CCC’s: It Is Time for an Antitrust Whistleblower Statute–Part 3

 by  Leave a Comment

This is Part Three of a four-part series of posts by myself and colleague Kimberly Justice on “It Is Time for an Antitrust Whistleblower Statute.”  Parts 1 and 2 can be found here and here.

***********************************************************************************

Note:   If the Grassley/Leahy Anti-Retaliation Act is passed, that protection would be part of the whistleblower statute. Ms. Justice and I are advocating that an antitrust whistleblower statute should go farther and provide a reward for actionable cartel-busting information.

The SEC whistleblower statute is a very successful model to be followed for a potential antitrust whistleblower statute. There should be differences in some areas (discussed below), but the SEC program has shown to be an effective tool in preserving the integrity of the nations’ securities market while conserving the investigative resources of the SEC.  But, it took a severe financial crisis to overcome the objections to an SEC whistleblower statute.  Many of the stakeholders, such as the Chamber of Commerce that opposed allowing a whistleblower award as part of the Dodd-Frank Act are likely to oppose an antitrust whistleblower statute.  But in November 2016, then SEC chair Mary Jo White said: “The whistleblower program has had a transformative impact on enforcement and that impact will only increase in the coming years.”

The success of the SEC whistleblower statute, at least from an enforcement perspective, is one reason why we think the time has come for a similar antitrust whistleblower statute.  It works.  The SEC, which pays the whistleblower 10-30% of the sanctions collected in successful actions, has rewarded 46 whistleblowers with approximately $158 million for information that has led to successful enforcement actions.

The SEC statute, like the antitrust statute we propose, is different than a typical False Claims Act-type whistleblower claim where the relator (whistleblower) brings an action in the name of the United States alleging the government has been the victim of fraud.  The SEC statute basically provides an informant with a reward (bounty) for coming forward with actionable information where the SEC obtains monetary sanctions.  The SEC, however, is precluded from making monetary awards “to any whistleblower who is convicted of a criminal violation related to the judicial or administrative action for which the whistleblower otherwise could receive an award.”

While the SEC statute provides a model, there are areas where adjustments for the nature of cartel violations may be made in an antitrust whistleblower statute.  The full SEC legislation can be found here, but below are a couple of key provisions and our suggestions about how they might be modified.

Payment of Award

The SEC whistleblower program allows for a reward, “In any covered judicial or administrative action, or related action.” 

The Antitrust Division does not have administrative actions.  An antitrust whistleblower would be eligible for an award, in our view, only based on original information that led to criminal Sherman Act convictions and the imposition of fines based on a conviction.

 Amount of Award

The SEC provides for a whistleblower award only where the penalties exceed $1 million.  In such cases the reward is an aggregate amount [if more than one whistleblower] equal to—

‘‘(A) not less than 10 percent, in total, of what has been collected of the monetary sanctions imposed in the action or related actions; and

‘‘(B) not more than 30 percent, in total, of what has been collected of the monetary sanctions imposed in the action or related actions.

In our view, this may not be an appropriate award schedule for an antitrust whistleblower.  At a minimum, the $1 million threshold should be eliminated. A whistleblower statute may be particularly effective in construction-type contracts where the loss to the victim is acute.  For example, a rigged electrical contract at a local hospital that would have been $750,000 with competitive bidding but has a low fixed bid of $1 million is as worthy of a whistleblower award as an international cartel where each consumer suffers a relatively small loss, but cumulatively the loss will easily exceed $1 million.

Also, the 10 to 30 percent award range may be excessive in a large cartel case.  The impetus behind our proposed legislation is not so much to make a whistleblower a mega-lottery winner, but to provide a way to help the whistleblower pay for what could be substantial attorney fees, and to compensate the whistleblower for what may be a long period of unemployment or underemployment, regardless of anti-retaliation protection. Therefore, we would eliminate the minimum award of 10%, leave the maximum of 30% and perhaps require that in making the award the Antitrust Division consider a) the attorney fees incurred; and b) the likely or actual loss of income over a period of time, as well as the value of the information provided, the level of cooperation and the amount of the recovery.

