MEMORANDUM AND ORDER
TABLE OF CONTENTS MEMORANDUM AND ORDER July 16, 1999
I. PROCEDURAL HISTORY .......................................................... 177
II. RULE 29 STANDARD ............................................................ 179
III. EVALUATING THE MERITS OF A PRICE-FIXING CLAIM ............................... 179
IV. THE FACTS ADDUCED AT TRIAL .................................................. 180 A. Background ............................................................... 180 B. Co-Conspirator Hearsay and Cultural Inferences ........................... 182 C. Failure to Present Sufficient Evidence of a Conspiracy Continuing Through November 15, 1990, of Which Jujo/NPI Was a Member .............. 184 1. Evidence of a March 1990 Conspiracy to Fix Prices ..................... 184
2. Evidence that Jujo Was a Member of a Price-Fixing Conspiracy .......... 188 3. Evidence that the Conspiracy Had Dissolved Before the Limitations Period .............................................................. 189 D. Failure to Present Sufficient Evidence that Any Continuing Conspiracy Had Substantial Effects ................................................ 192
V. CONCLUSION .................................................................. 196
This case, in its journey to and from the Court of Appeals, andin the trial before me, has raised important questions concerningthe extraterritorial application of American criminal antitrustlaws to a foreign corporation. The United States indicted aJapanese corporation, Nippon Paper Industries Co., Ltd. ("NPI"),alleging that NPI's predecessor, Jujo Paper Company, Ltd.("Jujo"), conspired with other Japanese manufacturers to fix theprice of thermal fax paper for export into the United States inviolation of the Sherman Antitrust Act, 15 U.S.C. § 1.
The charges were first dismissed by the trial court,1reinstated by the First Circuit,2 then tried before me forover six weeks.3 While the basic jurisdictional issue —whether criminal antitrust charges could be lodged against aJapanese corporation based on the facts as alleged — was resolvedby the First Circuit's decision, the trial of the matter provedcomplex and troubling. Ultimately, after more than six days ofdeliberation, the jury was unable to come to a decision.4
NPI renewed its motion for judgment of acquittal pursuant toFed.R.Crim.P. 29 (docket # 260). After review of the entirerecord of the trial, the exhibits, and lengthy memoranda, I GRANTthe motion and hereby direct a verdict of acquittal.
I. PROCEDURAL HISTORY
On December 13, 1995, a federal grand jury in Boston returnedan indictment against Jujo, and NPI, as Jujo's successor.Jujo/NPI was charged in one count of price-fixing. Theallegations were that beginning at least as early as February1990 and continuing at least through December 1990, NPI and itsco-conspirators participated in a price-fixing conspiracyinvolving the sale of thermal facsimile paper ("fax paper") soldin the United States and Canada ("North America").
NPI moved to dismiss. It alleged that if the conduct occurredat all, it took place entirely in Japan and as such Americancriminal antitrust laws could not be extraterritorially applied.The government contested both NPI's characterization of the facts— that the conduct at issue took place completely within Japan —and its characterization of the law — the limited nature ofAmerican jurisdiction. The government maintained that the caseinvolved a horizontal conspiracy amongst NPI and othermanufacturers which it conceded took place on Japanese soil, and,in effect, a vertical conspiracy between those manufacturers andthe trading houses which sold their product on American soil. TheJapanese conspiracy alone, the government maintained, wassupportable under Hartford Fire Ins. Co. v. California,509 U.S. 764, 113 S.Ct. 2891, 125 L.Ed.2d 612 (1993), because of itsintended and likely impact on American trade. The allegationsthat United States trading houses took steps to implement thescheme vitiated any concern about the extraterritorialapplication of American law.
The District Court dismissed. As to the allegation of illegalconduct within the United States, the Court held that thegovernment failed to adequately plead a vertical conspiracybetween American trading houses and the Japanese manufacturerswith whom they were affiliated. See United States v. NipponPaper Indus. Co., 944 F. Supp. 55, 63 (D.Mass. 1996). As to theactions of the Japanese manufacturers, the Court dismissed theindictment on the ground that a criminal antitrust prosecutioncould not be based on wholly extraterritorial conduct. See Id.at 66.5
The First Circuit reversed. In a case of first impression, thecourt held that the Sherman Act, previously givenextraterritorial application only in civil cases, had equalbreadth in a criminal case. See United States v. Nippon PaperIndus. Co., 109 F.3d 1, 4 (1st Cir. 1997), cert. denied, ___U.S. ___, 118 S.Ct. 685, 139 L.Ed.2d 632 (1998). Rejectingarguments derived from comity among nations, as well as thosehinging on differences between civil and criminal law, the Courtfound that Hartford Fire "definitively establishe[d]" thatAmerican antitrust laws apply to "wholly foreign conduct whichhas an intended and substantial effect in the United States."Id. at 9.
The case was reassigned to this Court. While concerns aboutcomity and the exigencies of a criminal prosecution may not havebeen sufficient to bar the prosecution, they figured prominentlyin the actual trial. Fundamental issues about language andmeaning — which inferences were reasonable and which were not inlight of Japanese culture and traditions — permeated the case. Inshort order, the Court was obliged to address: To what degreedoes the international nature of the investigation affect thediscovery obligations of the United States Government?(Memorandum and Order, May 15, 1998) Which country's law governsthe question of the liability of a successor corporation?6(Order, May 29, 1998) Should the Court allow the videoteleconferencing of a witness from Japan in the middle of thetrial when that witness was beyond government process?(Memorandum and Order, July 28, 1998) What procedures should theCourt follow when the translator for the defense and thetranslator for the government disagree on a critical issue(whether the word "Sando" meant agreement, which was illegal, orconcurrence, which, arguably, was not)? Should the Court permitthe introduction of evidence of price-fixing involving productsto be sent to other countries when such activities were notillegal in those countries?
In its original and renewed motions for acquittal, NPI claimsthat there was no evidence that a conspiracy to set pricesexisted, or that its predecessor, Jujo, knowingly joined it. Italso claims that even if one were to credit the evidence thatJujo was a member of a price-fixing conspiracy, the evidence isclear that it was not a member of any such conspiracy by the timethe limitations period began, that is after November 15,1990.7
In addition, NPI would have the Court reexamine jurisdiction,now in the light ofthe facts adduced at trial. The First Circuit, it argues, inreinstating this indictment, set a standard for a foreignantitrust conspiracy — even one allegedly involved inprice-fixing — that was different from the domestic one,requiring, in addition to the traditional factors, a showing of"conduct which has an intended and substantial effect in theUnited States." Nippon, 109 F.3d at 9. While the facts asalleged in the indictment may have passed muster, the facts asproved did not. Moreover, NPI argues even if the conspiracy'scontacts with the United States were at some point sufficient tomeet a "substantial effects" test, the Japanese manufacturers'complete loss of market share meant that no substantial effectscontinued into the limitation period.
NPI's renewed motion for judgment of acquittal pursuant to Rule29 is ALLOWED.
II. RULE 29 STANDARD
A motion under Fed.R.Crim. Proc. Rule 29 should be granted onlywhere the evidence adduced at trial is so insufficient that norational trier of fact can find proof beyond a reasonabledoubt.8 To be sure, this is a very heavy burden. The Courtmust give the prosecution the benefit of all reasonableinferences drawn from the evidence, including circumstantialevidence, "and the trial court is required to view the evidencein the light most favorable to the Government with respect toeach offense." United States v. Mariani, 725 F.2d 862, 865 (2ndCir. 1984). The Court may not weigh the evidence. See UnitedStates v. Arache, 946 F.2d 129, 139 (1st Cir. 1991)("credibility of witnesses [can] not be assessed in determiningthe sufficiency of the government's evidence.").
But the Court can determine whether the inferences that thegovernment asks the jury to draw are reasonable, or ratherinappropriately "piling inference upon inference." United Statesv. DeLutis, 722 F.2d 902, 907 (1st Cir. 1983). Thus, a reviewingcourt must "take a hard look at the record and [reject] thoseevidentiary interpretations and illations that are unreasonable,insupportable, or overly speculative. This function is especiallyimportant in criminal cases, given the prosecution's obligationto prove every element of an offense beyond a reasonable doubt."United States v. Spinney, 65 F.3d 231, 234 (1st Cir. 1995).
