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Time to Reopen Some Antitrust Division Field Offices?

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Time to Reopen Some Antitrust Division Field Offices?

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honoreebadgeThere has been much speculation about what a Trump presidency will mean for antitrust enforcement at the Antitrust Division and Federal Trade Commission. Much of the wonder is about whether Trump will take an activist approach he suggested during the campaign, for example, when he said he thought Amazon had “a huge antitrust problem” and he voiced opposition to AT&T’s effort to acquire effort to acquire Time Warner.   Or does the placement of Joshua Wright on the transition team signal a return to a more traditional Republican “hands off” role where the pendulum swings back to a belief that the market will correct concentration issues and the concern is more to prevent wrong-headed government intervention.

I have been thinking about whether there should be any adjustment in criminal enforcement. Criminal enforcement has generally been pretty steady over various administrations. They all have shared the belief that cartels are the “supreme evil of antitrust” and that jail sentences for culpable executives is the best deterrent. Two noteworthy developments in criminal enforcement, however, come to mind. Shortly after World War II, the legendary Thurman Arnold, head of the Antitrust Division, opened field offices to combat bid rigging in the construction trades. And, in 2013, then Assistant Attorney General Christine Varney closed four of the Division’s seven regional offices. The closed offices were Atlanta, Cleveland, Dallas and Philadelphia. New York, Chicago and San Francisco remained open. I think President-elect Trump should reverse that contraction and reopen field offices.

President-elect Trump has promised a massive public procurement effort to help rebuild America’s infrastructure. Two recent international cartel enforcement items brought to mind the wisdom of ramping up regional and local enforcement efforts to deter, investigate and prosecute bid rigging on these public projects. A couple of items caught my attention as I have been thinking of this subject.

 From Canada

On December 5, 2016, the Canadian press reported that:

The Competition Bureau of Canada says its efforts to identify and prevent bid rigging in construction contracts this year has already turned up potential criminal activity — just as new federal infrastructure money begins to flow.

Pierre-Yves Guay, the bureau’s assistant deputy commissioner, said some of the educational outreach the bureau has delivered since April has resulted in illegal activities being uncovered and inquiries being launched. (here)

From Brazil

USA Today reports on December 6, 2016

So far, there are indications that at least five bids related to World Cup stadiums were the subject of the cartel,” the anti-trust body CADE said in a statement…. Reports have been widespread about corruption linked to World Cup stadiums. Investigations are also on-going involving construction projects tied to this year’s Olympics in Rio de Janeiro.  (here).

I am going to write more about why I think it would be a good investment to open additional field offices. But first, a disclaimer. I was the Chief of the dearly departed Philadelphia Field Office and went down with the ship when the office was closed in 2013. I am not lobbying for my old job back, and in fact if I were adding field offices I would not at this time put one in Philadelphia. The real value of the Philadelphia office was the talent and experience of the staff there—and that, like Humpty Dumpty, can’t be put back to together again.   I do, however, think that the regional offices in Atlanta and Dallas should be reopened.

International cartels are a worthy focus of Antitrust Division resources but it’s worth remembering that the field offices played a huge role in the development of the Division’s international cartel program. The modern era of international cartel enforcement was the Archer Daniels Midland case brought by the Chicago Field Office. The record $500 million fine and other convictions in the vitamins investigation led by the Dallas Field Office followed that.  The Philadelphia Field Office had some “firsts” with the graphite electrode investigation and the extradition, trial and conviction of British executive Ian Norris. San Francisco has had accomplishments too numerous to mention as do the criminal sections headquartered in DC with blockbusters like air cargo and auto parts. The point is that international cartels can be investigated and prosecuted wherever there are talented and dedicated antitrust enforcers. But as for regional conspiracies, I don’t believe the opposite is true. The strength of the field offices had always been their ability to network with investigative agencies from the FBI, the gamut of federal IG’s offices, state and local prosecutors and public procurement officials. These local contacts were crucial to educating agents and purchasers about antitrust violations, and giving them the information (and motivation) needed to spot and report possible collusion.

