Price-Fixing Decision a Blow to Regulators

Federal trustbusters seeking to crack down on foreign cartels that fix prices of consumer products lost a key battle Monday when a judge dismissed criminal charges against a Japanese firm accused of conspiring to hike the price of facsimile paper sold in North America.

Legal experts said the judge’s decision marks the first time a court has ruled that to win guilty verdicts against international cartels, regulators must show that the alleged wrongdoing had “substantial effects” on commerce in this country. The finding could make it more difficult for the government to prosecute foreign firms for price-fixing, the experts said.

The opinion by U.S. District Judge Nancy Gertner in Boston “sets a unique precedent,” said Eleanor M. Fox, an antitrust law expert at New York University Law School. “The government had better have good evidence when they’re trying these cases.”

Fox and others said Gertner’s decision is important because federal prosecutors are increasingly using U.S. criminal antitrust laws to fight monopolies and market manipulation. About 30 grand juries across the nation are investigating alleged collusion by international cartels to fix prices for products ranging from cars to medicine.

The case in which Gertner presided marked the first time a foreign company was tried for alleged misconduct that took place entirely on foreign soil. It drew heated protests from the Japanese government, which argued in court papers that the U.S. trial of a Japanese firm, Nippon Paper Industries Co., violated international law and mocked Japanese sovereignty.

The alleged crimes occurred in 1990 when 10 paper makers met over tea in Tokyo to discuss falling fax paper prices in the United States and Canada. The criminal case began five years later when the U.S. Justice Department indicted Appleton Papers Inc. of Wisconsin, Japan-based Jujo Paper Co.--which merged with Nippon in 1993--and five other Japanese paper makers for alleged price-fixing.

Appleton Papers was acquitted by a Milwaukee jury in 1997. Five Japanese firms pleaded guilty and paid hefty fines. But Nippon sought vindication in court. A jury deadlocked on the charges last July after a monthlong trial, causing Nippon’s attorneys to ask Gertner to dismiss the case altogether.

In an opinion made public Monday, Gertner said evidence at the trial showed that though some paper prices went up after the 1990 meeting, some did not change, and others fell.

Alan M. Cohen, a New York attorney with O’Melveny & Myers who represented Nippon, said his client “is obviously gratified by the result.”

“It is very hard for the government to prove why prices go up,” Cohen said. “And attributing that to conspiracy is a very difficult thing to prove in a worldwide market. The government now will really have its work cut out for it.”

Gina Talamona, a spokeswoman with the Justice Department, said the department was reviewing Gertner’s opinion.

There was little doubt among antitrust scholars that the U.S. was pursuing the case to send a message to price-fixers across the globe.

Thermal fax paper, the glossy specialty paper that was once used for many fax machines and certain medical printing equipment, is now seldom used in modern business machines.