No Recovery for One Convicted of the Violation

No SEC whistleblower award can be made to ‘‘to any whistleblower who is convicted of a criminal violation related to the judicial or administrative action for which the whistleblower otherwise could receive an award under this section.”

             An antitrust whistleblower statute should certainly retain this provision.  It is our sense that the most likely potential antitrust whistleblowers will be lower-level employees who know about a conspiracy and take some action in furtherance of it—thus creating criminal liability for themselves.  This will give the Antitrust Division much control over who can become a whistleblower.  The Division retains the discretion whether to give non-prosecution protection, a necessary first step before an insider can become a whistleblower.  If the potential whistleblower has a level of culpability such that the Antitrust Division is not comfortable accepting as a whistleblower, the simple answer is to not grant non-prosecution protection.  Another possible scenario is that the Antitrust Division grant non-prosecution protection to a highly culpable individual (making them eligible for an award because no conviction) but write into the cooperation agreement that the cooperator waive the right to a potential “bounty.”

There may be, and hopefully will be, some whistleblowers who do not need non-prosecution protection (customers, administrative staff or others who learn of a cartel but have no role in it).  But, in practice, the Antitrust Division would have significant control over the whistleblower program because it is likely that many potential whistleblowers would have to take as a first step, negotiating non-prosecution agreements.

 Office of the Whistleblower

            A key aspect behind the success of the SEC whistleblower provision is that the SEC actively promotes the program.  The SEC established an Office of the Whistleblower.  This is an excerpt from the office’s home page:

Assistance and information from a whistleblower who knows of possible securities law violations can be among the most powerful weapons in the law enforcement arsenal of the Securities and Exchange Commission. Through their knowledge of the circumstances and individuals involved, whistleblowers can help the Commission identify possible fraud and other violations much earlier than might otherwise have been possible.

The level to which the Antitrust Division promotes a new whistleblower statute will determine its level of success.  When the Division first began the revised leniency program, it rolled it out like a new iPhone.  The Division went to great lengths to advertise the program and make the program successful in practice by working with companies to help them qualify if at all possible.  The flexibility and discretion built in to an SEC style whistleblower statute will give the Antitrust Division the ability to accentuate the features the whistleblower provisions that work best for law enforcement while mitigating any possible downside (such as very culpable people getting awards).

Miscellaneous

We’ve only touched on the most significant feature of the SEC whistleblower program that may be mimicked in an antitrust whistleblower statute.  There would be more “sausage making” into creating actual legislation.  Other features of the SEC program worth noting are the reporting requirements to Congress and the Inspector General review and report on the program.  If an antitrust whistleblower statute is nearly as effective as the SEC statute, law enforcement and consumers will be the winners.  But, if an antitrust whistleblower statute is a bad idea, it can be a short-lived bad idea.  In light of the success of the SEC program, it is prudent to give it a chance.

Thanks for reading

Robert.connolly@geyergorey.com

Kimberly A. Justice, kjustice@ktmc.com

CCC’s: It Is Time For An Antitrust Whistleblower Statute–Part 2

Objections to an Antitrust Whistleblower Statute

The idea of an antitrust whistleblower is not new, but it has never gained much traction in the past.  There have been significant objections, or at least disinterest—particularly from the Department of Justice.  The mood seemed to be “Our cup runneth over with Amnesty applications so let’s not screw this thing up.”  But, perhaps times have changed.  Our analysis is that the objections to a whistleblower statute were either superficial, or when having merit, still not enough to outweigh the benefits of a whistleblower statute.

Before considering some of the possible downside to an antitrust whistleblower statute, a little explanation of what we have in mind may be helpful.  We propose an SEC-style whistleblower statue where an informant can be awarded a level of compensation (bounty) when information of illegality leads to charges and recovery by the SEC. This is different than a False Claims Act qui tam case where a Relator brings a case in the name of the government alleging the government has been defrauded.  In fact, an antitrust whistleblower statute is needed because a qui tam case is not generally available in price-fixing matters since it is the private sector, not the government that has been harmed.

