Quarterly Cartel Catch-Up: 2024 Mid-Year Global Review

At the mid-year point, 2024 is shaping up to be an eventful year in cartel enforcement. In the United States, the U.S. Department of Justice (DOJ)’s Antitrust Division (Division) enjoyed two significant victories and finally decided how to proceed with one of its most problematic cases from last year. First, in May 2024, an individual pleaded guilty to conspiring to monopolize, rig bids, and allocate territories for wildfire services. The plea agreement is notable because it included a novel monopolization count in addition to a traditional bid-rigging count, and also because of the rare use of wiretap evidence revealed in the Division’s indictment. 

Second, on July 12, 2024, the Division obtained its first guilty verdict in a Sherman Act case on an individual indictment for bid-rigging in the ready-mix concrete industry. For the Division, Sherman Act trial victories have been hard to come by in recent years, apart from a jury’s February 2022 conviction of Brent Brewbaker for rigging bids to the North Carolina Department of Transportation.

Additionally, in the same Brewbaker case, on June 28, 2024, the DOJ’s Solicitor General asked the Supreme Court to review the Fourth Circuit Court of Appeals’ decision overturning Brewbaker’s conviction based on the existence of both horizontal (competitor) and vertical (supplier-distributor) relationships between the conspiring companies. This decision has the potential to undermine the Division’s criminal enforcement efforts, as it would significantly narrow the scope of conduct that the Division historically has prosecuted. Whether the Supreme Court chooses to hear the case will have significant consequences for the Division’s future enforcement efforts.

Outside of the United States, international cartel enforcement was top of mind as global enforcers and practitioners gathered in Barcelona for the bi-annual American Bar Association/International Bar Association International Cartel Workshop. Although publicly reported international cartel investigations appear to be stagnant, and the Japan Fair Trade Commission is folding its international cartel unit into its existing teams, international enforcers are taking a variety of steps to bolster enforcement. For example, Argentina and Canada are expanding their leniency programs, the EU recently orchestrated several cross-border dawn raids, and France is expanding its investigative gaze for cartel conduct to non-reportable transactions. It may be only a matter of time until international cartels are dominating the headlines again.

All this and more in the latest edition of the Quarterly Cartel Catch-Up.

Division Asks Supreme Court to Review Fourth Circuit’s Reversal of Executive’s Bid-Rigging Conviction Because of Dual-Distribution Relationship

Key Point: After much deliberation, the Division asked the Supreme Court to review the adverse decision by the Fourth Circuit, which would upend its long-held position that agreements between horizontal competitors—even if they also have a vertical relationship—are subject to per se liability.

On June 28, 2024, after two extensions of time, the DOJ’s Solicitor General petitioned the U.S. Supreme Court to review the Fourth Circuit’s decision overturning conviction of Brent Brewbaker, an executive at Contech Engineered Solutions LLC, for his role in a scheme to coordinate bids for aluminum structure projects in North Carolina. In January 2022, a jury convicted Brewbaker for coordinating Contech’s bids with Pomona Pipe Products and Lane Enterprises. However, Contech and Pomona had both a horizontal (competitors) and a vertical (supplier-distributor) relationship because Contech used Pomona as its exclusive distributor in North Carolina. Contech’s and Pomona’s bids also were interdependent; Pomona supplied the labor when Contech won, and Contech supplied the aluminum when Pomona won. 

However, on December 1, 2023, the Fourth Circuit Court of Appeals reversed Brewbaker’s antitrust conviction (the jury also convicted him on fraud charges) because it held that an agreement between competitor companies that also had a vertical relationship could not be considered per se (always) unlawful. The petition to the Supreme Court, which required approvals at the highest levels of the DOJ, emphasizes the long-accepted standard that bid rigging in all its forms is a per se antitrust violation, and that it should not matter whether one of the parties was a supplier to another. The DOJ contends that the Fourth Circuit’s decision “conflicts with this court's precedents, distorts established antitrust doctrine, and defies common sense.”

