slide1
Download
Skip this Video
Download Presentation
Understanding, Detecting, & Reporting Antitrust Violations

Loading in 2 Seconds...

play fullscreen
1 / 56

ANTITRUST DIVISION - PowerPoint PPT Presentation


  • 171 Views
  • Uploaded on

Understanding, Detecting, & Reporting Antitrust Violations. Howard J. Parker & Lidia Maher U.S. Department of Justice Antitrust Division San Francisco Field Office Jonathan A. Mark Washington State Office of the Attorney General Antitrust Division. DEPT. OF GENERAL ADMINISTRATION

loader
I am the owner, or an agent authorized to act on behalf of the owner, of the copyrighted work described.
capcha
Download Presentation

PowerPoint Slideshow about 'ANTITRUST DIVISION' - jaden


An Image/Link below is provided (as is) to download presentation

Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.


- - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - -
Presentation Transcript
slide1

Understanding, Detecting, &

Reporting Antitrust Violations

Howard J. Parker & Lidia Maher

U.S. Department of Justice

Antitrust Division

San Francisco Field Office

Jonathan A. Mark

Washington State Office of the Attorney General

Antitrust Division

DEPT. OF GENERAL ADMINISTRATION

WASHINGTON STATE AGENCIES

Olympia, WA

June 11, 2009

antitrust division offices
Antitrust Division Offices

New York

Philadelphia

Washington, D.C.

Cleveland

Chicago

Atlanta

Dallas

criminal antitrust enforcement
Criminal Antitrust Enforcement
  • Criminal investigation and enforcement
    • Bid rigging
    • Price fixing
    • Market allocation
state antitrust division
State Antitrust Division

Civil enforcement of the antitrust statutes in the Consumer Protection Act, our “baby Sherman Act.” Federal law is persuasive but not binding. So, pay attention to federal law overview, the same concepts apply in state law

Damages and restitution for state and local governmental agencies and consumers.

Civil penalties: $100k for individuals; $500k for corporations.

Injunctive relief

Civil enforcement of federal antitrust laws, in close coordination with the DOJ and the FTC.

Competition advocacy (bills, amicus)

penalties are significant
Penalties Are Significant
  • Corporation
    • Up to $100 million
  • Individual
    • $1,000,000; and/or
    • 10 years incarceration
  • Alternative Fine Statute
    • Twice gain to defendant; or
    • Twice loss to victim
  • State Law
    • $100,000 for individuals
    • $500,000 for corporations
    • Gross misdemeanor for certain bidding violations
criminal penalties obtained

Criminal Penalties Obtained

Largest Single Fine – $500 Million

Largest Single Case – $1.6 Billion

Recent Jail Sentences – 7 1/2 years

sherman antitrust act 1
Sherman Antitrust Act – § 1
  • “Every contract, combination in the form of trust or
  • otherwise, or conspiracy, in restraint of trade or
  • commerce among the several States, or with foreign
  • nations, is declared to be illegal. . . .”
  • Prohibits agreements among competitors in
  • restraint of trade or commerce.
elements of a sherman act violation
Elements of a Sherman Act Violation
  • Agreement
  • Unreasonable restraint of trade
  • Interstate commerce
agreement
Agreement
  • Meeting of the minds/understanding
  • Two or more unrelated persons
  • Does not have to be expressed or written
the washington state consumer protection act
The Washington State Consumer Protection Act
  • Revised Code of Washington 19.86.030:
    • “Every contract, combination, in the form of trust or otherwise, or conspiracy in restraint of trade or commerce is hereby declared unlawful.”
  • Substantially similar to the federal Sherman Act
  • No interstate commerce requirement
elements of a violation under rcw 19 86 030
Elements of a Violation under RCW 19.86.030
  • Agreement
  • Unreasonable restraint of trade
    • Per se (usually agreements among competitors)
    • Rule of Reason (usually vertical agreements)
  • “Injury” when seeking damages on behalf of state agencies
  • “Injury to business or property” in a private action.
cpa compared to sherman act
CPA Compared to Sherman Act
  • Very similar, but federal law is not binding on how the CPA is interpreted
  • For example:
    • Bar to recovery for indirect purchasers not applicable;
      • Blewett v. Abbott Laboratories (1997)
      • CPA amended in 2007
other relevant state laws
Other Relevant State Laws
  • State Constitution:
    • Article XII § 22 states: “Monopolies and trusts shall never be allowed in this state, and no incorporated company, copartnership, or association of persons in this state shall directly or indirectly combine or make any contract with any other incorporated company, foreign or domestic, through their stockholders, or the trustees or assignees of such stockholders, or with any copartnership or association of persons, or in any manner whatever for the purpose of fixing the price or limiting the production or regulating the transportation of any product or commodity.”
other relevant state laws1
Other Relevant State Laws
  • Washington Criminal Law
    • RCW 9. 18.120 & .130 - Suppression and collusion to prevent competitive bidding
      • Unlawful for any person to offer anything of value to another to induce that person to refrain from bidding or to enter into any agreement for the purpose of suppressing competition.
      • Gross misdemeanor
    • Enforced by county prosecutors, not AGO
  • Competitive bids required – RCW 43.19.1906
conditions conducive to collusion
Conditions Conducive to Collusion
  • Few sellers or bidders in the industry, or a small group of major vendors controls a large percentage of the market.
conditions conducive to collusion1
Conditions Conducive to Collusion
  • The product is standardized (commodity), and other competitive factors, such as design, quality, or service are not prevalent.
  • The product has no readily available substitute.
conditions conducive to collusion2
Conditions Conducive to Collusion
  • Competitors in the industry frequently interact through social conventions, trade association meetings, shifting employment, or when conducting legitimate business.
  • Bidders personally submit bids at the same physical location.
what is bid rigging
What is Bid Rigging?
  • Bid Rotation
    • Competitors agree to take turns being the low (winning) bidder
  • Bid Suppression
    • Competitor agrees not to bid
  • Complementary Bid
    • Competitor agrees to bid high
aircraft parts case
Aircraft Parts Case

