Risk managers and CCOs take note: DOJ and FTC have signaled a new era of antitrust enforcement. Leadership at both agencies is revamping guidance, and years-long efforts are beginning to bear fruit. Any company operating in a concentrated market could feel the effects of these changes.
There is no question that we are facing a “perfect storm” of antitrust enforcement. Antitrust enforcement is fast-becoming an area of rare bipartisanship. Republicans resent the growing power and influence of technology and social media companies. Democrats are concerned about the growth of the rich, large companies and political influence.
Assistant Attorney General Jonathan Kanter of the Antitrust Division Delivers Remarks to the New York State Bar Association Antitrust Section | OPA | Department of Justice https://t.co/vzNZSCH6Sr
— Massah D (@klonokid) January 25, 2022
Jonathan Kanter, the confirmed Assistant Attorney General of the Antitrust Division, has already signaled that enforcement changes are coming. He received bipartisan support in his confirmation, reflecting the expectation of aggressive enforcement. At the same time, congressional attempts to address antitrust issues in the marketplace are gaining steam.
Lina Kahn, the FTC Chairperson, has been a little bit more controversial, given her prior statements opposing Google and Facebook. Since her initial controversy, the FTC is settling down to business and continuing its enforcement action against Facebook in federal court.
Increasing Collaboration Between FTC and DOJ and a Revamped Approach to Merger Enforcement
Kanter gave a speech recently before the New York Bar Association at which he outlined his vision for enforcement and the need to update antitrust perspectives beyond the limited view of the past three decades. In recognition of the new era, the Justice Department and the FTC have initiated a review of both the Merger Guidelines and Vertical Conduct Guidelines. These revisions are expected to significantly alter DOJ’s and the FTC’s approach to merger and civil enforcement.
Kanter’s speech outlined a fresh approach to merger reviews. While noting that last year resulted in a record number of Hart-Scott-Rodino merger pre-notification filings, Kanter explained the need for a broader inquiry into the effect a proposed merger. With a broad analysis of potential anti-competitive effects, antitrust enforcement is expected to undergo changes in merger review to consider issues such as labor markets, consumer benefits, and anticipated reductions in competition among the remaining companies.
In another part of the speech, Kanter expressed reservations relating to prior antitrust settlements that permitted transactions to go forward with divestitures of overlapping operations and/or conduct-based prohibitions. Each of these approaches, in Kanter’s view, were questionable in effectiveness. Kanter may apply a simple view in future enforcement actions – if DOJ seeks to block a merger, the merger should not happen under any conditions. Again, this would be a significant departure from past approaches, although the last AAG Makan Delrahim, strongly advocated against merger settlements involving “conduct-based” settlements. Delrahim relied more often on structural changes to proposed mergers that incorporate divestitures. Kanter made clear he is not a big fan of divestitures since he questioned whether the divested assets were ever utilized to increase or restore a particular level of competition that existed in the market prior to the merger.
The Justice Department’s new approach to mergers and aggressive civil enforcement issues raise real risks to companies, particularly those operating in concentrated markets. The U.S. economy while growing has been rapidly shrinking in competition, particularly in various markets critical to the economy. Kanter’s fresh perspective on the value of “competition” as a driver of economic growth, consumer benefits, and innovation means more enforcement risks for companies in these concentrated markets, especially where a market leader has a dominant market share and influence.
Kanter, however, recognized that this new approach requires resources, and he highlighted the fact that the Antitrust Division has consistently shrunk in size over the last few years. DOJ is seeking a large budget increase to hire additional attorneys and staff. This takes time but will eventually occur since there is bipartisan support for the new era of antitrust enforcement.
CCOs and Criminal Cartel Compliance Programs
Chief compliance officers have plenty of things to do and risks to manage. CCOs have a unique remit and a set of skills that should be applied whenever needed. While I am not trying to increase CCO workload (and forgive me if I am), CCOs should have responsibility for design and implementation of an effective criminal antitrust compliance program.
For many years, antitrust compliance was the sole province of in-house counsel. This trend developed because of the need for legal analysis and understanding of civil antitrust issues – mergers, civil enforcement for anti-competitive conduct under Section 1 of the Sherman Act, or monopolization conduct under Section 2 of the Sherman Act.
Criminal antitrust enforcement, however, is subject to a per se rule under Section 1 of the Sherman Act. In shorthand, Section 1 authorizes criminal prosecution of companies and individuals for agreements between competitors to fix prices, rig bids, or allocate territories and/or customers. This last sentence covers a whole variety of criminal schemes. The lines between permissible and unlawful activity involving competitors is well defined. Of course, there are situations where arguments can be made but in almost every case Section 1 per se violations are clear. That is why CCOs should take responsibility for this area – CCOs know how to design and implement compliance programs to prohibit activity that is illegal – whether paying bribes, violating sanctions or fixing prices.
CCOs have the benefit of comprehensive guidance from the Department of Justice’s Antitrust Division on effective antitrust compliance programs. The requirements are well known to CCOs; they resemble those for other compliance programs. Of course, the risks are different but the means by which to mitigate the risks are the same as in other specific compliance programs.