Because only per se conduct can be a criminal antitrust violation, if the Fourth Circuit’s decision stands, the Division’s ability to prosecute collusive activity between companies that have any semblance of a vertical business relationship may be significantly complicated, if not foreclosed. For these reasons, the Supreme Court’s decision about whether it will hear this case will have significant consequences for the future of the Division’s criminal antitrust program.

Contractor Pleads Guilty to Rigging Bids and Monopolizing Wildfire Fuel-Truck Services in Idaho

Key Point: The Division’s Procurement Collusion Strike Force secured a guilty plea by an individual, based in part on wiretap evidence, for conspiring to rig bids for U.S. Forest Service contracts and monopolize wildfire-fighting fuel truck services.

The DOJ’s Procurement Collusion Strike Force notched another victory in May when the former owner of a contracting company that provided fuel truck services to U.S. Forest Service firefighters pleaded guilty to rigging bids, allocating territories, and conspiring to monopolize wildfire-fighting fuel truck services in the Great Basin wildfire dispatch region, which includes areas of Idaho, Utah, Nevada, and Wyoming from 2015 to 2023. From at least as early as February 2020 to March 2023, the defendants allegedly conspired to monopolize that same market by exchanging competitive bidding information and coordinating bids in order to “squeeze” and “drown” their competitors. A co-defendant is awaiting trial. 

Notably, the December 2023 indictment revealed the use of a court-ordered wiretap and contained excerpts of recorded conversations and text messages between the co-defendants. This case illustrates some of the most aggressive investigative tools available to antitrust enforcers and, while use of wiretap evidence is relatively rare in antitrust cases, highlights that companies should not expect enforcement agencies to provide notice before collecting evidence. Moreover, top Division officials have stated in speeches recently that they will be looking for opportunities to obtain tape-recorded evidence in criminal investigations and will expect employees of corporate leniency applicants to be willing to facilitate such recordings.

FBI Executes First Search Warrant in Criminal Investigation on Use of Pricing Algorithms in Rental Markets

Key Point: The Division follows through on its promise to target pricing algorithms as the FBI executes search warrants in connection with the Division’s price-fixing probe into residential rental markets.

On May 22, 2024, the Federal Bureau of Investigation (FBI) raided the headquarters of apartment owner and manager Cortland in Atlanta, Georgia, in connection with an investigation into price fixing in the rental housing market. Earlier this year, the Division opened a criminal investigation into RealPage, the developer of a technology platform that provides software for the multifamily rental housing market. The investigation also involves some of the apartment owners and managers that use the company’s pricing software.

As the Division’s investigation appears to expand, RealPage, Cortland, and dozens of other companies are also fending off civil litigation. A putative class action in Tennessee alleges that RealPage’s management software allows apartment managers to coordinate and agree upon rental housing prices and supply. Similarly, in November 2023, the District of Columbia filed a lawsuit—that has now survived motions to dismiss as to most Defendants—against RealPage and 14 of the largest residential landlords in the District for allegedly using the software to share competitively sensitive pricing information.

The Division’s rental price fixing investigation has become a prime example of what Assistant Attorney General Jonathan Kanter described in January 2024 as “numerous” active investigations by the Division relating to AI and competition. Other Division officials have further described criminal enforcement efforts targeting AI and pricing algorithms. As the focus on these tools intensifies, companies that use them should carefully vet the information that they are sharing and receiving.

Antitrust Scrutiny of the Health Industry Further Expands: Division Introduces Task Force on Health Care Monopolies and Collusion

Key Point: The HCMC’s creation confirms that companies of all sizes—not just “giants”—should take appropriate steps to mitigate risks associated with heightened antitrust scrutiny. 

On May 9, 2024, the Division announced that it is “upping [its] game” on health care enforcement through the creation of a Task Force on Health Care Monopolies and Collusion (HCMC). The HCMC will broadly “guide the division’s enforcement strategy and policy approach in health care, including by facilitating policy advocacy, investigations and, where warranted, civil and criminal enforcement in health care markets.” Assistant Attorney General Jonathan Kanter explained that the HCMC will be guided by three principles: (1) addressing consolidated and vertically integrated health care programs or “multisided giants”; (2) interagency coordination to regulate the industry from multiple angles, including criminal enforcement; and (3) stronger enforcement to build on the Biden administration’s “whole-of-government” approach to antitrust enforcement.

