US Antitrust Criminal Enforcement 2020 Year in Review
Despite the disruption from the COVID-19 public health crisis, criminal antitrust enforcement in the US broke significant new ground in 2020. This Year in Review of criminal antitrust prosecutions and investigations highlights some of the most important developments from the past year, including the first criminal prosecution of an alleged employee non-solicitation agreement, a wage-fixing indictment, the Antitrust Division's (the Division) new stance on deferred prosecution agreements, expanded DOJ guidance on effective corporate compliance programs, the passage of two pieces of antitrust enforcement-related legislation, and the expansion of the DOJ's Procurement Collusion Strike Force.
Employers Indicted for Labor Market Collusion
On January 7, 2021, the Division announced that a federal grand jury indicted Surgical Care affiliates LLC (SCA) for alleged non-solicitation agreements with competing healthcare companies in Texas and Colorado. The indictment alleges that SCA joined two conspiracies during the period from 2010 to 2017 in which it agreed with competitors that the companies would not solicit each other's senior-level employees in the outpatient medical care sector. SCA's alleged co-conspirators were not identified.
This case is the first publicly-disclosed criminal "no-poach" prosecution brought since the Division's 2016 announcement that it would criminally prosecute agreements among companies not to hire or solicit each other's employees. Under the 2016 "Antitrust Guidance for Human Resources Professionals," the DOJ and FTC announced that agreements among employers that constrain the terms of hiring or employment with respect to wages, benefits, job opportunities, or terms of employment may be deemed per se illegal under the Sherman Act, making them eligible for criminal prosecution under DOJ policy. Makan Delrahim, who served as Assistant Attorney General until the end of the Trump Administration, emphasized that "criminal prosecution of naked no-poach and wage-fixing agreements remains a high priority for the Antitrust Division."
In a related development, on December 10, 2020, the DOJ Antitrust Division announced a federal grand jury indictment against Neeraj Jindal, the former owner of a Texas healthcare staffing company, for wage-fixing in 2017. The indictment alleges that Jindal conspired with other staffing company owners to fix prices by lowering wages of physical therapists and physical therapist assistants to noncompetitive rates for their own gain. Jindal is also charged with obstructing the FTC investigation into the same conduct. As in the SCA case, and consistent with federal grand jury practice, Jindal's alleged unidentified co-conspirators were not named.
We expect the incoming administration to continue antitrust enforcement in labor markets, including criminal rather than civil enforcement in cases of "naked" anticompetitive conduct. In "The Biden Plan for Strengthening Worker Organizing, Collective Bargaining, and Unions," Joe Biden promised to "eliminate non-compete clauses and no-poaching agreements" to protect workers.
Antitrust Division's New Stance on Deferred Prosecution Agreements
In July 2019 the Antitrust Division announced a new policy allowing the use of deferred prosecution agreements (DPAs) to resolve criminal antitrust investigations when "relevant Factors, including the adequacy and effectiveness of the corporation's compliance program, weigh in favor of doing so." Assistant Attorney General Makan Delrahim noted that the use of DPAs, as the Justice Manual recognizes, "occup[ies] an important middle ground between declining prosecution and obtaining the conviction of a corporation." Before the 2019 announcement it had been the Division's policy not to use deferred prosecution agreements in criminal antitrust cases given the existence of the leniency program.
In March 2020, the Division announced that it had entered into a deferred prosecution agreement with Sandoz Inc., a generic pharmaceutical company charged with participating in criminal antitrust conspiracies. Sandoz agreed to pay a $195 million criminal penalty, fully cooperate with the ongoing criminal investigation, and admit that it "suppress[ed] and eliminate[d] competition by agreeing to allocate customers and rig bids for, and stabilize, maintain, and fix prices of, generic drugs sold in the United States." In return, the DOJ would defer for the term of the DPA any prosecution and trial of the charges filed against Sandoz. In entering into the DPA, the DOJ said that it considered Sandoz's timely and ongoing cooperation, which allowed the government to advance its investigation into possible antitrust conspiracies of other generic drug manufacturers, and that a conviction would likely result in Sandoz's mandatory exclusion from all federal healthcare programs, with substantial consequences to the corporation's employees and customers.