DOJ Antitrust Division Trends and What It Means for Compliance
Organizations have to take account of the increased risk of enforcement. DOJ’s Antitrust Division is poised to ramp up criminal enforcement. The Antitrust Division had a successful run for years in prosecuting companies and individuals for cartels involving auto suppliers, foreign exchange traders, generic pharmaceuticals, air cargo transportation companies, video displays, electronic capacitors and a variety of other industries. In the last two years, criminal enforcement was down. That is very likely to change in the next few years – the Antitrust Division is being re-invigorated under AAG Kanter’s leadership. He is committed to new initiatives, additional resources and a fresh approach to enforcement and promotion of competition.
The Antitrust Division has been aggressively bringing criminal cases against companies that wage-fix and enter into no-poach agreements in relevant labor markets. The Antitrust Division warned companies it was planning to bring criminal cases in this area and it has stuck to its word. More cases are expected.
In this era of aggressive antitrust enforcement, CCOs and in-house counsel have to coordinate compliance efforts. CCOs should take point on detecting and preventing criminal violations stemming from illegal agreements with competitors to restrict competition. In-house counsel should take the lead on potential civil issues and enforcement risks stemming from mergers and other potential anti-competitive agreements.
CCOs have to devote energy to conducting a meaningful risk assessment, adopting or revising policies and procedures, conducting regular training for relevant leadership and personnel, monitoring overall compliance and auditing/testing the compliance program. Illegal collusion can occur in a variety of circumstances, and with the ease of communications between individuals on phones and computers, the risk of illegal agreements between competitors is high. CCOs have to recognize this significant risk and prioritize resources and time in relation to other risks such as bribery, sanctions, data privacy, anti-money laundering and fraud.
While companies moan and groan when subject to an FCPA investigation, take it from me, an antitrust criminal investigation presents serious risks to the organization, requires lengthy and intense internal investigations that involve a variety of enforcement risks in the United States and foreign enforcement agencies. Organizations have to balance these consequences against reasonable expenditures and attention to antitrust compliance programs aimed at preventing antitrust violations from occurring in the first place.
Antitrust Division Indicts Four Individuals for Wage Fixing in Labor Markets
Criminal antitrust is burning a path in prosecuting illegal wage-fixing agreements in labor markets. The Justice Department warned companies over five years ago and now DOJ is executing on its warning. Over the last two years, the Antitrust Division has indicted four companies and seventeen (17) individuals. The Antitrust Division is promising more.
At the end of 2021, DOJ indicted six individuals, one of whom worked at Pratt Whitney, in a major case against aerospace engineering firms. Prior to this case, DOJ focused its initial cases against healthcare companies.
Last week, DOJ announced another major indictment against four managers of home health care agencies for conspiracy to suppress the wages and restrict job mobility of essential workers during the COVID-19 pandemic. DOJ announced the indictment as the beginning of a larger investigation into wage fixing and worker allocation schemes involving the Personal Support Specialist (PSS) workers.
The four defendants were charged in the case United States v. Faysal Kalayaf Manahe et al. The defendants owned and managed home health care workers, commonly referred to as Personal Support Specialists (PSS). Each PSS is paid an hourly wage. Home health care agencies submit reimbursement claims from Medicaid for eligible expenses. In response to the COVID-19 pandemic and the need for home health care services, Maine announced an increase in reimbursement rates for PSS employees. Home health care agencies were also eligible for Paycheck Protection Program loans.
The four defendants all resided and operated in the Portland, Maine area. As charged in the indictment, the four defendants and their respective companies conspired to fix wages of PSS employees and to refrain from hiring each other’s’ PSS employees. The indictment alleges that the defendants coordinated communications among themselves by setting up a group chat function among themselves entitled “Home Care.” The defendants attended virtual meetings to discuss and agree to levels of PSS wages. The defendants also met in person and discussed PSS wages and agreements among themselves.
As an example, the indictment alleged that around April 7 to 9, 2020, the defendants agreed via a group chat to fix the wages paid to PSS employees at $15 per hour for non-certified workers, and $16 per hour for certified workers.
The defendants also agreed to pressure other home health care agencies to ensure that they did not pay PSS employees at higher rates than the $15 to $16 range. In some cases, members of the conspiracy contacted Maine state authorities to request an investigation of these companies for compliance issues.
In seeking additional companies to join the conspiracy, members of the existing conspiracy drafted specific language for certifications by new members that would restrict the ability of new members to pay PSS employees higher than the agreed on rates. The market rate for PSS employees increased because of the increase in Maine’s reimbursement rates because of the COVID-19 pandemic. By preserving low employee rates, home health care agencies margins increased (the difference between reimbursement hourly rate and specific rate paid to PSS employees).
This article originally appeared as a three-part series on Michael Volkov’s blog Corruption, Crime and Compliance. It is reprinted here with permission.
Michael Volkov is the CEO of The Volkov Law Group LLC, where he provides compliance, internal investigation and white collar defense services. He can be reached at 