III. EVALUATING THE MERITS OF A PRICE-FIXING CLAIM
Section One of the Sherman Act reads: "Every contract,combination in the form of trust or otherwise, or conspiracy, inrestraint of trade or commerce among the Several States, or withforeign nations, is illegal." 15 U.S.C. § 1. In a price-fixingcase, the government must prove three elements: (1) that theconspiracy to fix prices described in the indictment wasknowingly formed and existed at or about the time alleged in theindictment; (2) that the defendant, NPI, through its predecessor,Jujo, knowingly became a member of the conspiracy to fixprices;9 and (3) that the conspiracy had an intended andsubstantial effect on commerce in the United States.10Moreover, all of the relevant factual conditions — existence ofthe conspiracy, Jujo/NPI's membership in it, and the conspiracy'shaving intended and substantial effects on commerce in the UnitedStates — must have existed at the time the limitation periodbegan, November 15, 1990.
The government has failed on all three elements to show that "areasonable mind might fairly conclude guilt beyond a reasonabledoubt." Curley v. United States, 160 F.2d 229, 232 (D.C.Cir.1947) (cited in 2 Charles A. Wright, Federal Practice andProcedure § 467 (1982 and Supp. 1999)). The problem with regardto the first two elements is the same: Even if the government wasable to show that a conspiracy to fix prices existed at one time,and included Jujo/NPI, it was unable to demonstrate to anyrational trier of fact beyond a reasonable doubt that theconspiracy continued through November 15, 1990. And, with regardto the third element, the government did not present sufficientevidence that the conspiracy, even if it continued to exist onNovember 15, 1990, still had a substantial effect on commerce inthe United States at that time.
IV. THE FACTS ADDUCED AT TRIAL
The centerpiece of the government's case was a meeting that washeld on March 30, 1990, attended by representatives of ten papercompanies that manufacture thermal fax paper imported into theUnited States. They included Kanzaki Paper Manufacturing Co. Ltd.("KSK"), Mitsubishi Paper Mills ("MPM"), Oji Paper Company("Oji"), Honshu Paper Company ("Honshu") and Jujo/NPI. Themeeting had been called to deal with a threat by an Americanpaper company to charge these Japanese manufacturers with"dumping" paper in the American market, or selling their productsat a price below their fair value to the detriment of a domesticindustry.11
The Japanese manufacturers made up perhaps thirty percent ofthe market for thermal fax paper; the American companies, seventypercent. Virtually all witnesses agreed that throughout 1990there was a substantial downward pressure on prices because of anoversupply of thermal fax paper. Indeed, the entire product linewas facing strong competition from "plain paper" fax machines.
The stakes were high: If the dumping charges were proved, theimports of the offending companies would be subject to a tariff.Given the size of their market share, the weakness of theproduct, and the oversupply of thermal fax paper — any tariffincreasing the cost of thermal fax paper would likely drive thesecompanies out of the American market. They had to walk a fineline — raising prices to avoid a dumping charge, without going sofar as to eliminate their market share entirely.12
Manufacturers can lawfully meet to discuss common concerns.Indeed, they can discuss market conditions, and even prices. SeeMonsanto Co. v. Spray-Rite Service Corp., 465 U.S. 752, 763, 104S.Ct. 1464, 79 L.Ed.2d 775 (1984). They can choose to concur inthe pricing decisions of others so long as they independentlyarrive at these decisions. Id. What theymay not lawfully do is to agree to fix the prices that they willcharge in the American market. And that, the government alleged,is just what they did: The Japanese companies illegally agreed toraise the price at which they sold thermal fax paper to $20.00per hundred square meters.
Implementation, however, was not easy. None of thesemanufacturing companies had sales divisions in the United Statescharged with importing the product. Each manufacturer would sellthe paper outright to a Japanese trading company. The Japanesetrading company, after marking up the product, would then sell itoutright to a trading company on United States soil. The UnitedStates trading companies, after adding their own markups, wouldsell the product to converters, companies that would convert thethermal fax rolls into the particular sizes the customersordered.
However complicated the implementation, the government provedovert acts in furtherance of the agreement — that some of theconspirators told their affiliated trading houses about themanufacturer's March meeting, directed them to raise the prices,and that some of the trading houses took steps to carry out theincrease, at least initially.
To be sure, some trading companies strongly resisted any priceincreases, arguing with the manufacturer's representatives,perhaps even refusing to implement it,13 or cutting specialdeals with customers to mitigate its effects. Indeed, by the endof the trial, the government was obliged to change its theoryfrom price-fixing to price stabilization.14 But thecomplexities of implementation according to the government werenot critical to their case. A price-fixing agreement, it noted,does not have to be successful to be illegal.
The defense agrees that a meeting was held, agrees that it wasin response to an anti-dumping threat, but contends that themeeting was on the permissible side of the line — Japanesemanufacturers meeting to discuss a common legal threat. Nothingnefarious was intended; nothing nefarious was accomplished.Documents which it highlighted suggested that the government'scharacterization of the March 30 meeting was wrong. Someparticipants had either second thoughts immediately about priceincreases or no intention of ever going along with it. Somedocuments suggested that the March 30 meeting was"all talk." They all had to make noises about price increases todeflect the anti-dumping threat; what they planned to do,however, was another matter.
Indeed, according to the defense, one indication of theinnocuous nature of the March 30 meeting was the patchwork quiltof prices that resulted. There were no across-the-boardincreases; most prices continued to decline. In any event, therewas no evidence of Jujo's participation. In a time line presentedto the jury, NPI attempted to show that after each criticalprice-fixing event alleged by the government, Jujo lowered itsprices. Whatever public face Jujo may have presented to otherJapanese competitors was belied by its actions.
Finally, by November 15, 1990, the government can show neitherthe continuation of the conspiracy nor its continued "substantialeffect" on American commerce. Oversupply of thermal fax paper,the pressures driving down prices, coupled with the strength ofthe American competitors create a paradox in the core of thegovernment's case: If there had been a conspiracy to fix pricesin March of 1990, and prices were raised or even stabilized, thatconspirator would immediately lose customers, market share and inshort order, any impact on the American market. If, recognizingthat, a conspirator jumped ship at the first opportunity,abandoning all efforts to increase or stabilize prices, then itwould have abandoned the conspiracy.
Indeed, the record reflects that both happened. Somecompanies, like Honshu, may well have tried to raise prices or atleast hold the line. By November of 1990 — they lost substantialnumbers of their American customers. Others, like Jujo and Oji,continued to lower prices — ignoring whatever representationsthey had made in March. By mid 1990 a price competition resumed —as to those still in the market — that was so vigorous that theAmerican companies threatened a dumping charge again.
B. Co-Conspirator Hearsay and Cultural Inferences
The evidence on which the government chiefly relied consistedof documents, business records and testimony by coconspirators —representatives of other Japanese manufacturers it contendedconspired to fix prices, employees of the trading companies whodistributed the product between Japan and the United States, andwithin the States, who allegedly implemented the price plan.
NPI vigorously challenged the testimony under F.R.E. Rule801(d)(2)(E), claiming that there was inadequate independentevidence to show that these were statements made byco-conspirators "during the course and in furtherance of theconspiracy." While the Court could weigh the statementsthemselves in making threshold determinations under the Rule,see Bourjaily v. United States, 483 U.S. 171, 180-81, 107 S.Ct.2775, 97 L.Ed.2d 144 (1987), those statements alone are notsufficient, absent independent evidence. See United States v.Sepulveda, 15 F.3d 1161, 1181-82 (1st Cir. 1993); United Statesv. Petrozziello, 548 F.2d 20 (1st Cir. 1977). On a preliminaryshowing by the government, the statements were admitted de bene.See United States v. Ciampaglia, 628 F.2d 632, 638 (1st Cir.1980).
The enterprise of making findings under Petrozziello, as wellas making findings under Rule 29, was complicated by thecultural/language divide in this case. There were warringtranslations of documents and testimony, and warring views of theinferences that could reasonably be drawn from certain acts andstatements. NPI attempted to show that acts that may appearnefarious to American eyes, had no such patina in Japan.15Where the contestedissues involved language, the translators were urged to resolvetheir differences; where they could not, the jury was given theevidence of both translations.16
Understanding full well the problem of bootstrapping — weighingtoo heavily the contested statements themselves, all the whiletrying to determine if they are admissible — as well as theproblems raised by language, I nevertheless concluded that thestatements had been appropriately admitted.17 But consideringall of the evidence, co-conspirator hearsay and otherwise, thegovernment's case faltered.
