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ANTITRUST ALERT
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A Global Resource for Compliance Officers & Legal Advisors
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Year in Review: Criminal Enforcement by the DOJ Antitrust Division in 2023

by , , and | Feb 8, 2024 | , ,

When it comes to antitrust criminal enforcement, 2023 will be remembered as the year when the US Department of Justice’s (DOJ) Antitrust Division redefined and tested the outer boundaries of its authority. This report looks back at the key events from the DOJ’s year in criminal antitrust enforcement.

Here’s a glimpse of what’s inside:

  • Despite four straight losses and a voluntary dismissal in labor market cases, the DOJ remains undeterred in bringing additional criminal wage-fixing and no-poach suits.
  • DOJ’s Procurement Collusion Strike Force secured several guilty pleas and stiff penalties in 2023 and will most likely continue pursuing aggressive investigative and litigation strategies moving forward.
  • The nearly decade-long investigation of the generic drug industry appears to be ending after the DOJ recently resolved and dismissed the remaining cases.
  • Deputy Attorney General Lisa Monaco highlighted cybersecurity, tech and national security as areas of heightened risk and thus heightened scrutiny, so corporations in these markets should take heed of the DOJ’s emphasis on corporate compliance in 2024.

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Cartel Corner | August 2022

by , , , and | Aug 31, 2022 | , , , , ,

Without question, 2022 has been a remarkably busy time for the US Department of Justice’s (DOJ’s) Antitrust Division (Division). Over just a few months, the Division rolled out meaningful revisions to its leniency policy aimed at encouraging prompt reporting of criminal violations, announced that it will (for the first time in nearly  50 years) bring criminal monopolization cases under Section 2 of the Sherman Act, continued to increase enforcement resources, and brought a number of new cases and obtained multiple guilty pleas.

However, activity does not always mean success. If there is any theme that defines the Division’s efforts over the last quarter, it is this: If at first you don’t succeed, try, try again. That is exactly what the Division has done. It tried two labor markets cases, ultimately losing both on a new and untested legal theory. And, over strong objections from a district court, the Division pursued an unprecedented third trial against those in the broiler chicken industry, resulting in a full acquittal for all defendants. None of this, however, has deterred the Division from continuing to pursue new investigations and bring new cases under novel legal theories.

In this installment of Cartel Corner, we examine recent and significant developments in antitrust criminal enforcement and profile what the Division has highlighted as its key enforcement priorities. If the past is prologue, we are bound to see more aggressive antitrust enforcement in the months to come, testing the boundaries of current antitrust law. Whether the Division can ultimately shift those boundaries, however, remains to be seen.

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DOJ Faces Setbacks in Labor Market Prosecutions but Remains Determined

