Worldwide: Quarterly Cartel Catch-Up: Recent Developments In Criminal Antitrust For Busy Corporate Counsel ‒ Summer 2021

More than halfway through the year, 2021 has shaped up to be another busy time for antitrust enforcers. In July, the Biden administration confirmed that antitrust remains a top priority by issuing a sweeping Executive Order, Promoting Competition in America, that effectively enlists dozens of federal agencies to promote its antitrust agenda to develop new rules and regulations, including the need for stringent enforcement against "no poach" and non-solicitation agreements. President Biden also announced that he would be tapping Jonathan Canter to lead the Department of Justice's Antitrust Division (the "Division"). This long-awaited nomination finally provides some insight about who will be making criminal antitrust enforcement decisions for the foreseeable future.

While the administration's antitrust policy and policymakers continue to take shape, the Division continues to file charges in both new and ongoing investigations. But these cases are not without their challenges. For example, although the Division filed yet another indictment for a "no-poach" agreement, several defendants filed motions to dismiss the indictments because, they argue, the Division violated their constitutional rights by failing to provide "fair warning" that it would bring criminal charges for these types of offenses.

Below we summarize significant cartel enforcement developments in the United States and abroad, including additional indictments in the Division's investigation in the poultry industry, updates in the Division's first-ever wage-fixing prosecution, and new charges in the real estate industry. These updates and more are in this latest edition of the Quarterly Cartel Catch-Up.

Six More Indictments in the Division's Chickens Investigation

Key Point: The Division indicted two companies and four additional individuals in its broiler chickens investigation, which is showing no signs of slowing down.

The DOJ's long-running investigation into the poultry industry continued to generate criminal charges over the summer. On May 20, 2021, the Division announced that a grand jury indicted Georgia-based Claxton Poultry Farms for its role in a nationwide conspiracy to fix prices and rig bids for the sale of broiler chickens. On July 28, 2021, grand juries returned indictments charging Koch Foods and four former executives of Pilgrim's Pride for their alleged roles in the conspiracy, which dated back to 2012.

The prospect of these additional charges has been percolating for some time. In February 2021, Pilgrim's Pride pleaded guilty and was sentenced to a $107 million fine for its role in the conspiracy, and the company's plea agreement "carved out" (excluded) several individuals, which enabled the Division to include them in a future indictment. Similarly, in October 2020, the Division indicted William Kantola, Koch Foods' senior vice president, along with nine other individuals for their role in the conspiracy.

These recent indictments bring the total charges in this investigation to 17, three companies and 14 individuals. With only one of these charges resolving through a plea agreement, the Division will be busy for the foreseeable future litigating these cases.

First-Ever Criminal Wage-Fixing Prosecution Adds an Additional Defendant, but Also a Motion to Dismiss

Key Point: The Division indicted a second individual defendant for fixing wages for healthcare workers and obstructing FTC investigation, while the first individual defendant filed a motion to dismiss these novel charges.

On April 19, 2021, the Division announced that the grand jury returned a superseding indictment that added John Rodgers as a defendant for his alleged role in this price-fixing conspiracy. The superseding indictment alleges that Neeraj Jindal, who was first indicted on December 10, 2020, and Rodgers, the respective owner and clinical director of a Texas-based therapist staffing company, agreed with co-conspirators in 2017 to pay lower rates to physical therapists and physical therapist assistants. The indictment also alleges that both Jindal and Rodgers obstructed an FTC investigation into their conduct by making false statements, withholding information, and destroying documents.

On May 25, 2021, Jindal filed a motion to dismiss the wage-fixing count of the superseding indictment.¹ Jindal argued that the indictment should be dismissed because the Division did not allege a per se Sherman Act violation that could be subject to criminal prosecution. According to Jindal, the courts have not had enough experience with wage-fixing agreements to treat them as per se offenses. Additionally, Jindal argued that the Division's decision to expand the scope of conduct it views as a per se criminal offense failed to provide him with "fair warning," and therefore violated his constitutional right to due process. The Division responded that the wage-fixing is simply another form of price-fixing, and highlighted several decisions in which courts have found that conspiracies to suppress pay are per se antitrust violations.

Jindal's arguments are similar to those raised by other defendants facing indictments for alleged no-poach agreements, all of which are still pending.

(3) Online Seller of DVDs and Blu-Ray Discs Pleads Guilty to Price-Fixing Conspiracy

Key Point: The Division's focus on policing digital platforms includes detecting collusive behavior.

On July 23, 2021, the Division announced that David Camp pleaded guilty to participating in a price-fixing conspiracy for the online sale of DVDs and Blu-ray discs. Camp, who allegedly participated in this conspiracy from May 2018 to October 2019, is the first individual to be charged and plead guilty in this investigation. This investigation is similar to the Division's 2015 prosecution of multiple individuals for their involvement in a price-fixing conspiracy for posters sold on Amazon Marketplace. This investigation, which was conducted with both the FBI and the U.S. Postal Service's Office of the Inspector General, serves as a reminder that the Division regularly monitors digital platforms for collusive behavior, and is willing to file criminal charges even if the volume of commerce—which, here, was $500,000—is not substantial.

North Carolina Engineering Firm Pleads Guilty to Bid-Rigging and Fraud Scheme in Infrastructure Procurement

Key Point: This is the first corporate plea that the Division obtained as part of the Procurement Collusion Strike Force.

