Quarterly Cartel Catch-Up: Recent Developments in Criminal Antitrust for Busy Corporate Counsel – Q4 2021
Quarterly Cartel Catch-Up: Recent Developments in Criminal Antitrust for Busy Corporate Counsel – Q4 2021
The end of 2021 continued to be a busy time for antitrust enforcers in the U.S. and around the world. Perhaps most notably, in November the Senate confirmed Jonathan Kanter to lead the U.S. Department of Justice’s Antitrust Division (Division). Kanter’s arrival as Assistant Attorney General (AAG) is likely to bring more certainty and decisiveness to the enforcement landscape. As AAG Kanter makes more decisions about staffing and enforcement actions, early 2022 is likely to provide clearer signs of how well the Division’s enforcement priorities will match the ambitious antitrust agenda set forth by the Biden administration.
Below, we summarize some of the most significant developments in domestic and international cartel enforcement over the past quarter. The highlights include the first federal district court to uphold the Division’s authority to criminally prosecute wage-fixing agreements, a deadlocked jury in the first trial in the broiler-chickens investigation, new charges in the concrete industry, and a rash of new enforcement actions and resolutions in Europe. These updates and more are in the latest edition of the Quarterly Cartel Catch-Up.
Key Point: A district court validated U.S. antitrust enforcers’ push to target wage-fixing in labor markets.
On November 29, 2021, the Division’s prosecution of wage-fixing in labor markets cleared a significant hurdle when a federal district court in Eastern Texas denied the defendants’ motions to dismiss their indictments. Prosecutors alleged that Neeraj Jindal and John Rodgers—the owner and clinical director, respectively, of Fit for Life Therapy LLC—agreed with competing physical-therapist-staffing companies to reduce the pay of their physical therapists and physical therapist assistants.
The defendants argued in their motion to dismiss the indictment that wage-fixing is not a per se offense. Jindal separately argued that the charges violated his due process right to receive fair warning that his alleged conduct was criminal because the Division previously had challenged wage-fixing only through civil lawsuits. Rodgers separately argued that the indictment should be dismissed because the Division made an oral promise that it would not prosecute him.
But Judge Amos Mazzant III denied the defendants’ motions to dismiss. Although the judge “recognize[d] that the facts of this case do not present those typical of a price-fixing agreement,” he found that “courts have not limited price-fixing conspiracies to agreements concerning the purchase and sale of goods but have found them to cover the purchase and sale of services.” The judge also summarily rejected Jindal’s due process argument and Rodgers’ claim that he received an oral non-prosecution agreement.
This case, which was filed in December 2020, was the Division’s first criminal indictment of a wage-fixing scheme after the Division issued its October 2016 guidance making clear that it would prosecute this conduct criminally. By allowing this prosecution to move forward, Judge Mazzant provided the Division with a crucial first victory in its effort to enforce labor market violations criminally under the Sherman Act. After the ruling, the Division promptly notified other courts where similar motions to dismiss are pending. The timing of this decision was also significant because, two weeks later, the Division secured an indictment against six executives in the aerospace industry for an alleged no-poach agreement, which is the first example of the Division of broadening its focus on this type of conduct beyond the healthcare industry.
Key Point: The Division suffered a major setback when the jury was unable to agree on a unanimous verdict, which sets the stage for a retrial in early 2022.
On December 16, 2021, after seven weeks of trial in Denver, Colorado, Judge Philip Brimmer declared a mistrial when the jury was unable to reach a unanimous verdict on any of the 10 defendants. The Division indicted the defendants—executives from Tysons, Pilgrim’s Pride, Koch Foods, and Claxton Poultry—in June 2020 and October 2020 for their alleged roles in a conspiracy from 2012 through 2019 to fix prices and rig bids for the sale of broiler chickens to grocers and restaurants. The jury deadlocked in its deliberations, which means the fate of all 10 executives remains unresolved. Soon after the mistrial, the defendants asked for a judgment of acquittal. But the judge denied the request and scheduled a retrial to begin in February 2022.
This was the first trial in the long-running investigation into the broiler-chicken industry. In February 2021, Pilgrim’s Pride pleaded guilty and agreed to pay a criminal fine of just over $107 million for its involvement in the conspiracy. In May 2021, the Division indicted Claxton Poultry and, in July 2021, the Division indicted Koch Foods and four former executives from Pilgrim’s Pride. With a retrial and these additional charges stacking up, the Division is likely to be occupied litigating these cases for some time.