by | Apr 26, 2022 | , , ,

WHAT HAPPENED

  • On back-to-back days this month, defendants charged and prosecuted by the US Department of Justice’s Antitrust Division (the DOJ) were acquitted on all Sherman Act charges in first-of-their-kind criminal antitrust trials involving labor markets.
  • On April 14, 2022, in United States v. Jindal, a federal jury in the US District Court for the Eastern District of Texas found two defendants not guilty of violating the Sherman Act by agreeing with competitors on wages they would pay their employees. The jury found one of the defendants guilty of obstructing a Federal Trade Commission (FTC) investigation by making false and misleading statements to the FTC and concealing information.
  • The following day, in United States v. DaVita, Inc., a Colorado federal jury acquitted DaVita, Inc. and its former chief executive on all counts of violating the antitrust laws by entering into non-solicit agreements with other employers.
  • The Jindal case was the DOJ’s first attempt to criminally prosecute so-called alleged “wage-fixing” agreements. Similarly, the DaVita case was DOJ’s first criminal trial targeting alleged no-poach or non-solicit agreements between employers.
  • Historically, the DOJ pursued enforcement of alleged anticompetitive labor market practices in the civil context rather than criminally. But in 2016, the DOJ did an about-face and warned employers in its 2016 Antitrust Guidance for Human Resource Professionals that it intended to proceed criminally against “naked wage-fixing or no-poach agreements” between horizontal competitors in labor markets. The DOJ’s efforts to investigate and criminally prosecute such agreements under this new policy started ramping up publicly in late 2020.
  • The DOJ filed an indictment against Jindal in December 2020 and a superseding indictment against Jindal and another defendant in April 2021. The DOJ alleged that the defendants participated in a conspiracy to lower the rates paid to physical therapists and physical therapist assistants in north Texas. A few months later, in July 2021, the DOJ filed an indictment against DaVita and its former CEO, alleging that they conspired with competitors in the healthcare industry not to solicit each other’s employees. The DOJ returned a superseding indictment in November 2021.
  • In both cases, the district courts denied the defendants’ motions to dismiss. The Jindal court held—for the first time ever—that an alleged wage-fixing conspiracy could constitute a per se criminal violation of the Sherman Act. Similarly, the DaVita court held that no-poach and non-solicit agreements could constitute per se violations—but only if the alleged naked agreements allocate the employment market. The DaVita court refused to announce a blanket rule that all no-poach or non-solicit agreements are subject to per se
  • Despite these rulings, the juries in both cases ultimately acquitted the defendants of all antitrust charges brought by the DOJ.

WHAT’S NEXT

  • The DOJ remains committed to investigating and criminally prosecuting wage-fixing and no-poach agreements despite these early setbacks. Since the Jindal indictment in December 2020, the DOJ has [...]

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Views and Lessons from the Trenches of the First Criminal No-Poach Trial

by , and | Apr 22, 2022 |

In a landmark case of first impression, the US Department of Justice’s (DOJ) Antitrust Division (Division) indicted and brought to trial a federal criminal prosecution alleging agreements between DaVita, Inc., its former CEO Kent Thiry and other companies not to solicit each other’s employees. The case was the first criminal trial of its kind in the Division’s recent efforts to expand Sherman Act liability under Section 1 to include so-called no-poach and non-solicit agreements. Following an eight-day jury trial and two days of deliberation, a Denver jury acquitted Thiry and DaVita on all counts of the unprecedented “no-poach” conspiracy. As the district judge himself succinctly put it to the jury: this case was “a unique case in the field of antitrust law.”

This criminal prosecution in the labor markets reflects a novel and aggressive stance on expanding Sherman Act criminal liability. In pursuit of this policy shift, the Division is trying to jam a square peg into a round hole by characterizing non-solicit and no-poach agreements as per se market allocation agreements. The per se rule creates a judicial shortcut of sorts that makes it easier for the government to prosecute classic cartel conduct such as price-fixing and bid rigging. This case, and related cases, are the first time the per se shortcut has been used in a so-called labor market allocation case. This unprecedented litigation created a watershed moment for the Division’s views that non-solicit and no-poach agreements are per se illegal. The complete acquittal of both defendants and the rulings of the district judge before trial cast doubt on whether the per se standard is appropriate for “no-poach” agreements and whether such agreements should be prosecuted criminally at all.

WHERE DID THIS COME FROM?

Historically, the Division pursued enforcement of alleged anticompetitive labor market practices in the civil context, meaning fines for companies and individuals. In fact, that was the approach the Division took with no-poach and no cold call agreements entered into by major technology and railway companies. The Division engaged in a volte-face and declared it would criminally prosecute such labor market agreements for the first time in October 2016. Without an intervening act of Congress, executive order or ruling by any court, the Division warned that going forward it intended to proceed criminally against “naked wage-fixing or no-poach agreements” between horizontal competitors in the labor market. The Division declared that investigating alleged “naked wage-fixing or no-poach agreements” was a top priority. Ignoring concerns related to the separation of powers, the Division unilaterally cited its discretion and put the full weight of the government into labor market no-poach agreements. That momentum accelerated in December 2020 and continued throughout 2021, with the Division bringing 12 criminal cases against nine individuals and three companies. In short, aggressive and expansive antitrust enforcement from the DOJ is now the new normal.

