United States: 4 Antitrust Risk Areas To Watch For Government Contractors

Upon passage, the Infrastructure Investment and Jobs Act would break ground on $550 billion in new infrastructure spending, including $110 billion of investment in roads, bridges and major projects; $65 billion for broadband deployment; and $21 billion for environmental remediation.¹

This anticipated spending provides significant opportunities for government contractors. But companies seeking government contracts should be aware that there is a new cop walking this beat. Two years ago, the U.S. Department of Justice launched the Procurement Collusion Strike Force, an interagency partnership that builds on the DOJ Antitrust Division's expertise in prosecuting anti-competitive conduct involving government procurement.

This article examines the division's past enforcement in the act's key spending areas, along with the PCSF's current efforts. With this past as a guide to future enforcement, we identify four risk areas to watch: joint bidding, dual distribution, legal certifications, and hiring and compensation.

Given the increased likelihood of detection and stiff penalties for antitrust violations, companies seeking government contracts should ensure that their compliance programs detect and prevent potential anti-competitive conduct in these risk areas.

Past Division Enforcement in Key Spending Areas

The division has a long history of enforcement actions against companies and individuals involved in infrastructure projects. For example, concrete is an essential component of many construction projects, including road and bridge projects managed by government agencies.

Take, for example, the Sept. 28 case U.S. v. Clarence Olson, in which a Minnesota-based contractor pleaded guilty in the U.S. District Court for the District of Minnesota to charges that he conspired to rig bids for municipal concrete repair and construction contracts.²

Also take, for example the Jan. 4 case U.S. v. Argos USA LLC, in which the Georgia-based ready-mix concrete company agreed to pay a $20 million criminal penalty as part of a deferred prosecution agreement to resolve charges in the U.S. District Court for the Southern District of Georgia that it violated the Sherman Act.³

In addition, in the 2020 case U.S. v. Evans Concrete LLC, the Georgia-based concrete supplier and four individuals were indicted for the same alleged conspiracy.⁴

These recent cases continue a trend of Antitrust Division enforcement in this industry. Take for example, 2011's U.S. v. VandeBrake in the U.S. District Court for the Northern District of Iowa. The division prosecuted an Iowa-based conspiracy to fix prices and rig bids for ready-mix concrete.⁵

As part of that investigation, one individual was sentenced to 48 months in prison.⁶ In sentencing the defendant, U.S. District Judge Mark Bennett acknowledged the "unique ease and opportunity that his industry, concrete sales, gave him in establishing a concrete cartel."⁷

This case followed the 2005 U.S. v. Irving Materials Inc. prosecution in the U.S. District Court for the Southern District of Indiana, of a concrete conspiracy based in that state, where one company was fined $29 million, which at the time was the largest criminal fine for a purely domestic Sherman Act violation.⁸

The Antitrust Division's efforts to combat anti-competitive conduct involving infrastructure projects are not limited to the concrete industry. Another recent Antitrust Division enforcement action targeted an alleged conspiracy to rig bids for aluminum-structure projects funded by the North Carolina Department of Transportation.⁹ Take, for example, October 2020's U.S. v. Brewbaker.

The Antitrust Division indicted an aluminum-structure manufacturer, Contech Engineered Solutions, and Brent Brewbaker, a former employee, in the U.S. District Court for the District of North Carolina for antitrust and fraud violations.¹⁰ In June, the division announced that the company had pleaded guilty, and agreed to pay a $7 million criminal fine and over $1.5 million in restitution.¹¹

Broadband deployment and environmental remediation are other key spending areas that have been active areas of enforcement historically, and individuals have been sentenced to lengthy prison terms.

Roughly a decade ago, the division prosecuted several companies and individuals in connection with bid-rigging and fraud associated with the federal government's E-Rate program, which subsidizes telecommunications and Internet infrastructure for low-income schools.¹² In 2010 in U.S. v. Green, consultant Judy Green was sentenced to a 90-month prison term following a jury trial in the U.S. Court of Appeals for the Ninth Circuit, in which she was convicted of all 22 counts brought against her, including bid-rigging and fraud charges.¹³

The Antitrust Division also has prosecuted companies and individuals for manipulating bidding processes in connection with environmental remediation efforts.¹⁴

