1. U.S. Department of Justice Antitrust Division
Recognizing Antitrust Conspiracies and Working with the Division
Introductions
- Want presentation to be informative and interactive. Please weigh in with questions/comments.
- Hope is to provide useful and helpful information about our criminal ATR program so that you’re able to potentially identify matters/fact patterns that may be relevant to ATR crimes and we can collaborate.
September 2019
Chris Maietta
Trial Attorney

2. Disclaimer
The views expressed in this presentation are not purported to represent those of the U.S. Department of Justice.
U.S. Department of Justice, Antitrust Division

3. Overview The Antitrust Division Criminal Antitrust Violations
Our Criminal Investigations
Detecting Antitrust Violations
Questions?
Goal is to share hallmarks of antitrust conspiracies and talk about how we can work together.
U.S. Department of Justice, Antitrust Division

4. Antitrust Division Within DOJ
Only component of DOJ that can prosecute Section 1 violations.
U.S. Department of Justice, Antitrust Division

5. Criminal Antitrust Violations
Price fixing
Bid rigging
Allocation agreements
Three flavors
Typical case involves a combination
Discuss each in detail, but first…
U.S. Department of Justice, Antitrust Division

6. The Sherman Act: 15 U.S.C. § 1
“Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal.”
“Every person who shall make any contract or engage in any combination or conspiracy hereby declared to be illegal shall be deemed guilty of a felony, and, on conviction thereof, shall be punished by fine not exceeding $100,000,000 if a corporation, or, if any other person, $1,000,000, or by imprisonment not exceeding 10 years, or by both said punishments, in the discretion of the court.”

7. Price Fixing
Competitors agree to fix or otherwise determine the prices at which their products or services are sold.
Include agreements to:
Charge the same price or raise prices together
Add fees or other surcharges
Eliminate discounts or have uniform discounts
Establish minimum or floor prices
Establish a standard pricing formula
Coordinate and not compete on other commercial terms (i.e., credit terms, warranties, etc.)
Schedule rolling price increases
Create a new pricing surcharge (e.g., service fee)
In a competitive market, we would expect customers to move from a seller who raises prices to a seller who doesn’t. In a price-fixed market, the customer has no choice.
U.S. Department of Justice, Antitrust Division

8. Price Fixing: An Example
A: “Will you agree to raise your price for salted peanuts to $1.99 a pound?” B: “Yes. Let’s raise the price at noon tomorrow.”
- Will you follow?
Photo credit: unknown1861/iStock/Getty Images Plus
U.S. Department of Justice, Antitrust Division

9. Price Fixing Example

10. Bid Rigging Competitors agree in advance who will win the bid.
Types of bid rigging:
Bid rotation or allocation—competitors agree to take turns winning bids
“Complementary” or “Cover” Bids—competitors agree to submit intentionally high bids, or otherwise unacceptable bids
Bid suppression or Limitation—competitors agree to refrain from bidding
Bid rigging is the way that conspiring businesses effectively raise prices when purchasers—often federal, state, or local governments—acquire products or services by soliciting bids. In a bid-rigging conspiracy, competitors agree in advance who will submit the winning bid on a contract that a public or private entity wants to award through a formal or informal competitive bidding process. In other words, competitors agree to eliminate competition for some piece of defined business, whether it be a sale, a contract, or a project. Basically predetermining winner and eliminating competition.
3 types:
Bid Rotation: In bid rotation, all coconspirators submit bids, but by agreement, take turns being the low bidder on a series of contracts.
Customer Allocation: A variation where the conspirators each get dibs on particular customers rather than just taking turns. Often takes the form of an agreement that all conspirators get to keep their current customers when those contracts come up for renewal.
Complementary Bidding: In either kind of conspiracy, coconspirators are likely to submit token bids which are intentionally high or which intentionally fail to meet all of the bid requirements in order to lose a contract. “Comp bids” are designed to give the appearance of competition. Value for competitors is that others will return the favor when it’s their turn to win the business.
Bid Suppression: In this type of scheme, one or more competitors agree not to bid, or withdraw a previously submitted bid, so that a designated bidder will win. In return, the nonbidder may receive a subcontract or payoff.
U.S. Department of Justice, Antitrust Division

11. Bid Rigging: An Example
A: “I’d like to win the bid to demolish the Water Street Bridge. If I get the job for $850,000, I can make some good money. Can you submit a bid above mine?” B: “Sure. I’ll come in at $900,000 if you’ll let me have the next one.” A: “Okay. I’ll plan on it.”
Sometimes Party B is the one who initiates: I’m about to submit my bid for this business and I want to make sure you win it. What should I bid? What are you bidding?
Subcontracting arrangements are often part of a bid-rigging scheme. Competitors who agree not to bid or submit a losing bid frequently receive subcontracts or supply contracts in exchange.
After the bid process is complete, the winning bidder may pay off the coconspirators through cash payments or subcontracts. Purchasing agents might also receive payoffs to make sure that the conspiracy is unreported. A purchasing agent might even be the originator of a conspiracy in circumstances that require bid rigging for the conspiracy to be successful. Evidence of such payoffs can be very persuasive for a jury.
Photo credit: Nomadsoul1/iStock/Getty Images Plus
U.S. Department of Justice, Antitrust Division