The HCMC’s launch follows the formation a joint strike force on unfair and illegal pricing, a request for information seeking public comment on deals involving health systems and services, and the creation of an online hub to facilitate reporting complaints. 

This constellation of enforcement efforts is likely to impact companies of all sizes across the healthcare industry. Accordingly, healthcare and healthcare-adjacent businesses should take appropriate steps now to mitigate the risks of investigation and enforcement actions. 

International Enforcers Updates: UK-EU Begin Process to Establish a Formal Antitrust Cooperation Agreement, and Argentina and Canada Expand Leniency Programs While Japan Scraps Its International Cartel Unit

Key Point: In the face of stagnant leniency applications, countries ramp up efforts to detect cartels and reinvigorate leniency programs.

In April 2024, the UK and EU began formal negotiations to conclude a post-Brexit competition cooperation agreement. Although the UK has concluded competition cooperation agreements with other countries, an agreement would facilitate cooperation and make it easier for the UK to share and receive information from EU enforcers. However, an agreement with the EU does not guarantee information sharing with each of the EU’s member states, which the UK will have to negotiate separately.

Other countries are taking steps to revamp their leniency programs. On May 28, 2024, Argentina’s Secretariat of Industry and Trade issued a Resolution formalizing its leniency program. Although Argentina’s Competition Law allowed for leniency applications, the tool was not well-defined, which limited predictability and transparency and, in turn, limited the program’s use and effectiveness. Argentina’s new regulation covers hardcore cartel conduct—such as price fixing, supply restrictions, market allocation, and bid rigging—and lets the applicant benefit from full immunity or a reduction of the fine related to the reported conduct. The regulation also creates a dedicated leniency unit that will be responsible for receiving and processing leniency applications.

On June 19, 2024, Canada’s Competition Bureau and its Public Prosecution Service expanded their Immunity and Leniency Programs to include wage-fixing and no-poach agreements. The move follows the agencies’ 2023 announcement that they would prosecute this type of conduct criminally, e.g., agreements to fix, maintain, decrease, or control wages or other terms of employment, or to refrain from soliciting or hiring each other’s employees.

Other agencies reprioritized their cartel efforts. In April 2024, the Japan Fair Trade Commission (JFTC) confirmed the dissolution of the “Senior Investigator for International Cartel” position and its corresponding division as part of an internal reorganization. Going forward, international investigations will be handled by the JFTC’s existing investigation teams. Although the JFTC emphasized that it continues to prioritize international cartels and is seeing an increasing of international cases involving digital platforms, the move suggests a deprioritization based on the unit’s limited success, perhaps coupled with a shift in focus towards domestic investigations. The change is consistent with the trend of fewer international cartel investigations and cases, but raises the question of whether that will change with even less scrutiny by enforcers.

France’s Autorité de la Concurrence Trailblazes Investigating Transactions as Potential Cartel Violations

Key Point: France is the first EU country to exercise authority to investigate non-reportable transactions for cartel conduct, and more are likely to follow.

On May 2, 2024, France’s national competition regulator, the Autorité de la Concurrence, closed a first‑of-its-kind investigation into whether a series of nonreportable mergers in the meat-cutting sector amounted to cartel violations. In 2019, the Autorité began investigating three industry giants—Akiolis, Saria, and Verdannet—who allegedly agreed to geographically allocate France’s meat-cutting market. This examination applied the 2023 Towercast judgment by the EU Court of Justice that allows the Autorité to investigate, under certain conditions, whether a merger below the threshold triggering judicial review amounts to an anticompetitive practice. In this case, the Autorité performed a rigorous analysis of the potential effects of these agreements on the market and found there was not an actual geographic market allocation plan because the parties’ exchanges were only preparatory discussions for the mergers, which were not anticompetitive. The Autorité’s investigation demonstrates the increased risks and legal uncertainty for transactions in France and the European Union.

Mexico’s COFECE Brings Charges and Levies Sanctions for Price Manipulation

Key Point: Mexican authorities showcase their commitment to stiffer enforcement through multiple actions aimed at anticompetitive conduct.

