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Clean Hands Can Stop More than COVID-19: Antitrust Risks in Times of Supply and Demand Shocks

The potential for government investigation increases during periods of rapid and extreme movement in price. The US Department of Justice (DOJ) recently reiterated its focus on prosecuting violations of antitrust laws, especially in areas affected by the coronavirus outbreak. On March 9, 2020, the DOJ announced that individuals or companies engaging in price fixing, bid-rigging, customer or region allocation, or other antitrust violations could face criminal prosecution. Government scrutiny is likely to be even higher on companies that produce items for sale to federal, state or local governments, as the DOJ’s Procurement Collusion Strike Force acts as a dedicated watchdog over government contractors to prevent bid-rigging in government contracts. More information on the Strike Force is available here.

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Procurement Collusion Strike Force’s Focus on Detection Yielding New Investigations

On March 3, 2020, the American Bar Association (ABA) hosted a Q&A with two members of the Procurement Collusion Strike Force (PCSF)—Mark Grundvig, the Assistant Chief of the DOJ Antitrust Division’s Criminal II section, and Marcus Mills, Special Agent, Major Fraud Investigations Division, USPS Office of Inspector General.

During the course of the Q&A, Mr. Grundvig and Mr. Mills provided their perspective on the goals and progress of the PCSF.

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Annual European Competition Review 2019

McDermott’s Annual European Competition Review summarizes key developments in European competition rules. During the previous year, several new regulations, notices and guidelines were issued by the European Commission. There were also many interesting cases decided by the General Court and the Court of Justice of the European Union. All these new rules and judicial decisions may be relevant for your company and your day-to-day practice.

In our super-connected age, we can be inundated by information from numerous sources and it is difficult to select what is really relevant to one’s business. The purpose of this review is to help general counsel and their teams to be aware of the essential updates.

This review was prepared by the Firm’s European Competition Team in Brussels and Paris. Throughout 2019 they have monitored legal developments and drafted the summary reports.

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Close Scrutiny for Class Settlements Where Plaintiff Attorneys Take Lion’s Share

Two recent US antitrust class action settlements drew additional scrutiny from federal judges, showing that the allocation of settlement funds between a proposed class and their attorneys will be carefully reviewed for fairness to class members.

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DOJ Set to Increase Scrutiny of Government Contractors with New Procurement Collusion Strike Force

Government contractors should be aware that the Department of Justice (DOJ) is taking new steps to scrutinize public procurement. The DOJ Antitrust Division’s creation of the Procurement Collusion Strike Force (PCSF) means that government procurement enforcement will be a significant focus for the agency moving forward. Although the new strike force builds on past government-wide efforts to detect illegal conduct in public procurement, recent activity from the Antitrust Division has raised the stakes. In light of this, government contractors should broaden their compliance programs to include antitrust so they can avoid heightened monetary penalties and possible prison terms for implicated employees.

I. What Happened

The DOJ’s Antitrust Division took another step to increase its attention on government procurement by focusing resources on a new task force designed to detect anticompetitive behavior amongst government contractors. On October 24, 2019, the Antitrust Division posted a notice in the Federal Register inviting public comment on its implementation of a “Procurement Collusion Strike Force” complaint form. The complaint form will facilitate “reporting by the public of complaints, concerns, and tips regarding potential antitrust crimes affecting government procurement, grants, and program funding.” While the DOJ’s unveiling of the PCSF is significant in itself, the event is just one of several pieces of activity from the Antitrust Division indicating that government contractors must begin to consider antitrust risk much more seriously.

