DealBook: JPMorgan Set to Pay Fines for Whale Trading Losses

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DealBook: JPMorgan Set to Pay More Than $900 Million in Fines

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Europe Fines Drug Companies for Delaying Generics

On Wednesday, the European Commission fined a Danish pharmaceutical company and a number of generic producers a total of 146 million euros, or $195 million.

The commission said that Lundbeck of Denmark colluded with companies like Ranbaxy of India and Merck of Germany in 2002 and 2003 to delay market entry of a less expensive generic version of a blockbuster antidepressant called citalopram. Joaquín Almunia, the European commissioner for competition, said that Lundbeck also destroyed significant quantities of the low-cost version of the drug.

“All this occurred at the expense of patients who were deprived of access to cheaper medicines,” Mr. Almunia said at a news conference on Wednesday. “It also harmed our public health systems, who for a longer period had to artificially bear the costs of an expensive medicine and one of the most widely prescribed antidepressants.”Lundbeck said it had done nothing wrong and would appeal the decision. “The company acted transparently and in good faith in trying to protect our patents,” Lundbeck said in a statement. “Upon entering the agreements, they were all reviewed by external antitrust experts.”

The case mirrors a decision on Monday by the United States Supreme Court, which empowers the Federal Trade Commission to sue drug makers that engage in so-called pay-for-delay tactics. The Supreme Court decision is likely to increase the number of generic drugs, in that way benefiting consumers. The F.T.C. said that pay-for-delay deals cost Americans $3.5 billion a year in higher drug prices.

Many European governments with socialized medical systems buy or help to pay for prescription drugs used by citizens, which means that the blocking of generics affects those nations’ budgets. Mr. Almunia said that when generic versions of citalopram became available in Britain, during the second half of 2004, prices there dropped by 90 percent.

The scale of savings in Britain helped to ensure that “public health systems can remain economically sustainable in these times of difficult budgetary constraints,” Mr. Almunia said. Peter Kaplan, a Federal Trade Commission spokesman, would not comment on the European decision, but he indicated that officials had been coordinating on the issue of drug pricing. “F.T.C. staffers have had productive policy discussions with their counterparts in the E.U. on the pay-for-delay issue, which is a longstanding enforcement priority at the F.T.C.,” Mr. Kaplan said.

Similarly, European Union officials said their decision on Wednesday was not timed to follow the Supreme Court case.

Early this year, the commission accused the drug giants Johnson & Johnson and Novartis of colluding to delay the availability of a generic version of fentanyl, a drug often used to ease severe pain. A year ago, the commission accused the French pharmaceutical company Servier and competitors of delaying the generic entry of perindopril, a cardiovascular medicine. And in 2011, the commission opened an investigation into whether the American pharmaceutical company Cephalon and the generic maker Teva of Israel hindered the entry of the generic version of modafinil, used for the treatment of certain types of sleeping disorders.

Those cases still are pending.

In the Lundbeck case, Mr. Almunia’s office said that various generic makers colluded with the Danish company, agreeing to not enter the market in return for “substantial payments and other inducements from Lundbeck amounting to tens of millions of euros.” Commission officials said that they had found documents referring to a “ ‘club’ being formed and ‘a pile of $$$’ to be shared among the participants.”

The European Commission fined Lundbeck 93.8 million euros, which amounts to roughly 4.6 percent of its 2012 sales. The regulator can fine companies up to 10 percent of annual sales.

DealBook: S.E.C. Fines Options Exchange for Lax Oversight

Scott Olson/Getty ImagesThe Standard & Poor’s 500-stock index options pit at the Chicago Board Options Exchange.

The Securities and Exchange Commission fined the Chicago Board Options Exchange and an affiliate $6 million on Tuesday for what it called breakdowns in regulatory oversight, including a failure to enforce rules to prevent abusive short-selling.

The agency said the financial penalty against the exchange and its affiliate, C2 Options Exchange, was the first action related to an exchange’s responsibility to self-police its market.

The case stemmed in part from oversight of OptionsXpress, a firm now owned by Charles Schwab, which was accused by the S.E.C. of engaging in an abusive naked short-selling scheme, or selling shares before borrowing them first. An S.E.C. judge on Friday ordered OptionsXpress, its former chief financial officer and a customer to pay $4.8 million in fines and to return $4.2 million.

