ANTITRUST ALERT
ANTITRUST ALERT
A Global Resource for Compliance Officers & Legal Advisors
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A Global Resource for Compliance Officers & Legal Advisors
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Cartel Corner | March 2022

by , , , , , and | Mar 21, 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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Recent Treasury Department Report Emphasizes Fostering Competition in Labor Markets

by and | Mar 15, 2022 | , , , , ,

Continuing the recent string of actions across the Biden administration in response to the July 2021 Executive Order on “Promoting Competition in the American Economy,” on March 7, 2022, the US Treasury Department (Treasury) released a report titled “The State of Labor Market Competition,” and on March 10, 2022, the US Departments of Justice (DOJ) and Labor (DOL) announced a Memorandum of Understanding (MOU) to strengthen and coordinate enforcement efforts in labor markets. These developments highlight the administration’s continuing focus on anticompetitive conduct in the labor markets at both the local and national levels and warrant careful attention by employers of all sizes and in all industries.

Treasury Report In Depth

  • Treasury’s report sets out to “summarize the prevalence and impact of uncompetitive firm behavior in labor markets.”
  • It focuses on both inter-employer conduct—such as the sharing of wage information, entering into no-poach agreements and outright conspiracies to fix wages—and employer-employee conduct—like forcing workers to sign non-compete agreements, mandatory arbitration agreements and class action waivers, misclassification of employees as independent contractors and opacity surrounding employees’ compensation rates—as being potentially anticompetitive and contributing to the imbalance of power between employers and employees in labor markets.
  • The structures of various labor markets, including overall low rates of unionization, “fissuring” of workplaces as a wide variety of job functions (e.g., janitorial or food services) are outsourced from in-house employees to external contractors, and occupational licensing requirements imposed by federal, state, and/or local governments, are highlighted as having overall negative effects on the competitiveness of various labor markets.
  • The report estimates that employers’ market power is responsible for approximately 20% lower wages compared to a fully competitive labor market, and notes that the harms that flow from a lack of labor market competition disproportionately impact lower-income occupations, women and people of color.
  • The report concludes by emphasizing that adverse effects on workers as a result of limited competition in labor markets have broader effects on the labor markets, the firms that participate in them and the economy as a whole.
  • Finally, the report specifically examines the labor markets in the healthcare, agricultural and minor-league baseball industries, and it outlines the Biden administration’s efforts to increase competition and deter and punish anticompetitive conduct in labor markets across the country.

The Memorandum of Understanding (MOU)

  • The DOJ and DOL’s MOU likewise emphasizes the shared “interest in protecting workers who have been harmed or may be at risk of being harmed as a result of anticompetitive conduct,” as Assistant Attorney General Jonathan Kanter noted in the joint press release announcing the MOU, “[p]rotecting the right of workers to earn a fair wage is core to the work of both our agencies, and it will continue to receive extraordinary vigilance from the Antitrust Division.”
  • The MOU states the DOJ’s and DOL’s intent to “share enforcement information, collaborate on new policies, and ensure that workers are protected from collusion and unlawful employer behavior.”
    • [...]

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Kanter Signals DOJ to Follow FTC Lockstep, Calls for Substantial Change to Competition Enforcement Approach

by and | Mar 14, 2022 | , , ,

In remarks delivered on January 18, 2022, and January 24, 2022, Jonathan Kanter, the Assistant Attorney General (AAG) for the US Department of Justice (DOJ) Antitrust Division, laid out the areas where he perceives shortcomings in antitrust enforcement. These speeches signaled that the Division, under Kanter’s direction, will take a more aggressive stance toward perceived anticompetitive conduct, echoing the changes in enforcement priorities at the Federal Trade Commission (FTC).