Regional conspiracies do not produce the extraordinary fines that international cartels can. But, there is merit to investigating and prosecuting regional cartels. First, the harm from bid rigging on public procurement is very focused. It isn’t a case of millions of consumers losing pennies on a purchase, but a federal, state or local entity losing a big chunk of its scarce tax dollars. Bid rigging schemes are often more effective at raising prices. They can also be very long-lasting as the structure of public procurement can make these awards both more susceptible to bid rigging and more difficult for market forces to disrupt in the short-term. For these reasons, the Sentencing Guidelines give a modest one-point bump for bid rigging, recognizing it generally has a more serious impact on the victim.

Finally, successful prosecution of a bid-rigging scheme can bring meaningful restitution to the public victim in the form of treble damages. It restores public confidence that tax dollars are being spent wisely. And the cost of publicly procured goods often sees a dramatic drop, sometimes even simply by the start of an investigation. I also think the prosecution and imprisonment of domestic price fixers and bid-riggers can generate publicity and pack more of a “deterrent punch” than prosecution of foreign executives, many whom remain fugitives.

These are just some quick thoughts on why I think a couple of field offices in strategically placed geographic areas would be a boon for antitrust enforcement. I’ll be thinking and writing more about this subject as I get some free time. But, what do you think? If you have any thoughts on the matter, I’d be happy to hear them.

Thanks for reading.  More to come.

The 3C’s: Will President Trump Revive Section 2 of the Sherman Act?

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Below is a post by Brad Geyer, my partner at GeyerGorey LLP.  As you can tell from the title of the post, it is not the typical Cartel Capers fare, but you might find it interesting.

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By Bradford L. Geyer [1]

When I concluded by summer of 2015 that our next President would be Donald Trump, my closest friends and associates were skeptical. Having grown up in the New York media market and reading the “Art of the Deal” after college, I studied Donald Trump because he was interesting. You are free to see it differently, but I see in President-Elect Trump as a strategic and tactical thinker who comes off as being spontaneous and off the cuff, but is actually in the third decade of his strategic plan. To read his books and to watch old videos shows a consistency in public policy views that is startling.

Few took President-Elect Trump seriously over the years in his statements about Antitrust, but like the protagonists in a movie, the best ones like to tell the antagonists that it’s coming.   Any mystery about President-Elect Trump’s Antitrust enforcement priorities should have been eliminated when in his “Gettysburg address” outlining his plans for his first 100 days, he blasted the media and turned his ire toward the Comcast / NBC Universal merger stating that the merged company is “trying to poison the mind of the American voter,” and said that the deal should never have been approved in the first place, and that it’s bad for democracy (here). He took his complaints further, promising action to prevent AT&T from buying Time Warner, the parent company of CNN, which he argued would concentrate too much power in one company (here). “We’ll look at breaking that deal up and other deals like it,” he vowed. “They’re trying to poison the mind of the American voter.”

President-Elect Trump has already been equally clear in expressing his thoughts about Amazon [2]:

Amazon has “a huge antitrust problem,” and (Jeff) Bezos (owner of the Washington Post and founder of Amazon.com) “thinks I would go after him for antitrust.”

– from the Twitter account of @realDonaldTrump (May 14, 2016)(here)

President-Elect Trump may have the most sophisticated view of Antitrust Law of any U.S. President in history. That experience was recently referenced by Emre N. Ilter in the National Law Review:

