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THE LATEST: Another E-Commerce Retailer Pleads Guilty in DOJ Investigation of Online Promotional Products Industry

On August 14, 2017, we reported on an online retailer’s guilty plea for conspiring to fix the prices of “customized promotional products” such as silicone wristbands and lanyards, and the ongoing US Department of Justice (DOJ) investigation into the online promotional products industry. On August 22, 2017, DOJ announced two more guilty pleas in the investigation, announcing that e-commerce company Custom Wristbands Inc. and its owner and CEO Christopher Angeles had pled guilty to violating the Sherman Act, 15 USC § 1.

WHAT HAPPENED:
  • According to an Information filed in the US District Court for the Southern District of Texas by DOJ and the US Attorney’s Office for the Southern District of Texas, Defendant Angeles and his co-conspirators engaged in a conspiracy from at least as early as June 2014 through at least June 2016 to “suppress and eliminate competition by fixing and maintaining prices of customized promotional products, including wristbands, sold in the United States and elsewhere.”
  • DOJ alleges that Defendants and co-conspirators attended meetings and communicated via text and online messaging platforms regarding pricing for the online sale of customized promotional products.
  • Defendant Custom Wristbands Inc. (d/b/a Kulayful Silicone Bracelets, Kulayful.com, Speedywristbands.com, Promotionalbands.com, Wristbandcreations.com, and 1inchbracelets.com) has agreed to pay a criminal fine in the amount of $409,342. Defendant Angeles faces up to 10 years in prison and up to a $1 million fine.
  • DOJ has announced that both defendants have agreed to cooperate with the Antitrust Division’s ongoing investigation.
WHAT THIS MEANS:
  • The DOJ Antitrust Division continues to investigate the “online promotional products industry” and we anticipate that additional defendants will be charged over the course of the investigation. 
  • DOJ continues to hold individual executives accountable in price fixing cases, even where their corporations plead guilty and agree to cooperate with ongoing investigations.



DOJ and SDNY US Attorney’s Office Indict Three Dealers in Foreign Currency Exchange Spot Market Conspiracy Case

A grand jury has indicted three foreign currency exchange spot market dealers for alleged violations of the Sherman Act, 15 U.S.C. § 1, in a case brought jointly by the DOJ’s Antitrust Division and the US Attorney’s Office for the Southern District of New York (SDNY). The allegations in the case, United States v. Usher, et al., are that the three named defendants conspired to suppress and eliminate competition for the purchase and sale of Euro/US dollar (EUR/USD) currency pairs via price fixing and bid rigging.

The foreign currency exchange spot market (the “FX Spot Market”) enables participants to buy and sell currencies at set exchange rates. The FX Spot Market is an “over-the-counter” market conducted via direct customer-to-dealer trades, i.e., without an exchange.  In the market, currencies are traded and priced in pairs, whereby one currency is exchanged for the other.  When filling customer orders, dealers in the FX Spot Market do not serve in a broker capacity, but rather fulfill the orders via their own trading and speculation in the requested currency markets.  Dealers employ traders to quote prices and engage in trades to fill customer orders.  The dealers and their traders are able to access a separate virtual market, known as the interdealer virtual market, which enables currency trades amongst dealers.  According to the Indictment, currency pair prices are set by a continuous auction in the interdealer virtual market, where “individual actions taken by competing traders—to bid or not bid, to offer or not offer, to trade or not to trade, at certain times, and using certain tactics—can cause or contribute to a change in the exchange rate shown in the [virtual trading] interface, and thus may benefit, harm, or be neutral to a competing trader.” The Indictment asserts that this is because the benchmarks used by the virtual market were calculated at particular times each day and were based on “real-time bidding, offering, and trading activity” on the virtual trading market.

The Indictment asserts that the defendants violated the Sherman Act by:

  • engaging in chat room communications whereby they discussed customer orders, trades, names and risk positions;
  • refraining from trading against each other’s interests;
  • coordinating bids for the purpose of fixing the price of the EUR/USD pair.

Defendants are alleged to have engaged in profitable EUR/USD transactions while acting to fix prices and rig bids for the EUR/USD product in the FX Spot Market.  The Indictment further alleges that others were co-conspirators, suggesting that there may be cooperating witnesses and possibly further indictments to follow. Of note, however, recent Trump Administration changes to US Attorneys and DOJ Division Deputies and Chiefs may conceivably alter the course of this and any follow-on litigation. Regardless, over-the-counter markets have been a focus of antitrust lawsuits in recent years, most notably in the widely-covered Libor suits, and that trend is expected to continue.




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