Overview of AAG Kanter’s Remarks

  • Kanter intends to shape the regulatory landscape to better reflect dynamic markets. Both speeches featured a cohesive overarching message: Kanter believes that the regulatory and jurisprudential antitrust regime does not reflect and cannot address the market realities that exist today. Kanter believes that the Supreme Court of the United States’ 1992 opinion in Eastman Kodak v. Image Technology Services supports a change in approach because “[l]egal presumptions that rest on formalistic distinctions rather than actual market realities are generally disfavored in antitrust law.”[1] To address widespread increases in market concentration as well as “the economic and transformational technological changes” that define today’s economy, Kanter intends to revise the Division’s approach for analyzing mergers and conduct.[2]
  • Kanter seeks to revive dormant areas of antitrust enforcement, in particular monopolization cases with a focus on tech “platform” companies. Kanter stated that the Division has failed to adequately address certain areas of antitrust enforcement. He noted that it has been almost 20 years since the Division’s last major monopolization case.[3] Dominant tech platforms have “extracted private data” and “have few, if any, realistic alternatives,” he said.[4] Shortly after Kanter’s comments about prioritizing monopolization cases, Richard Powers, the deputy for criminal enforcement, stated that the Division will now evaluate Section 2 conduct for criminal charges.[5] Powers’s comments signal a dramatic change in enforcement, reversing decades of policy in which Section 2 charges were only brought in the civil context. These statements from Division leadership mirror those of FTC Chair Lina Khan, who has repeatedly called for more robust antitrust enforcement, and indicate that Kanter intends to reshape the Division, both in terms of resource allocation and approach to anticompetitive conduct, from a civil and criminal perspective.
  • Kanter laid out the Division’s overarching priorities clearly in his remarks. The Division intends to take a more aggressive stance on vertical merger enforcement, reformulate the Horizontal and Vertical Merger Guidelines to better reflect market realities (in the government’s view), enter into fewer consent decrees and instead litigate cases to generate judicial opinions and advance the relevant case law, and bring more civil and criminal conduct cases.

 
Vertical Merger Enforcement to Become a Focal Point for Regulators

  • Kanter stated that agency enforcement of vertical mergers has been lacking. Kanter believes that the Division has placed too much value on the potential efficiencies of vertical mergers without identifying the relevant theories of harm presented by such transactions.
  • The Division intends to [...]

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DOJ Antitrust Division Signals Impending Criminal Monopolization Cases

by , , , and | Mar 11, 2022 | , , ,

WHAT HAPPENED

On March 2, 2022, the US Department of Justice (DOJ) Antitrust Division Deputy Assistant Attorney General Richard Powers revealed that the DOJ intends to investigate and pursue alleged criminal violations against individuals or companies who violate Section 2 of the Sherman Act. For more than 40 years, criminal enforcement of antitrust laws have focused nearly exclusively on hardcore, per se anticompetitive agreements (i.e., price fixing, output restriction or market allocation) among two or more horizontal competitors. Section 2 of the Sherman Act, on the other hand, primarily focuses on conduct by one firm or company with significant market power and, typically, is a means to bring a civil case for monopolization or anticompetitive use of the existing monopoly power.

LEGAL BACKGROUND

This marks a radical departure from longstanding DOJ antitrust enforcement of monopolization claims. In general, the DOJ has refrained from Section 2 criminal prosecutions.

Section 2 makes it illegal to acquire or maintain monopoly power through anticompetitive means and focuses primarily on unilateral or one-sided anticompetitive behavior. Courts (including the Supreme Court of the United States) generally have analyzed Section 2 cases under the “rule of reason,” which weighs both procompetitive and anticompetitive effects of conduct.

Because the rule of reason imposes a balancing test that is akin to the preponderance of evidence standard, the higher criminal burden of proof could clash with existing jurisprudence and agency guidelines on Section 2 enforcement standards. In contrast, Section 1 of the Sherman Act prohibits anticompetitive agreements—where courts have automatically deemed certain types of agreements, such as agreements to fix prices, allocate markets or rig bids—as illegal “per se,” because they (through ample judicial and economic experience) have been deemed to produce little or no procompetitive effects.

DOJ’s HISTORY WITH SECTION 2

In the last 50 years, the vast majority of criminal cases that the Antitrust Division has brought involved per se illegal agreements under Section 1. The Antitrust Division appears to have initiated very few criminal Section 2 cases during that same period with mixed success. For instance, in United States v. Cuisinarts, the DOJ prosecuted the defendant under Section 2 for per se resale price maintenance agreements.[1] The defendant agreed to pay a $250,000 fine for a plea of nolo contendere. However, today, the per se criminal treatment of resale price maintenance is in serious doubt as the long line of Supreme Court decisions from GTE Sylvania to Leegin have firmly placed most vertical resale price restraints for Section 2 under the rule of reason standard.

WHAT’S NEXT

In 2016, the Federal Trade Commission and the DOJ released a joint publication called the “Antitrust Guidance for Human Resource Professionals” when announcing expanded criminal enforcement in labor markets for wage fixing and no-poaching agreements.[2] We expect the DOJ to release similar guidance with respect to criminal prosecution of Section 2 claims.

The policy shift raises a host of additional questions, such as what types of conduct under Section 2 the Division intends to focus [...]

