Quarterly Cartel Catch-Up: Summer Surge Foreshadows Enforcement Intrigue

Despite the summer doldrums, cartel enforcers around the world had several notable enforcement actions and, perhaps more importantly, signaled a busy fall and winter.

In the United States, the Department of Justice’s Antitrust Division (Division) unveiled a case against RealPage, Inc. and its algorithmic pricing software. However, rather than a criminal action, the Division filed a civil antitrust lawsuit alleging that the pricing software enables the sharing of nonpublic, competitively sensitive information for the purpose of coordinating and artificially inflating apartment rental rates.

The Division’s Procurement Collusion Strike Force also remained active, indicting companies in Oklahoma, Michigan, and Puerto Rico, and obtaining new guilty pleas and fines. Also, during a series of speeches in September 2024, the Division’s Deputy Assistant Attorney General (DAAG) for Criminal Enforcement, Manish Kumar, and other top officials reaffirmed the Division’s commitment to enforcement in labor markets. Although the Division’s only current pending case is a Nevada wage fixing trial scheduled to begin in March 2025, he revealed that there are several active no-poach investigations and leniency applications. Kumar also emphasized the Division’s use of aggressive investigative techniques, such as wiretaps, which suggests a more active enforcement landscape. Meanwhile, the Division’s criminal enforcement program may face an existential challenge as the Supreme Court decides whether to hear an appeal about an overturned bid-rigging decision.

Around the world, international competition authorities continue to ramp up their enforcement efforts. In September 2024, the Philippine Competition Commission filed its first major enforcement action against an alleged onion cartel. Across Europe, competition authorities targeted the transportation sector with several dawn raids.

Competition authorities in Singapore and Mexico appear reinvigorated by new leadership. In Singapore, Alvin Koh, the new Chief Executive of the Competition and Consumer Commission of Singapore (CCCS), spoke about the Commission’s new priorities of investigations and market surveys. In Mexico, a now fully staffed Federal Economic Competition Commission (COFECE) is primed to exercise its authorities and harness the Commission’s full power to investigate anticompetitive conduct within the pharmaceutical and healthcare sectors.

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

Division Files Civil Antitrust Suit Against RealPage for Algorithmic Price-Fixing Scheme Allegedly Impacting Renters Nationwide

Key Point: Following an FBI raid of the headquarters of an apartment owner and manager earlier this year, the Division ultimately filed a civil action against RealPage targeting the use of its pricing software in residential rental markets.

On August 23, 2024, the Division, together with eight state attorneys general, filed a civil antitrust lawsuit against RealPage, Inc., alleging that the company uses its revenue management software to coordinate multifamily rental prices nationwide. A first-of-its-kind enforcement action, the complaint alleges that RealPage’s algorithmic pricing software enables commercial landlords to share nonpublic, competitively sensitive information about their apartment rental rates and other lease terms for the purpose of coordinating and artificially inflating rental rates.

RealPage allegedly collects this information from commercial landlords to inform its algorithm. But the complaint also alleges that RealPage uses two primary means to ensure that the pricing recommendations its algorithm generates are followed by landlords: (1) an auto-accept function that purportedly prompts landlords to apply RealPage’s recommended rental rate, and (2) pricing advisors who allegedly monitor users to ensure that these recommendations are followed.

The complaint further alleges that RealPage maintains a monopoly over multifamily commercial revenue management software and uses this power to obstruct rival software companies. Attorney General Merrick Garland and Deputy Attorney General Lisa Monaco have both highlighted the unique nature of this case and asserted that training and using software to undermine competition and fairness, though novel, is still breaking the law.

DOJ, Engineering Executive Spar Before the Supreme Court Over Fate of Criminal Antitrust Enforcement

Key Point: In response to DOJ’s appeal of a decision overturning a bid-rigging conviction, an engineering executive filed a cross-appeal asking Supreme Court to upend the criminal antitrust enforcement regime.

Instead of simply opposing the United States’ request that the Supreme Court review a Fourth Circuit decision overturning his bid-rigging conviction (covered in our last installment), former engineering executive Brent Brewbaker also filed his own request for an appeal asking the Supreme Court to declare criminal charges under Sherman Antitrust Act unconstitutional.