In 2016, in U.S. v. McDonald, a case involving cleanup efforts at two Environmental Protection Agency Superfund sites in New Jersey, the U.S. Court of Appeals for the Third Circuit sentenced former project manager Gordon McDonald to a 14-year prison term for multiple criminal offenses related to the bid-rigging scheme.¹⁵

Enhanced Focus on Government Procurement

The PCSF was established in November 2019, as an interagency partnership led by the Antitrust Division and comprised of U.S. attorney's offices, the Federal Bureau of Investigation and multiple agency inspectors general to detect, investigate and prosecute antitrust crimes and related fraud schemes in government procurement.¹⁶

The PCSF has trained more than 10,000 government personnel, including procurement officers and auditors, and has hosted workshops on using data analytics to detect antitrust violations.¹⁷ In addition, the PCSF has opened nearly three dozen investigations, and those efforts have started to result in prosecutions.¹⁸

Although division leadership has changed since the PCSF was established, combating collusion and fraud in government procurement remains a top priority. Earlier this year, acting Assistant Attorney General Richard Powers wrote that the Antitrust Division would "continue the fight against collusion affecting government spending and taxpayer dollars - including the vast sums of money allocated to maintain economic stability and fight the pandemic."¹⁹

Four Risk Areas to Watch

Drawing lessons from the Antitrust Division's past and present enforcement efforts, companies seeking government contracts should assess their risk in four key areas by asking the following questions.

1. Joint Bidding

Does the company engage in any joint bids or offers with potential competitors? If so, is the purpose of the joint-bidding arrangement merely to limit competition, or is it part of a legitimate larger collaboration such as a joint venture? As demonstrated by the August 2020, U.S. v. Gaines case in the U.S. District Court for the District of Minnesota involving bids submitted to the General Services Administration, the former may be a criminal violation of the Sherman Act.²⁰

But even if the joint arrangement is part of a larger collaboration, the company still must ensure that it is reasonably necessary to achieve the pro-competitive benefits from the collaboration.[21] Companies should ask, for example, whether they are able to perform the contract on their own; if so, any joint-bidding or teaming agreements for that contract deserve further scrutiny.

All such relationships should receive appropriate legal review and documentation to ensure compliance with antitrust laws.

2. Dual Distribution

Does the company pursue any contracts in competition with any of its distributors or dealers? For example, if the company submits bids directly to customers while also selling through distributors that may submit their own bids, some types of agreements concerning their bid submissions may constitute a criminal violation.

For example, in the North Carolina case discussed above, the Antitrust Division prosecuted an aluminum-structure manufacturer for communicating with its dealer regarding bid submissions and submitting "intentionally higher" bids than its dealer.²¹ Companies should review all agreements that affect bid submissions and refrain from submitting any bids that are not genuinely intended to win.

3. Legal Certifications

Does the company ensure that its certifications are accurate? Bids for government contracts often require numerous legal certifications, including those relating to independent bidding, small business set-asides, product origin and compliance with various laws.

Inaccurate certifications may trigger criminal investigations - and possibly prosecutions - for fraud or false statements. For example, on March 17, in U.S. v. Padron, Michael Angelo Padron, a former construction company owner was indicted in the U.S. District Court for the Western District of Texas, for an alleged scheme involving "false statements and representations to the contracting federal government agencies."²² Companies should review all certifications and perform sufficient due diligence to make accurate representations.

4. Hiring and Compensation

Does the company have any noncompete or no-poach agreements with other companies - e.g., suppliers, distributors - that limit competition for employees? Does the company have any agreements with other companies that limit competition for compensation offered to workers?

The Antitrust Division's enforcement efforts are not limited to product markets. In 2016, the Antitrust Division announced that naked restraints of trade in the labor market would be prosecuted criminally.²³ Since then, the division has charged three companies and four individuals for alleged wage-fixing and employee non-solicitation agreements.

Companies should be aware that they are considered "competitors in the employment marketplace, regardless of whether the firms make the same products or compete to provide the same services," according to the division,²⁴ and review agreements with business partners to ensure that they do not contain the types of hiring or pay restrictions that would violate antitrust laws.

In conclusion, the anticipated infrastructure spending presents significant business opportunities across many industries. But given the potential government scrutiny of anti-competitive conduct, in particular from the PCSF, companies pursuing these opportunities should address these risk areas and ensure that their operations are in compliance with antitrust and other laws.