DOJ SEEKS TO CREATE A NEW CATEGORY OF PER SE LIABILITY AND USES DAVITA AND THIRY AS A TEST CASE

The Division returned a superseding indictment against DaVita, Inc. and Kent Thiry on November 4, [...]

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Heard on Day One of 2022 Antitrust Law Spring Meeting

by , , , , , and | Apr 7, 2022 | , , , , , ,

This week, the American Bar Association’s Antitrust Law Section kicked off its annual Spring Meeting in Washington, DC, which features updates from the antitrust enforcers and substantive discussions on today’s most pressing antitrust issues. In this post, we share key takeaways from the first day of the Spring Meeting.

Agencies Continue to Be Hostile to M&A: Republican Federal Trade Commission (FTC) Commissioners Noah Phillips and Christine Wilson emphasized that the prevailing view under Democratic leadership at the antitrust agencies is that mergers provide no value and only carry costs.

  • Progressive leadership wants to “throw sand in the gears” to prevent deals from being proposed altogether. Recent policy changes are aimed at creating uncertainty, heightening risk and raising the transaction costs of doing deals to slow the pace of M&A activity.
  • Despite this, there was a precipitous drop in the number of FTC merger enforcement actions in the final year of the Trump administration (31) compared to the first year of the Biden administration (12).
  • There is no indication that early termination for Hart-Scott-Rodino (HSR) pre-merger notification filings will be reinstated.
  • “Close At Your Peril” letters are another tactic the agencies are using to heighten deal risk and deter parties from pursuing or consummating transactions, even though the antitrust agencies have always had the authority to investigate and challenge consummated transactions.
  • Many panelists commented on the lack of transparency between agency staff and merging parties on recent transactions. If the lack of transparency persists, it may create due process issues and problems for timing agreements that merging parties typically negotiate with staff.
  • The antitrust agencies are increasingly skeptical of the efficacy of structural and behavioral remedies to resolve competition concerns regarding a transaction. The Department of Justice (DOJ) Antitrust Division’s Principal Deputy Assistant Attorney General Doha Mekki said merging parties should expect the DOJ to reject “risky settlements” more often and instead seek to block transactions outright. Mekki said literature has shown that many merger settlements failed to protect competition.

Increased Antitrust Litigation Is on the Horizon: DOJ officials said companies should expect an increase in antitrust litigation on both civil and criminal matters.

  • The DOJ Antitrust Division has more cases in active litigation than it has had at any time in recent history. It currently has six active litigations involving civil matters and 21 ongoing litigations involving criminal matters.
  • The Antitrust Division is not considering cost as a gating factor for bringing new cases. Instead, it is bringing cases where it deems necessary to uphold the law and preserve competition. The DOJ is hiring more attorneys and using shared DOJ resources to support the increased rate of litigation.
  • The DOJ is also seeking faster access to the courts. Mekki indicated that in cases where potential anticompetitive harm resulting from a transaction is clear, the agency may file suit while an investigation remains pending and before merging parties have certified substantial compliance.

Updated Merger Guidelines Are Coming: Officials from both the FTC and [...]

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Cartel Corner | March 2022

by , , , , , and | Mar 21, 2022 | , , , , , ,

The US Department of Justice’s (DOJ) Antitrust Division (Division) has continued to actively investigate and pursue alleged criminal violations of antitrust laws and collusive activity in government procurement. US Attorney General Merrick Garland noted in a March 2022 speech at the ABA Institute on White Collar Crime that the Division ended last fiscal year “with 146 open grand jury investigations—the most in 30 years.” As we near the end of the first quarter of 2022, the Division has a record number of criminal cases either in trial or awaiting trial.

