Price fixing can land you in jail – and so can trying to hide it

Execs have gone to jail

Sometimes it might seem tempting to agree with a competitor to divvy up customers, or to keep your prices at an agreed level, or to take turns submitting the winning bid in response to RFPs. Those activities, though, can lead to indictment and prosecution by federal- or state authorities for violation of the antitrust laws.

True story: In 2011, two executives of a Japanese auto-parts manufacturer pled guilty to participating in a scheme to fix prices of parts sold to U.S. auto makers; the executives agreed to serve 12- and 15-month prison terms and to pay fines. [link]

True story: In 2005, the German airline Lufthansa and the British airline Virgin Atlantic blew the whistle on a price-fixing scheme by a total of 21 non-U.S. airlines, including British Airways, Qantas, and Korean Air. The U.S. Department of Justice prosecuted, resulting in a total of some $1.7 billion in fines, and in four airline executives being sentenced to prison terms in the U.S. [link] [link]

Cover-ups can get you, too

Keep in mind that prosecutors might not bother trying to prove up an antitrust violation. Instead, they might reach for the low-hanging fruit by bringing charges of obstruction of justice, which can be much easier to prove. (It’s not unlike putting Al Capone in prison for tax evasion instead of murder, or prosecuting Martha Stewart for making a false statement to the SEC instead of insider trading.)

True story: : In December 2010, a British executive, who had been extradited to the U.S., was sentenced to 18 months in prison and a $25,000 fine: not for price fixing itself, but for conspiring to obstruct a price-fixing investigation. [link]

Additional reading

For more information about unlawful collusive practices, the Department of Justice has a useful antitrust primer that explains many of the relevant concepts.