It has been another busy year for the Department of Justice's Procurement Collusion Strike Force (PCSF). Formed in 2019, the Department of Justice created the PCSF, a joint law enforcement effort to combat antitrust crimes and related fraudulent schemes that impact government procurement, grant, and program funding at all levels of government – federal, state and local. The PCSF is a constellation of partnerships among the Antitrust Division of the U.S. Department of Justice, multiple U.S. Attorneys' Offices around the country, the Federal Bureau of Investigation (FBI), and the Inspectors General for multiple federal agencies working together to crack down on unlawful anticompetitive activities in the public procurement process.
Around this time last year, our colleagues surveyed and summarized the activities of the PCSF, noting in particular the Antitrust Division's investment in training partner agencies and its interagency approach to several criminal matters involving bid rigging or teaming arrangements that negatively impacted government projects.1 Since that update, the PCSF has not slowed down, adding four new partner agencies, obtaining fifteen new convictions, and indicting two new cases, both involving military contractors.
The enforcement actions coming out of the PCSF over the last year show a continued focus on bid rigging, in cases against military contractors,2 construction company owners,3 and state Department of Transportation workers.4
PCSF Agency Expansion
The PCSF expanded in November 2022,5 adding four new partner agencies: (1) the Office of the Inspector General of the Department of Energy; (2) the Department of the Interior; (3) the Department of Transportation; and (4) the Environmental Protection Agency. These additions bring the PCSF membership total to 34 agencies6 and offices "committed to deterring, detecting, investigating and prosecuting antitrust crimes and related schemes that target government procurement, grants, and program funding at all levels of government."7
As these new members integrate into the PCSF, we expect to see a shift in the types of companies impacted by PCSF investigations and prosecutions. For example, those performing federal energy and environmental services, those constructing and servicing public lands, and those involved in federal road building may well see more antitrust investigations as a result of these increased partnerships. For instance, increased antitrust training and awareness among procurement officials often lead to identification of possible bid-rigging or price-fixing conspiracies.
PCSF Global Brings International Security Services Case
The PCSF Global initiative provides a good example of how new partnerships can lead to increased enforcement. The Antitrust Division first presented this global initiative to the OECD's Competition Committee 2020, to increase its international antitrust enforcement capabilities in the procurement arena. The first successful PCSF international prosecution took place in June 2021, against a Belgian security services firm accused of rigging bids, allocating customers, and fixing prices for government entities, including the U.S. Department of Defense.8 Similar to the domestic PCSF, the PCSF Global includes workshops, trainings, and presentations to enforcers in countries all across the globe.9
First Criminal Monopolization Cases in Decades for Invitations to Collude
Another critical update is that, through PCSF-supported enforcement, the Antitrust Division made legal history on Halloween of 2022, when it obtained its first conviction in nearly half a century for criminal monopolization.10 In United States v. Zito, a highway crack-sealing business owner pled guilty to attempted criminal monopolization for and "invitation to collude" to a competitor to allocate the crack-sealing services market (used by the government to repair public roadways). If agreed-to, the scheme would have created regional market monopolies for Zito's company and the would-be conspirator. Zito even proposed to pay his competitor $100,000 as a payoff for work he would lose through the proposed allocation scheme, if he joined.11 Instead of agreeing to Zito's solicitation, his competitor refused to enter into the agreement, leading to Zito's "attempted monopolization" conviction.
The Zito case is significant because it shows that the DOJ is willing to bring "attempted" antitrust conspiracies as criminal antitrust cases, even in instances where there is no actual completed "agreement," a hallmark of criminal antitrust enforcement for decades. While "attempts" to collude can and have been brought as fraud charges and can lead to greater sentencing exposure if charged as fraud, the DOJ currently seems focused on utilizing criminal antitrust laws to address such conduct. Recently, at the June 7 GCR Cartels Live 2023 conference in Washington, D.C., a representative for the DOJ described this case as an opportunity to use the criminal enforcement "tool" Section 2 provides to address anticompetitive conduct when the government is otherwise unable to bring a Section 1 market allocation claim (the competitor never agreed to the scheme and instead reported the conduct and became a cooperator, thus the "agreement" element was missing from such a claim).
