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Year in Review: Criminal Enforcement by the DOJ Antitrust Division in 2023

When it comes to antitrust criminal enforcement, 2023 will be remembered as the year when the US Department of Justice’s (DOJ) Antitrust Division redefined and tested the outer boundaries of its authority. This report looks back at the key events from the DOJ’s year in criminal antitrust enforcement.

Here’s a glimpse of what’s inside:

  • Despite four straight losses and a voluntary dismissal in labor market cases, the DOJ remains undeterred in bringing additional criminal wage-fixing and no-poach suits.
  • DOJ’s Procurement Collusion Strike Force secured several guilty pleas and stiff penalties in 2023 and will most likely continue pursuing aggressive investigative and litigation strategies moving forward.
  • The nearly decade-long investigation of the generic drug industry appears to be ending after the DOJ recently resolved and dismissed the remaining cases.
  • Deputy Attorney General Lisa Monaco highlighted cybersecurity, tech and national security as areas of heightened risk and thus heightened scrutiny, so corporations in these markets should take heed of the DOJ’s emphasis on corporate compliance in 2024.

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Fourth Circuit Holds Per-Se Rule Does Not Apply in Bid-Rigging Case

WHAT HAPPENED

A three-judge panel from the US Court of Appeals for the Fourth Circuit overturned an executive’s bid-rigging antitrust conviction, holding that the district court erred in applying the per se standard to the executive’s alleged bid-rigging conduct.

The executive, Brent Brewbaker, rigged bids between his former employer, Contech, and its distributor, Pomona Pipe Products. The Fourth Circuit found that while Contech and Pomona both submitted competing bids for North Carolina Department of Transportation (NCDOT) projects, and Contech coordinated with Pomona to make Contech’s bids slightly higher priced, this conduct could not be deemed inherently unlawful under prior precedent because the entities had a manufacturer-distributor arrangement and were not simply direct competitors. In particular, the Fourth Circuit noted that manufacturer-distributor relationships such as the one between Contech and Pomona do not inherently lead to anticompetitive harm and may enhance competition.

Therefore, given the kind of relationship Contech and Pomona had, the Fourth Circuit held that the district court should have analyzed the conduct under the rule of reason to weigh the competitive implications of the parties’ agreement and conduct.

BACKGROUND

  • Contech manufactured and sold aluminum products.
  • Pomona distributed Contech’s aluminum products and was Contech’s exclusive dealer in North Carolina.
  • NCDOT used a bidding process for aluminum structure projects throughout the state. These projects required both the aluminum product and the services to install the aluminum structures.
  • Contech, Pomona and a third company were the consistent bidders for the NCDOT projects.
  • When either Contech or Pomona won a bid for a project, each would fulfill its contract using the other’s supply or services. Pomona, therefore, served as Contech’s “dealer” with Contech supplying Pomona the aluminum it needed to use in the projects Pomona eventually won; vice versa, Pomona provided necessary services to Contech when Contech won a bid. Neither Contech nor Pomona could win a bid without the products or services of the other.
  • In 2019, Brewbaker took charge of Contech’s bidding for these NCDOT projects and began intentionally submitting losing bids to enable Pomona to win by first asking for Pomona’s total bid price and then adding a markup to Contech’s bid price before submitting the bid to NCDOT.
  • DOJ alleged that Contech and Pomona engaged in bid rigging because they directly competed against each other’s separate bids. Brewbaker and Contech were indicted for violating Section 1 of the Sherman Act and conspiracy to commit mail and wire fraud.
  • Contech pleaded guilty to bid rigging and one fraud count.
  • Brewbaker proceeded to trial, and the district court convicted him of bid rigging and five other fraud-related counts (which were not overturned by the Fourth Circuit), upon concluding that Contech and Pomona’s conduct fell squarely within the definition of antitrust “bid rigging” under Section 1 of the Sherman Act.

HOW THE DECISION WAS REACHED

  • The Fourth Circuit explained that the rule of reason standard is the default framework used to scrutinize most business practices under the antitrust laws. It weighs [...]