Concerns About an Antitrust Whistleblower statute

 It’s worth noting that the Criminal Antitrust Anti-Retaliation Act has been passed twice unanimously by the Senate in the last two Congresses and is up for vote again on the Senate floor.  It will no doubt pass—most likely again unanimously.  There is agreement that a person who reports criminal antitrust activity should not face retaliation in the workplace. (Despite the consensus, the House has failed to take up this bill the last two times it has passed the Senate).  There is controversy, however, about whether a whistleblower should be eligible for some type of bounty if the information leads to successful cartel prosecution and the imposition of fines.

In 2011, the General Accounting Office Published a report on Criminal Cartel Enforcement that reported stakeholders’ views on a possible antitrust whistleblower statute (here).  This is a summary of the GAO findings:

There was no consensus among key stakeholders GAO interviewed–antitrust plaintiffs’ and defense attorneys, among others–regarding the addition of a whistleblower reward, but they widely supported adding antiretaliatory protection. Nine of 21 key stakeholders stated that adding a whistleblower reward in the form of a bounty could result in greater cartel detection and deterrence, but 11 of 21 noted that such rewards could hinder DOJ’s enforcement program. Currently, whistleblowers who report criminal antitrust violations lack a civil remedy if they experience retaliation, such as being fired, so they may be hesitant to report criminal wrongdoing, and past reported cases suggest retaliation occurs in this type of situation. All 16 key stakeholders who had a position on the issue generally supported the addition of a civil whistleblower protection though senior DOJ Antitrust Division officials stated that they neither support nor oppose the idea.

The GAO report is several years old and it may be that positions have been reevaluated.  For example, I think the Antitrust Division today would support the anti-retaliation measures in whistleblower statute.  But below is an analysis of some of the objections raised to making a bounty available to an antitrust whistleblower.

Whistleblower Credibility

 The Antitrust Division’s principal concern was that jurors may not believe a witness who stands to benefit financially from successful enforcement action against those he implicated.  GAO Report p. 39.  But, a whistleblower is highly unlikely to ever be a principle witness at a trial.  An antitrust crime typically involves many culpable actors.  A whistleblower would generally “get the ball rolling” and provide evidence that will turn other witnesses, and allow subpoenas and search warrants from target companies.  Further, a single whistleblower who might receive a financial reward seems no less credible than witnesses from an amnesty company where everyone—including the highest-ranking culpable executives—will have escaped criminal prosecution.  Also, criminal antitrust trials are relatively rare—almost all cases are resolved by pleas.  Finally, it is not logical to worry about the credibility of a witness you would otherwise not even know about absent a whistleblower statute.

A Whistleblower Reward Could Result in Claims That Do Not Lead to Criminal Prosecution: 

 There was some fear expressed in the GAO report that would-be whistleblowers would fabricate information in order to conjure up a cartel in the hopes of collecting a reward.  GAO Report p. 40.  Anything is possible, but the Antitrust Division folks are pretty savvy and have standards for opening grand jury investigations.  Moreover, the possibility of fabricated charges exists today with a company applying for leniency in the hopes of knee-capping competitors who would have to deal with a criminal cartel investigation.  The reality is a “false accusation” simply wouldn’t be corroborated by anyone else and could land the accuser in jail for making a false statement.

In a similar vane, concern was expressed that a whistleblower statute may result in a deluge of complaints to the Antitrust Division that would take additional resources to sift through.  This seems like a good problem to have.  When Ms. Justice and I were at the Division, we received a fair number of complaints that amounted to no more than oligopoly pricing.  It did not take too much time to ask: “What else ya got?”

