Quarterly Cartel Catch-Up: Recent Developments in Criminal Antitrust for Busy Corporate Counsel ‒ 3rd Quarter 2023

The third quarter of 2023 was eventful for both domestic and international cartel enforcers. 

In the United States, the Department of Justice (DOJ) continues to revamp policies to sharpen its enforcement efforts. On October 4, 2023, the Deputy Attorney General announced a safe harbor for merging parties to self-report criminal violations—not just antitrust violations—for up to six months after the transaction closes. This Department-wide policy is intended to ensure consistency across self-reporting regimes in the DOJ’s criminal sections and promote a culture of compliance. In late September 2023, Assistant Attorney General for the Antitrust Division, Jonathan Kanter, reaffirmed the Division’s commitment to bringing criminal cases focused on labor markets. That same week, the Federal Trade Commission announced an agreement with the Department of Labor to share information and partner on investigations, which underscores the U.S. government’s broad commitment to policing labor market violations.

The DOJ’s Antitrust Division (Division) also continues to try cases with mixed results. The Division secured novel resolutions in its prosecution of a Florida oncologist for market allocation. The Division’s Procurement Collusion Strike Force (PCSF) has been very active, pursuing investigations of government contractors using aggressive theories of harm, and has notched additional victories with plea agreements and at trial.  However, the PCSF suffered a rare trial loss when a jury acquitted three men accused of rigging bids to the U.S. military for promotional products. When the Division does prevail, courts are handing out prison sentences to guilty executives, like the defendants in the Texas military contractor conspiracy.

Around the world, international competition authorities have picked up the pace in cartel enforcement. A recent uptick in dawn raids continues in Europe and Asia. Not satisfied with recent successes, several international enforcers are deploying new tactics and tools to detect and investigate cartels. However, not all news is good news for international enforcers. Courts in two EU member states—Greece and Turkey—recently allowed the subjects of investigations to push back on an enforcer’s dawn raid authorities, and another company is petitioning to do the same in the EU. In a recent speech, a Division official also highlighted the US’s increased cooperation with international partners, including a joint initiative with Canada and Mexico to police procurement ahead of the 2026 World Cup.

In sum, domestic and international enforcers will remain busy through the end of 2023, both with classic anticompetitive conduct and as they grapple with the implications of new technologies, such as artificial intelligence, for pricing and information sharing. 

These updates and more can be found in this latest edition of the Quarterly Cartel Catch-Up.

DOJ Extends Self-Reporting Safe Harbors, Including Leniency, to Merging Parties

Key Point: When companies are part of an acquisition, their review and diligence should include efforts to promptly identify and report any inherited misconduct to take advantage of DOJ’s new Mergers & Acquisitions Safe Harbor policy.

On October 4, 2023, Deputy Attorney General Lisa Monaco announced that DOJ will offer leniency to companies that self-report misconduct they inherit through corporate transactions. The new Mergers & Acquisitions Safe Harbor policy is designed to incentivize acquiring companies to identify and report the acquired entity’s misconduct within six months of the transaction’s closing date. This deadline applies regardless of whether the conduct was discovered pre- or post-acquisition. Monaco emphasized the Department’s hope that the policy would enhance corporate compliance and explained that the “last thing the Department wants to do is discourage companies with effective compliance programs from lawfully acquiring companies with ineffective compliance programs and a history of misconduct.”

The policy harkens back to a 2008 opinion in which the DOJ’s Foreign Corrupt Practices Act unit announced it would not bring charges against energy company Halliburton for criminal misconduct it identified and reported in a reasonable period of time post-acquisition. Monaco pointed out that although some divisions have since included mergers and acquisitions in their voluntary self-disclosure policies, their methods have differed in consistency and approach. Going forward, companies can avoid successor liability and de-risk transactions by awarding compliance a “prominent seat at the deal table,” engaging in thorough pre-transaction due diligence, and prioritizing timely self-reporting.

This policy is also important because it is not limited to Sherman Act violations. Previously, companies uncovering conduct that may or may not constitute a cartel offense, but that would likely constitute fraud or another Title 18 violation, may have been reluctant to self-report. Now, regardless of which statute(s) the conduct is ultimately determined to violate, companies will be protected from prosecution by any division of DOJ if they report the conduct uncovered within the six-month window. 

United States, Mexico, and Canada Announce Joint Initiative to Tackle Collusion in Lead Up to 2026 World Cup

Key Point: North American authorities launch a new initiative to proactively target cross-border antitrust violations.