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Cartel Corner | July 2023

In the first half of 2023, antitrust enforcers remained remarkably busy both in the United States (US) and across the European Union (EU). The US Department of Justice’s (DOJ’s) Antitrust Division (Division) and the Federal Trade Commission (FTC) have continued their aggressive and novel effort to drag antitrust enforcement into the labor markets. The DOJ Procurement Collusion Strike Force (PCSF) has pursued its crackdown on antitrust and fraud involving government procurement with a number of recent cases. And DOJ has pushed the boundaries under Section 2 of the Sherman Act—both by revitalizing the criminal provisions of the law and by pursuing “attempts” to monopolize criminally. The European Union has also kept the pressure on those doing business overseas, imposing significant fines in recent matters and upgrading its online leniency program to make it easier for companies to report wrongdoing.

In this installment of Cartel Corner, we examine this continued aggressiveness toward antitrust enforcement. While these government enforcement efforts have not always been successful, they have nonetheless reframed the landscape for many companies and individuals. What was once thought of as a civil antitrust violation at worst—or no violation at all—is now often pursued criminally. And antitrust enforcers are speaking in more strident tones as they attempt to remake, in certain ways, the way companies do business in the United States and abroad.

Whether antitrust enforcers are ultimately successful remains to be seen. Nonetheless, the trend is real, and it is one that all companies should be prepared to address in the weeks and months to come.

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European Competition Review 2022

This Review provides legal counsel and their teams easy reference guidance on essential EU competition law developments covering key areas of law and policy. Topics covered include:

  • Cartels & Restrictive Agreements
  • Abuse of Dominant Position
  • Merger Control
  • State Aid
  • Legislative and Policy Developments

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International News Spotlight on Competition Law

In line with the evolution of the economy and the ongoing growth of online business and global trade, we’re seeing a corresponding increase in competition regulation and a rise in enforcement across all authorities. In our latest International News, we take a deep dive into the issues at play.

The growth of the online economy has triggered the US Federal Trade Commission’s (FTC) update of its 20 year old .com Disclosures: How to Make Effective Disclosures in Digital Advertising guide, and the development of an analytical framework for all digital distribution across the European Union. In just one seismic shift under the new EU Vertical Block Exemption Regulation 2022/720, dual-pricing, i.e., setting different wholesale prices for online/offline sales by the same distributor, is no longer considered a hardcore restriction unless its purpose is to prevent the effective use of the internet to sell the goods or services.

In the United States, there is an increased focus on anticompetitive mergers and acquisitions (M&A). The Biden Administration, the Department of Justice Antitrust Division, and the FTC have all stated that the regulatory landscape needs to be reshaped to better reflect dynamic markets, and their priority is the aggressive pursuit of litigation against offending parties rather than the granting of consent decrees. The tendency to “sin first and beg forgiveness later” will emphatically no longer work, as a recent French gun-jumping case demonstrates.

Both the United States and the European Union have also turned their attention to investigating wage fixing and no-poach labour market violations that are not connected with M&A or business collaborations. It’s clear that competition/antitrust authorities are determined to expand their remit.

Read our full Spotlight on Competition Law here.




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Cartel Corner | August 2022

Without question, 2022 has been a remarkably busy time for the US Department of Justice’s (DOJ’s) Antitrust Division (Division). Over just a few months, the Division rolled out meaningful revisions to its leniency policy aimed at encouraging prompt reporting of criminal violations, announced that it will (for the first time in nearly  50 years) bring criminal monopolization cases under Section 2 of the Sherman Act, continued to increase enforcement resources, and brought a number of new cases and obtained multiple guilty pleas.

However, activity does not always mean success. If there is any theme that defines the Division’s efforts over the last quarter, it is this: If at first you don’t succeed, try, try again. That is exactly what the Division has done. It tried two labor markets cases, ultimately losing both on a new and untested legal theory. And, over strong objections from a district court, the Division pursued an unprecedented third trial against those in the broiler chicken industry, resulting in a full acquittal for all defendants. None of this, however, has deterred the Division from continuing to pursue new investigations and bring new cases under novel legal theories.

In this installment of Cartel Corner, we examine recent and significant developments in antitrust criminal enforcement and profile what the Division has highlighted as its key enforcement priorities. If the past is prologue, we are bound to see more aggressive antitrust enforcement in the months to come, testing the boundaries of current antitrust law. Whether the Division can ultimately shift those boundaries, however, remains to be seen.