C. Failure to Present Sufficient Evidence of a Conspiracy Continuing Through November 15, 1990, of Which Jujo/NPI Was a Member
1. Evidence of a March 1990 Conspiracy to Fix Prices
The government's most important evidence consists of a singledocument, a "Report on Thermal Paper Export Manufacturer'sMeeting." The report was prepared by Mr. Funabashi of Honshu, athermal fax paper manufacturer and one of the attendees of theMarch 30, 1990 meeting. Written the next morning, it describedwho attended: Honshu, KSK, MPM, Oji, and Jujo along with fiveother companies. According to the government's translation, thedocument states that "agreement and approval was obtained fromeach company to revise prices as given below." The new price forthe North American market was to be $20.00/100m2, to beimplemented in May 1990. This was the government's smoking gun.
The government buttressed the document through the testimony ofother "downstream" witnesses — the employees of Japanese andAmerican trading companies "ordered" to implement a priceincrease, the telexes and faxes between those trading companies,and other messages sent between manufacturers and the tradingcompanies.
NPI responds that the government's evidence is insufficient forseveral reasons. First, Mr. Funabashi's report is squarelycontradicted by the only testimony offered at trial of someonepresent at that meeting. Mr. Hinoki, also of Honshu, who was thegovernment's star witness,18 denied that any of themanufacturers at that meeting agreed either to increase or tostabilize prices, and indeed, did not recall what if anything wassaid about price increases in the United States.19
Second, there is no evidence, according to NPI, that themeeting consisted of anything other than mid-to-lower levelemployees who discussed, without the authority to bind theirrespective companies, the threat of an anti-dumping action bycompetitors in the U.S. Indeed, Mr. Hinoki testified not onlythat there was no agreement, but that he himself lacked ultimateprice authority to bind Honshu. NPI argues that there is noreason to think any of the other attendees had any more authoritythan he.
Third, NPI contests the translation of the word "Sando" in Mr.Funabashi's report of the March 30, 1990, meeting. According tothe government, "Sando" means "agreement"; according to NPI, itmeans "concurrence." While NPI acknowledges that "agreeing" torevise prices at a certain level would be illegal, it argues thatmerely concurring with a suggested priceis not. Indeed, it argues that the evidence shows only thatsomeone proposed that a $20.00/100m2 price would be a goodcountermeasure to the threatened dumping charge; it claims thatthere is no evidence that any manufacturer actually agreed not tocharge below that figure.20 Indeed, many of the documentssuggest that the manufacturers wanted to investigate the matterfurther before making a decision, consider the market trends, andgauge what other manufacturers were doing. Notwithstanding thetenor of Funabashi's account of the March 30, 1990, meeting,other documents suggested that the participating companies hadnot, in fact, made up their minds as to the pricingstrategy.21
Fourth, NPI claims that the record suggests that the companiesplanned to answer the anti-dumping threat with a responseindividualized to each customer, rather than with the blanket,across-the-board price increase as alleged in the indictment. Ina memorandum that Mr. Hinoki wrote to accompany his transmittalof Mr. Funabashi's report to Honshu's Seattle office, Mr. Hinokiclearly indicated that Honshu itself intended to respond to thedumping threat on a customer-by-customer basis: "Our company isthinking as its response, `to cooperate with the industry withoutreducing the amount of orders received,' and [we] would like toplan our responses according to each customer." From this NPIinfers that Honshu itself never intended to impose anacross-the-board price increase or price stabilization strategy.And if Honshu did not intend either sort of price strategy, thereis no reason to think that any others at the meeting dideither.22 Indeed, NPI cross-examined virtually each and everytrading house employee by showing that for the most part, pricescontinued to decline during the relevant period, culminating as Idescribe, infra, in a resumption of competition by mid 1990.
Finally, when the government's theory moved from price-fixingto price stabilization, the evidence was even more tenuous. Giventhe severe downward pressure on prices, if they stabilized at allduring the period immediately following the March 30 meeting —and as I describe there is reasonable doubt that they did forvery long — it was as likely or more likely to have been theresult of the serious threat of Appleton's anti-dumping petitionas any conspiracy to fix prices. A reasonable jury could notaccept the latter version beyond a reasonable doubt.
The government responds first by trying to account for Mr.Hinoki's profound weakness as a witness. It points out that Mr.Hinoki had reason in 1998 to deny that an agreement was madebecause his company then faced potential civil antitrustexposure. It argues that since I may not assess the credibilityof the witness, see United States v. Arache, 946 F.2d 129,139 (1st Cir. 1991), and I am obliged to take the evidence in thelight most favorable to the government, see United States v.Mariani, 725 F.2d 862, 865 (2d Cir. 1984), I must accept thegovernment's resolution of the conflict between Mr. Funabashi'sreport and Mr. Hinoki's testimony. The issue here is not justrejecting Mr. Hinoki's testimony on key points; the governmentwould have me accept an alternative picture, which Mr. Hinoki didnot paint. Nevertheless, it is a moot point. There is no questionthat, quite apart from Mr Hinoki's words, his actions in 1990 onbehalf of Honshu, and the actions of others, along with otherevidence, is consistent with the inference that a price-fixingconspiracy was formed at the March 30 meeting. The corroboratingevidence the government offers includes the following:
First, there is evidence of a meeting that predated and set thestage for the March 30 meeting. Mr. Tano of KSK wrote a reportmemorializing a "Meeting of Four Thermal Paper Companies" thatoccurred on February 1, 1990 at Jujo's "head office." The purposeof this meeting was reportedly "[f]irst, to put a stop [to pricedecreases], then announce price increases. If possible [theincreases should be] 10% up from April production lot." Duringthis meeting, arrangements were made for a follow-up meeting fivedays later, also to be held at Jujo's office, the purpose ofwhich was to "[d]isclose price levels for each market, [to] tryto put a stop to price decreases [and to] prepare the foundationfor launching price increases later on." The companies present atthe February 1 meeting, Jujo, KSK, MPM, and Oji, all attended theMarch 30 meeting as well.
Mr. Tano also memorialized the follow-up meeting on February 6,1990, at which ten thermal fax paper companies, including thefour from the meeting on February 1, were in attendance. Again,the discussion indicated that the manufacturers "[w]ould like toestablish the lowest price and then increase prices 10% fromaround April." The government plausibly argues that these twomeetings "la[id] the groundwork" for obtaining an "agreement andapproval" from each company "to revise prices."
The government also introduced evidence from after the March 30meeting consistent with the inference that a conspiracy to fixprices was formed at that time. On the very same day as themeeting, Mr. Hinoki and Mr. Funabashi went to the offices ofMitsui-Tokyo, one of the Japanese trading houses that handledthermal fax paper sales for both Honshu and Jujo, and met withMr. Sato of Mitsui to inform him about the agreement. Mr. Satomemorialized what they told him in a faxed report to Mitsui'soffices in the Unites States. His report stated:
(1) [We] heard that a Japan thermal paper mills export maker meeting was held today, with Jujo as the group leader, and prices were discussed. (2) The result was to increase prices by 10 PCT from the May/90 production lot. That is, to set up a new price level as follows. . . . Price: USD 20.00 PER 100 M2 import duty paid and delivered [emphasis in the original].
