Antitrust Division Must Honor Its Immunity Agreements

On January 14, 2005, the Eastern District of Pennsylvania enjoined the Antitrust Division from indicting and prosecuting Stolt-Nielsen S.A., Stolt-Nielsen Transportation Group, Ltd and Richard Wingfield. The decision is noteworthy because the Antitrust Division had taken the unusual step of attempting to indict and prosecute two corporations and an individual who participated in the Antitrust Division’s corporate amnesty program. This was reportedly the first time that the DOJ had tried to revoke an immunity agreement. The district court basically held that the DOJ got what it bargained for when it gave the company and its employees immunity from prosecution for potential antitrust violations in exchange for information that led to convictions of other firms involved in a cartel.

The Amnesty Program is designed to encourage companies involved in cartels to come forward with information about the illegal activity. The first company to come forward with details regarding the anticompetitive scheme gains full immunity from criminal prosecution. The district court found that the two corporations and the individual fulfilled their obligations under an amnesty agreement that produced successful prosecutions and uncovered an illegal cartel in the ocean parcel tanker business.

After counsel for Stolt-Nielsen discovered that the company was possibly engaged in a customer allocation scheme, the decision was made to seek amnesty and to determine whether Stolt-Nielsen would receive leniency under the Amnesty Program. In this situation, counsel for Stolt-Nielsen contacted the DOJ on November 24, 2002 to inquire whether the DOJ had opened an investigation into the parcel tanker industry and whether the DOJ had given a marker. A marker is provided to the first company to come forward to hold its place in line until the company completes its internal investigation into the potential anticompetitive activity.

On December 17, 2002, the DOJ provided the company with a marker indicating that it was first in line for the Amnesty Program. The company and the DOJ executed a letter agreement formalizing the company’s and all of its employees and executives immunity from prosecution on January 15, 2003. After obtaining convictions and fines, the DOJ attempted to revoke the agreement, contending that Stolt-Nielsen misrepresented when it had ceased its illegal activities. According to the DOJ, the company said it stopped violating the law in March 2002, but the company and its employees continued the illegal activity after that date. The only date, however, that was referenced in the letter agreement was January 15, 2003, the date it was signed. In that agreement, the DOJ agreed not to prosecute the company as well as its employees or executives for criminal activity, which may have occurred before the date of the letter. Nowhere in the agreement is there a reference to March 2002.

Stolt-Nielsen, its parent company, and Mr. Wingfield filed a civil suit in the U.S. District Court for the Eastern District of Pennsylvania seeking an injunction against the indictment and prosecution. The Eastern District of Pennsylvania ordered the Antitrust Division to honor what was memorialized in its written agreement regardless of whether any oral or any other tacit understanding of what the Division contends was meant during negotiations. Therefore, the district court ordered that the Antitrust Division was enjoined from indicting or prosecuting the two companies and Mr. Wingfield for any violation of the Sherman Act up to and including January 15, 2003, in the parcel tanker industry involving transportation to and from the United States.

Authored by:

Andre Barlow

202-218-0026

ABarlow@sheppardmullin.com