In this installment of Cartel Corner, we examine and review recent and significant developments in antitrust criminal enforcement and profile what the Division has highlighted as its key priorities for enforcement. For 2022 and beyond, those priorities are—and likely will remain—identifying and aggressively pursuing alleged violations involving the labor markets, consumer products, government procurement, and the generic pharmaceutical industry.

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THE LATEST: Employee “No-Poaching” Agreements Remain in the Antitrust Crosshairs

by , and | Feb 16, 2017 |

There have been a series of investigations, class action suits and high value settlements involving agreements not to solicit employees. In addition, the Department of Justice (DOJ) Antitrust Division made a splash a few months ago when it announced that it would criminally investigate and prosecute employers that engage in certain “naked” no-poach or wage-fixing agreements.

WHAT HAPPENED:
  • Employees filed a civil class action against the Carl’s Jr. hamburger chain because of a no-hire provision in its franchisee agreements.
  • The plaintiffs allege that Carl Karcher Enterprises (CKE), the franchisor, includes the no-hire provisions in its standard agreement to prevent its restaurants from hiring each other’s shift leaders. According to the complaint, the clause appears in the same part of the agreement that also prevents franchisees from competing for each other’s customers.
WHAT THIS MEANS:
  • The plaintiffs’ bar continues to view employee no-hire/non-solicitation agreements as a profitable area to bring class actions.
  • The DOJ’s policy guidance states that only “naked” agreements among employers will justify criminal enforcement. This means agreements that are not ancillary to some other joint competitive activity. Here, the restraint is arguably ancillary to operating a franchise chain.
  • Plaintiffs’ success likely will hinge on whether they can show that the agreement between the franchisor and its franchisees is really among separate entities rather than a single economic unit under the Copperweld
  • The Franchisor’s business justifications also are likely to be important as this litigation progresses.
  • Companies need to be sensitive to employment restrictions involving other employees such as non-solicitation or no-hire agreements.


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Detroit Nurses Object to Sixth Circuit Reviewing Class Certification Decision

by | Oct 15, 2013 | , ,

On October 11, 2013, the plaintiffs in the Detroit nurses litigation who have accused Detroit-area hospitals of conspiring to suppress their wages opposed VHS of Michigan, D/B/A Detroit Medical Center’s (DMC) petition to the Sixth Circuit for leave to appeal the district court’s decision granting class certification.

DMC had asked the Sixth Circuit to do an interlocutory appeal of a September ruling certifying a class of more than 20,000 registered nurses seeking more than $1.7 billion in damages based on a purported antitrust conspiracy among Detroit-area hospitals to reduce nurse wages.

The lawsuit was first filed in December 2006 and accuses the Detroit area hospitals of conspiring with one another to keep registered nurses’ wages low.  In particular, the lawsuit alleges that the hospitals agreed to exchange compensation information to reduce wages and competition to hire and retain Detroit nurses.  DMC is the only remaining defendant in the case.  The other seven defendants previously settled the litigation.

In September, a district court judge granted plaintiffs’ motion for class certification.  The hospital asked the Sixth Circuit to review that ruling a few weeks later.  In support of that request, DMC argued that the district court’s decision conflicts with the approach followed by other federal courts and raises important questions about the proper interpretation of the Supreme Court’s recent decision in Comcast Corp. v. Behrend, 133 S. Ct. 1426 (2013) (Comcast).

In particular, DMC argued that plaintiffs should not have been able to establish predominance through a damages model that calculated damages based in part on a theory of liability (wage fixing claim) that had already been dismissed on a motion for summary judgment.  In addition, DMC argued that the district court failed to take a “close look” at the damages model before certifying the class.

Plaintiffs argued that DMC attempted to make a strained analogy to Comcast and also criticized DMC for raising arguments on appeal that were not raised with the district court.  Plaintiffs argued that this case does not present the sort of “novel or unsettled question” of “class litigation in general” that is worthy of the Sixth Circuit’s discretionary review.

The full case name is In re: VHS of Michigan, Inc., No. 13-113 (6th Cir. filed Sep. 27, 2013).



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