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DOJ Faces Setbacks in Labor Market Prosecutions but Remains Determined

WHAT HAPPENED

  • On back-to-back days this month, defendants charged and prosecuted by the US Department of Justice’s Antitrust Division (the DOJ) were acquitted on all Sherman Act charges in first-of-their-kind criminal antitrust trials involving labor markets.
  • On April 14, 2022, in United States v. Jindal, a federal jury in the US District Court for the Eastern District of Texas found two defendants not guilty of violating the Sherman Act by agreeing with competitors on wages they would pay their employees. The jury found one of the defendants guilty of obstructing a Federal Trade Commission (FTC) investigation by making false and misleading statements to the FTC and concealing information.
  • The following day, in United States v. DaVita, Inc., a Colorado federal jury acquitted DaVita, Inc. and its former chief executive on all counts of violating the antitrust laws by entering into non-solicit agreements with other employers.
  • The Jindal case was the DOJ’s first attempt to criminally prosecute so-called alleged “wage-fixing” agreements. Similarly, the DaVita case was DOJ’s first criminal trial targeting alleged no-poach or non-solicit agreements between employers.
  • Historically, the DOJ pursued enforcement of alleged anticompetitive labor market practices in the civil context rather than criminally. But in 2016, the DOJ did an about-face and warned employers in its 2016 Antitrust Guidance for Human Resource Professionals that it intended to proceed criminally against “naked wage-fixing or no-poach agreements” between horizontal competitors in labor markets. The DOJ’s efforts to investigate and criminally prosecute such agreements under this new policy started ramping up publicly in late 2020.
  • The DOJ filed an indictment against Jindal in December 2020 and a superseding indictment against Jindal and another defendant in April 2021. The DOJ alleged that the defendants participated in a conspiracy to lower the rates paid to physical therapists and physical therapist assistants in north Texas. A few months later, in July 2021, the DOJ filed an indictment against DaVita and its former CEO, alleging that they conspired with competitors in the healthcare industry not to solicit each other’s employees. The DOJ returned a superseding indictment in November 2021.
  • In both cases, the district courts denied the defendants’ motions to dismiss. The Jindal court held—for the first time ever—that an alleged wage-fixing conspiracy could constitute a per se criminal violation of the Sherman Act. Similarly, the DaVita court held that no-poach and non-solicit agreements could constitute per se violations—but only if the alleged naked agreements allocate the employment market. The DaVita court refused to announce a blanket rule that all no-poach or non-solicit agreements are subject to per se
  • Despite these rulings, the juries in both cases ultimately acquitted the defendants of all antitrust charges brought by the DOJ.

WHAT’S NEXT

  • The DOJ remains committed to investigating and criminally prosecuting wage-fixing and no-poach agreements despite these early setbacks. Since the Jindal indictment in December 2020, the DOJ has [...]

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Heard on Day Two and Three of 2022 Antitrust Law Spring Meeting

On April 7 and 8, 2022, the American Bar Association’s Antitrust Law Section wrapped up its annual Spring Meeting. The event featured updates and remarks from several antitrust enforcers, including FTC Chair Lina Khan and US Assistant Attorney General for the Antitrust Division Jonathan Kanter. In this post, we share key takeaways from the final two days of the Spring Meeting.

FTC and DOJ Will Stay Focused on Litigation: Top officials at both US antitrust agencies highlighted the agencies’ full dockets and noted that litigation to enforce the antitrust laws will remain a top priority.

  • Three Directors from the Federal Trade Commission (FTC)—Holly Vedova, the Director of the Bureau of Competition; Samuel A.A. Levine, Director of Bureau of Consumer Protection; and Elizabeth Wilkins, Director of Office of Policy Planning—all emphasized that the FTC will work as one team and will not hesitate to initiate litigation.
  • Vedova noted the FTC’s recent success in several transactions being abandoned after the FTC initiated litigation. She expressed that the Bureau of Competition’s main focus will be litigation, where she believes her bureau will be most effective. Khan echoed these sentiments while speaking on a separate panel, emphasizing that two recently abandoned transactions were in the context of challenges to vertical transactions and that such challenges will continue to be a priority at the FTC.
  • Likewise, Kanter noted that the Department of Justice (DOJ) is not afraid to take on big cases or big companies and will not be afraid to litigate. He said the DOJ is just getting started and reiterated that the DOJ has more active cases than it has had in recent years.

Agencies Will Closely Scrutinize Potential Remedies in M&A: Both FTC and DOJ officials emphasized they will continue to examine the effectiveness of remedies and will only pursue strong remedies.

