the basis of that tip and the information from |
25 | that complainant, to open a Grand Jury and subpoena |
1 | witnesses and documents. The Canadians similarly issued a |
2 | search warrant in Canada, and we went forward with them |
3 | together, closely coordinating our document and witness |
4 | subpoenas and interviews from the very beginning. So we |
5 | worked as a team. We worked closely, and the case was |
6 | really possible because the documents and the witnesses |
7 | were in both places. Both markets were affected. |
8 | It shows what the ability to exchange |
9 | confidential information can do. The key point here |
10 | legally, I think, and I will just take one second, is |
11 | before this 1991 Mutual Legal Assistance Treaty was |
12 | ratified by both legislatures, we were not allowed to give |
13 | them confidential information not could they give us |
14 | confidential information. |
15 | Well, you can see, in law enforcement you are |
16 | immediately into the realm of confidential information. |
17 | The minute you issue a subpoena of any kind, that's |
18 | protected by law, as it should be. But the problem is if |
19 | you also can't share it with law enforcement authorities |
20 | who also have confidential information very valuable to |
21 | you, if you're separated by the procedures that had been |
22 | in place until 1991, you cannot move forward. In effect, |
23 | the criminal conspirators have a huge advantage over the |
24 | governments because they can hide documents one place or |
25 | another, not have witnesses cross borders. You can't get |
1 | hold of any transcripts because they're confidential, and |
2 | you're stymied. |
3 | Someone mentioned here a minute ago that the |
4 | bill which will be introduced shortly is a bipartisan bill |
5 | in the Congress, which would authorize the Department of |
6 | Justice to negotiate similar types of confidentiality |
7 | agreements, that is, sharing of confidential information, |
8 | on a country-by-country basis for both civil and criminal |
9 | cases. |
10 | This case today is an example of why that bill |
11 | and the authority it gives us to share confidential |
12 | information under protected circumstances -- there are a |
13 | lot of safeguards built into the bill -- but this is an |
14 | example, and it's the first big example -- we have others |
15 | ongoing -- of why this is so critically important to law |
16 | enforcement. |
17 | QUESTION: Do you have other countries |
18 | specifically in mind now? When you get the legislation |
19 | that would allow you to negotiate similar treaties with |
20 | other countries, do you have other countries particularly |
21 | in mind -- such as Japan or Russia? |
22 | MS. BINGAMAN: Well, I would not want to comment |
23 | on specific countries. We would undertake country-by- |
24 | country to consider negotiations if they are interested in |
25 | talking to us. |
1 | Let me emphasize, if we put such a treaty or an |
2 | agreement in place, if this legislation passes and another |
3 | country is added for civil and criminal, we are never |
4 | required to cooperate, just as the Canadians and we are |
5 | not required in any particular case to cooperate. Each of |
6 | us has to determine that, even with this treaty in place, |
7 | it is in the best interests of both agencies to proceed in |
8 | a particular case, as it clearly was here. But it does |
9 | not take away any discretion. It does not mean that we |
10 | have to do anything. |
11 | It simply makes it possible, if each of us |
12 | determines it's in our own country's best interests, to |
13 | proceed. |
14 | QUESTION: This is the first case that has |
15 | resulted in a conviction in Canada under this mutual legal |
16 | assistance in criminal matters. |
17 | MR. ADDY: Correct. |
18 | QUESTION: Have there been other cases in the |
19 | United States? |
20 | MS. BINGAMAN: I believe we have had help. I'm |
21 | going to have to ask Joe Widmar here. |
22 | Do you know if we've obtained -- I think we |
23 | have, but I don't know? I should have that information |
24 | here. |
25 | MR. WIDMAR: We have obtained other, we have |
1 | obtained help from Canada on occasion. |
2 | MS. PHELAN: The plastic forks. |
3 | MR. WIDMAR: Yes, the plastic forks. |
4 | QUESTION: The plastic forks. Picnic ware. |
5 | Also, the $950,000 fine in Canada, does that go |
6 | to the Treasury or to the consumer? |
7 | MR. ADDY: No. It's exactly the same scenario. |
8 | It goes to the Treasury, the Consolidated Revenue Fund. |
9 | QUESTION: Mr. Addy, what was the nature of the |
10 | original tip? Did a businessman have trouble getting |
11 | competitive bids, or what? |
