By E. Darius Sturmer, J.D.
Makan Delrahim, Assistant Attorney General in charge of the Department of Justice Antitrust Division, delivered a speech at the Fordham University School of Law in New York City discussing the application of the antitrust laws to the financial sector. The speech, entitled "Don’t ‘Take the Money and Run’: Antitrust in the Financial Sector", focused on three current "hot issues" in the area: the limits of fund and exchange collaboration, syndicate coordination, and ensuring antitrust compliance.
Delrahim first addressed the antitrust issues posed by common ownership and institutional investors. Noting recent debate "around the role of institutional investors in today’s economy, and whether or not their common ownership of competing firms has an effect on competition," the Assistant Attorney General mentioned a lack of agreement in current literature over which approaches to use to evaluate these effects and what the appropriate remedies should be to address potential adverse competitive effects. The Antitrust Division aims "to ensure any fix doesn’t chill innovation or harm investors," he explained.
A related area drawing the agency’s attention right now, Delrahim continued, is whether and how to bring the law governing interlocking directorates, Section 8 of the Clayton Act, forward to account for modern corporate structures. He reported that his agency is wrestling with whether to interpret the statute to apply to limited liability companies and other organizational structures as it does to corporations. While the statute itself uses only the term "corporation," it "pre-dates the use of LLCs, and certainly predates the widespread acceptance of structures like [LLCs] as an alternative corporate form to a traditional corporation," he remarked. He added that while courts have not yet directly addressed the question, and the legislative history leaves Congressional intent as to that issue unclear, the competition analysis is the same from an agency review perspective.
The Antitrust Division chief next spoke about unlawful collusion, offering highlights of the agency’s criminal enforcement efforts in the financial sector. Delrahim noted that the Antitrust Division’s investigations and prosecutions touching the industry have ranged from international cartels to more local bid rigging. He pointed to its involvement in numerous investigations relating to collusion among real estate investors and bidders at foreclosure and tax lien auctions, as well as prosecutions in the markets for municipal bond derivatives, interest rate benchmarks, and foreign currency exchange that have resulted in 39 convictions and criminal corporate fines of over $3.9 billion.
He acknowledged that not all of the agency’s prosecutions were successful, citing last year’s acquittal of several U.K.-based traders who were indicted for conspiring to manipulate the Eurodollar foreign exchange market and the appellate reversal of the trial convictions of two traders found guilty of manipulating their LIBOR submissions. Nevertheless, Delrahim said, the Justice Department remains willing to pursue "lengthy, difficult investigations from start to finish with dogged persistence and professionalism," and will continue to devote the necessary resources to prosecute challenging cases in the financial services industry. Delrahim pointed out the successful working relationship the Antitrust Division has with numerous other components and agencies both domestically and abroad, and hinted at several upcoming announcements by the agency, including one in an investigation involving the financial sector.
Lastly, Delrahim offered thoughts on the financial sector’s antitrust compliance. "For some firms, the commitment to a culture of compliance as a result of our investigations is readily apparent," he remarked. "Investment in compliance should have benefits," he added. "If violations do occur, robust compliance programs should lead to prompt detection, which not only nips the conduct in the bud, minimizing the harm to consumers, but also gives companies the greatest chance of winning the race for leniency." Delrahim cited plea agreements with Barclay’s and BNP Paribas following investigations into their participation in price fixing conspiracies to show that "extraordinary prospective compliance has tangible benefits," such as reduced criminal fines.