* * * * * Click Here for the Rest of the Story * * * * *

CCC’s: Criminal Antitrust Anti-Retaliation Act of 2017 Voted Out of Committee

 by  Leave a Comment

The Grassley/Leahy Criminal Antitrust Anti-Retaliation Act of 2017 was unanimously voted out of the Senate Judiciary Committee this morning and will now go to the Senate floor.  The bill has passed the full Senate unanimously twice before, but has never been taken up in the House.

The bill is an important first step in creating protection for individuals who report criminal antitrust activity.  I have advocated for a stronger whistleblower statute (here) (here) that would provide a possible financial incentive for a whistleblower to help defray what could be the substantial legal bills that may accompany involvement in an antitrust investigation, as well as provide possible reward for actionable information.  But, certainly an anti-retaliation provision should be part of any whistleblower statute.  This legislation will be a good start if the House can be persuaded to join the Senate and pass the bill.

Below is the text of the statute

Criminal Antitrust Anti-Retaliation Act of 2017

This bill amends the Antitrust Criminal Penalty Enhancement and Reform Act of 2004 to prohibit an employer from discharging, demoting, suspending, harassing, or in any other manner discriminating against an employee, contractor, subcontractor, or agent of such employer (covered individual) who: (1) provided information to the federal government or a person with supervisory authority over the covered individual (or such other person working for the employer who has the authority to investigate, discover, or terminate misconduct) concerning a violation of antitrust law or of another criminal law committed in conjunction with a potential violation of antitrust law or in conjunction with an antitrust investigation by the Department of Justice; or (2) filed, testified, participated, or otherwise assisted in an investigation relating to such a violation. This protection does not extend to any covered individual who planned and initiated such a violation or an obstruction to its investigation.

A violation with respect to the antitrust laws shall not be construed to include a civil violation of any law that is not also a criminal violation.

A covered individual who alleges discharge or other discrimination by an employer in violation of such prohibition is authorized to seek relief: (1) by filing a complaint with the Department of Labor; or (2) if Labor has not issued a final decision within 180 days of such filing, by bringing an action at law or equity in the appropriate U.S. district court. A covered individual who prevails in any such action is entitled to all relief necessary to make such individual whole, including reinstatement with the same status, back pay plus interest, and compensation for special damages sustained

Thanks for reading.  robert.connolly@geyergorey.com

CCC’s: It Is Time for an Antitrust Whistleblower Statute —Part I

 by  Leave a Comment

Kimberly Justice and I wrote an article published in Global Competition Review arguing that it is time for an “Antitrust Whistleblower Statute.”  [The article is behind a pay firewall (here).]  Kimberly and I will be expanding on this idea in Cartel Capers blog posts over the next two weeks.  Below is the first installment.  We explain why cartels are a great pond to be fishing in for informants, but a little “whistleblower” bait is needed.

***********************************************************

Over the last several years, Senators Chuck Grassley and Patrick Leahy have introduced antitrust whistleblower legislation that has passed in the Senate but died in the House.  Their proposed legislation would grant job protection to antitrust whistleblowers.  The legislation that Ms. Justice and I are proposing would go further; besides retaliation protection, we would offer potential financial reward to a whistleblower who initiated a successful cartel prosecution.

The time is right for antitrust whistleblower legislation. In 1993, the Antitrust Division revised its Corporate Leniency policy, setting the stage for similar, successful, legislation/polices to be enacted around the world.  Amnesty/Leniency rewards an entire company and its cooperating executives with non-prosecution for coming forward and reporting cartel behavior.  But leniency applications are slowing down—at least that is the perception of many observers—as the cost of obtaining leniency in terms of corporate time and attorney fees, in an expanding universe of jurisdictions, has would-be applicants reassessing the cost/benefit analysis.  A whistleblower statute would not replace, nor in our opinion undercut, leniency policies, but would add a new tool to uncover cartels that exist, and deter new cartels from forming.