Key Point: The Procurement Collusion Strike Force continues to target fraud on government contracts by securing its first guilty plea in an ongoing investigation into bid rigging for Minnesota municipal concrete repair and construction contracts.
On September 28, 2021, the Division announced that Clarence Olson pleaded guilty to conspiring to rig bids for public concrete repair and construction contracts in the state of Minnesota. Olson currently faces a maximum penalty of 10 years in prison and a $1 million criminal fine, but has agreed to cooperate with prosecutors in their ongoing investigation. Olson is the first individual charged in connection with this investigation, as well as the first to plead guilty.
Under Minnesota law, municipalities are required to obtain two or more bids before awarding a construction contract. According to the charges, between September 2012 and July 2017, Olson and the CEO of another, unidentified company submitted coordinated bids for concrete repair and construction projects to several Minnesota municipalities. After pre-determining who would win each bid, Olson and his co-conspirator created the appearance of competition by having one company submit inflated bids while the other submitted complementary bids with an even higher price.
This plea reaffirms the Division’s commitment to the Procurement Collusion Strike Force and its continued focus on schemes that impact state and local government procurement contracts.
Key Point: Deputy Assistant Attorney General Richard Powers seeks to boost international cartel enforcement by encouraging a “more robust dialogue” about improving leniency programs.
On October 13, 2021, the Division’s Deputy Assistant Attorney General for Criminal Enforcement Richard Powers spoke at a virtual meeting of the International Competition Network and emphasized that authorities across the globe are facing a “changing enforcement landscape.” With regard to leniency programs that many jurisdictions have in place, Powers warned against “thinking what worked 10–15 years ago will lead to the same outcomes today.” Power’s speech comes during a prolonged lull in international cartel investigations by U.S. enforcers. Although leniency programs have been a powerful tool to help detect and deter cartels by rewarding members that self-report unlawful conduct with full immunity or a reduction in fines, he cautioned that these programs succeed for international cartels—which likely have exposure in more than one jurisdiction—only when companies believe that they will receive consistent and predictable treatment around the world. In prior speeches, Powers flagged that the increase in follow-on civil litigation by private parties, which are being filed earlier and earlier, imposes additional costs that may dis-incentivize cooperation between whistleblowers and enforcers.
Powers suggested that any improvements focus on the three “cornerstones” of leniency: a fear of detection, the threat of sanctions, and transparent enforcement policies. For international cartels, global enforcers must have a robust dialogue and ensure open lines of communication about their policies and, when appropriate, specific cases. “Doing that helps further transparent and predictable enforcement policies, which enables prospective leniency applicants to predict with a high degree of confidence obligations and the outcome following its leniency application,” Powers said. He added that confidentiality between enforcement officials and whistleblowers is “paramount,” and that U.S. enforcers will not disclose information from leniency applicants without their consent. In other words, enforcers know that potential leniency applicants and their counsel are watching, so the programs need to deliver what they promise.
Key Point: The DOJ Antitrust Division’s commitment to investigations in labor markets is international.
During an October 1, 2021 speech at a well-known international competition conference, then-Acting Assistant Attorney General Richard A. Powers discussed the international dimensions of the Division’s newfound focus on competition in labor markets. In particular, Powers reaffirmed the Division’s commitment to cooperation and information-sharing with international competition authorities for both civil and criminal antitrust enforcement. Powers pointed out that cross-border coordination on labor-side investigations will become increasingly important, especially as remote work becomes commonplace, because conspiracies harming one country’s workers can be hatched in another country. Citing President Biden’s executive order on promoting competition in the U.S. economy, which we have reported on previously, Powers encouraged other jurisdictions to undertake a “whole-of-government approach” to competition by working with international institutions responsible for regulating the global economy.
The Division’s international engagement parallels its domestic focus on labor market. After the October 2016 announcement that it would investigate and criminally prosecute violations in the labor market, the Division filed several criminal charges for alleged labor violations—wage-fixing, no-poach, and no-solicit agreements—in the healthcare and aerospace engineering industries. And other countries seem to be following suit. Powers praised the competition authorities in France, Italy, Indonesia, Spain, Turkey, and Mexico for their efforts to increase labor-side competition. Other countries have been active as well. The Colombian competition authority, Superintendence of Industry and Commerce (SIC), recently launched its first investigation into a potential no-poach agreement concerning División Mayor del Fútbol Profesional Colombiano (DIMAYOR), an organization in Colombia’s club soccer league. The investigation is focused on whether the club agreed with other clubs not to poach a list of at least 16 soccer players from one another between 2018 and 2021.