Mr. Trump was involved in three significant antitrust proceedings in the late 1980s and early 1990s. First, in 1988, Mr. Trump paid a $750,000 civil penalty to settle charges brought by the US Department of Justice (DOJ) and Federal Trade Commission (FTC) that he had violated the Hart-Scott-Rodino Antitrust Improvements Act (HSR Act) by acquiring stock in two companies without making timely HSR filings. Around the same time, Mr. Trump, as one of the owners of the New Jersey Generals US Football League team, was involved in a private antitrust suit against the National Football League (NFL)—a case that resulted in a jury verdict that the NFL had willfully acquired or maintained monopoly power in a market consisting of major league professional football in the United States, in violation of Section 2 of the Sherman Act. Damages of $1, trebled to $3, were awarded. US Football League v. Nat’l Football League, 842 F.2d 1335 (2d Cir. 1988). Finally, Mr. Trump, in connection with his Atlantic City casinos, was sued by Boardwalk Properties, Inc. on numerous grounds including allegations that he had attempted to monopolize casino gambling and had conspired to suppress competition. After a lengthy legal battle, Mr. Trump prevailed. (here).

Combine experience, competition sophistication and seething intensity [3] and recognize that in the early 1980’s there were 50 media companies in the United States. Now that number is 6[4]. I suspect he believes there is a significant conscious parallelism among these six companies and there seems to be tight coordination and collaboration –a common gestalt — among these organizations on a host of issues. Call it a “thought cartel”. I would suggest that recent Wikileaks disclosures are likely to have reinforced this view among him and his team of advisors who may suspect that media companies are inducing lax regulation through maximizing the benefits of close relationships of its media figures with the political apparatus.[5]  Further, is President-Elect Trump viewing AT&T, Time Warner, Amazon, Comcast and even Google [6] individually as “media and information trusts”, as he finalizes his enforcement initiatives? My hunch is that he is and that each of these companies is at risk of enhanced enforcement attention.

It is clear that President Elect-Trump understands the power of the bully pulpit and he knows that if he can get AT&T and Time Warner to abort merger discussions before “the sheriff even rides into town” that means: 1) less work for him; 2) emboldened career civil service enforcers who were gearing up to make the case for blocking it; and 3) an enhanced perception of the Antitrust Division’s power. This, before he takes the oath of office in January, means enhanced leverage on day one.

I believe that it is possible he will pick a high visibility company, possibly on the crest of the wave of an aborted AT&T deal, to break up. So what potential “trust” will it be? Amazon has attracted criticism and controversy for years. Many of the criticisms are tied to allegations of anti-competitive or monopolistic behavior.  Does President-Elect Trump agree with Paul Krugman who recently penned, “Amazon.com, the giant online retailer, has too much power, and it uses that power in ways that hurt America.”[7]  Could the Department of Justice under the leadership of an Attorney General appointed by President-Elect Trump quite credibly take the view that Amazon is the Standard Oil Company or the AT&T or the Microsoft of its day [8] and bring an action to break it up?

I am certain that President-Elect Trump will announce that enforcement of the nation’s Antitrust Laws needs to be reinvigorated and that allegations of predatory pricing and attempts to monopolize certain sectors of the economy will not be tolerated. Some might expect that a Republican administration would line up alongside lax Section 2 enforcement. It is clear, however, that whatever else might be expected in a Trump administration, based on his statements throughout the campaign, consistency with Republican orthodoxy is not that thing and affected companies would be well served to increase their outside counsel budget.

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1. Mr. Geyer is a partner in the Washington and Philadelphia-based law firm of GeyerGorey LLP. Prior to entering private practice he was a prosecutor in the Antitrust Division of the Department of Justice for 21 years. From 2007 through 2012 he served as the Antitrust Division’s Special Counsel to the Criminal Division involving “war zone” cases and investigations involving procurement fraud and grand fraud.

2.  President-Elect Trump on Hannity May 12, 2016 at 15:59 through 17:20. “[Jeff Bezos is] using the Washington Post . . . he’s using that for political purposes to save Amazon in terms of taxes and in terms of antitrust.

3.  Any member of the Antitrust defense bar who would like to get a flavor of what I suspect will be reinvigorated Antitrust Enforcement under a Trump administration would be well served to watch this video which shows Seth Rogan and President Obama roasting President Elect Trump in 2011. If you are like me, when you watch this video you see a ferocious Kodiak bear in a cage that is being poked with sticks. The Bear is not reacting, but you can tell he is going to bust out of the cage and tear the pokers to shreds … after he constructs an ingenious plan. There is something about his reaction that makes you feel uncomfortable from the first Rogan joke. You want to plead with the men with the sticks to “please just stop.”   You actually look in your hand to make sure you aren’t holding a stick and try to drop it anyway. That is called power and intensity and control. He has it and he knows how to use it.