The cartel defense bar and corporate in-house teams are clearly watching the development of this shift in policy. At the GCR conference, several participants pleaded for more transparency and guidance from the Division so that companies know what conduct the DOJ now considers criminal, when, for the last forty plus years, the same conduct might have been addressed civilly or not at all. The quick dismissal of those calls for guidance and the advice to steer clear of conduct that could be a civil violation to avoid crossing the ill-defined criminal line was not well received by those representing business realities. It will be interesting to see what future criminal monopolization cases will look like, and whether they will continue to come up in the government procurement context or not.
Compliance and Self-Reporting Critical
Further emphasizing the PCFS's importance to the Antitrust Division, Deputy Assistant Attorney General Manish Kumar, in his keynote address at the same GCR conference, praised the PCSF as part of the Division's effort to make antitrust risk "front and center" for companies to encourage both compliance and, upon discovery of a violation, prompt self-reporting.12 He also named the PCSF as an example of the Antitrust Division working with "force multipliers" in a collaborative approach to enforcing the antitrust laws and that the PCSF was training members in data analytics, as part of the same effort—to increase deterrence and to more effectively enforce the antitrust laws.
New FTC Criminal Liaison Unit Focusing on Referrals to DOJ Antitrust
DAAG Kumar also touted the FTC's newly created Criminal Liaison Unit, or CLU, as another tool to identify and refer possible criminal antitrust violations. Although not formally a member of the PCSF, the FTC has a long-established relationship with the Antitrust Division and overlapping jurisdiction for civil antitrust enforcement, whereas only the DOJ can criminally prosecute antitrust conduct. Announced in March of this year, the CLU is led by two former Antitrust Division prosecutors, Susan Musser and Nate Brenner, and is set up to support criminal referrals from the FTC to the DOJ. While criminal referrals themselves are not new, the announcement of a formalized unit devoted to this area raises the likelihood of coordination and referrals between the FTC and DOJ and suggests there soon could be an increase in the number of criminal referrals. Accordingly, companies responding to FTC requests should be aware of the referral risk and treat such responses carefully as they could trigger a criminal referral and investigation.
Takeaways
Government contracting companies, especially those already under scrutiny of federal agency procurement officers, agency Inspector General investigations, and FTC investigations, should be aware that the spotlight the PCSF casts on them continues to shine brightly. Particularly:
- When facing any type of federal agency OIG or FBI investigation, be aware that information relating to communications with competitors regarding future pricing, bids, or restraining employee movement – especially those containing antitrust "red flag" terms like "agreement, "gentleman's agreement," "handshake agreement," "poaching" employees –can lead to potential criminal antitrust investigations of a possible bid-rigging, price-fixing, or market-allocation agreement.
- Even invitations by competitors to collude can lead to potential criminal monopolization or fraud investigations.
- Companies contracting with governments worldwide and those facing investigations by foreign competition or government procurement enforcers could trigger global cooperation and cross-border coordination of parallel antitrust or fraud investigations.
- Companies facing FTC competition or consumer protection investigations, or third-parties providing documents in FTC investigations containing evidence of communications with competitors evidencing potential coordination of bids, pricing, or allocation or markets, customers or employees should be aware that the FTC has experienced investigators ready to refer such information to the DOJ Antitrust Division for criminal investigation.
- Government contracting companies should consider enhancing antitrust compliance policies, programs, trainings, making sure the materials are updated to reflect the latest developments and trends.
Footnotes
2. See, e.g., Military Contractor Pleads Guilty to Bid Rigging | OPA | Department of Justice; Military Contractors Convicted for $7 Million Procurement Fraud Scheme | OPA | Department of Justice; Owner of Commercial Flooring Contractor Pleads Guilty to Participating in Kickback Scheme to Defraud a U.S. Army Facility | OPA | Department of Justice.
4. See, e.g., Former Engineering Executive Sentenced for Rigging Bids and Defrauding North Carolina Department of Transportation | OPA | Department of Justice; Former Public Official and California Contractor Sentenced for Bid Rigging and Bribery | OPA | Department of Justice; Two Additional Municipal Employees Plead Guilty to Fraud Conspiracy | OPA | Department of Justice.
6. The PCSF's other national investigative partners include:
- Department of Defense, Office of Inspector General
- Federal Bureau of Investigation
- General Services Administration, Office of Inspector General
- Department of Homeland Security, Office of Inspector General*
- Department of Justice, Office of Inspector General
- U.S. Air Force Office of Special Investigations*
- U.S. Postal Service, Office of Inspector General
7. Id.
11. 1_information_0.pdf (justice.gov)
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