“Price war is over between Smith & Smith and Jay-Em.”

-- Presidents of Jay-Em and Smith & Smith, 1986

Prices increased significantly – 60% jump between ’85 and ’86.

No economic explanation to support such a significant price

increase.

complementary bid
Complementary Bid

Bidder #1 awards subcontract, or pays kickback to Bidder #2.

traffic signals case
Traffic Signals Case

No significant cost advantage due to geographic location. Bid pattern continued even

when more projects offered in one area over other areas.

typhoon repair projects guam
Typhoon Repair Projects – Guam

Minimum of three bids required. Companies either with no interest in project, or in

existence only on paper, submit high bids so friend will get the project.

bpa brush clearing projects
BPA Brush Clearing Projects

Large quantity of projects almost equally divided on a dollar amount basis between

competitors.

mud mountain dam enumclaw
Mud Mountain Dam – Enumclaw

The Corps opened the bids on August 18, 1987.

The low bidder submitted a bid of $39,493,000.

The other three bidders bid in excess of $40 million.

eisenhower tunnel case
Eisenhower Tunnel Case

$150,000 Kickbacks $35,000

Flatiron Paving

Corn

Construction

Peter Kiewitt

$65,000

Asphalt Paving

Bid prices significantly over engineer’s estimate. Competing bidder given

subcontract on project.

bid suppression
Bid Suppression

Bidder #2 expressed interest in obtaining project. Had

capability and resources to do the project.

timber sales
Timber Sales

Period of significant bid competition

during periods of both high and low

end product prices.

Minimal or no competition.

No economic explanation for

cessation of competition.

Investigation begins.

Competition resumes.

concrete case
Concrete Case

Bidders submit identical prices so both can share in the project. Identical pricing not

experienced on previous projects. Bid prices significantly higher than pricing

offered in adjacent county.

judy green e rate case
Judy Green E-Rate Case
  • West Fresno Elementary School District Technology Project
  • Green hired as consultant to District
    • Green creates Request for Proposal (RFP)
    • RFP calls for bids on four items:
      • Cabling
      • Data (switches and routers)
      • Servers
      • PBX/video
green orchestrates bid rig
Green Orchestrates Bid Rig
  • Terms of Bid-Rigging Agreement
    • Only vendor H will bid on project
    • Vendor I subcontract for data and pbx
    • Vendor P subcontract for servers
    • Vendor V subcontract for video
    • Vendor S subcontract for data cabling
    • Vendors will provide kickback to Green
    • Green will disqualify non-conspirators
what is price fixing
What is “Price Fixing”?
  • Agreement to raise, lower, or maintain prices
  • Agreement not to negotiate on price
  • Agreement to limit discounts, rebates, or promotions
  • Agreement on price formulas or guidelines
lysine
Lysine
  • Lysine is a feed additive used by farmers around the world – $600M/year.
  • The world’s major producers secretly met at trade association meetings to agree on the exact tonnage for each and a price that was fixed to the penny.
  • With the assistance of an informer, the FBI was able to record some of the meetings!
lysine video clips
Lysine Video Clips

Tape Segment: January 18, 1995 Cartel Meeting in Atlanta, Georgia – The Lysine Cartel Members Show Disdain For Customers And Antitrust Enforcement

what are allocation schemes
What are “Allocation Schemes”

Any agreement not to compete for specific:

* Territories

* Customers

* Products

montana boats case
Montana Boats Case

Only two retailers of Lund fishing boats in state. Refusal to provide quote to

customers located in competitor’s allocated territory. Directed customers to

deal with competitor. No manufacturer limitation on where retailers could

sell boats.