4.  See, The Media Monopoly, 6th Edition, March 24, 2000, by Ben H. Bagdikian.

5.  For example, in an April 15, 2014 email released by WikiLeaks, Eric Schmidt, CEO of Google, proposed that a $1.5 billion Clinton Campaign vehicle be formed that, among other things, to convert each voter to a single record that aggregates all that is known about them. Are enforcers entitled to wonder if voters across the country want to be converted into a record and whether this market share in this endeavor is aided by power in Google’s core businesses? Would Google’s relationship with the Clinton campaign team regenerate an interest in their potential antitrust issues as Europe has? (When enforcers read this email does it bring the movie, “the Clockwork Orange” to mind like it did for me?).

6.  See, http://www.nytimes.com/2016/10/31/technology/google-europe-antitrust.html

7.   See, http://www.nytimes.com/2014/10/20/opinion/paul-krugman-amazons-monopsony-is-not-ok.html?_r=0

8.   Standard Oil Co. of New Jersey v. United States, 221 U.S. 1 (1911); United States v. American Tel. and Tel. Co. , 552 F.Supp. 131 (D.D.C. 1982); United States v. Microsoft Corp. , 56 F.3d 1448 (D.C.Cir . 1995).

ISRI gauging impact of coin buyback suspension

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The American Metal Market Daily is the online resource for metals industry news and proprietary pricing information covering the steel, non-ferrous and scrap markets. Since its first print issue published in 1882, AMM has been the trusted name in metals industry information.  This is what AMM has learned about growing concerns reporrted by members of and recent actions taken by the Institute of Scrap Recycling Industries, Inc. (ISRI)  on their behalf (click below to access the article):

“Collecting coins out of scrap metal is a decades-old practice—particularly since the shredder came into being, and more so since the advent of advanced metal processing technology,” he said. “If it is hurting our members as a result of pricing of zorba or through the inability to sell direct back to U.S. Mint, then obviously we need to step in.”

Antitrust in Asia: HONG KONG: June 2-3, 2016

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I wanted to pass on some information about another great ABA Antitrust Section program“Antitrust In Asia.”  The program is in Hong Kong, China on June 2-3, 2016, but early registration savings end on May 12.  The faculty includes enforcers from China, Competition Commission of Hong Kong, Competition Commission of India, Japan Fair Trade Commission, Korea Fair Trade Commission, Competition Commission of Singapore, and the U.S. DOJ & FTC.

Antitrust enforcement in Asia has taken a prominent and increasingly important place in the global competition ecosystem. This conference features leading enforcers, academics, and practitioners who will address key developments across the Asia-Pacific region, as well as provide conference attendees unique opportunities to interact with top policy-makers.  Here is a link to the full agenda, which includes: Merger Review, Enforcement Directions in Asia, Abuse of Dominance, and Private Actions.  The conference also features a “Roundtable with Enforcers From China’s AML Agencies” (Ministry of Commerce (MOFCOM), National Development and Reform Commission (NDRC) and State Administration for Industry and Commerce (SAIC)).  While the panels are always great, even better are the informal encounters with the enforcers, corporate counsel and other colleagues who attend the event.

Unfortunately, I won’t be attending.  I blew my modest international travel budget on the ABA Cartel Workshop in Tokyo, Japan in February.  Here is a short Cartel Caper blog post from that conference and a link to a conference follow-up article I wrote for Law 360 (here).  If you do attend the Antitrust in Asia conference and would like to post a blog entry about it, I’d be happy to publish it.  I am always looking to expand the international content of the blog.

Thanks for reading.