On June 7, 2021, the Division announced that Contech Engineered Solutions LLC, an engineering firm based in North Carolina, agreed to plead guilty to conspiring to rig bids and defraud the North Carolina Department of Transportation (NCDOT). Contech agreed to pay a criminal fine of $7 million, and $1,533,988 in restitution to NCDOT, as well as to cooperate in the Division's ongoing investigation.

According to the plea agreement, Contech admits to conspiring to rig bids for aluminum structure projects funded by the federal government and the NCDOT for nearly a decade, specifically, by submitting bids that were falsely held out to be competitive and free of collusion. Contech participated in the conspiracy from at least as early as 2009 through March 2018. Charges remain pending against former Contech executive Brent Brewbaker, who was named as a co-defendant in the same indictment.

This investigation and this recent plea agreement underscore the Division's commitment to the Procurement Collusion Strike Force (PCSF), which the Division formed in November 2019 to combat antitrust crimes and related fraudulent schemes that impact government procurement, grant, and program funding. As Congress tries to finalize a $3.5 trillion federal infrastructure bill, the Division's work in this area is only likely to grow.

Real Estate Professionals Indicted for Bid-Rigging in Farmland Auction

Key Point: The Division charges two more real estate professionals for conspiring to rig bids at an agricultural estate auction, reaffirming broader efforts to stem collusion in real estate industry.

On May 21, 2021, the Division announced that a federal grand jury had returned an indictment charging two Kentucky real estate professionals, Barry Dyer and Mackie Shelton, with conspiring to rig bids at a 2018 estate auction for farmland and timber rights. The single-count indictment accuses Dyer and Shelton of demanding and accepting a $40,000 payoff to stop bidding from two farmers who were interested in purchasing the land. Although the auction staff warned the unnamed farmers not to engage in the conduct, they agreed to pay Dyer and Shelton to stop bidding, which allowed them to win the auction at an artificially lower price.

This is yet another example of the Division's efforts to protect the integrity of the real estate industry, regardless of the size of the case. Also, given the nature of the case and the charges, this case may well be the product of the Division receiving a tip from a private citizen or local government, which is yet another way that criminal conduct can be revealed.

Real Estate Investor Pleads Guilty in Bid-Rigging Probe

Key Point: Guilty plea reminder of long-running investigation into collusion related to real estate foreclosures.

On August 6, 2021 the Division announced that Yama Marifat, a California real estate investor, pleaded guilty to rigging bids at public foreclosure auctions. The indictment alleged that, between April and October of 2009, Marifat and his co-conspirators agreed not to bid against each other on particular properties. They instead designated one participant to bid and win properties at the public auction, and then later would hold a private auction to determine who would receive the property and the payoff amount to the other participants.

Mr. Marifat is the 11th individual to plead guilty in this investigation of fraud and bid-rigging in the real estate market in San Joaquin County. The 10 other individuals have been sentenced to prison terms ranging from five to eight months, and have been assessed criminal fines and restitution totaling over $6 million.

The Division's commitment to prosecute bid-rigging in real estate foreclosure markets is longstanding. To date, the Division has brought charges against 140 individuals across the nation for this type of conduct. These charges have resulted in 124 guilty pleas and 12 individuals convicted at trial.

Missouri Man Pleads Guilty to Rigging Bids at Online GSA Auctions

Key Point: The Division continues to police anti-competitive behavior in General Services Administration (GSA) auctions by securing a guilty plea from a third co-conspirator in bid-rigging scheme.

On April 7, 2021, the Division announced that Alan Gaines pleaded guilty to a Sherman Act violation for conspiring to rig bids at auctions of surplus federal government equipment from July 2012 through May 2018. Gaines is the third individual charged in connection with this investigation, and the third to plead guilty.

Gaines and his co-conspirators coordinated bids for specific lots on sale at auctions run by the GSA, the agency that helps manage the federal government. According to the indictment, Gaines and his co-conspirators determined ahead of time who would win a particular lot. This scheme resulted in lower prices paid to the federal government, which the Division argued ultimately harmed U.S. taxpayers.

EU Levies Multimillion-Dollar Fines on Investment Banks for Bond-Related Schemes

Key Point: The European Commission is cracking down on anticompetitive practices in the bond trading markets.

On April 28, 2021, the European Commission fined several banks €28 million for participating in a cartel in the secondary trading market for Supra-sovereign, Sovereign, and Agency bonds (SSA bonds). According to reports, for five years the traders reportedly logged into multilateral and bilateral chatrooms on Bloomberg terminals to exchange updates on trading activities, coordinate prices shown to customers and the market in general, and align trading activities.

Later, on May 20, 2021, the Commission announced that seven investment banks colluded to influence the markets for European Government Bonds (EGBs). The fines against these seven banks totaled €371 million. From 2007 to 2011, the traders working on EGB desks allegedly remained in regular contact with one another using multilateral chatrooms to share commercially sensitive information, such as the prices and volumes offered prior to auctions and the prices shown to customers and the market in general. The conduct swept more broadly, but the Commission determined that several other banks that participated in the conspiracy could not be fined because their conduct occurred outside the statute of limitations. Additionally, the Commission spared NatWest because it informed the Commission of the cartel.

These decisions demonstrate the Commission's focus on the financial sector, its willingness to target big and well-established companies, and the benefits of seeking leniency.

Footnote

1. United States v. Jindal, 4:20-cr-00358-ALM-KPJ, ECF No. 35 (N.D. Tex. May 24, 2021).