In January 2021, the DOJ also announced that it had reached a DPA with Argos USA LLC, a producer and seller of ready-mix concrete. Argos agreed to pay a $20 million criminal penalty and admitted to participation in a conspiracy to "suppress and eliminate competition by fixing prices, rigging bids, and allocating markets for sales of ready-mix concrete." The DPA also required Argos to "[r]evis[e] and enhanc[e] its antitrust compliance program to directly address the issues" and provide periodic reports to the Division regarding the implementation of the compliance program. DOJ said that it agreed to a DPA for a number of reasons, including that the illegal conduct was limited to a small number of employees who joined Argos through the acquisition of another company after the conspiracy had already begun; Argos' commitment to continuing to enhance its compliance programs and internal controls; and the actions Argos took to address the misconduct, including revising and enhancing its antitrust compliance programs, conducting specific antitrust training, and terminating the employees primarily responsible for the wrongdoing.
New Corporate Compliance Programs Guidance
As the recent use of DPAs makes apparent, the effectiveness of a company's compliance program can have a significant impact on the disposition of criminal cases, including charging decisions, plea agreements and fine calculations. In June 2020, DOJ's Criminal Division updated its guidance about the evaluation of corporate compliance programs, as described in detail in our previous Advisory. The updated guidance stresses the need for continuous program improvement guided by proactive risk assessment, and emphasizes data-driven decision making and testing, while providing additional details on how prosecutors should evaluate various aspects of compliance program effectiveness. Although this new guidance did not come directly from the Antitrust Division, we expect that it will influence the Antitrust Division's evaluation of compliance programs in the context of its own prosecutions. Notably, in 2019, the Antitrust Division issued its own "Evaluation of Corporate Compliance Programs in Criminal Antitrust Investigations," which incorporated by reference the prior Criminal Division compliance program considerations. It remains to be seen whether the Antitrust Division will update its own corporate compliance guidance to specifically reflect aspects of the Criminal Division's June 2020 Guidance.
Passage of Two Antitrust Enforcement Acts Protects Employees and Corporations
Two laws enacted in 2020 protect employees and corporations who report antitrust-related violations. The Criminal Antitrust Anti-Retaliation Act (CAARA was signed into law on December 23, 2020 and protects whistleblowers who report alleged antitrust violations to cooperate in federal investigations by prohibiting employers from retaliating against these employees. Employees who face such retaliation may file a complaint with the Secretary of Labor or bring a civil action in district court, and employees are entitled to "all relief necessary" to be made whole, including reinstatement of employment status, backpay with interest, and compensation for special damages.
The Antitrust Criminal Penalty Enhancement and Reform Permanent Extension Act (ACPERPEA) was signed into law on October 1, 2020. ACPERPEA reauthorized the Antitrust Criminal Penalty Enhancement and Reform Act (ACPERA), which empowered the DOJ Antitrust Division in its efforts to detect and prosecute anticompetitive cartel conduct. ACPERA increased the maximum Sherman Act corporate fine to $100 million, the maximum individual fine to $1 million, and the maximum Sherman Act jail term to 10 years. ACPERA also provided incentives for corporations to self-report and cooperate with the government pursuant to the Antitrust Division's Corporate Leniency Policy. The Antitrust Division's Leniency Program allows corporations and individuals to self-report cartel activity and cooperate in the DOJ's investigation to avoid serious penalties such as criminal conviction, fines and prison sentences.
DOJ Expands Procurement Collusion Strike Force
In November 2020, the DOJ announced that it was expanding the Procurement Collusion Strike Force (PCSF), formed one year ago as an interagency collaboration of federal law enforcement and prosecutorial agencies and offices across the country to combat collusion, fraud, and antitrust crimes in public procurement. In 2020, the PCSF expanded to include 11 new partners, including US Attorneys' Offices, the United States Air Force Office of Special Investigations, and Department of Homeland Security's Office of Inspector General, for a total of 29 partner agencies and offices. PCSF's primary objectives are to deter, detect and prosecute antitrust crimes in the procurement space. The partnership coordinates responses to antitrust and related crimes within government procurement, and it accepts reports from members of the public on suspected antitrust crimes that may affect public procurement. Assistant Attorney General Makan Delrahim touted PCSF's growth over the past year and predicted that it would "continue to investigate aggressively cases of price fixing, bid rigging, and market allocation" related to government procurement in the future.
As the Biden Administration begins to implement its antitrust agenda, we expect that criminal antitrust enforcement will continue to be vigorous, and effective antitrust compliance programs will remain at least as important as ever.
© Arnold & Porter Kaye Scholer LLP 2021 All Rights Reserved. This Advisory is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.