Further, Mr. Hinoki twice transmitted, without qualification orcorrection, Mr. Funabashi's report describing what transpired atthe March 30 meeting. First, on March 31, 1990, Mr. Hinoki andMr. Funabashi gave a copy of the report to Mr. Hinoki'ssupervisor at Honshu, Mr. Onitsuka. Then, on April 2, 1990, Mr.Hinoki faxed a copy of the report to Mr. Takeyama in Honshu'sSeattle office. Mr. Hinoki even attached a report of his ownmaking (referred to above) which said that "[a] thermal paperexport manufacturer conference was held, and it was decided toimplement price increases from May." These acts of forwarding Mr.Funabashi's report to his boss and his colleague in the UnitedStates, along with his own attached report in the secondinstance, surely permit the inference that Mr. Hinoki thought in1990that an agreement to fix prices had been struck.23
What was happening at Honshu immediately following the meetingwas mirrored by what was happening at MPM. Mr. Oba of MitsubishiCorporation ("MC"), the Japanese trading house responsible forsales of thermal fax paper manufactured by MPM, testified that hewas summoned by Mr. Ishigaki of MPM to come to MPM's office sothat Mr. Ishigaki could explain to Mr. Oba the details of arecent manufacturers' meeting. Mr. Ishigaki too was a namedattendee at the February 1 meeting; MPM was also represented atthe meetings on February 6 and March 30. Mr. Ishigaki related toMr. Oba that the manufacturers had agreed at their recent meetingto increase prices for the sale of thermal fax paper to theUnited States and other markets. According to Mr. Oba, Mr.Ishigaki said that the manufacturers "fixed the price byterritory." Mr. Ishigaki then instructed Mr. Oba to have MCimplement the new price scheme starting from April or May of1990.
With regard to the claim that the representatives at the March30 meeting did not have the authority to bind their respectivecorporations, the government responds that Mr. Hinoki's actionsbelie that claim as well. When Messrs. Hinoki and Funabashivisited Mr. Sato at Mitsui (Honshu's and Jujo's Japanese tradinghouse), they told him not just that a price increase had beenproposed, but that a decision had been reached, the result being"to increase prices by 10 PCT" [emphasis in the original].Similarly, Mr. Funabashi's March 31 report stated not that Honshuand the other manufacturers were waiting on authorization fromhigher-ups before committing to the price-fixing agreement, butrather that "agreement and approval was obtained from eachcompany." And shortly thereafter, Mr. Ishigaki of MPM summonedMr. Oba of his Japanese trading house to confirm themanufacturer's agreement with him as well. As the governmentargues, "[t]his picture of multiple manufacturers'srepresentatives rushing . . . to advise trading houses and othersof the newly-forged agreement eviscerates NPI's position that therepresentatives needed time after the March 30, 1990 meeting toobtain authority to bind their respective companies to the deal."Furthermore, looking at the March 30 meeting in context with thetwo meetings in February, it is a reasonable inference that themanufacturers would have sent representatives to the March 30meeting who had authority to commit their respective companies.
With regard to the claim that Honshu, and presumably others,negotiated their prices according to each customer, rather thansetting them across-the-board, the evidence is consistent withthe government's price stabilization theory: Honshu was simplyplanning to be flexible in deciding how to try to raise orstabilize its prices. In other words, Honshu would negotiatedistinct contracts with each different customer whilesimultaneously working on raising its average price 10% or tosome other particular level.
Finally, with regard to the claim that prices did not in factrise, the government notes that it need not prove that aprice-fixing conspiracy was successfully implemented, only thatthe agreement was made and that some substantial steps were takento try to implement it. In anyevent, as I have noted, by the end of the trial, the governmentchanged its theory to address this issue. No longer was itclaiming a conspiracy to raise prices; this case involved, theynow suggested, a conspiracy to stabilize prices, to fix theirfall, an equally impermissible goal.
Given the strictures of the Rule 29 standard, I conclude thatthe government has established the existence of a conspiracy, atleast as of March 30, 1990.
2. Evidence that Jujo Was a Member of a Price-Fixing Conspiracy
The evidence that Jujo joined the conspiracy is somewhatweaker, but still not so weak that a jury could not reasonablyfind beyond a reasonable doubt that NPI was guilty of havingjoined the conspiracy, at least at its inception.
The government starts its case referring to two observations inthe report of Mr. Funabashi. First, he reports that Jujo was notonly at the meeting of ten manufacturers on March 30, 1990, butat the preliminary meeting, held an hour before the main meeting,which Mr. Funabashi described as a meeting of "the five majorcompanies." It would be odd for Jujo to be a "major company" andyet to play a passive or spectator's role. Second, Mr. Funabashireports that all of the companies in attendance at the mainmeeting agreed to and approved the collective price revisionscheme.24
In addition, the government points out that Jujo was a host forthe earlier February meetings, raising the inference that it hada leading role in the formation of the conspiracy. In addition,the government points to a memorandum from Mr. Sato of Mitsui'sto Mitsui's offices in the United States, where Jujo's thermalfax paper was distributed, which describes Jujo, based on whatMessrs. Hinoki and Funabashi told him, as "the group leader" ofthe March 30, 1990 meeting.
In a similar vein, the government cites a correspondence faxedby Mr. Ito of Mitsubishi International Corporation, MPM'sAmerican trading house in New York, to MC in Tokyo on April 9,1990. In this document, Mr. Ito relates that he spoke with arepresentative of Mitsui-New York, the U.S. trading houseresponsible for sales of thermal fax paper for both Jujo andHonshu. Specifically, he says that "[i]t seems that Jujo talkedto [Mitsui-New York] regarding $20.00 — Jujo's deadline is the15th, therefore no individual PRICE has been presented yet." Thissuggests according to the government, that Mr. Ito learned fromthe conversation with the representative from Mitsui-New Yorkthat Jujo had already advised Mitsui-New York, that a new $20.00price was in the works, even if not yet finalized.
The information that Mr. Ito relayed dovetails with what Mr.Sato of Mitsui-Japan said he would give to Mitsui. In hismemorandum to Mitsui-New York, Mr. Sato wrote that "[we] willobtain [information] on the detailed situation separately fromJUJO next week and let you know." This memorandum was written tendays before Mr. Ito confirmed that Mitsui-New York had receivedsome preliminary confirmation from Jujo about the agreed-upon$20.00 price level. Thus the government infers that Jujo"promptly started in the first week of April of 1990 to notifyits trading houses of the agreed-upon price for purposes ofimplementing the agreement."
Finally, the government cites to a report sent by arepresentative of Japan Pulp and Paper's ("JPP") Tokyo office toJPP-New York detailing a pricing instruction recently given toJPP-Tokyo over the telephone by a person that seems clearly to bea Jujo representative, someone named Saito (JPP, along withMitsui, distributed Jujo goods). The inference that Saito is aJujo representative is grounded in the fact that the rest of theinformation conveyed bySaito relates to recent trends in Jujo's production, Jujo'sresearch regarding intellectual property rights, and Jujo'sstarting to consult with attorneys. The report by therepresentative at JPP-Tokyo says that, as Saito "explained overthe phone the other day, [we] are offering a $20.00/100m2 pricewith free delivered duty paid from May." This too indicates thatJujo had taken steps to effectuate the manufacturers' March 30,1990 agreement.
NPI responds that this data establishes nothing more than guiltby association. The fact that Jujo attended the meetings inFebruary and March does not imply that it joined in theconspiracy. Mr. Funabashi's report characterizes what happened —that "agreement and approval was obtained from each company torevise prices" — but it does not indicate that anyone from Jujodid anything in particularly to clearly or affirmatively agree tojoin the conspiracy. More specifically, NPI argues that thegovernment was unable, throughout the trial, to provide anyevidence regarding who from Jujo attended the meetings andwhether that person had any binding authority with regard toJujo's pricing decisions.
With regard to the argument that Jujo must have been a majorplayer because Mr. Sato described it as the "group leader," NPIresponds that being a "group leader" means nothing more than thatJujo was the chair or moderator of that meeting, in a system inwhich the chair rotated from company to company.25 Thedocument does not indicate that Jujo itself made any particularstatements. Mr. Sato does indicate that he "will obtain[information] on the detailed situation separately from Jujo nextweek and let you know." But this does not imply that Jujoactually did or said anything that committed it to the conspiracyas of that date.
NPI also argues that none of the other documents mention anyspecific acts taken by Jujo which show that it was more thanpresent when price-fixing was discussed. And, as it points out,"[m]ere presence at the scene of a crime is insufficient to provemembership in a conspiracy," and even if "[i]t is fair inferencethat the defendant knew what was going on, . . . that is notenough to establish intent to conspire." United States v.Ocampo, 964 F.2d 80, 82 (1st Cir. 1992).
With regard to the fact that no company at the March 30 meetingspoke up and objected to KSK's $20.00/100m2 proposal, NPI arguesthat silence need not imply assent. Indeed, it offers anotherexplanation for the silence, namely that any company that spokeout against KSK's proposal ran the risk of KSK passing that on tothe American company that was threatening to bring theanti-dumping lawsuit.