There are two features of cartels that are key to understanding why an antitrust whistleblower statute would be a potent and needed weapon in the fight against cartels:

1)         There are many potential whistleblowers in virtually every price-fixing/bid rigging conspiracy.  The culpability level of the many players ranges from Masters (top-level) to Sherpas (working group guy).  Offering a potential whistleblower reward to a single cartel member still leaves a target rich enforcement of culpable executives to focus on; but

2)         It is costly for a potential whistleblower to come forward.  Any member of a cartel, even the least culpable, faces the possibility of significant jail time.  In order for a low-level cartel participant to come forward, he needs to engage a qualified attorney and negotiate a non-prosecution agreement with the Antitrust Division.  This is an expensive, potentially life changing decision.  Long-term unemployment may well follow.  Hefty attorney fees surely will.  Even the most desirable whistleblower—one with no culpability at all, such as a secretary, or customer– will not ensnare herself in a cartel investigation without some means to cover significant attorney costs and reap some compensation for doing “the right [but very costly] thing.”

Ms. Justice and I worked on two investigations which highlight these points.  The first was an international cartel investigation involving both US and foreign companies.  Within each company there were many executives—some retired—that had enough knowledge of the cartel that had they come forward, an investigation would have been opened.  If a single whistleblower had come forward, there still would have been many culpable individuals and companies left to prosecute.

Another prosecution involved a typical bid rigging scheme on a government contract.  This type of scheme is usually initiated by the owner/senior member of the company (who would not be eligible for whistleblower status).  But, it is also typical that an estimator who knows the boss has schemed with a competitor(s) is told to bump up the prices to reflect the agreement.  The estimator is liable as a participant in the cartel, but would make an excellent whistleblower.[1]

Given almost any cartel, international or local, a lower level employee could come forward and likely receive a non-prosecution/cooperation deal under the Antitrust Division’s current Individual Leniency Policy.  But the Individual Leniency Policy is almost never used because a rational person would likely prefer to lay low and hope the crime never gets uncovered than come forward, likely lose his job and have to pay an attorney to negotiate with the Antitrust Division for immunity.  Being an Antitrust Division witness is a marriage that lasts longer than many real marriages.  Criminal antitrust investigations take years, and if it is an international matter, a whistleblower will be called on to be interviewed by many jurisdictions around the globe.  Without some incentive of a reward, an individual would almost certainly not “volunteer” to assist in a cartel investigation.   Even a non-culpable witness/whistleblower such as a customer in whom a salesperson confided or a corporate administrative assistant who saw/heard incriminating information is not likely to come forward to the Antitrust Division on his/her own.

There are many potential antitrust whistleblowers.  But the disincentives to come forward voluntarily are significant.  Some “bait” is needed to entice a whistleblower:  protection from job retaliation and a financial incentive that would cover the significant costs of cooperation and perhaps even provide an “informants’’ bounty.”  The False Claims Act, the SEC and other whistleblower statutes are successful because individuals with knowledge can engage an attorney to guide them through the process in exchange for a possible award of attorney fees and a contingency fee.  The whistleblower’s attorney can develop the potential whistleblower’s claim, negotiate with the government, and represent the potential whistleblower throughout the process, all without an upfront cost to the potential whistleblower.  A former employee, for example, maybe one who has been fired or downsized—would have a way to report illegal conduct without assuming a tremendous legal bill—and even have a financial incentive to do so.

In the next blog post we will discuss some of the objections that have been raised to an antitrust whistleblower statute and why we think none of these concerns are serious enough to kill the whistleblower idea.  But, first, we’ll wrap this segment up by noting a couple of the benefits of a whistleblower statute which may be obvious:

  • A whistleblower can start a criminal cartel investigation with an insider’s view of the agreement and who is party to it. A single whistleblower does not preclude the Antitrust Division from also offering leniency, as it is unlikely one witnesses can provide indictable evidence.  But, whistleblower evidence/assistance should lead to an efficient investigation that preserves the most culpable cartel members for prosecution.
  • Like leniency, as the whistleblower tool gets used and generates publicity, it will be effective in deterring cartels from even forming. This effect is not capable of measurement, but it is logical that if a single member of a cartel (particularly lower-level Sherpas who may not be crazy about carrying out the Master’s scheme) has a means to report the cartel and be rewarded for actionable information, cartel members will have another reason to think twice before engaging in criminal antitrust behavior.

