On April 4, 2022 Assistant Attorney General Jonathan Kanter Delivered Opening Remarks at 2022 Spring Enforcers Summit in Washington,  DC (here).  AAG Kanter’s remarks outlined the Antitrust Division’s approach to merger enforcement explaining, “the Division has a preference for remedies over settlements.”  Kanter outlined some of the success the Division has had in blocking certain mergers.

AAG Kanter’s remarks also covered the criminal program including important announcements about revisions to the leniency program and an updated “Frequently Asked Questions” document:

“On criminal enforcement, I am excited to announce that as of today, the division is making important updates to its leniency program. Leniency is one of the division’s most important enforcement tools for rooting out cartels because it incentivizes corporations involved in wrongdoing to do the right thing by self-reporting.

While these core incentives have not changed, the updates to the leniency policy will further promote accountability. First, under the revised leniency policy, to qualify for leniency, a company must promptly self-report after discovering its wrongful conduct. A company that discovers it committed a crime and then sits on its hands hoping it goes unnoticed does not deserve leniency.

Second, to qualify for leniency, a company must now undertake remedial measures to redress the harm it caused and improve its compliance program.

Just as important as the changes to the policy is the division’s commitment to making that policy transparent, predictable, and accessible to the public. As of today, the division’s leniency policy lives in the antitrust chapter of the Justice Manual, which is easy to find on the DOJ website and is the definitive go-to source for internal policy and guidance across the department.

Today we are also issuing an updated version of the Frequently Asked Questions about our leniency policy. Front and center in our minds when updating that document was the need to simplify and demystify our practices. The FAQs are written in plain language. And we have added nearly 50 FAQs to ensure they address all the recurring questions we’ve received — and then some. This document will make it even easier for the public to learn about leniency and understand what benefits it provides and what the division requires in return.”

The speech does not contain links to the documents but they can all be found on the Antitrust Division’s Criminal Enforcement page on its web site (here).  I’ve also provided links below:

• 7-3.400 – Antitrust Division Leniency Policy and Procedures

DOJ Justice Manual, April 4, 2022

• FREQUENTLY ASKED QUESTIONS ABOUT THE ANTITRUST DIVISION’S LENIENCY PROGRAM

Originally Published November 19, 2008, Update Published January 26, 2017, Update Published April 4, 2022

• Model Conditional Corporate Leniency Letter

April 4, 2022

I’m sure the update will be the topic of much conversation at the ABA Spring Meeting this week and more will be written about what these changes mean.

Thanks for reading.  Bob Connolly  bob@reconnollylaw.com

After two plus years of connecting with my colleagues via Zoom I am excited to be heading to Washington D.C. next week for two great competition law programs–the ABA Antitrust Spring Meeting and GCR Live–Cartels.

The GCR Live Cartel program is on Tuesday April 5, 2022 and has numerous panels covering topics such as labor markets cases, international cartels and other related issues.  I know many of the panelists so I’m sure this will be a great program. The ABA Spring Meeting follows (April 5-8). I love the ABA Spring meeting because of the wide range of panels and the outstanding panelists. The panelists (and audience) are people who have great experience and passion for competition law so I get the chance to hear what’s going on and where people think things are heading on the great issues of the day in competition law.

I have been going to the ABA Spring Meeting for many years. I joined the Antitrust Division in 1980 just as the Chicago School revolution was getting traction.  Is another revolution or evolution brewing today?  Seems so. It’s another pivotal moment in the history of antitrust law.  At some point it will be my last Spring Meeting so I will enjoy the knowledge, debate and catching up next week for sure.

Hope to see you next week.

Bob Connolly   bob@reconnollylaw.com

Yesterday Attorney General Merrick B. Garland gave an important talk to the ABA Institute on White Collar Crime (here).  The 2022 White Collar Crime National Institute in San Francisco is just ending: March 2-4, 2022.

The talk was notable for several reasons–the first being that it is wonderful to see in-person conferences again.  More to the point, AG Garland made frequent mention of the work and mission of the Antitrust Division. It is a great boost for the morale of the Division team to see that they have the interest and support of the Attorney General.  That morale is particularly boosted when the words are followed by actions and AAG Garland announced a significant funding boost for the Division and its partner, the FBI’s White Collar Crime Program.

I suggest you read the short speech in its entirety because it dealt with a number of DOJ criminal enforcement priorities including pandemic fraud and enforcement of sanctions against Russian oligarchs. Below are a few highlights related to criminal antitrust enforcement:

• Fraud, theft, corruption, bribery, environmental crime, market manipulation, and anticompetitive agreements threaten the free and fair markets upon which our economy is based.
• We will, of course, continue to hold companies accountable for their criminal conduct. Today, I want to focus on individual defendants.  As the Deputy Attorney General noted, I have made it clear that the Department’s first priority in corporate criminal cases is to prosecute the individuals who commit and profit from corporate malfeasance.
• But most important, the prosecution of individuals is our first priority because it is essential to Americans’ trust in the rule of law. As I said a moment ago: the rule of law requires that there not be one rule for the powerful and another for the powerless; one rule for the rich and another for the poor.  When people see individuals walk while their companies pay the fines, they cannot help  but think that essential principle has been violated.
• As the Deputy Attorney General reported when she spoke with you last fall, we have restored prior Department guidance making clear that, to be eligible for any cooperation credit, companies must provide the Justice Department with all non-privileged information about individuals involved in or responsible for the misconduct at issue. This means all individuals, regardless of their position, status, or seniority, and regardless of whether a company deems their involvement as “substantial.”