Finally, NPI argues that there is no evidence that its pricesactually rose at all. While the government argues that there isno requirement of showing that the price-fixing agreement wasever implemented, plainly the failure of implementation suggeststhat there was no such agreement. See Matsushita Elec. Indus.Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 592, 106 S.Ct.1348, 89 L.Ed.2d 538 (1986). That evidence, while not dispositiveduring the immediate post-March 30 period, is compelling by thefall of 1990.
Viewing the evidence in the light most favorable to the UnitedStates, however, it is clear that a reasonable jury could findbeyond a reasonable doubt that Jujo joined the conspiracy at orabout March of 1990. Whether Jujo's participation continued intothe limitations period and indeed, whether the conspiracy itselflasted, is another question.
3. Evidence that the Conspiracy Had Dissolved Before the Limitations Period
While the law on withdrawal from a conspiracy is fairlystringent, there is ampleevidence to meet the Rule 29 standard that the conspiracy hadfallen apart well before November 15, 1990, and that, in anyevent, Jujo was no longer a member as of that date.
The standard for withdrawal from a conspiracy requires morethan "[m]ere cessation of activity in furtherance of theconspiracy." United States v. Juodakis, 834 F.2d 1099, 1102(1st Cir. 1987). See also United States v. Munoz, 36 F.3d 1229,1234 (1st Cir. 1994). "In order to withdraw, a conspirator mustact affirmatively either to defeat or disavow the purposes of theconspiracy." Juodakis, 834 F.2d at 1102. "Typically, there mustbe evidence either of a full confession to authorities or acommunication by the accused to his coconspirators that he hasabandoned the enterprise and its goals." Id.
But it would be a mistake to read the communication option toonarrowly, as if Jujo could successfully withdraw from theconspiracy if, and only if, it made an announcement to all theother manufacturers that it was withdrawing from the conspiracy.In United States v. Gypsum, Co., 438 U.S. 422, 98 S.Ct. 2864,57 L.Ed.2d 854 (1978), for example, the Supreme Court found thatthe trial judge erroneously instructed the jury that the only wayto withdraw from a price-fixing conspiracy was for the defendantto "affirmatively notif[y] each other member of the conspiracy hewill no longer participate in the undertaking so they understandthey can no longer expect his participation or acquiescence." 438U.S. at 463-64, 98 S.Ct. 2864. Rather, the Court held that"[a]ffirmative acts inconsistent with the object of theconspiracy and communicated in a manner reasonably calculated toreach coconspirators have generally been regarded as sufficientto establish withdrawal or abandonment." Id. at 464-65, 98S.Ct. 2864. The clear implication was that "resumption ofcompetitive behavior, such as intensified price cutting or pricewars," id. at 464, 98 S.Ct. 2864, would be sufficient tocommunicate withdrawal or general abandonment of a price-fixingconspiracy. See United States v. Swiss Valley Farms Company,Inc., 912 F. Supp. 401, 402 (C.D.Ill. 1995) (citing Gypsum forthe proposition "that evidence showing a resumption ofcompetitive bidding by Defendants is also admissible asaffirmative action to defeat or disavow the purpose of the bidrigging conspiracy."). Indeed, as in the instant case, thedefendants in Gypsum wanted to argue that vigorous competitionhad returned before the applicable five year statute oflimitations period had started to run. 438 U.S. at 465 n. 38, 98S.Ct. 2864.
The evidence that Jujo did not follow through as a member ofthe conspiracy, and surely had withdrawn by November 15, 1990,starts with another document written by Mr. Sato of Mitsui on May7, 1990. He writes:
Today I obtained the following information from Mr. Takemoto of Jujo:
1) They currently are reviewing internally what the future pricing should be in response to the anti-dumping problem, and hope to prepare Jujo's policy and determine the direction for consultation with [Mitsui] within one or two days.
2) [He says] basically, the direction is for Jujo to respond with independent pricing, separately from the other makers including Oji, Taio, Mitsubishi and Honshu, as otherwise (because it is conceivable that offering similar price increases [as theirs] would only serve to deepen the problem).
Clearly, Jujo has communicated here to one of its tradinghouses, one that dealt also with another member of the allegedconspiracy, Honshu, that it was going to make its own independentjudgments of how to handle the threat of an anti-dumping suit,and that it was not, or was no longer going to coordinate anyprices with other members of the conspiracy. Indeed, anotherdocument from Mitsui, recording conversations with two Jujoemployees, shows that Jujo was consulting independentlywith counsel in Washington D.C. to determine how to respond withpricing to the anti-dumping threat.
Moreover, from the outset following the March 30 meeting,Jujo's response to the anti-dumping threat was clearly to engagein individualized, customer-by-customer price negotiations.Individualized, customer-by-customer price negotiations pave theway for a competitive market. Though, as indicated above, theyare compatible with a flexible approach to price-fixing, apattern of price stabilization, there is a point at which thepattern of pricing proves something totally different. If pricesin fact consistently go down, as they did by May, June, andthereafter, individualized negotiations become the mechanism bywhich real competition takes place. In other words, they are theway in which former conspirators break ranks and start to engagein a price war to save their customer base. And a price warbegan.
Witness after witness testified that price data from Jujo andtheir competitors shows that while some prices went up initiallyto the $18/100m2 range, some did not change, and some fell.Indeed, by mid 1990, and later, a reasonable fact finder lookingonly at prices, would be obliged to conclude that the conspiracyhad evaporated. Jujo's prices continued to fall. KSK's and Oji'sprices dropped from $19.00 in March 1990 to $15.01 in December1990, while Mitsubishi's prices to one customer dropped from$18.30 in August, to $16.68 in December. One government witnessadmitted that there was a "price war" among all the thermal papermanufacturers beginning July 20, 1990, and lasting through thefall. Another characterized the 1990 market as "wickedlycompetitive," prices were going "down, down, down." Indeed, bymid 1990, prices were so low that Appleton was still threateningthe manufacturers' including Jujo — with an anti-dumpingpetition.26 Oji, in particular, was regularly undercuttingits competitors. Competitors knew what each other was charging,had customers in common from whom they obtained price informationand were knowingly undercutting each others' prices.
By the fall of 1990, raising prices made no economic sensewhatsoever, if it ever did, whatever the justification. Anymovement towards raising prices, had precisely the samedevastating effect on these manufacturers that an anti-dumpingtariff would have had. The American manufacturers had captured somuch of the business that the Japanese manufacturers wereirrelevant. (See Section D infra on "substantial effects.")
To be sure, the government cites certain specific prices thatJujo charged certain specific customers that did not drop during1990. But as NPI points out, this is explained by contractualprice commitments to those customers. The prices betweencustomers varied and tended to drop over the course of the yearin a way that one would not expect in a non-competitive market.And the general pattern of falling prices is particularlyimpressive given that all the manufacturers were sensitive to thecontinued threat of an anti-dumping suit, and thus necessarilywere wary about lowering their prices.
Finally, while there is a plethora of telexes and memorandaconcerning a March 30 meeting ostensibly to "fix prices," thereis no credible evidence of subsequent meetings in the fall of1990 that had the same purpose or the same effect (even for ashort time).27
Taking into account all of the evidence presented at trial,even when viewing it in the light most favorable to thegovernment, I conclude that it is clear that whatever agreementhad existed in March, had dissolved by mid 1990. Jujo wasstriking out on its own by May 1990; any conspiracy to fix pricesgenerally collapsed by the summer or early fall of the year. NPIhas carried its burden of showing that it withdrew from theconspiracy to fix prices, and that the conspiracy was generallyabandoned, before the limitations period. Accordingly, I holdthat the government failed to establish the first two elements ofCount 1 within the relevant limitations period.
D. Failure to Present Sufficient Evidence that Any Continuing Conspiracy Had Substantial Effects
As an alternative ground for acquittal, even assuming that theconspiracy was ongoing, and that Jujo was still a member of theconspiracy, I hold that the government failed to carry its burdenof showing that the conspiracy had substantial effects in theUnited States after November 15, 1990.