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DOJ to Devote Substantial Resources to Investigating and Prosecuting Corporate Crime, Emphasizing Importance of Effective Compliance Programs

by , , , , and | Mar 9, 2022 | ,

In March 3, 2022, speeches at the American Bar Association’s Annual National Institute on White Collar Crime (ABA White Collar Institute), US Attorney General (AG) Merrick Garland and US Assistant Attorney General for the Criminal Division (AAG) Kenneth Polite Jr. addressed the US Department of Justice’s (DOJ) increased commitment to investigating and prosecuting corporate crime.

As a testament to their commitment to these resource-intensive cases, AG Garland discussed plans to hire 120 new prosecutors and 900 new FBI agents; this announcement represents a substantial surge in resources. AG Garland and AAG Polite also addressed specific ways they intend to increase enforcement efforts, including through the expanded use of data analytics. Finally, in addition to outlining substantive enforcement priorities, AG Garland and AAG Polite emphasized DOJ’s focus on individual accountability, with AG Garland reiterating that DOJ’s primary goal is “obtaining individual convictions rather than accepting big-dollar corporate dispositions.”

As AG Garland warned, DOJ’s white-collar enforcement efforts will further “accelerate as we come out of the pandemic” and DOJ’s interest in corporate crime is clearly “waxing again.” Companies must therefore take proactive steps to prepare for this increased enforcement activity.

IN DEPTH

Substantial Additional Resources for Corporate Crime Enforcement

In 2021, DOJ charged 5,521 individuals with “white collar” crimes, which represented a 10% increase over 2020. During his speech, AG Garland announced that DOJ will be devoting even more resources toward its corporate crime enforcement efforts going forward. Specifically, DOJ will seek funding to hire 120 new prosecutors and 900 new FBI agents, all of whom would focus on white-collar crime. If DOJ obtains such funding, those new prosecutors and agents could supercharge DOJ’s enforcement efforts. For example, 120 prosecutors is more prosecutors than there are in many US Attorneys’ Offices (including in the District of Massachusetts, a district that is already active in corporate enforcement, particularly in the resource-intensive healthcare space). Adding 900 new FBI agents—a number that is similarly larger than many existing FBI field offices—could allow DOJ to pursue thousands of new corporate criminal investigations.

Expanded Use of Data Analytics

For the past two years, DOJ and other federal agencies have increasingly relied on sophisticated data analytics tools to identify and prosecute corporate crime. AG Garland specifically identified data analytics as another “force-multiplier” for DOJ. DOJ’s use of data analytics will undoubtedly expand going forward. Among other things, AG Garland announced that a new squad of FBI agents has been embedded within the Criminal Division’s Fraud Section to “further strengthen [DOJ’s] ability to bring data-driven corporate crime cases nationwide.” As DOJ increasingly relies on “big data,” including vast amounts of data from other state and federal agencies, companies must ensure that they are proactively using data analytics to further their own internal compliance efforts.

DOJ’s Priority Enforcement Areas

AG Garland and AAG Polite mentioned several of DOJ’s specific white-collar criminal enforcement priorities during their remarks. In addition to traditional areas such as healthcare fraud, securities fraud and [...]

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Treasury Responds to Biden Administration Executive Order with Report, Recommendations to Increase Alcohol Industry Competition

by and | Feb 15, 2022 | , , , ,



On February 9, 2022, the US Treasury Department (Treasury) released a report with recommendations for how the Tobacco Tax and Trade Bureau (TTB), Federal Trade Commission (FTC) and Department of Justice (DOJ) can help drive competition in the beer, wine and spirits markets by stepping up conduct enforcement, adopting creative and nuanced theories of harm in merger reviews and implementing new regulations to decrease the burden on smaller industry participants. Treasury’s report is based, in part, on hundreds of comments received from industry participants and paints a detailed picture of the current landscape for alcohol beverage distribution and sale across the United States.

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Former Government Contractor Executive Convicted of Procurement Fraud

by and | Feb 2, 2022 |

On February 1, 2022, a federal jury found a former engineering firm executive guilty of conspiring to rig bids and defraud the North Carolina Department of Transportation (NCDOT) of hundreds of public works contracts worth more than $23 million. From at least 2009 through fall 2018, Brent Brewbaker was responsible for crafting and submitting bids to NCDOT on behalf of Contech Engineered Solutions LLC, an engineering firm that makes products used in bridge construction, water drainage and other public works projects.