Antitrust enforcers won’t play ball with attempts to profit off the World Cup. On September 22, 2023, the Division, Mexico’s Federal Economic Competition Commission (COFECE), and Canada’s Competition Bureau announced a joint initiative to disrupt collusion related to the 2026 FIFA World Cup, which will be jointly hosted by the three nations. 

This initiative should come as no surprise to soccer fans or, for that matter, informed antitrust lawyers, as international sporting events have become wellsprings of government investigations. FIFA has been the subject of a long-running fraud and corruption probe dating back to 2015, which has resulted in numerous guilty pleas and convictions (some of which were recently overturned). This also builds on comparable efforts by other international antitrust authorities. As we shared in our last QCC, the Japan Fair Trade Commission recently charged six companies and seven individuals with bid rigging in connection with the 2021 Olympics.

Although no 2026 World Cup matches have been played, launching this initiative suggests that enforcers are targeting potentially unlawful activity as it happens. The initiative’s announcement specifically noted that the build up to the World Cup will likely see significant activity in the construction, entertainment, and tourism industries in the cities scheduled to host World Cup games. Companies in these areas and industries should remain vigilant; their efforts will show the extent to which they are able and willing to cooperate with international authorities to detect and deter potential antitrust violations.

EU and Asia Cartel Enforcement Efforts Heat Up Over the Summer

Key Point: Antitrust enforcers in the EU and Asia have kept busy during the past quarter, which suggests renewed vigor in cartel enforcement efforts in the regions. However, legal challenges could force agencies to adopt a more restrained approach.

A recent surge in dawn raids and announcements regarding use of new and existing authorities to detect anticompetitive activity across the EU and Asia signal a renewed effort to crack down on cartels. Although leniency applications in some jurisdictions have reportedly returned to pre-pandemic numbers, antitrust enforcers do not appear to be slowing down.

In September 2023, French authorities announced a raid at the premises of an unnamed technology company suspected of having implemented anticompetitive practices in the graphics cards sector. In September 2023, Greek and Spanish authorities raided several companies involved in the sale of electricity distribution equipment. In July 2023, the Italian enforcer aided the offices of several fuel companies after opening a probe into suspected price fixing in biofuel prices. 

Meanwhile, in Asia, Korea’s Fair Trade Commission (KFTC) raided four local securities companies over price fixing allegations related to the commission that the companies charged on their products, and Hong Kong’s Competition Commission conducted a third round of inspections at one of the city’s largest fish markets. Looking forward, the KFTC has also recently published draft regulations that would both expand the KFTC’s investigatory authority and increase penalties for subcontracting violations.

In September 2023, it was reported that Japan’s Fair Trade Commission (JFTC) received a “rush” of leniency applications related to its ongoing investigation of the country’s top four property insurance companies for suspected collusion on premium prices for joint insurance contracts with corporate customers. The JFTC’s investigation appears to have been prompted by an earlier investigation by Japan’s Financial Services Agency into a suspected breach of insurance rules. Additionally, in September 2023, the former investigation chief at JFTC revealed that the agency is making “active use” of economic analysis to detect cartels. Former JFTC official Hiroshi Yamada described a sophisticated economic analysis that has become a trigger for opening an investigation.

But not all news has been good for enforcers. In several European jurisdictions, dawn raids have encountered legal headwinds. In Turkey, the Constitutional Court recently found that the antitrust enforcer must secure judge approval before conducting an on-site inspection. In Greece, the Supreme Administrative Court concluded that the significance of a dawn raid means that parties can challenge the validity of the raid before the antitrust enforcer issues a final decision.

Division Reaffirms Its Interest in Criminal Labor Market Cases, and Federal Trade Commission and Department of Labor Announce New Effort to Coordinate Enforcement Efforts in Labor Markets

Key Point: Division leadership declares that criminal enforcement of antitrust laws in labor markets remains a top priority, while the Department of Labor and the FTC signal their commitment to working together to regulate and investigate competition specifically within the “gig economy.”

In August 2023, given their mutual interest in “protecting and promoting competition in labor markets and promoting the welfare of American workers,” the Department of Labor and the Federal Trade Commission entered into a Memorandum of Understanding (MOU) to coordinate investigations, enforcement, and the sharing of training resources. The MOU establishes formal collaboration between the agencies on issues including labor market concentration, one-sided contract terms and labor developments in the “gig economy.”