In § 1 of the Sherman Act, the very same phrase conveys both ajurisdictional requirement and a merits requirement. The phrase"in restraint of trade or commerce among the several states",15 U.S.C. § 1, is "both an element of the offense and a vitalprerequisite for federal court jurisdiction." Mortensen v. FirstFederal Savings and Loan Assoc., 549 F.2d 884, 890-91 (3d Cir.1977).
Several questions follow: Is the standard for provingjurisdiction the same as the standard for proving effects on themerits? To what degree is the standard affected by the fact thata price-fixing conspiracy is involved which in a domestic settingis a per se restraint on trade.
Logic suggests that the basic standard is the same for provingeither jurisdiction and the third element of the offense on themerits. The language of § 1 is the same; the primary concerns ofone mirror the concerns of the other — whether the federal lawcan be applied to NPI's actions. While there may be additionalconcerns (such as concerns about international comity) that maybe appropriate for the judge to consider in determiningjurisdiction, the core question is, or should be, the same.
Moreover, this is particularly so where the factualdetermination necessary for one, overlaps with the factualdetermination necessary for the other. See id. at 893 (quotingMcBeath v. Inter-American Citizens for Decency Committee,374 F.2d 359 (5th Cir.) cert. denied, 389 U.S. 896, 88 S.Ct. 216,19 L.Ed.2d 214 (1967)) ("[W]here the factual and jurisdictionalissues are completely intermeshed the jurisdictional issuesshould be referred to the merits, for it is impossible to decidethe one without the other.")
The requirement that the First Circuit reaffirmed in itsdecision in Nippon, that the government prove "intended" aswell as "substantial effects" on interstate commerce, reflectsthe special concerns attendant to prosecuting a wholly foreignconspiracy. As Judge Learned Hand wrote in his seminal opinion inUnited States v. Aluminum Co. of America, 148 F.2d 416, 443 (2dCir. 1945), "[w]e should not impute to Congress an intent topunish all whom its courts can catch, for conduct which has noconsequences within the United States." Hartford Fire sincestated the standard for civil suits of foreign defendants, sayingthat "it is well establishedby now that the Sherman Act applies to foreign conduct that wasmeant to produce and did in fact produce some substantial effectin the United States." 509 U.S. at 796, 113 S.Ct. 2891. The FirstCircuit's opinion in Nippon extended that same standard tocriminal defendants. 109 F.3d at 9.
In a domestic price-fixing case, the third prong of § 1 imposesa minimal standard. Proof of the conspiracy and an overt act areper se proof of a substantial impact on the market. The questionis whether the standard is any different when the governmentalleges that a foreign entity has engaged in price-fixing, whenthe concerns about price-fixing meet the concerns aboutextraterritorial prosecutions.
As I noted during the trial, there are two general templatesfor evaluating jurisdictional issues involving restraints ontrade: a per se test and a "rule of reason" test.
The per se model is the traditional domestic price-fixingconspiracy in which courts have not required an appraisal of theactual magnitude of the impact in a domestic setting.Price-fixing is the paradigm of an act in violation of § 1 of theSherman Act. As Areeda says, "price-fixing cartels are condemnedper se because the conduct it tempting to businessmen but verydangerous to society. The conceivable benefits are few inprinciple, small in magnitude, speculative in occurrence, andalways premised on the existence of price-fixing power which islikely to be exercised adversely to the public." VII PhillipAreeda and Herbert Hovenkamp, Antitrust Law ¶ 1509, at 412(1997). In line with this, the Supreme Court held that"[w]hatever economic justification particular price-fixingagreements may be thought to have, the law does not permit aninquiry into their reasonableness. They are all banned because oftheir actual or potential threat to the central nervous system ofthe economy." United States v. Socony-Vacuum Oil Co.,310 U.S. 150, 224 n. 59, 60 S.Ct. 811, 84 L.Ed. 1129 (1940).
The "rule of reason" approach is typically applied torestraints of trade not involving price-fixing or claims ofvertical conspiracies. In those cases, proof that a given set ofacts took place did not necessarily mean that they had a"substantial effect" on the market. The specific impact had to beproved under a "rule of reason" analysis which considers multiplefactors.
The activities of these foreign manufacturers could fit intothe first or the second category, depending upon thecircumstances. In the abstract, there may well be a foreignanalog of a domestic price-fixing conspiracy, where the actsalleged were of such a nature that there was no doubt about theimpact, where "the anti-competitive nature and effect" of thepractice is "so apparent and so serious that the courts will notpause to assess them in the light of the rule of reason." UnitedStates v. Sealy, Inc., 388 U.S. 350, 87 S.Ct. 1847, 18 L.Ed.2d1238 (1967). Alternatively, there may well be the foreign analogof a vertical conspiracy, where the anti-competitive nature ofthe activity depends upon a number of factors, where thegovernment's proof is less clear, where there is an issue aboutthe relationship between the Japanese acts and the Americaneffect.28
NPI, expressly relying on Metro Industries v. Sammi Corp.,82 F.3d 839 (9th Cir. 1996), argues that an internationalprice-fixing, unlike a domestic price-fixing, is subject todifferent rules in all cases — i.e. a rule of reason test. Thecourt in Metro Industries relied on the following quotationfrom Areeda to justify invoking the "rule of reason" analysis:
[T]he conventional assumptions that courts make in appraising restraints in domestic markets are not necessarily applicable in foreign markets. A foreign joint venture among competitors, for example, might be more "reasonable" than a comparable domestic transaction in several respects: the actual or potential harms touching American commerce may be more remote; the parties' necessities may be greater in view of foreign market circumstances; and the alternatives may be fewer, more burdensome, or less helpful. The fact that foreign conduct would be a per se offense — one that is condemned without proof of particular effects and with little regard for possible justifications in the particular case — when entirely domestic does not call for a fundamentally different analysis. Domestic antitrust policy uses per se rules for conduct that, in most of its manifestations, is potentially very dangerous with little or no redeeming virtue. That rationale would be inapplicable to foreign restraints that, in many instances, either pose very little danger to American commerce or have more persuasive justifications than are likely in similar restraints at home. For example, price-fixing in a foreign country might have some but very little impact on United States commerce.
Metro Industries, 82 F.3d at 845 (quoting 1 Phillip Areeda &Donald F. Turner, Antitrust Law ¶ 237 (1978)). Based on thisquite reasonable awareness of the differences between domesticand foreign economic activity, the court in Metro Industriesconcluded that whenever "a Sherman Act claim is based on conductoutside the United States, we apply rule of reason analysis todetermine whether there is a Sherman Act violation." Id.
NPI, in turn, recommends the same reasoning to me. It arguesthat the government failed to show that there were substantialeffects because it "failed to establish any other evidence as tohow much, if any, of that market was affected by the allegedconspiracy."
The problem with NPI's position is that the Metro Industriescourt was wrong to apply the rule of reason analysis to aprice-fixing case just because the defendant is foreign. Nosuch test was implied by Hartford Fire. Indeed, Areeda notes:
Metro Industries's use of the rule of reason treatment for all restraints abroad  is squarely in conflict with the First Circuit's Nippon decision that a criminal indictment may issue for naked price-fixing occurring abroad but having the United States as its intended target. As a general matter, rule of reason offenses are not the product of criminal prosecutions. At least on the facts of the Nippon case, we are inclined to favor the First Circuit's conclusion over that of the Ninth Circuit.
IA Phillip Areeda and Herbert Hovenkamp, Antitrust Law ¶ 273b,at 379 (1997).
More substantively, the reason the Metro Industries court waswrong is that it failed to appreciate both the context for thelengthy quotation taken from Areeda, and the underlyingjustification for use of a per se test in the case ofprice-fixing. The Areeda quotation concluded with the thoughtthat "price-fixing in a foreign country might have some but verylittle impact on United States commerce." But this is consistentwith the thought that if the conspiracy were intentionallydirected at the United States, and if it had the capacity tohave substantial effects on the United States, then it would bethe sort of activity which would be a matter of serious concernto the United States.
Because price-fixing is the paradigm of a § 1 violation, Areedais clear to distinguish it from other sorts of anticompetitiveaction which might be treated more leniently in a foreigncountry. Thus he says, "to say that domestic per se rules are notnecessarily and automatically applicable in the internationalcontext is not to say that an antitrust court needs to hesitatevery long before condemning restraints withsignificant and obvious effects on United States commerce, andwithout any plausible purpose other than the suppression ofcompetition with and in the United States." IA Antitrust Law ¶273b, at 376 (1997).
