Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Barclays to settle Euribor manipulation claims for $94M, (Nov 3, 2015)

By Lene Powell, J.D.

In an ice-breaker settlement, Barclays PLC has agreed to pay $94 million to settle investor claims that it conspired to manipulate the European Interbank Offered Rate (Euribor) benchmark and the prices of Euribor-based derivatives in violation of commodities and antitrust laws, as well as RICO and common law. The settlement requires approval by the court (Sullivan v. Barclays Plc, October 30, 2015).

Manipulation. Euribor is a benchmark rate intended to reflect the interest rate charged on short-term loans of unsecured funds denominated in the Euro currency between prime banks in the wholesale money (or interbank) market. The rate is calculated as an average of submissions by panel banks, and is used to price, settle and benchmark over $200 trillion of Euribor-based derivatives.

A number of investors led by a Chicago-based commodity futures trader alleged that a group of major banks, including Barclays, made knowingly false submissions of Euribor to deliberately move the rate in an artificial direction that financially benefitted the banks’ Euribor-based derivatives positions. According to the plaintiffs, traders at the panel banks routinely accommodated one another’s requests to push rates in a certain direction, and warned each other to keep it quiet. The traders were not always subtle. One trader opened an exchange with, “HELLO LET’S CHEAT ON THE FIXES??”

Together with the other banks, the Barclays traders’ unlawful conduct led to deferred and/or non-criminal prosecution agreements with the U.S. Department of Justice and settlements with the Commodities Futures Trading Commission (CFTC), the U.K. Financial Services Authority (FSA), the European Commission and the Swiss Financial Market Supervisory Authority requiring the banks to pay collective fines and penalties exceeding $4.5 billion. In particular, Barclays’ settlements with the DOJ, CFTC, and U.K. Financial Conduct Authority in June 2012 resulted in penalties of more than $450 million. The plaintiffs argued that Barclays and the other banks had the ability to and did cause artificial prices, and that their conduct constituted manipulation in violation of the Commodity Exchange Act.

Conspiracy. According to the plaintiffs, the banks had engaged in a conspiracy in restraint of trade by sharing price and volume information with competitors for the purpose of collusively fixing Euribor and the price of Euribor-based derivatives. The banks were horizontal competitors with one another for attracting transactions in the Euribor-based derivatives market, and the collusion had the effect of restraining or changing output in the derivatives market because market participants naturally responded to the changed prices. The plaintiffs argued that the alleged rate-setting collusion harmed competition among sellers and buyers of Euribor-based derivatives and violated Section 1 of the Sherman Act. The plaintiffs also asserted RICO and unjust enrichment claims.

Settlement. According to class counsel, the proposed $94 million settlement was produced by well-informed, arms-length negotiations, and was fair, reasonable and adequate in light of all the circumstances. The plaintiffs noted that the benefit of continued antitrust litigation might be limited by Barclays’ potential qualification for leniency under Antitrust Criminal Penalty Enhancement and Reform Act (ACPERA), which would limit any antitrust liability to single damages for Barclays’ own conduct.

The case is No. 13-cv-02811 (PKC).

Attorneys: Christopher Lovell (Lovell Stewart Halebian Jacobson LLP) for Stephen Sullivan and White Oak Fund LP. Todd Seaver (Berman DeValerio) for FrontPoint Partners Trading Fund, L.P., FrontPoint Australian Opportunities Trust, Sonterra Capital Master Fund, LTD. and California State Teachers' Retirement System. Jonathan David Schiller (Boies, Schiller & Flexner LLP) for Barclays PLC, Barclays Bank PLC and Barclays Capital Inc. Lawrence Jay Zweifach (Gibson Dunn & Crutcher LLP) for UBS AG. James Miller (Clifford Chance US LLP) for The Royal Bank of Scotland PLC. Andrew Corydon Finch (Paul, Weiss, Rifkind, Wharton & Garrison LLP) for Deutsche Bank AG. Edwin R Deyoung (Locke Lord Bissell & Liddell LLP) for HSBC Holdings PLC.

Companies: White Oak Fund LP; FrontPoint Partners Trading Fund, L.P.; FrontPoint Australian Opportunities Trust; Sonterra Capital Master Fund, LTD.; California State Teachers' Retirement System; Barclays PLC; Barclays Bank PLC; Barclays Capital Inc.; UBS AG; The Royal Bank of Scotland PLC; Deutsche Bank AG; HSBC Holdings PLC

News: Antitrust NewYorkNews