12 | MR. ADDY: He complained to the bureau that he |
13 | was shopping for this. He's what they call a thermal |
14 | paper converter. He was trying to obtain a supply and |
15 | came to us with a complaint about the pricing of that |
16 | supply. |
17 | QUESTION: And who was that businessman? |
18 | QUESTION: Can you tell us about the fellow? |
19 | MR. ADDY: I'm having my office check now |
20 | whether he's agreed to let us disclose his name. That's |
21 | not on the public record. |
22 | QUESTION: Did this person participate in the |
23 | investigation after he came to you? Did he wear a wire? |
24 | Did he help you in this? |
25 | MR. ADDY: No. No. It was, his role in the |
1 | investigation, primarily, was to provide us the |
2 | information on his initial complaint. After that, after |
3 | that period, we took over and worked with Anne's group. |
4 | QUESTION: Do you expect further fines in Canada |
5 | or further prosecutions in Canada? |
6 | MR. ADDY: I expect further developments on this |
7 | case. Yes. |
8 | QUESTION: Do you know how much the price fixing |
9 | cost Canadian consumers? |
10 | MR. ADDY: I suppose you can do the same type of |
11 | math that Anne was running through a minute ago. The |
12 | market in Canada -- and correct me if I misstate it, |
13 | Martin -- but the market in Canada was in the order of $18 |
14 | million during, for that year, and there were several |
15 | players in that market. The company that pleaded guilty |
16 | on Tuesday was not the only supplier, obviously, in the |
17 | Canadian market. And that company, Kanzaki, cooperated |
18 | and assisted us in our investigation in the case as well. |
19 | QUESTION: Someone mentioned that these |
20 | companies control about half of the market. I wanted to |
21 | confirm that and also ask you if you think that they |
22 | wanted to control so much of the market? |
23 | MS. BINGAMAN: That is up to the market. We're |
24 | not in the business of deciding who controls what |
25 | percentage of the market unless the control is obtained |
1 | through illegal acts, and in that case we stop the acts |
2 | and try to restore the market situation. The acts here |
3 | were price fixing. But they don't go to percentage |
4 | control of the market. |
5 | The conduct here that was illegal was blatant, |
6 | naked price fixing. So that's what's stopped. |
7 | QUESTION: The Canadian press reports this |
8 | morning have Rittenhouse and Appleton Papers as co- |
9 | conspirators. Does Justice Department allege that as |
10 | well? If not, why not? |
11 | MS. BINGAMAN: We have an investigation ongoing |
12 | and that is all I can say on it at this point. You can |
13 | read our information. We're prohibited by law from going |
14 | beyond what's on the public record. But the investigation |
15 | is continuing. |
16 | QUESTION: I have two other things to clarify. |
17 | The $950,000 fine, is that Canadian dollars -- |
18 | MR. ADDY: Yes. |
19 | QUESTION: -- or U.S. dollars? |
20 | It's Canadian dollars? |
21 | MR. ADDY: We levy our fines in Canadian |
22 | dollars. |
23 | (General laughter) |
24 | QUESTION: The market share alleged by these |
25 | companies, they control half of the market is the U.S. -- |
1 | is that correct? |
2 | MS. BINGAMAN: You know the truth? I didn't |
3 | know that fact. I take it as a given if it's correct. |
4 | But I personally don't -- is that correct? |
5 | MS. PHELAN: Well, it's 40 percent to 45 |
6 | percent? |
7 | MS. BINGAMAN: This is Lisa Phelan, who did the |
8 | case. |
9 | I was remiss in not mentioning the staff. Lisa |
10 | killed herself. Bob Kramer is here, too, too, and John |
11 | Greaney. We have had a tremendous staff on this that has |
12 | just done a wonderful, wonderful job. I should have said |
13 | that at the beginning because the truth is I stand up here |
14 | and act like I'm taking credit, but it goes on very much |
15 | by the lawyers here, not me personally. |
16 | QUESTION: Forgive my simplicity, perhaps, but |
17 | if they controlled only about 40 percent of the market and |
18 | they were fixing the prices, why couldn't the rest of the |
19 | market simply have undercut them and driven the price down |
20 | that way? |
21 | MS. BINGAMAN: You'd think they would have. |
22 | We're looking at that also. |
23 | QUESTION: So this could, in fact, affect, |
24 | really, the entire market? |
25 | MS. BINGAMAN: The investigation is ongoing. |
1 | That's all I can say. |
2 | Okay. Thank you all very much. We're very |
3 | proud of this. |
4 | Thank you. |
5 | [Whereupon, at 12:23 p.m., the press conference |
6 | was concluded.] |
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