FormerFedsGroup issues White Paper Working Draft on US Mint mutilated coin program

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WASHINGTON, April 26, 2016 /PRNewswire/ — The FormerFeds Group LLC, today announced the release of its White Paper on the U.S. Mint’s Mutilated Coin Redemption Program including recommendations to improve coin redemption procedures.  This program was suspended by the Department of the Treasury in November 2015 for a review of its security processes.  The FormerFeds Group White Paper was commissioned by GeyerGorey LLP, the law firm representing Wealthy Max Limited (Wealthy Max), a claimant in a federal civil forfeiture case involving redemption of supposedly counterfeit coins.

The White Paper was produced by a team of professional researchers, analysts and retired FBI agents all working in the FormerFeds Group organization.  The document reviews the history and development of the U.S. Mint’s Mutilated Coin Redemption Program since its founding in 1911, and recent concerns about the possibility of criminal exploitation of the program.  It concludes with several policy recommendations for the Mint and Treasury Department to consider when determining how best to restructure and relaunch the program.  A copy of the White Paper can be downloaded here.

“Over the last six months the FormerFeds Group has worked closely with the Wealthy Max legal defense team to provide investigation support, internal compliance review and auditing and most recently policy research and recommendations,” saidRoy Johnson, Special Agent in Charge, FormerFeds Group LLC.  “Our investigation into this program has found no evidence counterfeit mutilated coins have ever been redeemed, yet concerns have lingered about this possibility.  This White Paper uses our research and analysis capabilities to present a neutral review of the current program, and generate practical recommendations for improvements in security that will not significantly increase costs.  We believe there is consensus among all stakeholders that the Mutilated Coin Redemption Program is worthwhile and should be maintained in a manner that addresses security concerns.  Our White Paper reflects the FormerFeds Group contribution to this discussion.”

On April 25th the White Paper was delivered to multiple officials at the U.S. Mint and is also being sent to members of the House Financial Services Subcommittee on Domestic Monetary Policy and Technology as well as senior officials from the Departments of Treasury, Justice and Homeland Security.

The primary recommendation of the FormerFeds Group White Paper is that the U.S. Mint require all large scale coin redeemers to implement a rigorous compliance program with third party validation, to demonstrate coins being redeemed are genuine U.S. currency.  Each shipment of coins would need to be inspected and validated prior to being submitted to the U.S. Mint for redemption.  The costs of the compliance program would be borne by the organizations redeeming coins and thus would not add to the government’s expenses associated with this program.

“The FormerFeds Group thinks the institution of a well-structured and documented compliance program for coin redeemers is an effective and viable approach to addressing concerns regarding the potential redemption of coins that are not genuine U.S. currency. We would welcome the opportunity to sit down with Mint officials to discuss our recommendations in greater detail,” concluded Raymond J. Carr, Special Agent in Charge, FormerFeds Group.

The FormerFedsGroup is an international provider of compliance, investigative, crisis management and business development services for private and non-government organizations.  The organization is staffed with experienced professionals, all of whom have over 20-years of experience in United States federal law enforcement.

SOURCE The FormerFeds Group LLC

Related Links

http://www.formerfedsgroup.com2015-05-29 11.34.57

Chasing the Jackpot in America’s Cash Stream-AMM

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The American Metal Market Daily attended the FormerFedsGroup.Com unsealing of 13 metric tons of Wealthy Max US clad coins in Hong Kong. American Metal Market is the online resource for metals industry news and proprietary pricing information covering the steel, non-ferrous and scrap markets. Since its first print issue published in 1882, AMM has been the trusted name in metals industry information.  This is what AMM has learned about the scrap industry and the coin redemption industry in what is a fascinating read.

Cash and Carry: The US Mint vs. Wealthy Max
Chasing the Elusive Jackpot in America’s Cash Stream 

CCC: Recommended Blog: “Grand Jury Target”

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Recommended Blog: “Grand Jury Target”

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I’ve been following a blog for a while that I find informative and interesting: Grand Jury Target: Tracking Federal Prosecutions of Corporate Executives.  The blog is by Sara Kropf, a trial lawyer in Washington, D.C.  A March 8th post was titled:  “Why Are we Falling for the Department of Justice’s Sales Pitch?  The blog recounted Ms. Kropf’s experience at the recent White Collar Crime seminar, including the constant pitches by DOJ officials to rush in to confess.