More to come.  Thanks for reading.

robert.connolly@geyergorey.com

*******************************

[1]   Where the government is a victim of a fraud—and bid rigging is a fraud—a whistleblower case can currently be brought under the False Claims Act.  There are occasional instances of bid rigging whistleblower case.  But, it would be better to have these types of cases covered by a particular antitrust whistleblower statute and better publicized with an Antitrust Division Office Whistleblower Office.

CCC’s: It’s Time For an Antitrust Whistleblower Statute

 by  Leave a Comment

Kimberly Justice and I have written an article arguing that it is time for an “Antitrust Whistleblower Statute.”  The article was published in Global Competition Review, but is behind a paid firewall (here).  Kimberly and I will be expanding on this idea in Cartel Capers blog posts over the next two weeks.  The first installment will be on Monday and explain why cartels are a great pond to be fishing in for informants, but a little “whistleblower” bait is needed. Other topics will include:
1)      An evaluation of the objections to an antitrust whistleblower statute;
2)      A survey of whistleblower related incentives offered by foreign competition agencies;
3)      A preview of what an antitrust whistleblower statute should look like; and
4)      If we receive comments/feedback, we’d like to collect and post them together.
Stay tuned.  Thanks for reading.

CCC’s: Valspar Seeks Third Circuit En Banc Rehearing on Summary Judgment Standard

 by  Leave a Comment

In a recent guest post, Richard Wolfram discussed his objections to recent First and Third Circuit decisions on summary judgment in antitrust collusion cases.  See Supreme Court Dodges Question of Antitrust Summary Judgment Standard, Higher Bar to Reach Jury Splitting Circuits, Will Valspar Be Up Next?  Mr. Wolfram wrote:

As Evergreen [First Circuit case] explained in its petition, and as applies equally in Valspar [Third Circuit case], to require that the plaintiff show by a preponderance of evidence on summary judgment that a jury would find in its favor effectively pre-empts the role of the jury, infringes on the Seventh Amendment right of the plaintiff, and is illogical, in effect raising the bar by requiring that the plaintiff satisfy the preponderance standard at both the summary judgment phase and at trial.  Inquiring minds may wonder — will Valspar be the vehicle where the Court finally addresses these issues?

The plaintiff in Valspar just filed a Petition for Panel Rehearing and Rehearing En Banc in the Third Circuit.  Echoing the comments made by Mr. Wolfram, appellant’s petition states:

En banc review is necessary because the panel’s decision eviscerates the protections of Section 1 of the Sherman Antitrust Act by making an unprecedented summary judgment standard for plaintiffs trying to prove a price-fixing conspiracy by circumstantial evidence in the Third Circuit. A majority of the panel incorrectly created a new “more likely than not” standard to evaluate circumstantial evidence at summary judgment.

Valspar’s petition is here: Valspar en banc petition.

Stay tuned.  Thanks for reading

CCC’s: A New Article on Algorithmic Collusion (Guest Post by Ai Deng PhD.)

 by  Leave a Comment

Below is a post by valued guest contributor, Ai Deng, PhD. of Bates White Economic Consulting.

*****************************

In a new article I published in Law360 last week, I discussed the following four reasons why the scope of colluding algorithms, even if they are technologically possible, could be limited:

  • Algorithmic asymmetry
  • Robust compliance
  • Observable collusive outcomes
  • Risk of class actions

The paper is titled “Four Reasons We May Not See Colluding Robots Anytime Soon” and is available here. If you do not have a subscription to Law360 but would like to have a copy, please feel free to email me at ai.deng@bateswhite.com

As always, I appreciate your thoughts and comments. You can reach me at the email above or connect with me on LinkedIn [here].