The Attorney General noted the accomplishments and busy schedule of the Antitrust Division’s Criminal Enforcement Program:

• The Department’s Antitrust Division has also been busy investigating and prosecuting price-fixing and other criminal violations of the antitrust laws. It ended the last fiscal year having brought 25 criminal cases against 29 individual and 14 corporate defendants, and with 146 open grand jury investigations — the most in 30 years.
•  The Antitrust Division is now trying or preparing to try 18 indicted cases against 10 companies and 42 individuals, including 8 current or former CEOs or company presidents.

And the AG’s words were backed up by financial support:

• In that regard, the President’s FY22 budget seeks increases for the Justice Department’s corporate criminal enforcement efforts. These increases extend to our 94 U.S. Attorneys’ Offices, as well as to the Criminal, Antitrust, Tax, and Environment Divisions.
•  The FY22 budget also seeks $325 million to fund more than 900 FBI agents to support the FBI’s White Collar-Crime Program.

The Attorney General closed his remarks with this warning: “As a defense attorney, prosecutor, and judge, I have also seen the Justice Department’s interest in prosecuting corporate crime wax and wane over time. Today, it is waxing again.”

Besides all the exciting intellectual debate over the “consumer welfare standard” “post-Chicago School antitrust economics” and other civil enforcement challenges, there is still a DOJ/Antitrust Division focus on the nuts and bolts of deterring, uncovering and prosecuting white collar crime; and in particular, holding individuals accountable.

There’s never been a better time for defense counsel impress upon their clients the need of serious antitrust compliance training and when necessary, continue their efforts to defend those who believe they are wrongly accused.

Thanks for reading.

Bob Connolly  bob@reconnollylaw.com

I have no expertise in predicting whether the Supreme Court will grant certiorari on any given petition. But I am hopeful that the high court will do so on the issue of whether the application of the per se rule in a criminal antitrust case is unconstitutional. I have seen a couple of items recently that may be a sign that the Court is ready to address this issue.

First, there have been a number of Supreme Court cases where the constitutional rights of criminal defendants have been strengthened/upheld. In Hemphill v. New York, No. 20-637 (January 20, 2022) the Supreme Court upheld a criminal defendant’s right to cross-examine a prosecution witness, overturning the conviction of a man who was found guilty of killing a 2-year-old boy. The defendant, Hemphill, had claimed that another man was the gunman in the stray bullet shooting. Prosecutors read to the jury the transcript testimony of this man, an unavailable witness, over the hearsay objection of the defendant. The testimony was portions of the plea allocution of the unavailable witness to possession of a gun different than the murder weapon. The Supreme Court ruled that this evidence was improperly admitted as a hearsay exception and reversed the conviction.

Another recent case is Van Buren v. United States, 141 S. Ct. 1648 (2021). In Van Buren the Court adopted a narrow reading of the Computer Fraud and Abuse Act statute and concluded that it was not violated when the defendant had legitime access to a police database but improperly accessed it for personal purposes. The Court relied primarily on the text of the statute, particularly the definition of “exceeds authorized access.”  The majority found that Van Buren was authorized to access the material he obtained and in the manner that he obtained it. He did access the information for an improper purpose but his conduct did not fall within the prohibition of the text of the statute.

Petition for Certiorari of Christopher Lischewski Challenging the Per Se Rule

Hemphill, Van Buren and other cases[1]addressing defendants’ constitutional rights have nothing to do with the per serule. There is, however, a petition for cert before the Supreme Court challenging the per se rule application in a criminal antitrust case. On December 6, 2021, Christopher Lischewski filed a petition for a writ of certiorari. Lischewski v. United States, __U.S.__ , case no. 20-10211(December 8, 2021). Lischewski was convicted of orchestrating and participating in a conspiracy to fix the price of tuna. The jury had been given a typical per se charge:

Conspiracies to fix prices are deemed to be unreasonable restraints of trade and therefore illegal, without consideration of the precise harm they have caused or any business justification for their use.

Therefore, if you find that the government has met its burden with respect to each of the elements of the charged offense, you need not be concerned with whether the agreement was reasonable or unreasonable, the justifications for the agreement, or the harm, if any, done by it. It is not a defense that the parties may have acted with good motives, or may have thought that what they were doing was legal, or that the conspiracy may have had some good results. If there was, in fact, a conspiracy to fix the prices for canned tuna as alleged, it was illegal.[2]

The “Question Presented” in Lischewski’s petition is: “…whether the operation of the per se rule in criminal antitrust cases violates the constitutional principle that every element of an offense must be submitted to a jury and proven beyond a reasonable doubt.”

On December 17, 2021, the Government filed a notice stating, “The Government hereby waives its right to file a response to the petition in this case, unless requested to do so by the Court.”  The Court replied on December 29, 2021: “Response requested.” The government’s response is due February 28, 2022. It seems interesting that the Court requested a response from the government. Does that mean that the Court may give serious consideration to granting the petition? Or that the petition caught the eye of one or more Justice? Seems so, but I don’t know. If anyone who has some expertise in this area would care to comment that would be much appreciated. 

The Supreme Court has recently denied cert in a previous appeal from the Ninth Circuit regarding the per se rule. Sanchez v. United States, case 19-288, (January 13, 2020)(cert. denied). Sanchez involved a conviction for bid rigging at public auctions. Nonetheless, defendants have continued to raise and preserve constitutional objections to the per serule in virtually (and perhaps every) current criminal price-fixing/bid rigging/market allocation case being prosecuted by the Antitrust Division. It is time for the Supreme Court to weigh in on this issue. As one Ninth Circuit judge said: I think if it’s going to get straightened out [whether the per se rule is constitutional in a criminal case] it’s going to have to require either an en banc panel of this court or more likely the Supreme Court itself.”[3]

What if the Per Se Rule Is Struck Down?