On September 22, 2023, Assistant Attorney General Jonathan Kanter remarked that the Division remains committed to pursuing criminal enforcement of antitrust laws in labor markets. Despite recent trial losses, Kanter confirmed that the Division is “just as committed as ever” to “prosecut[ing] criminal violations of the Sherman Act in labor markets.” 

Kanter’s recent remarks underscore the Division’s greater interest in utilizing criminal enforcement to re-shape and correct labor markets. Kanter described “competitive labor markets a[s] foundational to the purposes of the antitrust laws.” 

The announcement by these agencies reflects a growing interest among federal agencies in protecting labor markets. However, the practical effects of these coordination efforts remain to be seen.

Florida Oncologist Pleads Guilty in Cancer Treatment Conspiracy but the Division Agrees to Forgo Jail Time

Key Point: On the threshold of a retrial, the Division allowed a Florida oncologist to plead guilty and pay a fine but is not requiring a period of confinement. 

On August 24, 2023, the Division announced that an oncologist pleaded guilty for suppressing competition for oncology treatments in a conspiracy that spanned nearly two decades. In September 2020, the Division indicted Dr. William Harwin and others for allegedly allocating treatments for cancer patients. The Division alleged that Dr. Harwin and his company, Florida Cancer Specialists & Research Institute LLC (FCS), agreed to provide all chemotherapy treatments, while another oncology company in Southwest Florida agreed to provide all radiation treatments.

Although FCS agreed to a deferred prosecution agreement in April 2020, which included paying a US$100 million fine, Dr. Harwin refused to plead guilty and his case proceeded to trial in September 2022. When jury deliberations were interrupted by a hurricane, the judge declared a mistrial, and Dr. Harwin’s retrial was scheduled to begin in September 2023. Notably, the plea agreement does not include a term of incarceration. This unusual decision—to reach a plea agreement with an indicted executive that does not include a jail term—not only allows the Division to preserve limited resources as it stares down a busy trial schedule and evidence that was becoming increasingly stale, but it also avoids the risk of another loss at trial. Regardless, this is a decision that defense counsel will likely point to regularly in the future as precedent for a “no jail” resolution for cartel defendants.

The Division Secures Three Guilty Pleas in Ongoing Joint Investigation of Collusion in the Asphalt Industry

Key Point: The Division is partnering with various other agencies to crack down on bid rigging and other antitrust violations as seen through the guilty pleas secured in the joint investigation of collusion in the asphalt industry.

On August 17, 2023, the Division secured a guilty plea from Kevin Shell, vice president of estimating for Michigan-based F. Allied Construction Company Inc. (Allied). On August 29, 2023, the Division obtained two additional guilty pleas from the company, Allied, and its president, Andrew Foster. The Division alleged that Allied, Foster, and Shell conspired with two unnamed asphalt paving companies and their employees to rig bids in each other’s favor. Allied, Foster, and Shell participated in the two conspiracies from June 2013 through June 2019, and from July 2017 through May 2021, respectively. The two conspiracies operated in the same way: the co-conspirators coordinated each other’s bid prices so that the agreed-upon losing company would submit intentionally non-competitive bids.

These guilty pleas are part of an ongoing antitrust investigation into bid rigging and other anticompetitive conduct in the asphalt paving services industry. This is a joint investigation by the Division’s Chicago office, the Department of Transportation’s Office of the Inspector General, and the U.S. Postal Service’s Office of Inspector General. The Division’s Deputy Assistant Attorney General Manish Kumar stated that, “along with our law enforcement partners, the division will continue to seek justice when corporations and their leaders deprive customers of fair and open competition.” This series of guilty pleas shows how the Division’s focus on an industry can result in multiple, successive convictions as it works with its inter-agency partners to pursue antitrust violations at all levels of the government procurement process.

As dollars flow from the congressional appropriations for infrastructure spending, the Division and other relevant agencies’ Inspector General offices can be expected to have a keen eye out for any collusion relating to projects funded with government money. 

Imprisoned Executive Appeals Bid Rigging Conviction and Challenges the “Per Se” Standard

Key Point: The Department of Justice continues to hold executives accountable when they subvert the competitive process.

In September 2022, a federal jury in North Carolina found that Brent Brewbaker, a former engineered solutions executive at Contech, was guilty of involvement in a bid rigging scheme to defraud the North Carolina Department of Transportation. Brewbaker’s counsel argued on appeal that the district court wrongly excluded evidence at trial by determining that the per se rule applied to the alleged bid rigging. Brewbaker’s attorney argued that the excluded evidence would have shown that the conduct in question was part of a legitimate joint venture between two companies in a vertical relationship, which would have been allowed under the rule of reason standard, rather than the more stringent per se standard.

