Antitrust Prosecutions Under The Obama Administration
The arena for antitrust enforcement is about to get tougher. Under the Bush administration, deregulation was tantamount to anarchy. Nothing was controlled and we are living with the consequences.
The economic circumstances of today are requiring enormous infrastructure outlays. The flood of construction contracts to be let will be inviting targets for “gentlemen’s agreements”, otherwise known as price fixing. Anyone who has frequented “bid lettings” is aware of the conversations that take place there. There will be rather substantial profitability resulting from the expansion of project volume. That in itself will have an impact upon pricing.
In public works projects, the contracting authority engineers will have placed a construction value on each project, a necessity for the budgeting process. The relationship between the engineer valuations and the bid levels, as well as the similarity or patterns of bidding will in some instances suggest that the bidding system is not as competitive as it was supposed to be.
In the normal course, some disgruntled employees of contractors will report to enforcement authorities that their former companies were submitting collusive bids. Alternatively, someone caught up in some other enforcement difficulty will make a plea deal by giving up a bunch of price fixing conspirators. Finally, whiskey brain causes public statements that are often overheard by the wrong sort. Investigations will more frequently spring from those reports than was the case under the Bush administration.
There will be a more aggressive enforcement posture under the Obama administration. There is always a more aggressive antitrust enforcement atmosphere in a Democrat administration anyway. Now, however, there is a supplemental purpose to the infrastructure projects – the creation of jobs. Every dollar of job creation funding will be deemed precious. People found or believed to be colluding on the price of public works can expect a tougher enforcement environment because of these influences.
That places a premium upon astute professional management of antitrust investigations right from the start. As soon as you get wind of an inquiry into collusive pricing that could include your company, if for no other reason simply because your company was a bidder, you must get control of where you are in terms of possible exposure. Immediate focus has a lot to do with minimizing exposure. Your competitors who are also involved in the investigation will also be sensitive to the urgency of the need to get on top of this. Delay on your part in dealing expertly with it can be expected to increase your company’s likelihood of having a difficult time.
By way of a refresher on this recently neglected subject, denials of involvement by your people will not readily be credible if they were where the meetings took place at the time the meetings took place. No one is likely to believe that your company received advance copies of competitor bids or similar before the fact information without your reciprocation in providing your own similar information.
Prosecutors know that no one gets involved in price fixing inadvertently. Grand juries will be easier to influence because grand jurors are aware of the dire circumstances in which so much public funding is being devoted to public works. None of this will be taken lightly. Wrist slaps should not be expected. Prison terms will be meted out. Civil damages cases will aggressively follow government action. There is too much private attorney incentive in them for it to be otherwise.
Experience teaches that everyone knows about most of this, but is not deterred from doing it when the opportunities arise. You cannot count upon antitrust compliance lectures to insulate you. They have not in the past and they won’t now. Moreover, companies that have antitrust compliance programs and that are caught in price fixing anyway will be considered to have deliberately used the compliance program as a smoke screen. Those of us who were involved in them in the 60s know very well that when it comes to price fixing, you are better off not to have a formal antitrust compliance program. There are easier ways to get the message to those who are in a position to become involved. If they are going to do it despite a simple reminder, they would do it despite a formal program too.
Historically, punishment for price fixing has been very expensive. In addition to the cost of lawyers, there are fines and damages to pay – even in settled damage cases. Moreover we can expect jail sentences to be imposed more frequently under current conditions. How these risks are dealt with requires specialized experience that is immediately brought to bear at the earliest moment. There are options early on in antitrust investigations. Those options depend on who you are and how quickly you do what you need to do to reduce risk. Only experienced antitrust practitioners will know what these are and how to use them.
When you think you may be at risk, don’t wait until your also at risk competitors throw you under the bus to save their own hides.