 Cartels are the supreme evil of antitrust. It says so on my blog masthead–and Justice Scalia said it first in Verizon v. Trinko, 540 U.S. 398, 408 (2004). But a robust criminal enforcement program is not as reliant on a per se rule as many think. When the government charges cartel behavior such as price fixing or bid rigging the case almost always involves secrecy, code names, covert meetings, document destruction and other fraudulent activity. The Lischewski indictment, for example, alleged the conspirators:

employed measures to conceal their conduct, including, but not limited to, using code when referring to coconspirators, meeting at offsite locations to avoid detection, limiting distribution and discouraging retention of documents reflecting conspiratorial contacts, and providing misleading justifications for prices.

US v. Lischewski, Indictment, Paragraph 10 H, Case 3:18-cr-00203-RS, filed 05/16/18 (N.D. Cal). To raise a defense that an agreement was “pro-competitive” a defendant would first have to admit that there was an agreement that he/she knew about and participated in. As a prosecutor, if you get that admission you are already rounding third base and on your way to home.  Also, eliminating the per se rule does not eliminate the Federal Rules of Evidence.  The evidence relevant to a price fixing trial need not be as expansive as the evidence relevant in a monopolization case.

There may be some cases where, without a per se rule, the government may have great difficulty proving an unreasonable restraint beyond a reasonable doubt. Perhaps those cases should not be brought as criminal cases. The per se rule was created by the Supreme Court when price fixing was a misdemeanor and there was no realistic threat of an individual going to jail. Today, the Sherman Act has a maximum penalty for an individual of 10 years in prison, which the Antitrust Division has actually sought. When lobbying Congress to pass a 10-year maximum prison sentence, the DOJ leadership stated: “the [criminal] cases that we are charging, and prosecuting are unmistakable fraud.”[4]  As long as the Antitrust Division remains faithful to that pledge, the lack of a per se rule should not deter the prosecution of hard-core cartels.

Thanks for reading.  Bob Connolly   bob@reconnollylaw.com

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[1] See generally, Joseph Mark Stern, Sotomayor and Gorsuch Resume Their Fight for the Future of the Sixth Amendment, Slate, January 7, 2019, available at. https://slate.com/news-and-politics/2019/01/sotomayor-gorsuch-supreme-court-dissent-criminal-restitution.html;  see also Mark Joseph Stern, “Neil Gorsuch and Sonia Sotomayor Team Up to Protect Criminal Defendants,” Slate November 19, 2018.  available at https://slate.com/news-and-politics/2018/11/neil-gorsuch-sonia-sotomayor-sixth-amendment-dissent.html.

[2]  As an aside, doesn’t it seem a bit odd that for a felony that carries a maximum penally of 10 years in jail, the jury is instructed that good motives and even good results are irrelevant?

[3]  Mlex, Joshua Sisco, January 16, 2019 “In foreclosure auction appeal, court questions applicability of per se standard, (protected by firewall).

[4]   Scott D. Hammond, Deputy Assistant Att’y Gen., Antitrust Div., U.S. Dep’t. of Justice, Transcript of TestimonyBefore the United States Sentencing Commission Concerning Proposed 2005 Amendments to Section 2R1.1 at 3 (Apr. 12, 2005), available at http://www.justice.gov/atr/public/ testimony/209071.pdf.

Recently I ran a post about the FTC’s interest in hiring junior attorneys:   “FTC Has the Help Wanted Sign Out.”  Yesterday the Antitrust Division, USDOJ announced that it is seeking experienced trial lawyers to serve as first and second chairs on the Division’s active and growing litigation docket.   More information from the announcement is below:

The United States Department of Justice, Antitrust Division, is seeking experienced first-chair and second-chair trial lawyers to take leadership roles on high-profile antitrust and competition cases involving challenges to anticompetitive mergers and business conduct, including monopolization cases. The attorneys hired can expect to be given significant responsibility and have immediate involvement with antitrust matters of national importance.

Senior Trial Counsel will be hired for 13-month Term Appointments, with the option of extension up to 4 years. The positions will be based out of the Division’s Washington, San Francisco, New York, or Chicago offices.  Our office places a high value on diversity of experiences and perspectives and encourages applications from all qualified individuals from all ethnic and racial backgrounds, veterans, LGBT individuals, and persons with disabilities.

Some of the required qualificators are:

• At least seven years of complex litigation and trial experience (more than 15 years preferred), with a preference for experience in civil litigation;
• Trial team leadership experience, preferably as first-chair or second-chair;
• Significant brief-writing and oral-argument experience;

For full information about these openings, see here.

Thanks for reading.

Bob Connolly              bob@reconnollylaw.com

The FTC is hiring a number of attorneys to beef up its enforcement effort in the Bureau of Competition.  The FTC calls the hiring “Continuous.”  Complete information about these openings can be found here.

The FTC’s Bureau of Competition (BC) enforces the nation’s antitrust laws, which form the foundation of our free market economy. BC is currently seeking attorneys to support enforcement work in its Litigation Divisions. Learn more about BC here.

Here are some bullet points from the FTC announcement:

• Location: Washington, DC
• Telework eligible    Yes—as determined by the agency policy.
• Salary   $89,834 – $138,868 per year
• Pay scale & grade    GS 12 – 13
•  Appointment type   Term – 14 months – NTE 4 years.  This is a TERM appointment in the Excepted Service and will be filled on a full-time basis.

I had a career in government service with the Antitrust Division, Department of Justice and never regretted a moment of my time so I’m happy to be able to pass on this information for your consideration.

