Federal Antitrust Violations: Price Fixing and Bid Rigging Defense.

In a federal criminal antitrust case, the government must prove several elements to sustain a conviction. While some requirements may be easier for prosecutors to satisfy than others, the government must establish all necessary elements beyond a reasonable doubt. Here are the primary elements prosecutors must prove in price-fixing and bid-rigging cases:

Price Fixing, Bid Rigging, and Market Allocation (Per Se Violations)

Federal antitrust law generally classifies price fixing, bid rigging, and market allocation as per se violations. This means that if the government can prove the existence of an unlawful agreement, it does not need to further prove that the agreement restrained trade or was unreasonable. The agreement itself is evidence of a criminal violation.

The Requirement of an Agreement (Section 1 of the Sherman Act)

Section 1 of the Sherman Act is the primary federal antitrust statute, and it requires an agreement to be formed between at least two parties. While this agreement can be express or implied, and it doesn’t need to be formally documented, prosecutors must still show evidence of a meeting of the minds.

Knowing Participation

Even when they can establish the existence of an antitrust conspiracy, prosecutors must also prove that the defendant knowingly and intentionally joined the conspiracy. This means the government must prove that the defendant acted voluntarily and intentionally to join the conspiracy, but need not prove that the defendant knew the conduct was illegal.

Impact on Interstate or Foreign Commerce

Because antitrust violations are federal crimes, prosecutors must demonstrate that the alleged conspiracy substantially affected interstate or foreign commerce or occurred within the flow of interstate or foreign commerce.

Parallel Conduct

While parallel conduct may lead to suspicion, parallel conduct alone does not necessarily establish a criminal antitrust agreement. The government must prove more than just the fact that companies acted similarly; they must show that companies acted in concert.

How Can Bid-Rotation, Cover Bids, and Subcontracting Evidence Be Mistaken for an Agreement?

As detailed above, federal criminal antitrust cases involving bid rigging often focus on evidence of various types of collusive practices. These are often grouped into several broad categories:

Bid Suppression

Bid suppression occurs when competitors agreement to either not bid on a project or to withdraw their bids. Here, the evidence of bid suppression may raise suspicions. However, bid suppression does not necessarily prove that a criminal antitrust agreement has been formed. It could be that companies are choosing not to bid because they do not have the capacity to take on new projects, or they do not see a competitive advantage in doing so.

Complementary Bidding (also known as “Cover Bidding”)

Complementary bidding occurs when competitors agree to submit bids that are not competitive. The purpose of complementary bidding is to create the appearance of competition while making sure that a specific, predetermined bid is selected.

Bid Rotation

Bid rotation involves conspirators agreeing to take turns being the winning bidder. Conspirators may develop a pattern for their bid rotation, and they will determine each company’s role in advance.

Subcontracting Work

In some bid rigging cases, the company or individual that wins the project will then hire the other participants to do subcontracting work. This allows them to share the financial benefits of the contract, and it can be a key element in proving an antitrust conspiracy.

Market Allocation

When competitors agree to carve up a market, this is called market allocation. This may involve dividing a market by customers, the products sold, the territories operated in, or the specific geographic areas to which they will target their sales efforts.

Who May Be Investigating, and What Does a Grand-Jury Target or Subject Status Mean?

Which Federal Agencies Have the Authority to Bring Federal Antitrust Charges?

The Department of Justice (DOJ) Antitrust Division has primary responsibility for federal criminal antitrust enforcement. While the Federal Trade Commission (FTC) has similar authority, it has not historically focused its efforts on federal criminal prosecution of antitrust matters. However, the DOJ has the authority to seek the assistance of state attorneys general in order to share information, coordinate their investigations, and assist with enforcement.

In addition to state-level involvement, the DOJ will also work closely with relevant federal law enforcement agencies in order to conduct their investigation. In some cases, the DOJ will conduct joint investigations with counterparts in other nations, as well.

How Do These Investigations Begin?

Investigation can begin in several ways. The DOJ Antitrust Division may come into possession of evidence of price fixing, bid rigging, or market allocation when:

• It receives a complaint from a consumer or competing business;
• An informant or whistleblower contacts the DOJ;
• A company or individual makes an antitrust leniency application;
• A company or individual reports an antitrust crime to the DOJ Antitrust Division through its Whistleblower Rewards Program; or,
• The DOJ’s Antitrust Division learns of a problem through industry screening.

What is a Grand-Jury Investigation?

A grand-jury investigation is the most common means by which prosecutors seek evidence in criminal antitrust cases. During the investigation process, the DOJ may seek evidence by:

• Issuing subpoenas to companies to produce emails, electronic and hard-copy records, bids, and pricing records;
• Issuing subpoenas to individuals, known as witnesses, to require them to provide testimony in grand-jury proceedings;
• Conducting search warrants at business offices or residences; and,
• Conducting interviews with company executives, employees, and other witnesses.