dust control case
Dust Control Case

Pre-conspiracy

Conspiracy

Wyoming

Wyoming

Co. A

Co. A

Co. B

Co. B

Colorado

Colorado

Prior to agreement, A&B competed for work in both states. After agreement, each

limited quotes to customers in allocated territory.

commercial garbage cases
Commercial Garbage Cases

New

Customers

Existing

Customers

Company A

Company B

Company C

Company either refused to quote or quoted high drop-box price. Company was

servicing customers in same area at lower prices.

sources of antitrust cases
Sources of Antitrust Cases
  • Employees
      • Current or former
  • Customers/Purchasing Agents
      • Suspicious patterns/incriminating remarks
  • Competitors
      • Invited into conspiracy
  • Corporate Leniency Program
suspicious bid patterns
Suspicious Bid Patterns
  • The same suppliers, with similar capabilities, submit bids and each company seems to take a turn being the successful bidder (bid rotation);
  • The same company always wins a particular procurement and there are other companies with similar capabilities, but either don’t bid or consistently submit higher bids (bid suppression or complementary bid);
  • Some bids are much higher than published price lists, previous bids by the same firms, or engineering cost estimates;
suspicious bid patterns1
Suspicious Bid Patterns
  • Fewer than normal competitors submit bids, and there is no economic explanation for the reduction in competitors, i.e. full workload, bankruptcy, etc.;
  • A company appears to be bidding substantially higher on some bids than on other bids, with no apparent cost differences to account for the difference;
  • A successful bidder subcontracts work to competitors that submitted unsuccessful bids on the same project.
possible price fixing patterns
Possible Price-Fixing Patterns
  • Identical prices from competitors when:
    • Prices stay identical for long periods of time; and
    • In the past, prices were consistently different.
  • Prices are increased simultaneously and increased, either the same amount or the same percentage;
  • Discounts are eliminated, especially in a market where discounts historically were given.
allocation scheme patterns
Allocation Scheme Patterns
  • Companies that have consistently sold in the territory (or to a customer) suddenly stop selling in that territory (to that customer), and there is no economic explanation for doing so.
  • Companies that consistently competed on price begin quoting unreasonably high prices, or refuse to quote a price.
conduct that indicates possible collusion
Conduct That Indicates Possible Collusion
  • Indications that one competitor may have prepared bid or pricing documents for other competitors:
    • Identical calculation, syntax, or spelling errors;
    • Identical handwriting, typeface, or stationery in the bid proposals or price announcements submitted by competing vendors;
    • Identical postmarks, return addresses, fax telephone numbers, or e-mail addresses – for electronic bids, also consider reviewing the metadata (hidden data);
conduct that indicates possible collusion1
Conduct That Indicates Possible Collusion
  • Bid or price documents contain white-outs or other notations indicating last minute price changes;
  • A bidder requests a bid package for himself and a competitor or submits both his and another’s bids;
  • A company submits a bid when it is incapable of successfully performing the contract;
  • A company brings multiple bids to a bid opening and submits its bid only after determining (or trying to determine) who else is bidding.
suspicious statements that indicate possible collusion
Suspicious Statements That Indicate Possible Collusion
  • Use of the word “we” with reference to the industry: we decided to raise prices, we decided company X would be the low bidder;
  • Statement that a particular customer, territory or contract “belongs” to a certain vendor: “It was our turn to win.” “We were supposed to be the low bidder.”
  • Statements related to a cessation of price competition: “The price war is over, prices will go up.”
  • Any statement indicating vendors have discussed prices among themselves or even that they have had non-public meetings or communications.
what you can do to discourage and detect collusion
What You Can Do To Discourage and Detect Collusion
  • Expand bidders list – solicit as many reliable sources as economically possible and keep track of possible bidders who express interest in the project;
  • Set the public bid opening at least one day after specified due date;
  • Require a certification of independent price determination to be submitted with all bids;
what you can do to discourage and detect collusion1
What You Can Do To Discourage and Detect Collusion
  • Retain all bids, envelopes, facsimile transmittal sheets, or e-mail transmittal messages, that the bids or quotes were in or which accompanied the bids;
  • If the prices or bids submitted don’t make sense, press your vendors to explain and justify their prices;
  • Become familiar with the market in which you make your purchases.
questions

Questions?

Howard J. Parker & Lidia Maher

USDOJ, Antitrust Division

(415) 436-6660

[email protected]

[email protected]

Jonathan A. Mark

Washington State Attorney General’s Office, Antitrust Division

(206) 587-5510

[email protected]

www.atg.wa.gov/antitrust.aspx

usdoj antitrust division arra initiative website
USDOJ Antitrust Division ARRA Initiative Website

www.usdoj.gov/atr/public/criminal/

economic_recovery.htm

ad