How the Justice Dept. Looks for Market Cheaters

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By Liz Crampton

Repeat contract winners and higher-than-expected bids are among the red flags that prompt antitrust enforcers to investigate for illegal anticompetitive conduct, a Justice Department official said.

Roger Alford, a deputy assistant attorney general in the antitrust division, offered a rare glimpse into the specifics of what investigators look for when cracking down on corrupt or anticompetitive behavior. His Oct. 3 comments in Brazil also show the government’s effort to ramp up coordination with foreign antitrust authorities, a stated priority for the new administration. Part of that cooperation comes through “transparency,” he said, so that other regulators can trust U.S. enforcers’ findings.

Conditions are “favorable to collusion” when an industry has few buyers or sellers that repeatedly try to sell to one another, there are limited substitutes, or when competitors are often in touch, Alford said. Enforcers “grow suspicious” when bids are higher than expected. They suspect collusion when the same company wins a contract repeatedly.

“Antitrust enforcers are adept at combating collusive conduct and attuned to the tell-tale signs of anticompetitive and corrupt activity,” Alford said.

Government contracting is where enforcers most often see both corruption like bribery and anticompetitive conduct like bid-rigging, Alford said. The antitrust division is charged with going after illegal bid-rigging, but the DOJ criminal division looks into illegal acts like bribery of public officials, kickbacks, or fraud. The antitrust division has worked with the Federal Bureau of Investigation in cases that show both anticompetitive acts and corruption.

The government has found “synergies in grouping these kinds of conduct together, because investigations in any one of these areas may lead to operational intelligence in the other,” he said.

Trump administration antitrust officials have made clear they intend to pursue increased international cooperation as major goal. About one-fourth of merger challenges in the U.S. involved cooperation with foreign authorities during the investigations, according to Patricia Brink, director of civil enforcement for the division.

Alford stressed that connection in his speech. “We as competition enforcers are in a unique position to observe the connection between the rule of law and economic prosperity; for this reason, our counterparts are important to us not only as partners in specific cases, but also as allies in promoting rule of law principles for the benefit of the economy and consumers everywhere,” he said.

Reliance on Whistleblowers

Alford pointed to the antitrust division’s leniency program as one of the most successful tools the Justice Department uses to prosecute criminal cartels. The program encourages corporations to self-report illegal price-fixing cartels or other misconduct like bid-rigging. If they cooperate fully in the investigations, they can avoid fines and punishment.

“Thanks to the leniency program, companies have strong incentives to review their activities, root out illegal anticompetitive conduct, and report criminal conspiracies,” he said. “Their trust in the fair enforcement of our leniency program is a key factor in our ability to detect and deter criminal activity.”

In the last days of the Obama administration, the antitrust division updated its leniency guidelines, sparking worry among practitioners that the Justice Department had narrowed the window for companies to come forward about their conduct. The guidance suggested that companies who weren’t first in line to come forward wouldn’t be given reduced penalties.

But in March, the acting head of the antitrust division at the time, Brent Snyder, reassured companies seeking leniency for criminal corporate misconduct that they would be given the same consideration they have in the past. As always, the first company to come forward with previously unknown information about a cartel won’t be prosecuted at all.

He specifically noted, however, that another type of leniency can be granted when a company self-reports conduct that the DOJ is already investigating or at least aware of. In that case, lesser penalties may be given in exchange for information.

Chasing Individuals

Alford also said the antitrust division continues to seek prison time for people accused of committing crimes like bid-rigging, which Alford said is “the single most effective deterrent to criminal collusion.”

The Justice Department has a number of long-running price-fixing investigations and has brought charges against individuals in a number of industries, such as canned seafood and real estate foreclosure auctions.

Last month, two real estate investors pleaded guilty for their role in conspiracies to rig bids at public real estate foreclosure auctions in Northern Carolina, bringing the total guilty pleas to 62.

Officials also have warned that criminal charges could result from investigations into illegal agreements in which competing companies agree not to hire each other’s employees or set their compensation.

The DOJ and Federal Trade Commission last year announced that they would go after human resources officers for “wage-fixing” and no-poaching agreements.

The agencies warned human resources professionals that they could be violating the law if they made deals with one or more people at another company about employees’ salaries or other terms of compensation (wage fixing) or if they agreed with one or more people at another company to refuse to solicit or hire that other company’s employees (no-poach agreements).

To contact the reporter on this story: Liz Crampton in Washington at lcrampton@bna.com

To contact the editor responsible for this story: Fawn Johnson at fjohnson@bna.com

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