Thanks for reading.

CCC’s: Evergreen: Supreme Court Dodges Question of Antitrust Summary Judgment Standard, Higher Bar to Reach Jury Splitting Circuits. Will Valspar be Next Up?

 by  Leave a Comment

Below is a Guest Post by Richard Wolfram, counsel for Evergreen Partnering Group, Inc.  Evergreen filed suit alleging polystyrene converters and their trade association engaged in a concerted refusal to deal with the company in violation of the Sherman Act. The United States District Court for the District of Massachusetts initially dismissed the action.  Evergreen appealed and the First Circuit vacated and remanded. 720 F. 3d 33 (1st Cir. 2013).  The district court then entered summary judgment in favor of the defendants. 116 F. Supp. 3d 1.  (D. Mass. 2015). Evergreen again appealed and the First Circuit upheld the dismissal of the action.  Evergreen Partnering Group v. Pactiv Corp, et. al., 832 F. 3d 1 (1stCir. 2017).  After the First Circuit denied without comment Evergreen’s petition for rehearing, Evergreen filed a petition for certiorari with the U.S. Supreme Court.  Respondents filed an Opposition brief at the request of the Court and Evergreen filed a Reply.  (No. 16-1148.)

**************************************************************************

On October 2, 2017, the U.S. Supreme Court denied Evergreen’s petition for certiorari in its concerted refusal to deal case from the First Circuit.  Evergreen contended that the court of appeals, in dismissing the case, misinterpreted and misapplied the summary judgment standard in antitrust, and that the standard itself is the source of significant confusion and inconsistent reasoning among the federal circuits and thus calls for clarification by the Court.  Evergreen’s petition was supported by an amicus brief submitted by 12 professors of antitrust law and economics.

The Court, as is customary, gave no explanation for denying Evergreen’s petition.  The Court lost an important and timely opportunity to clarify an issue that has created tremendous confusion and inconsistency among the circuits — the proper tools for applying the summary judgment standard in antitrust.  Although the Court understandably focuses on issues of law and not fact for petitions that it accepts, one has to wonder what set of facts — with the lower court here improperly weighing evidence and making credibility determinations and applying the much-criticized equal inferences rule — would serve as a better vehicle for resolving this question.  This issue is not going away, and anyone who practices antitrust knows that. Click here and here for articles about the decision.

Confirming this comment, and on the same day, a panel of the Third Circuit Court of Appeals publicly issued a decision affirming summary judgment dismissal of a Sherman Act Section 1 oligopoly conspiracy case despite findings of 31 uniform price increases by defendants over 11 years, well over any increase in costs and despite declining demand and excess capacity.  Valspar Corp. v. Dupont,  (3d Cir., 10/2/17). Arguably pre-empting the role of the trier of fact, just as Evergreen alleged the First Circuit did in its case, the Third Circuit panel required that the plaintiff provide inferences that the alleged conspiracy was “more likely than not” rather than applying the general summary judgment standard, as repeated by the Supreme Court in Kodak, that the plaintiff show simply that a jury could reasonably find in favor of the plaintiff.  The plaintiff’s burden at trial is to prove its case by a preponderance of evidence (51%), whereas its burden on summary judgment is simply to show that a jury could reasonably find in its favor — which the Supreme Court itself has explained is less than the preponderance standard. As Evergreen explained in its petition, and as applies equally in Valspar, to require that the plaintiff show by a preponderance of evidence on summary judgment that a jury would find in its favor effectively pre-empts the role of the jury, infringes on the Seventh Amendment right of the plaintiff, and is illogical, in effect raising the bar by requiring that the plaintiff satisfy the preponderance standard at both the summary judgment phase and at trial.  Inquiring minds may wonder — will Valspar be the vehicle where the Court finally addresses these issues?  For more information on Valspar, see write-up by the American Antitrust Institute, which filed an amicus in support of the plaintiff (here).