On September 4, 2024, the United States filed its response to Brewbaker’s cross-petition to appeal defending its criminal antitrust enforcement authority. Brewbaker argued that criminal enforcement of Section 1 of the Sherman Antitrust Act violates the non-delegation doctrine, the Fifth Amendment’s prohibition against vague criminal statutes, and the right to trial by jury. Among other arguments, he claimed that the per se rule is not defined by objective standards and unconstitutionally requires defendants to prove their innocence by showing that the agreements are reasonable, and therefore not subject to criminal prosecution. In his cross-petition and October 3, 2024 reply, Brewbaker argued that the Fourth Circuit Court of Appeals correctly found that the case was not suitable for criminal prosecution.

In its response, the United States argued that Section 1 does not give the courts the power to define new offenses. In the United States’ view, there is a single offense—entering an agreement in restraint of trade—and violating the per se rule is simply “one of two ways to commit the offense.” The government also pointed to the six courts of appeals that have rejected such challenges and characterizes the per se rule as a “legal standard, not an evidentiary presumption.” The United States explained that finding an agreement per se unlawful is only a recognition of a type of agreement that Section 1 prohibits as a matter of law, but the government still bears the burden of proving beyond a reasonable doubt that such an agreement existed and the defendant joined it.

Four Supreme Court Justices must agree to hear the appeal for the case to proceed. Regardless, the outcome will have significant consequences for the Division’s criminal enforcement program. If left standing, the Brewbaker decision will continue to create uncertainty; but if the appeal is heard, including Brewbaker’s cross-petition, the fate of the Division’s entire criminal enforcement program may be at stake.

Uptick in Dawn Raids Continues as Multiple European Transportation Companies Come Under Investigation, But Some Companies Are Pushing Back

Key Point: As European authorities exercise their dawn raid authorities against the transportation sector, challenges to those authorities in Italy may make some authorities think twice.

European authorities have conducted dawn raids against multiple companies in the transportation sector around the continent this quarter. Authorities utilize dawn raids, also known as unannounced inspections, to gather evidence of potentially anticompetitive conduct. Although raids do not necessarily mean that a violation occurred, they signal that a company is the subject of investigative scrutiny and can lead to business disruption and negative press.

The Belgian Competition Authority (BCA) carried out searches of several public transport companies suspected of price fixing and falsifying public tenders in the bus and coach passenger transport industry. The BCA indicated that the dawn raids constitute a preliminary step in its investigation, and they will now examine the electronic data and archives seized during the raids to assess next steps.

In Greece, the Hellenic Competition Commission launched dawn raids in the ferry line connection of Perama (Attica) - Paloukia (Salamis). The raids—announced in September 2024—are connected to an investigation into the ferry service industry for an alleged anticompetitive horizontal agreement and abuse of dominance practices under European Union auspices. The ferry connection under scrutiny is the most trafficked line in Greece and ranks seventh among all European Union ports. In 2022 alone, the line transported 7.1 million passengers and 3.7 million vehicles.

However, European authorities’ use of dawn raids continues to face challenges. Similar to the dawn raid challenges faced by the United Kingdom’s Competition and Markets Authority, a local court ordered Italy’s Competition Authority (ICA) to justify its joint March 2024 dawn raid with Irish antitrust enforcers against Ryanair’s Dublin premises. On October 10, 2024, the Regional Administrative Court of Lazio issued an interim order stating that the ICA cannot use the documents it obtained during the raid until the court issues a decision on its legality. A hearing is set for February 19, 2025. 

The raid came on the heels of a probe into whether the airline leveraged its market power to isolate rival servicers of flight, hotel, and car rental booking services. Ryanair challenged that raid and requested a finding that the documents seized were unlawfully obtained and therefore inadmissible. A lower court previously issued a decision requiring the ICA to disclose information about the basis for its raid, which the ICA believed was confidential and would become prejudicial because it would disclose its investigative strategy. If the decision stands, it may make the ICA and other European authorities think twice about conducting dawn raids.

No Summer Vacation for the Procurement Collusion Strike Force

Key Point: The Division’s Procurement Collusion Strike Force obtained a new indictment and secured a guilty plea and multimillion-dollar sentence in separate cases.

As summer 2024 came to a close, the Division touted guilty pleas, fines, and new indictments in Oklahoma, Michigan, and Puerto Rico. 