The Fourth Circuit, however, pushed back against the contention that alleged bid rigging was not a per se violation of antitrust laws. During argument, one judge said it was an “undisputed fact” that the two companies shared their bids and then bid higher and noted that the per se standard was still the main obstacle to Brewbaker’s argument. DOJ argued that the agreement in question was not part of a vertical relationship between a manufacturer and a distributor because, unlike cases where manufacturers have arrangements with distributors not to undercut prices, here there was no restraint on distribution, but rather a horizontal agreement over price between two competitors. Brewbaker remains in prison while the appeal is being decided.

International Enforcers Also Remain Focused on Prosecuting Government Procurement Fraud

Key Point: The Division’s recent focus on government contracting has been echoed internationally, with charges being brought in government bid rigging schemes in both South Korea and Canada.

In July 2023, South Korea’s antitrust regulators levied US$32.2 million in fines on 32 pharmaceutical companies for bid rigging violations related to the South Korean government’s procurement of certain vaccines. South Korea’s investigation revealed that these companies shared their respective bid prices among themselves, and effectively chose the winning bids in advance. The Korean Fair Trade Commission (KFTC) claimed that, through this bidding behavior, the 32 companies involved were able to win 147 out of 170 bids issued at above-market prices. 

In response to South Korea’s investigation and findings, the KFTC stated, “the latest action is significant, as it sheds light on the extensive bid rigging in the local vaccine market involving nearly all players, including vaccine manufacturers, distributors, and wholesalers.”

Elsewhere, in September 2023, the Canadian Court of Quebec criminally charged two individuals in connection with an alleged bid rigging scheme regarding pavement contracts. Marcel Roireau, the vice president of operations for Construction DJL, Inc., and Serge Daunais, the vice president, secretary, and general manager of Pavages Maska, Inc., have been charged under the bid rigging provisions of Canada’s Competition Act. The Canadian Competition Bureau alleges that Roireau and Daunais participated in an agreement to submit cover bids to the Ministère des Transports du Quebec (MTQ) for paving contracts. Under Canada’s Competition Act, it is a criminal offense to engage in bid rigging. In addition to criminal charges, those in violation of Canada’s illegal agreements provisions are also subject to fines set at the discretion of the court. These developments highlight that international enforcement authorities continue to be focused on government procurement, an approach that is consistent with the Division’s methodology.

Procurement Collusion Strike Force Shows No Signs of Slowing Investigation and Enforcement

Key Point: The Division loses a procurement fraud case at trial but its focus on this type of conduct shows no signs of abating, as evidenced by public statements and tough sentences.

On September 14, 2023, following a fifteen-day trial, a federal jury in Florida acquitted the three defendants of all charges related to an alleged conspiracy to rig bids for customized promotional products for the U.S. Army. The Division indicted the three men on April 12, 2022, for allegedly exchanging bidding information and submitting bids on behalf of one another relating to the sale of customizable hats, water bottles, backpacks, and other promotional items sold to the U.S. military. One defendant was also separately charged with defrauding the government by allegedly creating shell companies to submit sham bids to create the illusion of a competitive market.

The investigation was a product of the Division’s Procurement Collusion Strike Force (PCSF), and the whole-of-government approach—here, the Division worked with the U.S. Army Criminal Investigation Division and the U.S. Air Force Office of Special Investigations—used to detect, investigate, and prosecute fraud in government procurements. Although the Division’s recent trial loss follows the loss of another trial in May 2023 in Minnesota, the PCSF shows no signs of slowing down and will likely continue to closely scrutinize government procurements for any evidence of wrongdoing.

Where the PCSF has successfully obtained a guilty plea or conviction, consequences have been severe for companies and individuals alike. In August 2023, in another bid rigging case brought by the PCSF, two military contractors were sentenced to prison time—10 months and 6 months, respectively—and to pay criminal fines for their role in a bid rigging conspiracy for certain government contracts related to servicing military equipment. Additionally, J&J Korea Inc., a South Korean subsidiary of a Texas company, was sentenced on September 12, 2023 to pay almost US$9 million dollars in fines and restitution for rigging bids for repair and maintenance services at U.S. military installations. Two officers of J&J Korea were also indicted in March 2022 in connection with the bid rigging scheme.

As of October 2023, the PCSF has opened more than 115 investigations and secured upward of 50 guilty pleas and trial convictions.