12. Bid Rigging Example

13. Allocation Agreements
Competitors agree to divide up a market, usually by territory, customer, or type of product. May also include a bid rigging component intended to bring about the allocation scheme.
Be on the lookout for situations in which the same company seems to get business over and over again and competitors never seem to solicit it. Look for anything that makes it obvious that companies that should want the business, aren’t seeking it. Someone giving up business opportunity for which they’re otherwise obviously qualified.
Customer or Market Allocation: In this scheme, coconspirators agree to divide up customers or geographic areas. The result is that the coconspirators will not bid or will submit only complementary bids when a solicitation for bids is made by a customer or in an area not assigned to them. This scheme is most commonly found in the service sector and may involve quoted prices for services as opposed to bids.
Red Flags:
• Competitors suddenly stop selling in a territory
• Competitors suddenly stop selling to a customer
• Competitor refers customers to other competitors
• Salesperson or prospective bidder says that a particular customer or contract “belongs” to a certain competitor
Photo credit: Thomas Northcut/iStock/Getty Images Plus
U.S. Department of Justice, Antitrust Division

14. Market Allocation

15. Penalties Are Significant
Criminal Penalties
Individuals: Incarceration up to 10 years
Corporations: Fines up to $100 million or twice gain/loss
Volume of commerce drives the sentence for both individuals and corporations
Other Penalties
Restitution paid to identified victims
Civil lawsuits for three times the damages
Because plea or conviction is based on beyond a reasonable doubt standard, debarment from federal and other contracts is often a foregone conclusion
- Typical criminal incarceration of 1-5 years
Photo credit: ABDESIGN/iStock/Getty Images Plus
U.S. Department of Justice, Antitrust Division

16. Results of Antitrust Division Efforts
U.S. Department of Justice, Antitrust Division

17. Antitrust and Fraud Charges

18. Our Criminal Investigations
Sources of investigative leads
Investigative tools
Other crimes we prosecute
U.S. Department of Justice, Antitrust Division

19. Sources of Investigative Leads
Law enforcement/agency referrals
Includes numerous Inspectors General, the FBI, DCIS, IRS, etc.
Often arises out of non-Antitrust conduct
Direct complaints to the Antitrust Division
Corporate investigations and audits
Disgruntled employees
Non-colluding competitors
Civil lawsuits
Leniency program
Kickback and other kinds of public corruption investigations often will turn up evidence of antitrust crimes if the investigators are on the lookout for such evidence. Again, the strongest evidence is communications between competitors planning any kind of coordinated pricing or bidding behavior, or agreeing to “leave alone” certain customers or pieces of business.
U.S. Department of Justice, Antitrust Division

20. Antitrust Leniency Program
Unique investigative tool within all DOJ components
Encourages self-reporting sets “race to courthouse”
“Leniency-plus” and “second-in” benefits
Main requirements:
Applicant self-reports its involvement in criminal antitrust offense;
Is not THE ringleader;
Ended its participation in the conduct when discovered; and
Ongoing cooperation
Leniency applicants are an effective generator of leads for both international cartel cases and domestic antitrust matters. Unlike most complainants, leniency applicants have direct knowledge of conspiratorial activity. The Antitrust Division’s Leniency Policy allows companies and individuals involved in antitrust crimes to self-report and avoid criminal convictions and resulting fines and incarceration. The first corporate or individual conspirator to confess participation in an antitrust crime, fully cooperate with the Antitrust Division, and meet additional conditions (which are set forth in a written policy) receives leniency for the reported antitrust crime. The benefits of being admitted to the program can provide substantial incentives to cooperate for those with inside knowledge of an antitrust conspiracy. Very successful program
--Leniency is available for corporations either before or after an investigation has started. Type A leniency is available before we have information about activity from any source and Type B is available even after we have information about activity. Only first qualifying company can receive corporate leniency for ATR conspiracy, which incentivizes races to be first to report.
--Individual leniency available to individuals coming forward alone before any corp has sought leniency. Less common but exists to create incentive for corps.
-- TALK ABOUT SIGNIFICANCE OF COOPERATION; NOT JUST INTERVIEW HERE OR THERE. WITNESSES MADE AVAILABLE, DOCS (INCLUDING OVERSEAS). Literally can put you inside conspiracy and allow access to overseas conduct that’s impacting US. Can be burden, can be expensive.
--Has been very effective tool – rather give up one in search of others. Conspiratorial members thinking who will dime out in conspiracy?
--Also leniency plus – subjects of ongoing investigation can qualify for leniency in other markets where they compete. If qualify, help on product B gets them further reduction in product A fine.
U.S. Department of Justice, Antitrust Division

21. Investigative Tools Business records analysis Interviews
Grand jury subpoenas
Documents and testimony
Search warrants
Consensual monitoring
Wiretap
We can also get bank records (FinCEN), toll/phone records (through GJ subpoenas), and ECPA warrants.
U.S. Department of Justice, Antitrust Division