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The Latest: New DOJ Antitrust Division Policy Makes Compliance Programs More Critical than Ever

What Happened:

  • Last week, the Antitrust Division reported that it has changed its Justice Manual to state that it will consider antitrust compliance at the charging stage in criminal antitrust investigations, instead of waiting for plea negotiation or the sentencing stage.
  • Previously, the Antitrust Division had granted leniency only to the first whistleblower to come completely clean. Under the Antitrust Division’s policy reversal, this is no longer the only way to gain credit with the Antitrust Division, and the Antitrust Division will now consider if the Company has “robust” compliance programs when determining whether to bring charges.
  • With the announcement this past Thursday, the Antitrust Division published a guidance document that focuses on evaluating compliance programs in criminal antitrust investigations. This is the first time the Antitrust Division has published guidance on evaluating compliance programs in the context of criminal antitrust violations, and companies can now use this document to determine whether their compliance programs are in line with the Antitrust Division’s standards.
  • The Antitrust Division lists certain factors that Antitrust Division prosecutors should consider when evaluating the effectiveness of an antitrust compliance program. These are:
    1. The design and comprehensiveness of the program
    2. The culture of compliance within the company
    3. Responsibility for, and resources dedicated to, antitrust compliance
    4. Antitrust risk assessment techniques
    5. Compliance training and communication to employees
    6. Monitoring and auditing techniques, including continued review, evaluation and revision of the antitrust compliance program
    7. Reporting mechanisms
    8. Compliance incentives and discipline
    9. Remediation methods
  • In general, when analyzing a program, the Antitrust Division will ask whether the compliance program is well designed, whether it is being applied earnestly and in good faith, and whether it works.
  • Finally, the Antitrust Division also revised sections of its Manual on the processes for recommending indictments, plea agreements and selecting compliance monitors.

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Cartel Snapshot: Mid-Year Update

2019 MID-YEAR UPDATE

The Department of Justice (DOJ) Antitrust Division announced three new investigations and several developments in its other investigations, including new investigations in the commercial flooring industry, online auctions for surplus government equipment and insulation installation contracts. The Antitrust Division also released its Spring 2019 Division Update, which notes that the Division “is preparing for trial in six matters and had 91 pending grand jury investigations at the close of FY 2018.”

In April 2019, the Division held a public roundtable discussion on the Antitrust Criminal Penalty Enhancement & Reform Act (ACPERA), which is due to sunset next year. ACPERA reduces the criminal liability and civil damages exposure of companies and individuals who are granted leniency under the Division’s Leniency Program for cooperating in investigations into cartel and other anticompetitive conduct. The roundtable consisted of a series of panel discussions allowing judges, attorneys, economists, academics, the business community and other interested stakeholders to weigh in on how the law can be improved. The Division was particularly interested in the public’s views on whether ACPERA has properly incentivized the self-reporting of criminal conduct and whether there are issues that have impeded the law’s intended effect.

The European Commission (Commission) announced developments in ongoing investigations in the auto parts industry, and in its government bonds and car emissions cases. The Commission also launched a new online tool to make it easier for companies to submit statements and documents as part of leniency and settlement proceedings in cartel cases.

US DEVELOPMENTS

  • The first new investigation disclosed by the DOJ is in the commercial flooring industry. The DOJ charged a former vice president of a commercial flooring contractor in Chicago of exchanging price information with its rivals to fix prices of contracts for removal and installation of commercial flooring. Assistant Attorney General Delrahim of the Antitrust Division said that the indictment “is the first of what we expect to be many in this ongoing investigation into bid rigging” in the commercial flooring industry.
  • The DOJ disclosed a second new investigation into bid rigging of Government Services Administration (GSA) contracts. The owner of a Texas company pleaded guilty to rigging bids for surplus government equipment—computers for resale and for recycling—in online GSA auctions.
  • The DOJ announced a third new investigation into bid rigging by insulation installation contractors. A manager for a Connecticut-based insulation contractor pleaded guilty for his role in rigging $45 million worth of bids for insulation installation contracts in New England from 2011 to 2018.
  • The DOJ’s investigation into fuel-supply contracts for the armed services remains active. Two more Korean companies pleaded guilty for their involvement in a bid-rigging conspiracy that targeted contracts to supply fuel to US Armed Forces in South Korea.
  • The DOJ’s investigation into price fixing in the promotional products space appears quite active.
  • In May 2019, state attorneys general for 43 states and Puerto Rico brought federal and state antitrust, consumer protection and common law claims against 18 generic [...]