Key Point: The Biden administration is using antitrust tools, including investigations, to combat rising prices in several different industries across the US economy.
In July 2021, President Biden issued a sweeping executive order that called for a “whole-of-government competition policy” and deputized more than a dozen federal agencies to work in concert with the DOJ and the FTC to implement his antitrust agenda. A recent news article highlighted how the administration has been building on that executive order by calling for increased scrutiny by regulators and policy-makers alike. As a result, these federal agencies are initiating investigations, crafting new rules, and proposing new legislation.
Among other actions, the Federal Maritime Commission is looking at ocean shippers, the FTC is requesting information from major retailers, and Department of Agriculture is offering funds and issuing new rules to promote competition in the meat-processing industry. The private sector has taken notice. In early December 2021, a group of more than 6,000 farmers sent a letter asking the DOJ to investigate recent spikes in fertilizer prices. With emboldened consumers and an administration that is keen to focus on these issues, the number of industries receiving increased scrutiny through the lens of antitrust is not like to ebb any time soon.
Key Point: The European Commission conducted a series of dawn raids, an aggressive investigative technique, in multiple industries.
During the fall of 2021, the European Commission (EC) carried out dawn raids, or unannounced inspections/searches, in the wood pulp, animal health, and defense industries. In each instance, the EC publicized the raid and provided high-level details about the reason for the raid and why each industry was being investigated. The decision to search a company typically means that the EC is comfortable having its investigation become widely known, either because its investigation is far enough along or it sees value in publicizing its actions.
Notably, the EC conducted these three raids over a period of six weeks. It remains to be seen whether the timing of these raids was merely a coincidence or a warning that there may be more cartel investigations to come, especially if the EC believes that there is value because unsuspecting companies may not be well prepared.
Key Point: The European Commission continues its investigation of collusion in the financial sector as it again fined banks involved in a foreign exchange cartel.
The European Commission completed its cartel investigation into the Foreign Exchange (“Forex”) spot trading market by imposing €344 million in fines on five banks. The EC charged them under Article 101 and 53 of the TFEU, which prohibits concerted conduct and cartels. The EC determined that some traders in the Forex market exchanged sensitive information and trading plans, and coordinated their trading strategies.
The EC issued these fines based on its 2006 Guidelines. This is the third time the EC has fined banks for collusion in the Forex market. The other two settlement decisions, involving different groups of banks, were adopted in May 2019. As EC Competition Commissioner Margrethe Vestager stated, the EC is committed “to ensure[ing] a sound and competitive financial sector that is essential for investment and growth.”
Key Point: The European Commission concludes its canned vegetables industry investigation while its investigation of the ethanol industry is ongoing.
On November 19, 2021, the EC marked the end of its investigation into a canned vegetables cartel when it fined Conserve Italia and its subsidiary a combined €20 million (US $22.6 million). For more than 13 years, the companies manipulated the market for canned vegetables across Europe by fixing prices, agreeing on market shares and volume quotas, allocating customers and markets, exchanging commercially sensitive information, and coordinating their replies to tenders. The EC previously entered settlement agreements with Conserve Italia’s three co-conspirators in which they admitted to violations and received reduced fines. However, Conserve elected not to settle and the EC’s investigation ultimately resulted in this fine. This is not the first time that the EC investigated the canned food industry. The EC fined Bonduelle €30 million (US $33.4 million) in 2014and fined Spanish company Riberebro €5.2 million (US $5.8 million) in 2016 for their role in a canned mushroom cartel.
In a separate investigation into the ethanol market, the Spanish renewable energy company Abengoa SA recently admitted its involvement in an ethanol cartel and agreed to pay a €20 million (US $22.6 million) fine, which took into account an “inability to pay” claim by the company. The EC began investigating Abengoa and other major ethanol producers—Belgium’s Alcogroup and Sweden’s Lantmännen—in 2015. Enforcers found that Abengoa conspired with other market participants to fix the benchmarks used to set wholesale ethanol prices between 2011 and 2014. The EC’s investigation into Alcogroup and Lantmännen remains ongoing.