Richard Wolfram  rwolfram@rwolframlex.com

CCC’s: Antitrust Division DAAG Delivers Remarks at International Conference

 by  Leave a Comment

The Antitrust Division’s Deputy Assistant Attorney General for International Affairs, Roger Alford delivered a speech on October 3, 2017 in San Paolo, Brazil. (here).  There were no groundbreaking announcements in the speech, but since it was the first delivered since Makan Delrahim took over as head of the Antitrust Division, I thought it might be of interest.

There were two aspects of the talk worth noting.  First, Mr. Alford highlighted the Division’s longstanding focus on holding individuals accountable:

As my colleagues at the Antitrust Division have explained before, “[h]olding companies accountable and assessing large fines, alone, are not the only means, or even the most effective way, to accomplish our goal of deterring and ending cartels. Individuals commit the crimes for which corporate offenders pay. Every corporate crime involves individual wrongdoing.” For that reason, we at the Antitrust Division have a long history of holding individuals accountable for antitrust crimes, and we have consistently touted prison time for individuals as the single most effective deterrent to criminal collusion.

The other item that caught my eye in the speech was the Mr. Alford’s reference to two Antitrust Division recent prosecutions:

  • In June of this year, Yuval Marshak was sentenced to 30 months in prison for participating in a scheme to defraud the U.S. Department of Defense.
  • In 2016, we tried and obtained the conviction of John Bennett for fraud against the United States as a result of a kickback scheme in the procurement of environmental clean-up services. He was ultimately sentenced to five years in prison.

These examples of “fraud prosecutions” are interesting because there is sometimes an internal debate in the Antitrust Division about whether only Sherman Act, (i.e. price fixing or bid rigging) charges should be brought or whether the Division has a broader mandate to prosecute what is sometimes called “corruption of the bidding process.” A “corruption of the bidding process” example would be bribing a procurement official to tailor bid specifications to favor one company.  In a hybrid case, there may be both a bribe of a procurement official and collusion among the favored bidders.

At times, investigation and prosecution of collusion on public contracts such as defense, roads, and schools has been a priority for the Division.  Public contracts are typically where collusion and bribery turn up–and jail sentences tend to be long.  The Division has limited resources, however, so when international cartels dominate, there may be few resources left to devote to public contracts.

The interesting thing about public contract investigations, is that the Division has some ability to be proactive in generating new investigations (as opposed to being reactive to leads/leniencies that come into the Division.)  When resources are available, the Division will often beat the bushes talking to federal agents and procurement officials looking for tips on possible worthwhile investigations.  It will be worth watching to see if there is any noticeable shift in emphasis under the new Antitrust Division leadership.

Thanks for reading.

CCC’s: UK’s Competition and Market Authority: [Real] Estate Agents Cartel Case Study

 by  Leave a Comment

I thought this might be of interest to readers and/or to pass on to clients.  The UK’s Competition and Markets Authority (CMA) just published a case study of their investigation of a real estate against cartel in the UK (here).   Below are the lessons learned section of the study:

What are the lessons?

  • Be careful when talking business with your competitors – make sure you don’t agree not to compete with each other.

  • Be especially wary of any conversations about pricing, or about a shared approach to pricing. Each business must set and decide its prices independently.

  • Competition law applies to small businesses as well as large ones. The estate agents in this case were small local or regional businesses.

  • The consequences of breaking competition law can be severe; fines can be as much as 10% of a business’ global turnover and a director can be banned from being a director of a company, or being involved in the promotion, formation or management of one, for up to 15 years. In the most serious cases, individuals can go to prison for up to 5 years. [In the United States the maximum prison sentence is 10 years.]

  • Competition law applies to all industries and the CMA will take action against those breaking the law.

  • The Somerset estate agents’ cartel is the second recent enforcement case the CMA has taken in the property sector. The CMA remains committed to tackling illegal anti-competitive conduct in the sector.

You can subscribe to the CMS for email updates (here).

Thanks for reading.