Bob Connolly             bob@reconnollylaw.com

On November 29, 2021 in U.S. v.  Neeraj Jindal and John Rodgers, Civil Action No. 4:20-CR-00358A (N.D. Texas), District Court Judge Amos L. Mazzant rejected defendants’ motion to dismiss the indictment on various grounds, including challenges to the per se rule. Among  other arguments, defendants argued that “wage-fixing” was not covered by the Sherman Act because it did not involve the purchase and sale of goods. Defendants also argued that courts did not have enough experience with wage-fixing (this was the government’s first wage-fixing indictment) to label the conduct a per se violation.

The indictment charges Neeraj Jindal, the former owner of a physical therapist staffing company, and John Rodgers an ex-director of the company, with a per se Sherman Act violation by agreeing to fix the wages paid to physical therapists and therapist assistants in the Dallas-Fort Worth area.

Judge Mazzant wrote a thoroughly researched and well-reasoned opinion finding that the per se rule applied to an agreement to fix wages. The opinion dealt with number of issues raised but in this blog post I discuss two important aspects of the Court’s ruling.  The full opinion is well worth reading (here).USvJINDAL20211129.

The Per Se Rule Applies to Buyers as Well as Sellers

Judge Mazzant recognized that the facts of the case were unusual.  This was the first ever criminal wage fixing case brought by the Antitrust Division. Price-fixing cases nearly always involve the sale of good with the restraint resulting in increased prices for consumers.  A successful wage-fixing conspiracy could arguably reduce the price paid by consumers–if the savings in suppressed wages was passed on. Nonetheless, the Court found that “[J]ust because the typical price-fixing conspiracy involves certain hallmarks does not mean that other less prevalent forms of price-fixing agreements are not likewise unlawful.”  The Court noted that price-fixing agreements among buyers have been condemned as per seviolations citing Mandeville Island Farms, Inc. v. Am. Crystal Sugar Co., 334 U.S. 219, 235 (1948)(“It is clear that the agreement is the sort of combination condemned by the Act, even though the price-fixing was by purchasers, and the persons specially injured . . . are sellers, not customers or consumers.”) and Nat’l Macaroni Mfrs. Ass’n v. Fed. Trade Comm’n., 345 F.2d 421, 426–27 (7th Cir. 1995)(finding a price-fixing agreement among manufacturers to standardize the composition of their product in an effort to depress the price of an essential raw material to be illegal per se).

The Per Se Rule Covers All Price Fixing Schemes Even If it Is The First Time an Industry Has Been Targeted.

The defendants also argued that the per se rule applies only after the courts have had enough experience with a particular restraint to find that it always or almost always would restrain trade and since this was the first ever wage-fixing case, that threshold was not met here.  “Defendants contend that agreements are deemed unlawful per se “only after courts have had considerable experience with the type of restraint at issue” (Dkt. #36 at p. 10)(quoting Leegin, 551 U.S. at 886).”  The Court wrote that judicial experience is needed to create a new per se rule, “Judicial experience informs the decision to recognize a “new per serule.”  But price-fixing is not a new per se rule and judicial experience is not needed in every industry before applying the established per se rule against price-fixing to a new form. (“As courts have recognized, price-fixing agreements come in many forms.”).  After surveying many cases Judge Mazzant wrote:

“the definition of horizontal price-fixing agreements cuts broadly. As such, any naked agreement among competitors—whether by sellers or buyers—that fixes components that affect price meets the definition of a horizontal price-fixing agreement. See Socony-Vacuum, 310 U.S. at 221.”

The Court concluded, “The indictment thus alleges a naked price-fixing conspiracy among buyers in the labor market to fix the pay rates” and “As such, the indictment describes a price-fixing conspiracy that is per se unlawful.”

Judge Mazzant also quoted higher authority, Justice Kavanaugh, who wrote in his concurrence in National Collegiate Athletic Ass’n v. Alston, 141 S. Ct. 2141 (2021): “Price-fixing labor is price-fixing labor. And price-fixing labor is ordinarily a textbook antitrust problem because it extinguishes the free market in which individuals can otherwise obtain fair compensation for their work.” Id. at 2167–68 (Kavanaugh, J., concurring) (citations omitted).

I wholeheartedly agree with Justice Kavanaugh and Judge Mazzant.  In an earlier blog post I wrote:

“Labor is an input for making any product. Businesses can’t collude with competitors about the price they will pay for inputs to make a product or to allocate suppliers.  Think about a company that produces widgets.  This widget requires copper wire, glass products, machinery and labor.  It seems obvious (hopefully) that an executive in one company cannot call a competitor and say, “Let’s agree to not pay any more than X for the copper?”  Or “If you don’t solicit quotes from my supplier, I won’t from yours.”  Labor is also an input.  Why would it be OK to call a competitor and say, “Let’s agree not to pay any more than X per hour” for the input of labor?”  https://cartelcapers.com/blog/prosecutors-focus-on-labor-market-collusion-sharpens-the-need-for-compliance-training/,  November 15, 2021.

Will There Problems With the Per Se Rule Down the Road? (Or In the Supreme Court?)

While I agree that the per se rule applies to labor markets with the same force (and exceptions for ancillary agreements) as it does to other markets, there are two points of blackletter law relied on in Judge Mazzant’s opinion that I believe may eventually be overturned by the Supreme Court and lead to the ultimate demise of the per se rule in any criminal antitrust cases.