In an indictment unsealed on August 8, 2024, the Division charged Oklahoma-based Sioux Erosion Control, Inc., its vice president BG Dale Biscoe, and another employee with taking part in a price-fixing conspiracy that included over $100 million in transportation construction projects in Oklahoma. The indictment alleges that, between 2017 and 2023, Biscoe and his competitors agreed to allocate contracts and rigged bids for particular erosion control contracts by submitting intentionally high bids. 

On August 15, 2024, a Michigan judge sentenced Pontiac-based Asphalt Specialists LLC to pay a $6.5 million fine for conspiring to rig bids for asphalt-paving services in the Michigan asphalt industry. According to the January 2024 plea agreement, Asphalt Specialists and its two co-conspirators coordinated bid prices so that predetermined companies were submitting intentionally high bids that were likely to lose.

On August 30, 2024, the executive of a wholesale steel distributor in Puerto Rico pleaded guilty to conspiring with competitors to fix prices for sales of rebar used in residential and commercial construction. From 2015 to 2022—while Puerto Rico was recovering from Hurricanes Irma and Maria—Edgardo Sola Colon conspired with competitors to fix prices for steel products that were distributed to hardware stores, building contractors, and other businesses in Puerto Rico. According to the plea agreement, the conspiracy affected more than $50 million in sales.

Philippine Competition Commission Files First Major Enforcement Action Against Alleged Onion Cartel Based in Part on Evidence Collected During a Dawn Raid

Key Point: The Philippine Competition Commission exercised its new authorities to bring these novel cartel charges under the Philippine Competition Act.

In September 2024, the Enforcement Office of the Philippine Competition Commission (PCC) filed the first-ever charges against a suspected cartel under the Philippine Competition Act (PCA). The complaint charges twelve entities and individuals involved in the Philippines’ onion import industry, and alleges coordination among competitors as onion prices spiked in the Philippines in 2022 and 2023. 

According to the PCC, the defendants worked together to allocate permits for importing onions, thereby controlling supply. The PCC alleges that the defendants colluded “to lessen competition by exchanging sensitive business information such as price, suppliers, customers, volume, shipping, distribution, and storage” in violation of the PCA. Notably, the PCC’s case is built in part on evidence collected during a September 2023 dawn raid of the defendants, which was the first dawn raid pursuant to the Supreme Court’s 2019 Rule on Administrative Search and Inspection. The PCC is seeking a fine of approximately 2.4 billion Philippine pesos, or about US$43 million.

Division Officials Reaffirm Commitment to No-Poach Enforcement and to the Use of Leniency and Proactive Investigative Techniques to Make Cases

Key Point: In a series of September speeches, Division officials highlighted enforcement priorities and approaches.

In a September 9, 2024 speech, Division Deputy Assistant Attorney General (DAAG) for Criminal Enforcement, Manish Kumar, emphasized that labor market and no-poach enforcement continue to be agency priorities despite a string of losses at trial. Kumar warned that employers should not take the absence of cases pending trial as a sign that the Division’s focus on no-poach enforcement has waned. To the contrary, he revealed “a number” of active no-poach investigations and “numerous” leniency applications involving labor market conduct.

The next day, DAAG Kumar discussed the agency’s Leniency Program more generally and shared that 2023 had “one of the highest numbers of leniency applications received in the last decade.”  Under the updated leniency policy (April 2022), an applicant involved in unlawful antitrust collusion can avoid prosecution by self-reporting its participation and proactively taking remedial actions. However, the receipt of multiple applications does not speak to their merit, nor does it indicate whether those applications concern multiple products within the same industry or potential criminal conduct across multiple industries.  Kumar added that the agency is also considering other programs to incentivize whistleblowers and victims to report criminal activity.

On September 11–13, 2024, the Division’s Director of Criminal Enforcement, Emma Burnham, discussed the Division’s use of proactive and covert investigations into criminal activity, including running longer covert investigations, wiretaps, and other monitoring tools to obtain persuasive “real time evidence” for jury trials. Director Burnham described the Strike Force as “a force multiplier,” and noted the Division is considering how it might recreate a similar effect in its private price-fixing cases.

New Leadership at Mexico’s COFECE Means Further Scrutiny of Pharmaceutical and Healthcare Sectors, Among Others

Key Point: Mexico’s competition authority is fully staffed for the first time in two years, thereby reinvigorating new and existing enforcement actions.