The correct approach to a foreign price-fixing conspiracy,therefore, is what the First Circuit announced, something akin toa "per se plus" test, adding to the traditional domestic analysisthe requirement that the government show substantial effects byshowing a substantial connection to the United States market.
I instructed the jury on this "per se plus" test by saying thatsubstantial effects could be shown in any of the following ways:
• whether the volume of commerce affected by the conspiracy was substantial;
• whether the share of the market allegedly impacted by alleged conspiracy was substantial;
• whether the conspiracy as a whole substantially lessened competition in the thermal fax paper market.
The government claims that it made sufficient proof of allthree. I will acknowledge that the government carried its burdenwith regard to substantial effects on either of the first twoprongs but only around the time the conspiracy allegedly wasformed, i.e. around the end of March, 1990. It presentedsufficient evidence that Jujo had approximately $6 million insales in the United States at the start of the allegedconspiracy, and that the Japanese thermal fax paper manufacturersas a whole had approximately thirty percent of the market at thetime.29
The problem with the government's position is that the evidenceindicates that the Japanese share of the market collapsed during1990. Witness after witness testified to the fact that anycompany that did raise its prices lost market share at aprecipitous rate. The pattern of prices suggested that by mid1990, most abandoned the enterprise. Even so, document afterdocument suggested that the market for Japanese thermal faxpaper, not too robust at the beginning of 1990, was virtuallyextinguished by the end of the year. McCall of DaiEi reports thatJapanese competitors had become an "insignificant" force in themarket place. Appleton and KSP, the American companies continuedto aggressively compete with one another, and, although they hadcaptured so much of the market, continued to threatenanti-dumping petitions in order to drive out any of the remainingJapanese manufacturers left standing. The American companiesplainly had the capacity to supply the entire demand for thermalfax paper by the fall of 1990. The Japanese conspiracy — ifanything remained by November of 1990 — could hardly have had a"substantial effect" on American commerce.
It should be emphasized that a substantial effect on UnitedStates commerce cannot simply be assumed to continue because itonce existed. There is no reason to treat having substantialeffects on United States commerce like being a member of aconspiracy, which, as discussed above, is held to continue untilits goals or membership have been affirmatively abandoned. SeeJuodakis, 834 F.2d, at 1102. Rather, because it is a matter ofobjective fact, rather than subjective intent (to agree), thegovernment must prove that the test is met at the relevant time.Because the government failed to introduce any evidence on thispoint for the relevant timeperiod, and has not rebutted the testimony of almost all thewitnesses whose conclusions were adverse to the government, itcannot claim to have carried its burden of showing that thealleged conspiratorial conduct produced substantial effects inthe United States.
For the reasons detailed above, I find that the government hasfailed to carry its burden of proof on any of the three elementsof the price-fixing conspiracy on which NPI is charged. That is,the government failed to show that as of November 15, 1990 — thedate marking the start of the period covered by the statute oflimitations — there was a conspiracy to fix prices, that Jujo,NPI's predecessor, was a member of such a conspiracy, or thatsuch a conspiracy had intended and substantial effects on UnitedStates commerce. Accordingly, NPI's renewed motion for acquittal(docket # 260) is GRANTED.
1. United States v. Nippon Paper Indus. Co., 944 F. Supp. 55(D.Mass. 1996).
2. United States v. Nippon Paper Indus. Co., 109 F.3d 1 (1stCir. 1997).
3. The trial started on June 1, 1998, and after twenty-sixtrial days, a mistrial was declared on July 13, 1998.
4. Jury deliberations started on July 1, 1998, and on July 13,1998, a mistrial was declared.
5. A horizontal conspiracy is one that involves defendants ina given market, at the same level of distribution. See UnitedStates v. Socony-Vacuum Oil Co., 310 U.S. 150, 218, 60 S.Ct.811, 84 L.Ed. 1129 (1940). By contrast, a vertical conspiracy isan agreement between defendants at different levels ofdistribution. See Business Electronics Corp. v. SharpElectronics Corp., 485 U.S. 717, 730, 108 S.Ct. 1515, 99 L.Ed.2d808 (1988). Such conspiracies typically involve a manufacturer orsupplier dictating the resale price of an item it sold to itsdistributor or to other customers.
6. The government sought to hold NPI responsible for the actsof its predecessor company, Jujo. I treated the issue as a choiceof law question and concluded that Japanese law was notinconsistent with holding NPI responsible as a successor. SeeMemorandum and Order, dated May 29, 1998.
7. The indictment in this case was handed down on December 13,1990, but NPI agrees with the government that the relevant datefor the statutory period is November 15, 1990.
8. Rule 29(a) provides that "[t]he court on motion of thedefendant or of its own motion shall order the entry of judgmentof acquittal . . . after the evidence on either side is closed ifthe evidence is insufficient to sustain a conviction."Fed.R.Crim.P. 29(a).
9. See United States v. All Star Industries, 962 F.2d 465,474 (5th Cir. 1992) (in a per se violation case, the governmenthas the burden to prove "that defendants knowingly andintentionally joined that agreement").
10. See Nippon, 109 F.3d. at 9 (holding "that Section One ofthe Sherman Act applies to wholly foreign conduct which has anintended and substantial effect in the United States.").
11. See 19 U.S.C. § 1673. Dumping is determined byevaluating the price charged in the United States with the pricein the home market, suitably adjusting for "costs, charges, andexpenses incurred as a result of exporting the goods from thehome country to the United States." NSK Ltd. v. United States,115 F.3d 965, 969 (Fed.Cir. 1997).
12. There was the aroma of a setup in all of this by theAmerican companies seeking not just to eliminate their Japaneserival's competitive edge, but to eliminate their Japanese rivalsentirely. One of the attendees at the March 30, 1990, meeting,KSK, was the parent company of Kanzaki Specialty Papers (KSP), anAmerican company. (KSP was considered to be an Americancorporation for anti-dumping purposes.) Hirosuke Fukuda, a KSPvice president, testified that he used KSK to get informationabout Japanese prices; KSK in turn directed its American company,KSP, to join with Appleton and threaten to file an anti-dumpingpetition. That, in turn, would force the Japanese companies toraise their prices and push them out of the market.
13. For example, Mr. Ito of MIC (the American trading house)writes to MC (the Japanese trading house) in June of 1990: "Underthe current environment, for whatever reasons this is not amarket under which we can accept a price increase. I also don'tthink there would be a general price increase with the concernfor dumping as Mitsubishi explains. If Mitsubishi needed to raiseprices somehow (for public consumption) because of dumping, theycan find a technical solution that would keep the actual priceswith no change . . ."
"Either way, under the current circumstances I have to say thatan actual price increase is impossible, and accordingly we mustuse an actual price
14. NPI claimed that this change represented a materialvariance between the government's price-fixing indictment, andits price stabilization proof, and moved for a mistrial. While Idenied the motion, on reflection I believe the ruling was inerror. The indictment suggested a simple theory — an agreement toincrease prices and its implementation. Even the government'sopening reflected this approach. The defense defended, in part,on the grounds that many prices in fact declined after theMarch 30 meeting. A price stabilization theory concedes that, butsuggests that prices would have declined more had there been noagreement. In the light of that issue, one can envision adifferent defense — significantly with expert witnesses, perhapsdifferent cross examination. The issue, however, is mooted by theinstant order.
15. It is commonplace to talk about how fact finders are askedto draw reasonable inferences from the evidence based on their"shared perceptions" and their common understanding of the"habits, practices, and inclinations of human beings." UnitedStates v. Ortiz, 966 F.2d 707, 712 (1st Cir. 1992). HereAmerican "shared perceptions" and the common understandings ofthe significance of particular acts may well be at odds with themeaning given those acts in Japan. To the extent that this wasso, it was incumbent upon NPI to present evidence to that effectto the jury.
16. A government witness, Andy McCall of DaiEi, testified thatin Japanese, "[s]entences often don't have a subject, but at thebeginning [of the text] the subject is identified, and then insubsequent sentences . . . the subject would not be repeated." Aninterpreter would be obliged to infer who the subject is.Moreover, he noted that Japanese history is "longer than ourhistory is. So there's some shared values that the Japanese haveand are understood through history, culture and language."Sometimes those values are implied, "written between the lines,"and can be difficult to understand for a non-native.