The Court As Fact Finder On An Element Of the Offense

Judge Mazzant correctly noted that, “Whether the allegations in an Indictment constitute a per se violation is a legal question for the court.”  But under the per se rule the court is the finder of fact on an element of the offense: whether the agreement constituted a “restraint of trade” beyond a reasonable doubt.  I doubt, under current Supreme Court jurisprudence, whether the court can do that.  It reminds me of a case when I was Chief of the Antitrust Division’s Philadelphia Field Office.  We prosecuted and convicted a defendant for making a false statement.  The trial court, as every court before it had done, found that the “materiality” element of the statement/offense was an issue for the court to decide.  The  conviction was overturned as a companion case to United States v. Gaudin, 115 S.Ct. 2310 (1995), where the Supreme Court reversed long standing precedent and held that materiality is an issue to be determined by the jury. The Supreme Court explained that if materiality is an element of the offense, that element must be submitted to the jury, and the jury must find materiality beyond a reasonable doubt to convict.  Whether an agreement constitutes a “restraint of trade” is an element of the Sherman Act (indeed the very conduct Section One condemns) so it follows that a jury must make that finding.  Reading Judge Mazzant’s correct statement, that whether the per se rule applies is a matter of law, gives me a flashback to how surprised we were (but ultimately agreed) when the Supreme Court ruled in Gaudin.  Is the antitrust bar in for a big surprise if the per se rule challenges ever reach the Supreme Court?

Did the Sherman Act or the Supreme Court Create the Per Se Rule?

Judge Mazzant also correctly notes that under current jurisprudence the Supreme Court has created two substantive rule for analyzing restraints of trade: the per se rule and the rule of reason. (“In determining whether a restraint is unreasonable, and thus unlawful, courts use one of two rules of decision [per se and rule of reason].”). This is another passage I’ve read hundreds of times as a prosecutor and never had pause–it is, after all, blackletter law. But can the Supreme Court do that?  Well, they did.  But will the current Supreme Court have a different view?

One problem with having a per se rule and rule of reason may be that a textualist Supreme Court may fail to see those words in the text of Section One of the Sherman Act. Do these three words “restraint of trade” set forth a per se rule and/or a rule of reason? That’s a curious and expansive way to read “restraint of trade” and not one to be found in any dictionary.  Could it be that in a criminal antitrust case, the proper interpretation of the Sherman Act Section One would be to put it to the jury whether the restraint alleged existed and whether it was a restraint of trade?[1]  And if the Supreme Court created the two substantive rules, (per se and rule of reason), is that not judicial legislation?  Justice Gorsuch Justice wrote in one of his last opinions while on the 10th Circuit Court of Appeals, explaining  the court’s job: “[I]t is (or should be) emphatically to apply, not rewrite, the law enacted by the people’s representatives.”  A.M. ex rel. FM v. Holmes, 830 F.3d 1123, 1170 (10th Cir. 2016).  How then might a court apply the Sherman Act as written.  I believe that in every Sherman Act Section One indictment, the question should be put to the jury “Is the agreement [if you find one] a restraint of trade?”  This does not mean every criminal trial will be a wide open for requiring evidence of product market, market power, etc.  Instead the concepts of per se, quick look and rule of reason are not substantive rules, but are guideposts under the Federal Rule of Evidence 401 and 403 of what is relevant evidence given the particular charge in the case.

Congress, of course, could amend the Sherman Act to actually say, “Price fixing, bid rigging and market allocation are per se illegal.”  Condemning price-fixing is still among a shrinking number of policies that have bipartisan support.

Challenges to the per se rule have appeared in various forms in almost every recent criminal antitrust case.  Lower courts will almost certainly continue to bat down these challenges with ample precedent, including, of course, Supreme Court precedent establishing the per se rule.  At oral argument in the Ninth Circuit on a per se challenge one panelist commented, “I think if it’s going to get straightened out [whether the per se rule is constitutional] it’s going to have to require an en banc panel of this court or more likely the Supreme Court itself.”  I have written before about what I perceive to be fatal flaws in the use of the per se rule in criminal antitrust cases, see e.g., The End is Near For the Per Se Rule in Criminal Sherman Act Cases, April 2019, and since then, in numerous blog posts.  I am hoping to revise my writing on this issue with some new thoughts and discussion of recent cases.

I would be most grateful if anyone cares to give feedback from “Connolly, you’re an idiot” to “Have you thought about…”  Please contact me if you’d like to discuss.  bob@reconnollylaw.com (215) 219-4418.

Thanks for reading. 

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[1]   From watching television shows  about UFO’s and aliens, I’ve learned a good way to hedge your bets is with statements like “Could it be…?” “Some people say….” ”Is it possible?,” etc.

Bob Connolly, bob@reconnollylaw.com

In an October 16, 2016 FTC/DOJ press release: FTC and DOJ Release Guidance for Human Resource Professionals on How Antitrust Law Applies to Employee Hiring and Compensation the Antitrust Division first announced: “Going forward, the Justice Department intends to criminally investigate naked no-poaching or wage-fixing agreements that are unrelated or unnecessary to a larger legitimate collaboration between the employers.” The Antitrust Division has since made good on that promise with several criminal cases, some involving individuals as defendants, currently in the courts.  See, United States v. Jindal, No. 4:20-cr-00358 (E.D. Tex. Dec. 9, 2020); United States v. Surgical Care Affiliates, LLC, No: 3-21-CR0011-L (N.D. Tex. Jan. 5, 2021); United States v. Hee et al., No. 2:21-cr-00098-RFB-BNW (D. Nev. Mar. 30, 2021); United States v. DaVita, Inc., No. 21-cr-00229-RBJ (D. Colo. July 14, 2021).