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Recent Indictments Demonstrate Increased Focus on Bid-Rigging in Government Procurements

Companies involved in the government contracting industry should take note that the government is honing in on anticompetitive conduct affecting government procurements. The federal government has demonstrated an increased interest in this area, and companies should refresh and audit their compliance programs to avoid hefty civil and criminal penalties and potential prison terms for implicated employees.

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Cartel Snapshot: February 2019

Q4 UPDATE: OVERVIEW OF CARTEL INVESTIGATIONS

Although 2018 saw guilty pleas and new indictments in several ongoing Department of Justice (DOJ) investigations, the year finished by continuing a downward trend in antitrust enforcement. DOJ’s criminal and civil fines in 2018 ended around $400 million—well short of the billion-dollar plus highs in 2014 and 2015, during the height of the auto parts and foreign exchange investigations. EU fines ended at €800 million, which was less than in 2017 and less than one fourth of the amount of fines imposed in 2016.

US DEVELOPMENTS
  • The DOJ has intervened in three federal class actions in the Eastern District of Washington to express its view over the proper standard of scrutiny to apply to no-poach agreements that are at the heart of several civil suits across the country. While a longer, more formal statement from the DOJ is expected soon, it appears that the DOJ will argue that the rule of reason should apply to most if not all of these lawsuits.
  • The DOJ revealed a new investigation into the bid rigging of fuel-supply contracts for US armed forces abroad. Three South Korea-based companies agreed to plead guilty to criminal charges and to pay $82 million in criminal fines for their involvement in a decade-long bid-rigging conspiracy that targeted contracts to supply fuel to United States Army, Navy, Marine Corps and Air Force bases in South Korea.
  • Two former Deutsche Bank traders urged a Manhattan federal judge in December 2018 to reverse their convictions for rigging the London Interbank Offered Rate (Libor) and to dismiss the charges against them. Prosecutors obtained the convictions in October 2018 by arguing that the two traders had conspired with the bank’s Libor submitters to skew the lending benchmark to benefit their derivative trades. In December, the pair argued that prosecutors obtained that conviction by lying to the court and the jury and by hiding evidence from defense attorneys throughout the case.
  • Two executives pleaded guilty and agreed to cooperate with the DOJ’s investigation into price fixing in the freight-forwarding industry.
  • While the DOJ’s investigation into price fixing of online promotional products appeared to slow, in November 2018, the DOJ announced new charges against another online promotional products company and its executive for conspiring to fix prices for customized promotional products, including wristbands, lanyards, temporary tattoos and buttons between May 2014 and June 2016.
  • The DOJ’s investigation into bid rigging of public real estate foreclosure auctions continues, as additional charges and guilty pleas continue to roll in.
  • Following up on an indictment from 2015, the DOJ obtained a plea agreement from an art dealer in the UK for agreeing with its competitors on Amazon Marketplace and elsewhere to fix the price of art posters sold online to customers in the US. The defendant agreed to pay a criminal fine of $50,000, plus fees, and agreed to a recommended sentence between 12 and 60 months.
EU DEVELOPMENTS
  • In November 2018, the Commission opened an investigation to determine [...]

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Out of Bounds: Sports Agencies Flagged for Anticompetitive Bidding Agreements

The US Department of Justice (DOJ) recently sued former joint venture partners because they allegedly coordinated their competitive activities beyond the legitimate scope of their venture. This case illustrates several important points. First, companies who collaborate through joint ventures and similar arrangements need to be mindful that any legitimate collaborative activity does not “spill over” to restrain competition in other unrelated areas. Second, DOJ discovered the conduct during its review of documents produced in connection with a merger investigation. This is the most recent reminder of how broad ranging discovery in merger investigations can result in wholly unrelated conduct investigations and lawsuits. Third, one of the parties was a portfolio company of a private equity sponsor, highlighting how private investors can be targeted for antitrust violations. (more…)




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