22. Other Criminal Statutes We Charge (In addition to the Sherman Act: 15 U.S.C. § 1)
Bribery/gratuities (18 U.S.C § 201)
False and fictitious claims (18 U.S.C. § 287)
Conspiracy to defraud U.S. (18 U.S.C. § 371)
False statements (18 U.S.C. § 1001)
Mail/wire fraud (18 U.S.C. §§ 1341, 1343)
Obstruction of justice (18 U.S.C. § 1519)
Tax Crimes (26 U.S.C. §§ 7201, 7206(1))
Prosecute all related conduct. Can be just us or in conjunction with other agencies.
GSA case – believed to be one of largest SBA frauds ever…27 contracts worth more than $70M. Scheme was that 8(a) eligible company partnered with larger ineligible company. Would bid on and receive work, which then would be done entirely by non-eligible company. SBA 8(a) requires to perform at least 15% of work. Uncovered arrangement where eligible company received 3% off the top for getting the contract and providing no work or resources. Ineligible company kept the rest. Simply a pass through. We had guaranteed percentage of contracts for simply obtaining them and doing no work, performed no labor, lied about who employees worked for and even changed resumes, larger company performed accounting and actually did bids for smaller co without asking.
U.S. Department of Justice, Antitrust Division

23. Detecting Antitrust Violations
Favorable conditions for collusion
Bid patterns
Warning signs in pricing
Suspicious statements
Suspicious conduct
U.S. Department of Justice, Antitrust Division

24. Favorable Conditions for Collusion
Few sellers
Difficult for new competitors to enter the market
Few substitute products
Standardized products
Repetitive or regularly scheduled purchases
Rush or emergency work
While it can happen in any industry, there are some where it is more likely to occur.
Fewer sellers can mean it is easier for them to get together an agree. Or if there is a core group of major bidders and the rest or fringe sellers who only control a small fraction of the market.
Barriers to entry: High start-up costs (factories, large sales force, etc); highly regulated industry
Standard products are easier to collude on.
Repetitive purchases means vendors may become familiar with the other bidders and can share work
Trade shows/conferences- collusion more likely when industry players know one another.
Movement within the industry- if employees know one another and move from company to company, can use their contacts to maintain or begin collusive discussions
Generally, stable product and long-term players in the industry
U.S. Department of Justice, Antitrust Division

25. What to Watch For: Warning Signs in Pricing
Sudden and identical increases in price or price ranges that cannot be explained by cost increases
Anticipated discounts or rebates disappear unexpectedly
Similar transportation costs specified by local and non-local companies
Attempts to “shop around” stonewalled
Generally, be aware of situations in which all prices seem to be uniform and suppliers refuse to negotiate those prices
U.S. Department of Justice, Antitrust Division

26. What to Watch For: Bid Patterns
Same company always wins or loses
Certain companies only submit bids in certain geographical areas
Companies appear to take “turns” winning
Winning company subcontracts to losing company
Regular suppliers/vendors fail to bid for work they typically perform, but continue to bid for other work
Bids are much higher than estimates or previous bids
Large differences between price of winning bid and other bids
All companies end up winning the same amount of work over a series of bids
PR School Buses –
Here, local school bus services are provided in part by private companies. Federal grants from DOE pay for bus service in low resource areas, among others. School bus bidding occurs every few years and RFP is by route. Once RFP issued, school bus companies would meet at community center before the bids were due and divide up who would win each route. They’d also decide who would be the secondary (and complementary) bid and agreed on pricing. Had recording, phone calls, and witness testimony, among other evidence. 4 individuals convicted of Sherman Act and Mail Fraud, sentenced to 1+ years.
Two significant signs that would be of particular relevance. First, folks forbearing obvious opportunities to bid on routes for which they were qualified. Second, same folks would make wildly variant bids for similar products. On its face, no reason to drastically change one bid from the other.
U.S. Department of Justice, Antitrust Division

27. What to Watch For: Suspicious Statements
A customer or territory “belongs” to a supplier
References to “respecting” the customers or territories of competitors
References to “courtesy” bids or “throwing in a number”
Use of same terminology or rationales by companies when explaining price increases
Statements indicating advance knowledge of competitor’s pricing
Generally, be aware of situations in which all prices seem to be uniform and suppliers refuse to negotiate those prices
U.S. Department of Justice, Antitrust Division

28. Other Suspicious Conduct and Behavior
Companies meet privately before bids
Company submits bid for work it cannot perform
Bids contain last minute changes
Procurement official regularly exempts competitive bidding because of “emergency” work
Invoicing for work awarded contains charges for “consulting” work, when “consulting” not reasonably within scope of work
Procurement officials associated with “consulting” vendors
Things to look for:
Identical bids from different companies
Bids come in way above estimate
Winning bidder subcontracts to one or more losing bidders
The range of bids shows a clear gap between the winner and all others
All bids are very close (an indicator that they know one another’s prices)
Qualified bidders don’t bid
U.S. Department of Justice, Antitrust Division

29. Questions? Chris Maietta Trial Attorney United States Department of Justice Antitrust Division
U.S. Department of Justice, Antitrust Division