On November 5, the Department of Justice (DOJ) Antitrust Division announced a new Procurement Collusion Strike Force (PCSF). The PCSF aims to deter, detect, investigate, and prosecute antitrust crimes and related criminal schemes that undermine the integrity of the government procurement process.
Interagency partnership will consist of prosecutors from DOJ’s Antitrust Division plus 13 US Attorneys’ Offices across the US (including Washington, DC, New York, Southern District), the FBI, and four federal Offices of Inspector General.
Antitrust – What conduct to stay away from?
According to Assistant Attorney General Makan Delrahim, criminal antitrust violations such as bid-rigging, price-fixing, and market allocation distort the free market and harm customers with high prices and lower quality goods and services.
The Antitrust division has identified three types of unlawful agreements:
- Price fixing – agreement amount competitors to raise prices
- Bid rigging – typically through bid suppression, bid rotation or complementary bidding
- Customer / Market Allocation – agreement to divide market by customers, products, territories and market share.
DOJ must prove that “The alleged members of the conspiracy in some way came to an agreement or mutual understanding to accomplish a common purpose.” The evidence does not need to show that: meeting occurred or there was a formal agreement.
Results of antitrust division efforts
Top antitrust fines include:
- Citicorp – Foreign Exchange – $900 million;
- Deutsche Bank – Libor – $775 million;
- Barclays – Foreign Exchange – $650 million;
- JP Morgan Chase – Foreign Exchange – $550 million;
- Hoffman-La Roche – Vitamins – $500 million;
- AU Optronics – LCD – $500 million;
- Yazaki – Auto parts – $470 million;
- Bridgestone – Auto parts – $425 million;
- LG – LCD – $400 million;
- Air France – Air Cargo – $350 million.
Most cases are brought through DOJ Antitrust’s division Leniency Program. According to the program the first company to come forward and cooperate fully with the DOJ get a “free pass” for the company and its employees.
“Amnesty plus” – companies investigated can disclose a new antitrust case and get a “free pass” on both existing case and the new case brought up.
Leniency has been used in practice in the LIBOR, Auto parts and Air Cargo cases.
Several government contractors and individual executives were charged in connections with rigging bids and fixing prices for the supply of fuel to US military bases in South Korea.
The case resulted in guilty pleas, $156 million in criminal fines and $205 million in civil settlements.
DOJ Antitrust and Civil divisions coordinated with the Korean Federal Trade Commission and local criminal authorities.
The PCSF features
The PCSF will include:
- Training and education to Federal, state, and local agency procurement and grant officers, as well as agency auditors and investigators;
- Training and education to government contractors, their trade associations, and lawyers;
- Improving data analytics to identify red flags of collusion (DOJ’s red flags of Collusion can be found here) in government procurement data; and
- Joint investigation and prosecution of potential criminal antitrust violations in the procurement area.
The PCSF’s website is already available here.
Impact to Government Contractors
False Claims Act (“FCA”) – Additional repercussions under the FCA for:
- Knowingly submitting a false claim
- Knowingly making a false records
Damages and penalties include entire value of the contract trebled. Even if the contract is fully performed. Statutory penalties of up to $21,563 per false claim.
Cases can also lead to suspension and debarment from government contracting. This relates to no new contract, orders or contract extensions.
Importance of Corporate Compliance Programs
The DOJ antitrust announced that it will credit corporate compliance programs.
They will also determine if the Government will seek a “Felony Guilty Plea” or a “Deferred Prosecution Agreement.”
The key benefit for government contractors is that having a good compliance program will reduce the risk of debarment.
Key part of an Antitrust compliance program include:
- the design and comprehensiveness of the program;
- the culture of compliance within the company;
- responsibility for, and resources dedicated to, antitrust compliance;
- antitrust risk assessment techniques;
- compliance training and communication to employees;
- monitoring and auditing techniques, including continued review, evaluation, and revision of the antitrust compliance program;
- reporting mechanisms;
- compliance incentives and discipline; and
- remediation methods.