Disclosure: During his time at the DOJ, author Andre Geverola was the lead prosecutor in U.S. v. VandeBrake. As director of criminal litigation he supervised U.S. v. Argos USA, U.S v. Evans Concrete, U.S. v. Brewbaker, U.S. v. Gaines and U.S. v. Padron, each mentioned in this article.

Footnotes

1. See Press Release, The White House, UPDATED FACT SHEET: Bipartisan Infrastructure Investment and Jobs Act (Aug. 2, 2021); Mark Epley et al., Revving up the Engine: Senate Prepares to Pass Landmark Bipartisan Infrastructure Legislation for Transportation, Broadband, Energy and Water Projects (Aug. 6, 2021).

2. Press Release, U.S. Dept of Justice, Concrete Contractor Pleads Guilty to Rigging Bids for Public Contracts in Minnesota (Sept. 28, 2021).

3. Deferred Prosecution Agreement, United States v. Argos USA LLC, No. 4:21-cr-00002 (S.D. Ga. Jan. 4, 2021).

4. See Indictment, United States v. Evans Concrete, LLC, No. 4:20-cr-00081 (S.D. Ga. Sept. 2, 2020).

5. See United States v. VandeBrake  , 771 F. Supp. 2d 961 (N.D. Iowa 2011).

6. Id. at 1019.

7. Id. at 965.

8. See Press Release, U.S. Dep't of Justice, Indiana Ready Mixed Concrete Producer and Four Executives Agree to Plead Guilty to Price-Fixing Charge (June 29, 2005).

9. Press Release, U.S. Dep't of Justice, Engineering Firm Pleads Guilty to Decade Long Bid Rigging and Fraud Scheme (June 7, 2021).

10. Indictment, United States v. Brewbaker, No. 5:20-cr-00481 (E.D.N.C. Oct. 21, 2020).

11. Press Release, U.S. Dep't of Justice, Engineering Firm Pleads Guilty to Decade-Long Bid Rigging and Fraud Scheme (June 7, 2021).

12. See U.S. Dep't of Justice, Antitrust Division Update 2 (Spring 2009).

13. United States v. Green, 592 F.3d 1057, 1060, 1063 (9th Cir. 2010).

14. See, e.g., Press Release, U.S. Dept of Justice, Canadian Executive Pleads Guilty to Fraud and Money Laundering Conspiracies Involving a New Jersey Environmental Protection Agency Superfund Site (July 6, 2009).

15. See United States v. McDonald, 654 F. App'x. 118, 121 (3d Cir. 2016); Press Release, U.S. Dep't of Justice, Former Project Manager Sentenced to Serve Time in Prison for Role in Bid Rigging and Other Fraudulent Schemes Involving Two EPA Superfund Sites in New Jersey (Mar. 4, 2014).

16. See Press Release, U.S. Dep't of Justice, Justice Department Announces Procurement Collusion Strike Force: a Coordinated National Response to Combat Antitrust Crimes and Related Schemes in Government Procurement, Grant and Program Funding (Nov. 5, 2019).

17. U.S. Dep't of Justice, Antitrust Division Update 15-16 (Spring 2021).

18. Id. at 15; see, e.g., Press Release, U.S. Dep't of Justice, Belgian Security Services Firm Agrees to Plead Guilty to Criminal Antitrust Conspiracy Affecting Department of Defense Procurement (June 25, 2021).

19. U.S. Dep't of Justice, Antitrust Division Update 2 (Spring 2021).

20. See Press Release, U.S. Dep't of Justice, Bidder Pleads Guilty to Rigging Rids at Online Auctions for Surplus Government Equipment (Apr. 7, 2021); Order, United States v. Gaines, No. 0:20-cr-00020 (D. Minn. Sept. 1, 2020), (adopting report and recommendation denying defendant's motion to dismiss which argued that the bids were part of a joint venture).

21. Indictment ¶¶ 2, 7, United States v. Brewbaker, No. 5:20-cr-00481 (E.D.N.C. Oct. 21, 2020).

22. Indictment ¶21(f), United States v. Padron, No. 5:21-cr-00124 (W.D. Tex. Mar. 17, 2021).

23. U.S. Dep't of Justice & Fed. Trade Comm'n, Antitrust Guidance for Human Resource Professionals 4 (Oct. 2016).

24. Id. at 2.

Originally Published by Law360.

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