In a statement, the S.E.C. said: “Self-regulatory organizations must enforce the federal securities laws as well as their own rules to regulate trading on their exchanges by their member firms. In doing so, they must sufficiently manage an inherent conflict that exists between self-regulatory obligations and the business interests of an S.R.O. and its members. An S.E.C. investigation found that C.B.O.E. failed to adequately police and control this conflict for a member firm that later became the subject of an S.E.C. enforcement action. C.B.O.E. put the interests of the firm ahead of its regulatory obligations by failing to properly investigate the firm’s compliance” with the regulation against abusive short-selling and then interfered with the S.E.C. investigation into the firm.

The S.E.C. added that the exchange had an ineffective surveillance program that failed to detect wrongdoing despite numerous red flags that its members were engaged in abusive short-selling and also did not live up to its regulatory and compliance responsibilities in several other areas over four years.

“This settlement marks a significant step in putting the S.E.C. matter behind us, but our commitment to maintaining the very highest standards in regulation and compliance will be carried forward throughout our organization,” the exchange said in a statement.

“In addition to working proactively with the S.E.C. throughout its investigation, we voluntarily launched our own exhaustive, internal assessment of regulatory and compliance practices across our entire organization, assisted by third-party consultants and independent outside counsel. All actions either required or recommended by the S.E.C., as well as those resulting from our rigorous self-review, have been or are now being implemented,” it said.

Europe Fines Electronics Makers $1.92 Billion

Senior managers at some of the world’s largest electronics companies often used those meetings, mostly in Asia, to fix the price of picture and display tubes for televisions and computer screens, the top European antitrust regulator said Wednesday.

Joaquín Almunia, the E.U. competition commissioner, said he would levy fines totaling almost €1.5 billion, or $1.96 billion, on seven companies involved in the two cartels, which operated for a decade until 2006. Combined, the fines amount to the largest single penalty for price fixing ever imposed by the commission.

The action follows a spate of similar cases in the glass and display sectors, where bulky cathode ray tubes have been supplanted by technologies like liquid crystal display and plasma that allow manufacturers to build far more compact monitors and screens.

Mr. Almunia imposed the strongest penalties on Philips Electronics of the Netherlands and LG Electronics of South Korea.

Mr. Almunia said at a news conference that the cartel activity began in the late 1990s, when the market was still strong for cathode ray tubes, and lasted until 2006 even as that market declined, allowing the conspirators to continue generating strong returns for a technology that was rapidly becoming outmoded.

“The companies were trying to manage through collusion the decline in the market for these kinds of tubes,” Mr. Almunia said. “The undue profits that the companies derived from the collusion may even have artificially slowed down the transition to the more modern products like LCD and plasma displays.”

Excerpts of minutes from meetings held by the cartel members obtained during the investigation showed the efforts they made to fix the market for the older technologies, according to commission officials.

“Producers need to avoid price competition through controlling their production capacity (of flat types in particular),” one excerpt read. Another noted that “mutual cooperation is required to deal with an expected economic downturn” in the second half of 2002.

One of the “greens meetings” took place at the Palm Garden Golf Club and was followed by a “Top Management” meeting in the Terengganu room of a Marriott Hotel, according to a person with knowledge of the investigation who asked not to be named because of the legal sensitivity of the case.

The person gave no further details about the location or the meeting. But those details suggested that the conspirators played and ate during the day at a luxury golfing resort near the Malaysian capital Kuala Lumpur that is equipped with a driving range, infinity-edge swimming pool and tennis courts.

In addition to the “greens meetings,” there were “glass meetings” for lower-level managers, the name probably related to the glass structure of the cathode ray tubes, officials said. They were held in Asia and in European cities including Glasgow, Paris, Rome, Amsterdam and Budapest, commission officials said.

The cartels “feature all the worst kinds of anti-competitive behavior that are strictly forbidden to companies doing business in Europe,” Mr. Almunia said. There had been “serious harm” to producers in Europe and to consumers, he said, since the cathode ray tubes had accounted for up to 70 percent of the price of screens.

The commission’s antitrust division can fine offenders up to 10 percent of their annual worldwide sales, and the fine on Wednesday exceeded the previous record of almost €1.4 billion, which was imposed in 2008, for a car-glass cartel.

But unlike regulators in the United States, the commission has no criminal enforcement powers and cannot prosecute or seek to jail participants for anti-competitive offenses. Many lawyers say that remains a shortcoming of the European system.