New leadership at Mexico’s COFECE is strengthening the competition authority’s ability to act. After suffering from persistent vacancies for two years, all seven seats on the Board of Commissioners are filled. The appointments of Rodrigo Alcázar Silva and Giovanni Tapia Lezama will allow COFECE to take certain actions that require five votes, such as issuing guidelines and determining essential factors or barriers to competition.

Additionally, the chair of the Commission—Andrea Marván—has signaled her intention to utilize all of COFECE’s legal authorities. Those powers include requesting the initiation of criminal proceedings against individuals engaged in cartel conduct, launching class action lawsuits, and requesting precautionary measures during investigations. Dusting off these tools would be a watershed development: COFECE has sought the initiation of criminal proceedings only a handful of times in its history, and the Commission has never before employed precautionary measures or class action lawsuits.

These actions are likely to bolster its recent scrutiny of the pharmaceutical and healthcare sectors, which are the subject of two investigations initiated in 2022. The first involves bid rigging in the market for radiological material acquired by the National Health System. The second concerns the distribution and commercialization of scopolamine, an active ingredient in drugs that treat nausea and vomiting. Both investigations are expected to conclude in early 2025.

COFECE is already showing new signs of life. In July 2024, it announced an investigation into horizontal restraints in the public procurement of medical services for neonatal metabolic screening tests and related products. The screening tests have been mandatory in Mexico since 1998. A public announcement regarding the investigation’s findings is expected in late 2026.

Division Probes Managed Sell-Off by Banks Following Archegos Collapse

Key Point: Division is examining whether banks’ attempt to stave off losses by controlling the sale of certain stocks violated the antitrust laws. 

The Division has reopened a probe into potential coordination by banks attempting to unwind their holdings after the March 2021 collapse of Archegos, which reinforces the Division’s broad view of its investigative mandate. 

Archegos, the family office of hedge fund manager Bill Hwang, heavily invested in a handful of stocks through “swap” agreements—a derivatives contract betting on whether an asset would increase or decrease in value—with investment banks. Archegos’ banks hedged their swaps by purchasing the underlying stock; if Archegos correctly bet that a stock’s price would increase by $1, a bank would pay Archegos $1 but would also hold an asset worth $1 more, leaving the bank no worse off.

However, Archegos allegedly lied to its banks—including how it had taken near-identical positions with several creditors, leaving them with large holdings of the same stocks. In March 2021, after one of its stocks unexpectedly dropped in value, Archegos could no longer settle its swap account, which left its creditors billions of dollars in the red. Archegos (and one of its creditors) folded shortly thereafter. In April 2022, the Department of Justice indicted Hwang (and others) on charges of racketeering conspiracy, securities fraud, wire fraud, and stock manipulation. A jury convicted Hwang on all but one count in July 2024. 

Now, the Division has re-opened an investigation into whether Archegos’ banks also may have violated the antitrust laws. In March 2021, after learning of Archegos’ impending collapse, Archegos’ creditors allegedly discussed a managed sale of the Archegos stocks, purportedly to allow for a slower unwinding that would mitigate losses and avoid a massive price collapse. Not every bank appears to have signed on, but at least three appear to have reached a formal agreement to manage their own sales. 

Details on the Division’s probe remain scant, but the probe underscores a broad understanding and application of its enforcement mandate.

“Watch This Space”: Bolstered by New Competition Chief, Singapore’s Competition Watchdog Promises an Uptick in Enforcement

Key Point: Singapore’s new Chief Executive of the Competition and Consumer Commission of Singapore is promising greater scrutiny of certain sectors and expanded market studies.

On September 5, 2024, Alvin Koh, the new Chief Executive of the Competition and Consumer Commission of Singapore (CCCS), spoke with reporters about the CCCS’s heightened enforcement efforts. During the pandemic, the CCCS largely focused on merger notifications and other pandemic-specific responses. More recently, however, the CCCS has reprioritized investigations and market surveys. Koh intends for the CCCS to become a more streamlined organization that focuses its resources on areas such as aviation, digital markets, price transparency, and Singapore’s growing green energy market. 

In fiscal year 2023, Koh explained that enforcement efforts increased steadily to include eight preliminary inquiries and six completed market surveys, triple those completed in fiscal year 2022. Since the start of the 2024 fiscal year, the CCCS has issued two infringement decisions based on bid rigging in the procurement industry and conducted broader market studies, including a joint market study with the Personal Data Protection Commission of the digital advertising space in Singapore.