On February 17, 2022, the Antitrust Division of the U.S. Department of Justice (DOJ) and Federal Bureau of Investigation (FBI) announced an initiative to combat collusive schemes designed to exploit supply chain disruptions caused by Covid-19. The agencies intend to work together to prioritize existing investigations and to proactively investigate collusion in industries that have been particularly affected by supply chain disruptions, concerned that the pandemic may have opened up opportunities for competitors to fix prices for illicit gains.
In pursuit of this effort on an international level, the DOJ has assembled a working group of global peers including the Australian Competition and Consumer Commission, the Canadian Competition Bureau, the New Zealand Commerce Commission, and the United Kingdom Competition and Markets Authority. This working group is reportedly sharing intelligence and utilizing international cooperation tools to detect and prevent anticompetitive schemes to fix prices or wages, rig bids, or allocate markets.
Whole of government approach to Procurement Collusion Allegations
The DOJ and FBI have previously joined forces to pursue areas of criminal antitrust enforcement. In November 2019, the DOJ launched the Procurement Collusion Strike Force (PCSF) as a coordinated national response amongst U.S. Attorneys’ Offices, the FBI, and multiple agency inspectors general to combat antitrust schemes in government contracting at federal, state, and local levels. Since its creation, the PCSF has added a number of national partners and even expanded internationally with the Fall 2020 launch of PCSF: Global, which is designed to promote the investigation and prosecution of schemes outside of the U.S.
The PCSF’s public investigations have to date brought scrutiny in the markets for security services, aluminum structures, and concrete construction. These efforts have led to a total of USD22 million paid in criminal fines and multiple guilty pleas by corporations and individuals, including the PCSF’s first international resolution in June 2021 involving a Belgian firm which pled guilty to participating in a conspiracy to rig bids, allocate customers, and fix prices for defense-related security services. Most recently, in February 2022 a former executive of a North Carolina engineering firm was convicted for his participation in a bid-rigging conspiracy for aluminum structure project contracts involving the North Carolina Department of Transportation.
The PCSF, which has been described by its Director Daniel Glad as “a whole-of-government approach to combating a whole-of-government problem,” takes to heart the inter-agency cooperative approach encouraged in President Joe Biden’s July 2021 Executive Order on Promoting Competition in the American Economy. Glad indicated in an October 2021 speech that the DOJ sees an opportunity to “lead the way” in vigorous enforcement of the antitrust laws, and that the PCSF “sets a model” for cooperative government partnerships to aggressively protect competition.
A Spring 2021 update from the DOJ indicated that the agency has “nearly three dozen PCSF-related investigations opened to date,” with this number climbing as PCSF agents uncover additional conduct through its Tip Center, district teams, and the PCSF Data Analytics Project, which uses analytics to identify collusion and target bid rigging.
The recent success of the PCSF and proactive stance of the DOJ in tackling potential collusive behavior in specific markets presage an increase in criminal antitrust enforcement, and confirm that the agency’s reach will be bolstered through collaborations backed by the whole of government.
DOJ Focus on supply chain disruptions
The DOJ’s focus on supply chain collusion may have been born in part out of criticism from legislators and broader dissatisfaction from a public that has seen inflation accelerating to the highest level in decades. On February 8, 2022, Senator Elizabeth Warren (D-Mass.) implored Attorney General Merrick Garland and Deputy Attorney General Lisa Monaco to take more aggressive action against companies engaged in price-fixing. Warren wrote that increased demand coupled with buckling supply chains have allowed companies to grow their market power through anticompetitive means, which she implied is the root of today’s inflation.
The DOJ’s latest initiative expands the scope of its scrutiny into the transportation sector. In July 2021, the DOJ signed the first inter-agency Memorandum of Understanding with the Federal Maritime Commission (FMC) to foster cooperation between the agencies in oversight of the competitive conditions in the ocean liner shipping industry. This partnership was reaffirmed on February 28 through a joint announcement that the agencies would share resources to enhance enforcement in the maritime industry: the DOJ is to provide the FMC with the support of attorneys and economists for enforcement against violations of the Shipping Act, and the FMC has pledged to provide the DOJ with support and industry expertise in relation to antitrust enforcement actions. The DOJ’s most recent endeavor now brings other companies involved in the supply chain – those with trucking, warehousing, third party logistics, and delivery capabilities – into the crosshairs.
Key points
In partnership with the FBI, the DOJ Antitrust Division recently announced an initiative focused on collusive conduct arising from supply chain disruptions caused by Covid-19.
The announcement of this criminal enforcement priority follows on the heels of the Procurement Collusion Strike Force’s active prosecutions in 2020 and 2021, which resulted in a total of USD22 million in criminal fines and multiple guilty pleas.
The DOJ’s proactive posture in terms of criminal antitrust enforcement in recent years suggests an increase in both its activity and the activity of its national partners in the near future, posing a significant threat to those who seek to violate the antitrust laws.