17. The defense insisted that the co-conspirators under therule had to be either named in the indictment, or had to havequalified for that designation under the substantive law ofconspiracy. Since the Japanese trading houses would not havequalified under Monsanto Company v. Spray-Rite Service Corp.,465 U.S. 752, 104 S.Ct. 1464, 79 L.Ed.2d 775 (1984), NPI argues,the statements and faxes from these companies must be excluded.
The law with respect to co-conspirator hearsay, however, is notcoterminous with the substantive criminal law. See United Statesv. Carter 966 F. Supp. 336, 346 (E.D.Pa. 1997). Under thecircumstances, I found that there was sufficient evidence to meetthe Petrozziello standard: Many of the documents which tendedto prove the existence of a conspiracy had an independent nonhearsay basis — records of regularly conducted activity underF.R.E. Rule 803(6), or statements against interest under F.R.E.Rule 806(b)(3). These included the critical memoranda withrespect to the March 30, 1990, meeting of the allegedco-conspirators, as well as documents suggesting price increasesto at least certain Jujo customers.
In addition, there was testimony concerning non-assertiveconduct, notably the presence of a Jujo representative at crucialmeetings in February and March, who, according to Mr. Hinoki,made no objections to what was being said. In some instances, thecontested co-conspirator statement was not offered for its truthat all. In order to rebut NPI's claim that the prices charged inthe United States were the product of independent negotiatingbetween customers and trading houses, and trading houses and themanufacturers, rather than the manufacturers' orders, thegovernment sought to introduce the fact that efforts to increaseprices in some instances followed a communication with themanufacturer or Japanese trading house alerting the Americantrading companies to the March 30 agreement. Moreover, it wassignificant that these statements — offered de bene or for a nonhearsay statement — corroborated each other as I noted: "[W]herethere are 15 statements from independent co-conspirators[,] [o]neargument is that the facial consistency of all theco-conspirators' statements is independent evidence." See UnitedStates v. Garner, 837 F.2d 1404, 1415 (7th Cir. 1987) ("Theremarkable consistency with which payments were made [toinspectors] and the fact that the inspectors raised the standardfee almost simultaneously from $10 to $20 suggests that theinspectors were communicating with each other and encouragingeach other to raise the fee.") In this regard, I am notspecifically weighing the content of the statements — only thatthey are consistent with each other.
Where the standard for proving the existence of a conspiracyand the defendant's participation in it is by a preponderance ofthe evidence, I concluded that the evidence was sufficient. Wherethe standard is more rigorous, and where the evidence concernsthe continuation of that conspiracy into the fall of 1990, I havecome to a different conclusion.
18. Hinoki's testimony was so important to the government thatit sought to take his testimony via video teleconferencing. Thetestimony was taken each evening at 6:00 p.m. Boston time, and7:00 a.m. Tokyo time. See Memorandum and Order, July 28, 1998.
19. The government improperly sought to impeach Mr. Hinoki,its own witness, by suggesting that he had earlier given theAUSAs and their paralegals different stories, more favorable tothe government. The examination was entirely impermissible. Thegovernment refused to allow the defense to use its "rough notes"of its meeting with Mr. Hinoki to cross-examine, but it had noproblem using them. The AUSA repeatedly asked Mr. Hinokiquestions beginning with, "Didn't you tell me [such and such]when I met with you . . ." See United States v. Shoupe,548 F.2d 636, 643 (6th Cir. 1977) (holding that "recitation by theprosecutor of the entire substance of a witness's disavowed,unsworn prior statements, which, if credited by the jury, wouldbe sufficient to sustain a conviction, abridged defendants' rightto a fair trial in violation of the Due Process Clause of the 5thAmendment."). See also United States v. Zackson, 12 F.3d 1178,1185 (2d Cir. 1993), cert. denied 512 U.S. 1224, 114 S.Ct.2717, 129 L.Ed.2d 842 (1994) (excluding testimony of a governmentwitness where the government's proffer indicated that the witnesswould offer no probative testimony and was using the witness onlyas a conduit to get potentially prejudicial hearsay before thejury.)
20. NPI tries to advance another legal argument in thiscontext as well, namely that meeting to discuss how to respond toan anti-dumping suit is not illegal. However, NPI misreads theNoerr-Pennington doctrine, which only exempts joint efforts toinfluence political or judicial decision makers from anti-trustlaws. See McGuire Oil Co. v. Mapco, Inc., 958 F.2d 1552,1558-59 (11th Cir. 1992). There is no evidence that the meetingon March 30, 1990, was aimed at formulating a litigation strategyor starting a political action campaign. The Funabashi report,according to the inferences the government would have a jurydraw, deals only with a price-fixing strategy, and that is notallowed under the Noerr-Pennington doctrine.
21. In Mr. Funabashi's report of the March 30 meeting, thegovernment translated one phrase as expressing Honshu's intent to"cooperate" with the industry. The defense offered an alternative— "to keep up with" or "to go along with." The witness concededthat the Japanese translation of that particular word was veryambiguous.
22. On cross-examination of the trading house representatives,NPI showed that the prices actually tended to fall when they weresupposed to be rising or at least stabilizing. I deal with thisprimarily in the context of the general abandonment of theconspiracy, infra, but it could also serve as evidence ofcompetition in what was a buyers' market.
23. The government also cites a report generated on April 5,1990, by Mr. Watanabe of "Mr. Fax," one of Honshu's customers.The report said that he was "suddenly" visited by three people,one of whom was Mr. Motoyama, the manager responsible for Oji'ssales of thermal fax paper to the United States market. Accordingto Mr. Watanabe, Mr. Motoyama stated that the "mills have decided[on a] new export price at [the] meetings of last week" and that"Oji has announced [a] new price by 10% increase." This report isparticularly noteworthy given that Mr. Motoyama was a namedattendee at the meeting on February 1, and that his firm, Oji,was represented at both the February 6 and March 30 meetings.
24. As noted above, NPI contests the translation of "Sando" as"agreement." For purposes of this motion, I am obliged to acceptthe government's version.
25. Initially, the government's translator suggested "groupleader," while NPI's translator suggested "moderator." Thegovernment's translator then adopted the latter translation.
26. KSK (the Japanese parent to KSP, the American companyworking with Appleton Paper) reported that based on the data itwas analyzing, Jujo and the others were "dumping" paper in theAmerican market in June of 1990 — when Appleton wrote to theMinistry of International Trade and Industry of Japan, as well asin August of 1990.
27. A telex sent from DaiEi Papers, New Jersey, to DaiEi, SanFrancisco, simply reports a thermal paper manufacturer's meetingat which MPM reported Appleton's threat to file an anti-dumpingpetition Oji and Daio. The tone of this report and its content iswholly different from the March 30 Funabashi memorandum.Likewise, a fax between Mitsui trading houses, confirms that whatwas happening was not the lock-step participation in aprice-fixing conspiracy, but rather a company struggling todiscount prices while avoiding dumping charges. The only evidencethe government has for the fall of 1990 is that there wascontinued talk among manufacturers about a threatenedanti-dumping petition, which is hardly illegal. Indeed, to theextent that those threats hung in the air, they suggested thatthere were no contrived price increases or price stabilization.For the threats to be credible, prices had to be quite low.
28. I warned the government that "[i]t appears that thegovernment is prepared to take its chances . . . that its proofwould be . . . so clear that it necessarily produces substantialeffects or it will be domestic enough that the jurisdiction issuewill be beside the point. If the government wants to take itschances that that's the nature of the proof, then I will reservethis issue until trial, until at the conclusion . . . on adirected verdict. . . ."
29. NPI claims that "Japanese manufacturers lacked sufficientmarket power, as a matter of law, to cause a substantial effecton United States commerce." In support of this claim, it offersthe following quote from Areeda: "Most recent cases dismiss casesas a matter of law where the defendant's market share is lessthan 50 percent." This quote is taken from ¶ 801, but ¶ 801 dealswith § 2 of the Sherman Act, not § 1. It's concern with"substantial" market share is with what it takes to be amonopoly. This has no bearing on what is required to have asubstantial share of the market under the per se plus test forforeign price-fixing.