In two recent cases, Mexico’s Federal Economic Competition Commission (COFECE) demonstrated its commitment to a new era of enhanced competition policy enforcement and its intention to use all available authorities to analyze, investigate, and punish anticompetitive conduct.

First, in April 2024, COFECE filed a criminal complaint against several individuals for their alleged participation in a scheme to manipulate the sale price of building coating products in the construction sector. If convicted, these individuals face between 5 and 10 years in prison.

In an administrative proceeding in June 2024, COFECE imposed a 3.4 million pesos fine on Combustibles Puerto de Abrigo Dzilam de Bravo, along with three of its associates, for manipulating the price of marine diesel at service stations in Dzilam de Bravo in the state of Yucatan.

These enforcement actions suggest that COFECE’s enhanced scrutiny of companies and individuals will likely continue to bear fruit.

EU Regulators Keep Markets on Their Toes with More Dawn Raids, While UK Authorities Wins a Legal Challenge to Its Dawn Raid Authority

Key Point: European competition authorities collaborate to execute dawn raids, and a UK court restores the Competition Market Authority’s (CMA) Ability to Conduct Dawn Raids against Domestic Premises.

In June 2024, the European Commission (EC) announced dawn raids at the premises of a consultancy firm in two EU Member States related to the ongoing investigation of the tires sector, which prompted dawn raids of several companies earlier this year. The EC conducted these raids alongside their competition counterparts in the local member states where raids occurred. Notably, the EC explained that the raids were based on concerns that the consultancy firm may have facilitated or instigated an alleged price coordination amongst tire manufacturers.

These come on the heels of several other dawn raids across the EU. 

• In May 2024, the French Competition Authority announced dawn raids the actions as part of a probe into anticompetitive practices in the explosives manufacturing and distribution sector for civil projects such as quarries and public works.
• In June 2024, the Italian Competition Authority announced that it had raided the premises of several pharmaceutical companies as part of an investigation into the market for the pharmaceutical ranibizumab amid suspected collusion for delaying the entry into the Italian market of a biosimilar drug. The Dutch Competition Authority carried out parallel raids but did not confirm whether it had also opened an investigation into the companies.
• Also in June 2024, the Italian Competition Authority announced raids of seven vehicle maintenance and repair companies suspected of rigging three bids to supply a waste collection provider.  

In April 2024, the UK’s High Court reversed a decision by a lower court refusing to grant the CMA a warrant for a domestic property of individual executives. When the lower court denied the warrant applications in November 2023, it published the decisions over the objection of the CMA. The High Court’s decision vindicates the breadth of the CMA’s dawn raid authority and its ability to exercise that authority in ongoing and future investigations.

The trend of increased dawn raids is showing no signs of slowing down across Europe as enforcers continue to exercise their broad authorities—or, in the UK, as the CMA’s dawn raid authority is reaffirmed—to investigate suspected anticompetitive conduct.

The Division’s Criminal Probe into the Generic Pharmaceutical Industry Concludes as the Last Remaining Executive Is Sentenced to Probation

Key Point: A former generic pharmaceuticals executive was sentenced to one year of probation for his role in a generic drug price-fixing scheme, bringing an end to the Division’s federal criminal investigation.

On May 15, 2024, U.S. District Judge Richard Barclay Surrick sentenced Hector Armando Kellum, a former senior generic pharmaceuticals executive, to one year of probation and imposed a $20,000 fine for his participation in a generic drug price-fixing scheme. In 2020, Kellum pleaded guilty to a single charge and agreed to cooperate with the Division’s criminal investigation into the generic drug industry. Kellum was the last remaining defendant in the Division’s long-running investigation of price-fixing in the generic drug industry. In November 2023, the Division dismissed charges against Ara Aprahamian, a senior executive at another generic pharmaceutical company, leaving only Kellum and the first two defendants who pleaded guilty in December 2016—both of whom also received probation in April 2024—to be sentenced. 

Although related civil litigation is ongoing, Kellum’s sentencing resolves all of the Division’s publicly filed matters related to its generic drugs investigation. It also marks a notable exception to Division track record because none of the individuals charged received jail time.