The focus on labor market collusion is not a passing interest of the Antitrust Division.  On October 1, 2021, Acting Assistant Attorney General Richard A. Powers of the Antitrust Division spoke about the history of and commitment to enforcing the antitrust laws, including criminal enforcement, in labor markets:

If it was important for enforcers to protect competition in labor markets decades ago — and I believe it was — it is essential now.”  [Powers added:] “Importantly, criminal prosecution of labor market conspiracies is the tip of the spear; the Division’s focus on labor markets extends beyond its cartel program. The Division is also committed to using its civil authority to detect, investigate, and challenge anticompetitive non-compete agreements, mergers that create or enhance monopsony power in labor markets, the unilateral exercise of monopsony power, and information sharing by employers.

The speech can be found (here). The FTC and States have also been active in bringing civil cases challenging “no-poach” labor agreements.  Finally, enforcers around the globe have also been making labor market collusion investigations a top priority.  Recently EU Competition Commissioner Margrethe Vestager emphasized the EU focus on competition in labor markets due to “no-poach” deals.  Vestager said individuals are negatively effected “when companies collude to fix the wages they pay or when they use so-called ‘no-poach’ agreements as an indirect way to keep wages down, restricting talent from moving where it serves the economy best.”  See EU’s Vestager warns of more anti-cartel raids, criticises ‘no-poach’ deals,  Reuters, By Foo Yun Chee, October 22, 2021.  A list of various foreign enforcers’ cases involving labor market collusion can be found in Mr. Powers’ speech.

Education on Labor Market Collusion Should be a Top Priority for Compliance Training

In the criminal labor market collusion cases the Antitrust Division has recently filed, the parties are “duking it out” as to whether the labor market agreements fall within the per se rule or should be judged by the rule of reason.  There are skilled lawyers on both sides of the issue and it will be fascinating to see how the cases turn out.  My own view is that, while I think applying the per se rule in criminal antitrust cases is unconstitutional, see Cartel Capers, Supreme Court Review Sought for Per Se Rule in Criminal Cases, as long as there is a per se rule, [and there is], the same rules should apply to labor/wages.  But, whether a case is per se criminal case or a rule of reason civil case seeking damages, there are good reasons to educate executives involved in the hiring/personnel decisions to try to avoid any litigation.

Benefits of Compliance Training for Labor Market Collusion

•  AVOIDING LITIGATION

The number of actions brought by enforcers at every level indicates that there has been a serious deficiency in compliance training.  It has only been since late 2016 that the Antitrust Division has stated that it would treat naked price fixing and “no-poach agreements as criminal violations.  It would be possible, therefore, that this “side of the house” may have been neglected or underrepresented in whatever compliance training may have been provided.  It appears labor market agreements among competitors developed and some at least are seemingly ongoing.

• COMPLIANCE CREDIT

The Department of Justice and the Antitrust Division give credit for compliance programs that meet certain criteria  See U.S. DEP’T JUSTICE, CRIMINAL DIV., EVALUATION OF CORPORATE COMPLIANCE PROGRAMS, updated June 2020, Antitrust Division Announces New Policy to Incentivize Corporate Compliance, July 11, 2019; Antitrust Division, USDOJ, Evaluation of Corporate Compliance Programs in Criminal Antitrust Investigations, July 11, 2019.  In a recent speech, Deputy Attorney General Lisa O. Monaco highlighted the incentives for a company to have a compliance program before the government not so gently indicates that one is needed:

“A company can fulfill its fiduciary duty to shareholders and maintain a commitment to compliance and lawfulness. In fact, companies serve their shareholders when they proactively put in place compliance functions and spend resources anticipating problems. They do so both by avoiding regulatory actions in the first place and receiving credit from the government. Conversely, we will ensure the absence of such programs inevitably proves a costly omission for companies who end up the focus of department investigations.”

DAG Monaca’s remarks can be read (here), watched on video (here), and the DAG’s related memo can be read (here). 

• DUTY TO EMPLOYEES

DAG Monaco’s remarks emphasize a company’s fiduciary duty to shareholders.  I’d like to also emphasize a corporation’s duty to its employees.  When I was with the Antitrust Division it was personally disturbing to investigate and sometimes prosecute executives who found themselves involved in a criminal investigation and had never had any antitrust training.  To be sure, I think most executives have a “gut feeling” that price fixing and bid rigging are not ethical business practices, but many executives had a serious underappreciation of the length and stress of a criminal antitrust investigation and the fact they could face 10 years in jail.  Even if an executive obtains immunity and becomes a government witness, a criminal antitrust investigation is one of the most stressful things an executive–and his or her family–may ever deal with.  Even civil cases are a serious problem for employees as well as their company. Employees may “groan” or “roll their eyeballs” if they are scheduled for more compliance training (I may have done that occasionally with all the training we received at DOJ) but the threat of criminal prosecution and a jail sentences should perk up an audience quickly.

Some Suggestions For Compliance Training

I’ll offer some suggested compliance guidance regarding labor market collusion for human resource employees and others involved in the hiring process. Disclaimer:  This is by no means a complete compliance guidance outline–but it would be a start.

One document to highlight would be the speech on October 1, 2021 by Antitrust Division Acting Assistant Attorney General Richard Powers (noted above), which emphasizes that the DOJ has made good on its promise to prioritize labor market collusion cases–including bringing criminal charges against individuals allegedly involved in the collusion. Relevant employees should also have a copy, and a presentation explaining, the Department of Justice and FTC’s Antitrust Guidance for Human Resource Professionals, Department of Justice, Antitrust Division/Federal Trade Commission, October  2016:  “The agencies’ joint guidance include[ing] a Q&A section that explains how antitrust law applies to various scenarios that HR professionals might encounter in their daily work lives.”  It would also be important to have a hotline for employees to call with questions about the Antitrust Guidance and how it might apply to particular situations.