  • Kanter said that divestiture remedies will be the rare exception and will no longer be the norm. He further cautioned merging parties to avoid engaging in “regulatory arbitrage” and trying to leverage investigation outcomes in one jurisdiction against another because global cooperation among antitrust enforcers is high.
  • Vedova also indicated that the Bureau of Competition has no appetite for weak or uncertain settlements, especially those involving behavioral remedies, which have proven ineffective. The FTC will require meaningful structural relief to resolve competition concerns regarding a transaction.
  • Parties should also not expect the FTC to engage in long settlement discussions due to the unprecedented volume of merger reviews. Vedova noted that staff’s time is valuable and is much better spent preparing for litigation rather than negotiating remedies. She further indicated that the FTC will not engage in remedy discussions unless the Hart-Scott-Rodino (HSR) clock is stopped and timing agreements are tolled.
  • State attorneys general will similarly evaluate remedies and, if necessary, pursue additional remedies than those sought by federal antitrust enforcers. For example, in a recent dialysis acquisition, the state of Utah sought divestiture of a fourth clinic above the three divestitures required to [...]

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Heard on Day One of 2022 Antitrust Law Spring Meeting

This week, the American Bar Association’s Antitrust Law Section kicked off its annual Spring Meeting in Washington, DC, which features updates from the antitrust enforcers and substantive discussions on today’s most pressing antitrust issues. In this post, we share key takeaways from the first day of the Spring Meeting.

Agencies Continue to Be Hostile to M&A: Republican Federal Trade Commission (FTC) Commissioners Noah Phillips and Christine Wilson emphasized that the prevailing view under Democratic leadership at the antitrust agencies is that mergers provide no value and only carry costs.

  • Progressive leadership wants to “throw sand in the gears” to prevent deals from being proposed altogether. Recent policy changes are aimed at creating uncertainty, heightening risk and raising the transaction costs of doing deals to slow the pace of M&A activity.
  • Despite this, there was a precipitous drop in the number of FTC merger enforcement actions in the final year of the Trump administration (31) compared to the first year of the Biden administration (12).
  • There is no indication that early termination for Hart-Scott-Rodino (HSR) pre-merger notification filings will be reinstated.
  • “Close At Your Peril” letters are another tactic the agencies are using to heighten deal risk and deter parties from pursuing or consummating transactions, even though the antitrust agencies have always had the authority to investigate and challenge consummated transactions.
  • Many panelists commented on the lack of transparency between agency staff and merging parties on recent transactions. If the lack of transparency persists, it may create due process issues and problems for timing agreements that merging parties typically negotiate with staff.
  • The antitrust agencies are increasingly skeptical of the efficacy of structural and behavioral remedies to resolve competition concerns regarding a transaction. The Department of Justice (DOJ) Antitrust Division’s Principal Deputy Assistant Attorney General Doha Mekki said merging parties should expect the DOJ to reject “risky settlements” more often and instead seek to block transactions outright. Mekki said literature has shown that many merger settlements failed to protect competition.

Increased Antitrust Litigation Is on the Horizon: DOJ officials said companies should expect an increase in antitrust litigation on both civil and criminal matters.

  • The DOJ Antitrust Division has more cases in active litigation than it has had at any time in recent history. It currently has six active litigations involving civil matters and 21 ongoing litigations involving criminal matters.
  • The Antitrust Division is not considering cost as a gating factor for bringing new cases. Instead, it is bringing cases where it deems necessary to uphold the law and preserve competition. The DOJ is hiring more attorneys and using shared DOJ resources to support the increased rate of litigation.
  • The DOJ is also seeking faster access to the courts. Mekki indicated that in cases where potential anticompetitive harm resulting from a transaction is clear, the agency may file suit while an investigation remains pending and before merging parties have certified substantial compliance.

Updated Merger Guidelines Are Coming: Officials from both the FTC and [...]

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Cartel Corner | March 2022

The US Department of Justice’s (DOJ) Antitrust Division (Division) has continued to actively investigate and pursue alleged criminal violations of antitrust laws and collusive activity in government procurement. US Attorney General Merrick Garland noted in a March 2022 speech at the ABA Institute on White Collar Crime that the Division ended last fiscal year “with 146 open grand jury investigations—the most in 30 years.” As we near the end of the first quarter of 2022, the Division has a record number of criminal cases either in trial or awaiting trial.

In this installment of Cartel Corner, we examine and review recent and significant developments in antitrust criminal enforcement and profile what the Division has highlighted as its key priorities for enforcement. For 2022 and beyond, those priorities are—and likely will remain—identifying and aggressively pursuing alleged violations involving the labor markets, consumer products, government procurement, and the generic pharmaceutical industry.

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