What Is a Grand-Jury Target?

A target is a person whom the prosecutor believes has “substantial evidence” linking them to the suspected crime. Once you learn that you are the target of a federal antitrust investigation, it will be imperative to quickly engage an experienced federal antitrust defense lawyer who can aggressively defend against federal criminal charges on your behalf.

Spodek Law Group is a second generation New York firm. Todd Spodek practices out of the firm his father opened in 1976.

When Does Self-Reporting Improve an Antitrust Defense, and When Can It Backfire?

When Is Corporate Leniency an Option?

In some cases, corporations can secure corporate leniency by self-reporting and offering full cooperation to the government. This is a strategic defense decision, though. For example, under the Antitrust Division’s Corporate Leniency Policy, the federal government typically grants amnesty only to the “first qualifying company” that steps forward. Therefore, companies will need to make quick yet informed decisions when they face a federal criminal antitrust investigation. With this in mind, companies that consider self-reporting must promptly engage experienced federal antitrust defense counsel in order to gauge their prospects for obtaining corporate leniency under the Antitrust Division’s Corporate Leniency Policy.

How Is Corporate Leniency Granted?

Under the Antitrust Division’s Corporate Leniency Policy, companies and individuals will need to meet certain requirements to qualify for leniency. To qualify for corporate leniency, a corporation must:

• Promptly self-report after discovering the unlawful conduct, promptly terminate its participation, and undertake remedial measures to prevent reoffending;
• Promptly disclose the agreement to the DOJ and provide complete and truthful cooperation with the government’s investigation, including the government’s pursuit of antitrust prosecution against both participating companies and individuals;
• Restitute victims where possible; and,
• Not have coerced any other company or individual to participate in the unlawful agreement or have led the conspiracy.

Once you engage experienced federal antitrust defense counsel, your lawyers will then seek to use your company’s self-reporting efforts and cooperation to persuade the government to grant corporate leniency.

When Does Individual Leniency Become an Option?

In order to qualify for individual leniency under the Antitrust Division’s Individual Leniency Policy, individuals must generally come forward to the DOJ before it has begun its investigation. With this in mind, if you are an individual facing the possibility of criminal charges for price fixing, bid rigging, or market allocation, it will be imperative that you consult with your federal antitrust defense lawyers promptly.

What is Amnesty Plus?

In certain circumstances, the Antitrust Division’s Corporate Leniency Policy also allows for the possibility of “amnesty plus.” With amnesty plus, if a company discloses another violation of federal criminal antitrust law (i.e. a second, separate, previously unknown antitrust conspiracy), the company may be eligible for leniency in the second conspiracy and may receive an additional reduction in the penalty for the first conspiracy. When this occurs, companies and individual defense counsel will need to immediately evaluate their prospects for securing leniency in order to build an effective defense strategy.

Which Federal Antitrust Penalties Extend Beyond the Statutory Maximum Fine?

What Are the Penalties for Individuals Who Commit a Federal Antitrust Violation?

Under the Sherman Act, the maximum punishment for individuals convicted of a federal antitrust violation is ten years in federal prison and a maximum individual fine of one million dollars. However, these are the theoretical maximums; in practice, penalties will depend on a variety of factors. Federal prosecutors may seek maximum penalties when they have strong evidence of a person’s direct involvement in an unlawful agreement, particularly when the person is an executive or high-ranking corporate employee who orchestrated the conspiracy. On the other hand, a federal antitrust defense lawyer will do his or her best to persuade the government to seek the minimum penalties, especially in cases in which the individual did not personally benefit from the conspiracy and will not repeat the offense.

What Are the Penalties for Corporations and Businesses That Commit a Federal Antitrust Violation?

Under the Sherman Act, the maximum corporate fine is one hundred million dollars. However, corporations and businesses may still face steep fines even if they do not meet the threshold for the corporate statutory maximum, and this is one of the reasons why it is so important to have an experienced federal antitrust defense lawyer on your side. For example, if you have been convicted of a bid-rigging conspiracy, the government may argue that your company should be held financially responsible for the full value of the contract it helped steal from an honest competitor.

How Are Penalties Calculated in Civil Antitrust Cases?

Civil antitrust cases generally carry treble damages. This means that if a plaintiff or a group of plaintiffs can prove losses due to a corporation or individual’s antitrust violation, the corporation or individual will then be held liable for three times the amount of the plaintiff’s proven losses. In some cases, a corporation or individual will have the means to pay treble damages, and in others, treble damages will exceed the corporation or individual’s total value. This is why it is so important for companies and individuals to pursue an effective defense at the federal and state levels.

Calling About Someone You Love

Most first calls to a defense firm come from a family member rather than the person under investigation. If that is you, Spodek Law Group answers its phone at any hour, and families retain the firm on a relative's behalf every week. Reach it at 888 348 8028.