I don’t think labor market collusion is as difficult to avoid–and detect–as it may seem to some. Labor is an input for making any product. Businesses can’t collude with competitors about the price they will pay for inputs to make a product or to allocate suppliers.  Think about a company that produces widgets.  This widget requires copper wire, glass products, machinery and labor.  It seems obvious (hopefully) that an executive in one company cannot call a competitor and say, “Let’s agree to not pay any more than X for the copper?”  Or “If you don’t solicit quotes from my supplier, I won’t from yours.”  Labor is also an input.  Why would it be OK to call a competitor and say “Let’s agree not to pay any more than X per hour” for the input of labor?

As with any input, however, not every agreement between competitors is per se illegal or “naked” price fixing violation.  When companies integrate resources, as in a buying group or joint venture, the agreement will be judged under the rule of reason: Do the procompetitive benefits outweigh the anticompetitive harm?  The FTC/DOJ guidance explains a basic difference between a “naked” agreement and an agreement “ancillary” to a procompetitive collaboration:

“That means that if the agreement is separate from or not reasonably necessary to a larger legitimate collaboration between the employers, the agreement is deemed illegal without any inquiry into its competitive effects. Legitimate joint ventures (including, for example, appropriate shared use of facilities) are not considered per se illegal under the antitrust laws.”  Antitrust Guidance for Human Resource Professionals, Department of Justice, Antitrust Division/Federal Trade Commission, October  2016, at 3.

As mentioned, employees should have guidance as to who to call within the company if they have questions about the propriety of an agreement with a competitor regarding labor.

Thinking of labor as any other input, I’d add this to my presentation:

1. An agreement does not have to be in writing. It can be inferred from other circumstances – such as evidence of discussions and parallel behavior.
2. The DOJ intends to proceed criminally against naked wage-fixing or no-poaching agreements. The penalties can be severe, including jail time for individuals.
3. Like any other cartel, agreements to reduce competition can be prosecuted even if they don’t eliminate all competition or are unsuccessful.
4. An added bonus is that if senior executives who have both pricing and hiring authority get this training, it is a refresher about the dire consequences of price fixing, bid rigging and market allocation either as a seller or a buyer.

CONCLUSION

In October 2016 when the DOJ FTC Antitrust Guidance for Human Resource Professionals was issued it led to a blizzard of “client alerts” warning of this emphasis of the FTC/DOJ.  Now would be a good time to see if there was a follow up to client alerts within organizations–including law firms.  Did the right people get the Antitrust Guidance?  Was there follow up training?  Is there a process in place for employees to ask questions?

There’s much more to be said about compliance and labor market collusion, and no doubt better and more detailed ways to say it. There are many published articles detailing more complete elements of an effective corporate compliance program and culture.  The point of this humble blog post is that if labor market collusion is a priority for enforcement agencies, compliance training should be a priority for companies. And, if you take the approach that labor is an input, subject to the same antitrust rules as any other input, you have provided more than just training on labor market collusion.

Thanks for reading   bob@reconnollylaw.com

by Bob Connolly  bob@reconnollylaw.com

             For your weekend reading and viewing pleasure you might want to set aside a bit of time to digest the Department of Justice’s latest guidance on how they intend to treat corporate crime. [Read DAG’s LISA O. Monaco’s remarks (here)(and watch the same on video (here) and review the DAG’s related memo (here). ]  There are three main takeaways: an increasingly high bar for a company to receive “cooperation credit;” more expansive evaluation of a company’s past conduct in making settlement/plea negotiation demands; and a likely increase on insistence of compliance monitors.

1. Cooperation Credit

            DAG Monaco opened by stating: “Attorney General Garland has made clear it is unambiguously this department’s first priority in corporate criminal matters to prosecute the individuals who commit and profit from corporate malfeasance.”  I don’t think there is anything new here for the Antitrust Division which has long made individual accountability a cornerstone of its enforcement efforts.  DAG Monaco’s remarks reflected what I believe to already be the Antitrust Division approach:  “I am directing the department to restore prior guidance making clear that to be eligible for any cooperation credit, companies must provide the department with all non-privileged information about individuals involved in or responsible for the misconduct at issue. To be clear, a company must identify all individuals involved in the misconduct, regardless of their position, status or seniority.”

DAG Monaco set forth the standard in evaluating individual prosecutions:

“As set forth in the Justice Manual, a prosecutor should commence a case if he or she believes that a putative defendant’s conduct constitutes a federal offense, and that the admissible evidence will probably be sufficient to obtain and sustain a conviction. So long as those principles are followed, we will urge prosecutors to be bold in holding accountable those who commit criminal conduct.”

The Antitrust Division’s need for cooperating witnesses and limited resources means that not every culpable individual will be prosecuted.  The “Big fish–little fish” theory of prosecution will live on–as will disagreements about who is a “little fish” when it comes to individual prosecutions.  It is still best not to be a fish at all swimming in cartel waters.

2. Expansive View of Prior Misconduct

 “The second change I am announcing today deals with the issue of a company’s prior misconduct and how that affects our decisions about the appropriate corporate resolution.”  DAG Monaco explained:  “Foremost, the department will now consider all a company’s prior misconduct when considering how to settle a current case — civil, criminal, and regulatory actions; whether or not that prior misconduct is similar to whatever issue put your company on the frying pan today.”

DAG Monaco gave this example:

“A prosecutor in the FCPA unit needs to take a department-wide view of misconduct: Has this company run afoul of the Tax Division, the Environment and Natural Resources Division, the money laundering sections, the U.S. Attorney’s Offices, and so on? He or she also needs to weigh what has happened outside the department — whether this company was prosecuted by another country or state, or whether this company has a history of running afoul of regulators. Some prior instances of misconduct may ultimately prove to have less significance, but prosecutors need to start by assuming all prior misconduct is potentially relevant.”