This approach—to quickly rush to DOJ to win cooperation credit—seems to be the sad reality of current white collar practice when you represent large companies. (Don’t even get me started in the antitrust amnesty program and the problematic incentives that program creates.)

Check out the blog.  I think you’ll be well rewarded for your time.

Thanks for reading this one too!

Video Highlight Reel of the Wealthy Max Compliance Audit of Unsealing of 13 Metric Tons of US Clad Coins in Hong Kong by the FormerFedsGroup

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Enclosed is the highlight reel from the Wealthy Max Compliance Audit that included the unsealing, sampling and testing of 13 metric tons of US clad coins.

American Metals Market Report on Hong Kong Unsealing by FormerFedsGroup of 13 Metric Tons of Mutilated Clad Coins Processed by Wealthy Max

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The country’s oldest and most respected metals market trade publication, AMM, attended the Hong Kong unsealing of 13 metric tons of US clad coins on February 23rd that were processed in Foshan, China by the Wealthy Max quality assurance line in September, 2014, immediately following its processing of four shipments of mutilated clad coins that were seized by the government as being counterfeit.  Now, the US Attorney’s Office of the Eastern District of Pennsylvania, which played no role in creating this mess, has, sensibly, reasonably and in good faith, has started referring to the coins as not meeting Mint specifications rather than in the preposterous terms used by the US Attorney’s Office of New Jersey and the Department of Homeland Security who, preposterously, continue to allege counterfeiting in one of the most slipshod, ramshackle and careless investigations in recent memory.  Linked here is the carefully researched article.

CCC’s: Brent Snyder’s Remarks On Individual Accountability for Antitrust Crimes

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Brent Snyder, the Antitrust Division’s Deputy Assistant Attorney General for Criminal Enforcement, made extended remarks today at the Yale Global Antitrust Enforcement Conference (here). Mr. Snyder emphasized that the Division has long believed, and acted on this belief, that holding individuals accountable for antitrust crimes was both appropriate and the best means of deterrence:

This emphasis on individual accountability is fundamental to Antitrust Division prosecutors. The division has long touted prison time for individuals as the single most effective deterrent to the “temptation to cheat the system and profit from collusion.” My predecessors ensured that this message was often repeated. To quote just one of them, Scott Hammond said that “[i]t is indisputable that the most effective deterrent to cartel offenses is to impose jail sentences on the individuals who commit them.”

Mr. Snyder also made the first remarks (I believe) on how the September 9, 2015 Yatesmemorandum (here) has affected Antitrust Division practices:

Our record with respect to individual accountability speaks for itself. But we are embracing the Deputy Attorney General’s directive to do even better. We have adopted new internal procedures to ensure that each of our criminal offices systematically identifies all potentially culpable individuals as early in the investigative process as feasible and that we bring cases against individuals as quickly as evidentiary sufficiency permits to minimize the risk that cases will be time-barred or that evidence will become stale from the passage of time. We are also undertaking a more comprehensive review of the organizational structure of culpable companies to ensure that we are identifying and investigating all senior executives who potentially condoned, directed, or participated in the criminal conduct.

It will be interesting to see how/if the Yates memo affects Division prosecution decisions in regard to how far down the cartel bench in a given company the Division may go to hold individuals accountable. After all, many cartels, particularly international cartels, can involve many employees (and former employees) of a firm.

It will also be interesting to see if the new policy memo has any effect on the Division’s Corporate Leniency Program. It can be argued that granting leniency to all culpable current employees of the leniency applicant is inconsistent with the Yates memo if the necessary cooperation could be gained at a lower cost. That may be a  topic covered in an upcoming ABA program: The DOJ Amnesty Program After The Yates Memo (here).

Thanks for reading.