Read more here to learn how companies can minimize the risk that they are investigated by the Procurement Collusion Strike Force (PCSF).



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Antitrust M&A Snapshot | Q4 2021

by , , , and | Feb 1, 2022 | , , , , ,

In the United States, antitrust agencies have now filled senior leadership positions, although the Federal Trade Commission (FTC) awaits the appointment of a fifth commissioner. Challenges to mergers continue apace at both the FTC and the Department of Justice (DOJ). The agencies challenged two mergers in the fourth quarter and a third transaction was abandoned. Additionally, nine consent orders were approved. The FTC is also including prior approval provisions in consent orders across industries, requiring parties seeking to settle merger disputes to agree to provide the FTC with greater rights to reject potential future deals.

The European Commission (Commission) imposed interim measures for the first time in the context of the Commission’s determination that Illumina’s acquisition of GRAIL was premature. The Commission conditionally cleared, in Phase I, Veolia’s acquisition of Suez—a transaction involving two French incumbents in the water and waste sectors—following comprehensive commitments. IAG withdrew from its proposed acquisition of Air Europa following the Commission’s decision not to approve the transaction absent further concessions.

In the United Kingdom, the Competition & Markets Authority (CMA) imposed a record fine of £50.5 million on Facebook for breaching an initial enforcement order related to its acquisition of Giphy, and ultimately required Facebook to sell Giphy. The CMA also updated its merger guidance in parallel with the entry into force of the UK National Security and Investment Act, published a new template for initial enforcement orders and updated its guidance on interim measures.

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Antitrust M&A Snapshot | Q3 2021

by , , , and | Nov 1, 2021 | , , , , ,

In the United States, the US Department of Justice’s (DOJ) challenge of American Airlines and JetBlue’s “Northeast Alliance” after the joint venture’s approval by the US Department of Transportation earlier this year demonstrates the Biden administration’s commitment to aggressive antitrust enforcement. US President Joe Biden issued an Executive Order calling for tougher antitrust enforcement, including “encouraging” the DOJ and Federal Trade Commission (FTC) to modify the horizontal and vertical merger guidelines to address increasing consolidation. At the same time, the FTC, under Chair Lina Khan, continues its rapid pace of change to the merger review process.

Under a new interpretation of Article 22 of the EU Merger Regulation (EUMR), the European Commission (Commission) asserted jurisdiction over Illumina’s acquisition of GRAIL and Facebook’s acquisition of Kustomer, even though the transactions did not meet the Commission or Member State filing thresholds. The EU General Court confirmed a significant gun-jumping fine imposed on Altice for breach of the EUMR notification and standstill obligations.

In the United Kingdom, the UK government published plans to update antitrust rules, including revising its jurisdictional thresholds and expanding the “share of supply” test to allow the CMA to more easily capture vertical and conglomerate mergers, as well as acquisitions of startups. And the Competition & Markets Authority’s (CMA) handling of the Veolia/Suez transaction demonstrates the CMA’s willingness to engage with parties to seek practical interim solutions while it is investigating a consummated transaction for potential antitrust concerns.

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Antitrust M&A Snapshot | Q2 2021

by , , , and | Aug 6, 2021 | , , , , ,

In the United States, aggressive antitrust enforcement is likely to continue with the appointment of Lina Khan as Federal Trade Commission (FTC) Chair and the nomination of Jonathan Kanter to lead the Department of Justice’s (DOJ) Antitrust Division. The premerger notification landscape continues to shift as filings reach another record high. Technology companies remain in the “hot seat” as legislators in the US House of Representatives introduced five antitrust reform bills that would change the enforcement landscape for digital platforms, including seeking to preclude large digital platform companies from acquiring smaller, nascent competitors. And the US Department of Justice is making good on President Biden’s pledge to regulate “Big Ag” by challenging Zen-Noh Grain Corporation’s proposed acquisition of 38 grain elevators from Bunge North America, Inc.

Meanwhile, in Q1 2021, the European Commission (Commission) published its Guidance on Article 22 of the EU Merger Regulation. The Guidance encourages the EU Member States to refer certain transactions to the Commission even if the transaction is not notifiable under the laws of the referring Member State(s). In Q2, not long after the issuance of the Guidance, the Commission received its first referral request to assess the proposed acquisition of GRAIL by Illumina. In light of the growing global debate on the need for more effective merger control, EU Competition Commissioner Margrethe Vestager confirmed that the Commission will not soften EU merger policy going forward. The Commission’s statement was made despite the fact no deals have been blocked by the Commission in about the last two years.

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