This change could well impact Antitrust Division’s settlements; especially in larger national/international conspiracies.  Companies at that level often have many divisions, lines of business and may well have had regulatory/criminal issues unrelated to cartel activity (or a line of business/subsidiary, etc. that was involved in cartel activity).  This “history” must now be considered by Division prosecutors in negotiating a settlement.

     3.     More Extensive Use of Corporate Monitors

 “The final change I am announcing today deals with the use of corporate monitors.”  DAG Monaco expressly rescinded prior guidance from 2018 that seemingly disfavored  the use of external compliance monitors:

“To the extent that prior Justice Department guidance suggested that monitorships are disfavored or are the exception, I am rescinding that guidance. Instead, I am making clear that the department is free to require the imposition of independent monitors whenever it is appropriate to do so in order to satisfy our prosecutors that a company is living up to its compliance and disclosure obligations under the DPA or NPA.”

On the plus side, DAG Monaco highlighted the incentives for a company to have a compliance program before the government not so gently indicates that one is needed:

“A company can fulfill its fiduciary duty to shareholders and maintain a commitment to compliance and lawfulness. In fact, companies serve their shareholders when they proactively put in place compliance functions and spend resources anticipating problems. They do so both by avoiding regulatory actions in the first place and receiving credit from the government. Conversely, we will ensure the absence of such programs inevitably proves a costly omission for companies who end up the focus of department investigations.”

Conclusion

             It is well worth the time to read DAG’s remarks (here) and watch the same on video (here) and review the DAG’s related memo (here).  DAG Monaco concluded with this helpful summary:

 “I’m sure many of you in the audience are going to get calls from clients over the next few days with questions about what this all means. So, let me conclude by giving you the answers — with these five points:

• Companies need to actively review their compliance programs to ensure they adequately monitor for and remediate misconduct — or else it’s going to cost them down the line.

• For clients facing investigations, as of today, the department will review their whole criminal, civil and regulatory record — not just a sliver of that record.

• For clients cooperating with the government, they need to identify all individuals involved in the misconduct — not just those substantially involved — and produce all non-privileged information about those individuals’ involvement.

• For clients negotiating resolutions, there is no default presumption against corporate monitors. That decision about a monitor will be made by the facts and circumstances of each case.

• Looking to the future, this is a start — and not the end — of this administration’s actions to better combat corporate crime.

Thanks for reading.  Bob Connolly  bob@reconnollylaw.com

At an October 1, 2021 in-person conference (Fordham’s 48th Annual Conference on International Antitrust Law and Policy) Acting Assistant Attorney General Richard A. Powers of the Antitrust Division spoke about the history of and Antitrust Division’s commitment to enforcing the antitrust laws, including criminal enforcement, in labor markets:  “If it was important for enforcers to protect competition in labor markets decades ago — and I believe it was — it is essential now.”

I suggest reading the speech in its entirety (here) but I’ll quote a few of the remarks:

• “Between 2010 and 2012, the Division filed civil enforcement actions against Adobe, Apple, eBay, Google, Intel, Intuit, Lucasfilm, and Pixar for entering into unlawful agreements not to compete for each other’s workers through various means. These enforcement actions were important for a few reasons. First, they made clear that companies that do not compete to make or sell the same products or services nonetheless compete vigorously in labor markets. That is why they have incentives to collude in a labor market in the first instance. Second, the investigation reaffirmed that agreements to allocate labor markets are no different than agreements to allocate markets by territory or customer. [Well, they were treated a little differently as these likely would have been criminal cases given the explicit evidence of agreement but civil cases were brought first as a sort of “warning shot.].
• Beginning in October 2016, the Division made a series of public statements that, going forward, it intends to criminally prosecute naked labor market allocation and wage-fixing conspiracies.
• Since that time, labor market investigations have comprised a growing portion of our docket. Thus far, we have charged four criminal cases for alleged collusion in labor markets.
• At bottom, the Division is committed to prosecuting naked conspiracies in labor markets because they rob workers of competitive wages, benefits, and other terms of employment. While this work is principally criminal enforcement, we are not blind to the social impact of this work. Free market competition for workers can mean the difference between saving for a home, sending kids to college, and leaving a toxic workplace, or not. Work is also fundamental to our dignity. As enforcers, we know firsthand what it means to ascribe dignity and values to work.
• Importantly, criminal prosecution of labor market conspiracies is the tip of the spear; the Division’s focus on labor markets extends beyond its cartel program. The Division is also committed to using its civil authority to detect, investigate, and challenge anticompetitive non-compete agreements, mergers that create or enhance monopsony power in labor markets, the unilateral exercise of monopsony power, and information sharing by employers.
• While competition policy is not conducive to a one-size-fits-all approach, I note that many international enforcers have used their enforcement authority to root out labor-market conspiracies with admirable results….”

There is much more in Mr. Powers’ remarks including a discussion of continued cooperation among international enforcers. There are also footnotes with citations to many of the cases/facts mentioned in the speech.

If there was ever a “hot topic” in antitrust compliance counseling it would be to advise clients that not just the DOJ, but the FTC, State AG’s and international enforcers are focusing on agreements between competitors to reduce or eliminate competition for an input commonly known as employees.  It is key to understand, that like any other cartel, buyer or seller, agreements to reduce competition can  be prosecuted even if they don’t eliminate all competition or are unsuccessful. While a bit simplified: It is just as unlawful to fix the price at which you pay employees as it is to fix the price of the widgets those employees make.

Thanks for reading.

Bob Connolly             bob@reconnollylaw.com