Category: Criminal

Last month, the DOJ finally secured its first criminal conviction for a labor-market antitrust offense.  (Check here for our previous coverage of this prosecution trend.)  VDA OC LLC (“VDA”), a healthcare staffing company, pleaded guilty to a Sherman Act offense in United States v. Hee.

Two weeks ago, the District of Colorado denied defendants’ motion to dismiss in a criminal case targeting agreements between competitors not to solicit (or “poach”) each other’s employees.  United States v. DaVita Inc. et al. is part of a wave of four criminal cases regarding no-poach and wage-fixing deals brought by the Department of Justice for the first time ever over the past year. The DOJ contends that the arrangements at issue are per se unlawful under the Sherman Act, even though no appellate court has ever expressly held as such.  Defendants in each case, including DaVita, moved to dismiss the charges, asserting that these types of agreements are not per se illegal and that they lacked fair notice that their conduct was a crime.    

In addition to the DaVita decision, the motion to dismiss in United States v. Jindal was also recently denied by the Eastern District of Texas.  Motions to dismiss in two other cases remain pending, but these first decisions illuminate how courts may treat similar prosecutions going forward. 

Information can be an invaluable asset.  This is especially evident in the technology sector, where companies use increasingly sophisticated methods to collect, aggregate, and analyze data.  Exclusive possession of data can, of course, confer significant competitive advantages—but may also prompt legal challenges from competitors or scrutiny from regulators.  Authorities in France and Germany have investigations underway into whether the collection and use of consumer data by major online platforms including Facebook and Google are having anticompetitive effects.  And on December 19, 2017, Germany’s competition authority—the Bundeskartellamt— informed Facebook that it “holds the view that Facebook is abusing [a dominant market position] by making the use of its social network conditional on its being allowed to limitlessly amass every kind of data generated by using third-party websites and merge it with the user’s Facebook account.”

The Department of Justice Antitrust Division recently announced that California-based Custom Wristbands Inc. (d/b/a Kulayful Silicone Bracelets, Kulayful.com, Speedywristbands.com, Promotionalbands.com, Wristbandcreations.com, and 1inchbracelets.com) (“Custom Wristbands”) and its top executive Christopher Angeles agreed to plead guilty for conspiring to fix prices for wristbands and other customized novelty products sold online.

Since we last reported on the state and federal government’s generic drug pricing investigations and litigations (click here to read more), the U.S. Department of Justice (“DOJ”) has obtained its first guilty pleas.  On January 9, 2017, Heritage Pharmaceutical Inc.’s former CEO and its former president (the defendants are brothers-in-law) pleaded guilty to manipulating the prices of and divvying up customers for an antibiotic, doxycycline hyclate, and a diabetes medicine, glyburide.  The defendants are scheduled to be sentenced on September 28, 2017, and they face up to ten years of imprisonment.  The government’s filings in other lawsuits make clear that the defendants’ sentencing was delayed until the defendants complete their cooperation with the government.

The Antitrust Division recently issued its 2016 annual spring update. Taking advantage of modern technology, Bill Baer—now the Acting Associate Attorney General serving in the DOJ’s third-highest ranking position—prepared video remarks for your viewing pleasure.  (Still, most of the Division’s updates were included in written commentary.)  Renata B. Hesse now serves as the Principal Deputy Assistant Attorney General responsible for overseeing the Antitrust Division.

We’ve previously written about how the Yates Memo announced an increased focus on individual accountability, and that the DOJ’s broader focus on individual accountability would likely encourage the Antitrust Division to increase its efforts to prosecute individuals for antitrust violations.

Last month, the Associated Press was the first to report that the DOJ is investigating whether American Airlines, Delta Air Lines, Southwest Airlines, and United Airlines have engaged in collusion.  Since that time, there has been much speculation in the press about the DOJ’s investigation.  But given that the investigation is not a public proceeding, what do we really know?

We have been following developments in People of the State of New York v. Actavis, the New York Attorney General’s “product hopping” suit against Actavis and its subsidiary, Forest Laboratories LLC (together, “Actavis”).  Now, an FTC Commissioner and a D.C. Circuit Judge have weighed in as well—and they are criticizing a key portion of the Second Circuit’s ruling. 

We previously noted that the UK’s new competition regulator, the Competition and Markets Authority, has indicated that cartel enforcement will be one of its top priorities, hoping to “open as many new criminal cartel investigations as possible” in 2015-2016.  However, the agency announced this week that its first trial in this area, concerning cartel conduct in the market for galvanized steel water storage tanks, has resulted in an acquittal.

AU Optronics Corp. (“AUO”) filed a petition for a writ of certiori in Hui Hsiung, et al. v. United States of America on March 16, 2015, seeking Supreme Court review of the Ninth Circuit’s 2014 decision that upheld the convictions of AUO and its former executives for their participation in a global cartel to fix the price of liquid crystal display (“LCD”) panels.  The United States Department of Justice, Antitrust Division, which had tried AUO and its former executives in the district court in San Francisco, filed its brief in opposition to the petition on May 15, 2015, and petitioners filed a reply on May 22, 2015.  

Since we last reported on the generic pricing investigations, the investigations have expanded. Par Pharmaceutical Companies, Inc. disclosed in its March 13, 2015 Annual Report that it had received a December 5, 2014 subpoena from the DOJ’s Antitrust Division that sought “communications with competitors regarding [Par’s] authorized generic version of Covis’s Lanoxin® (digoxin) oral tablets and [Par’s] generic doxycycline products.”

In what it is calling the Antitrust Division’s “first criminal prosecution against a conspiracy specifically targeting e-commerce,” the Department of Justice has announced that an individual has agreed to plead guilty to charges that he conspired to fix the prices of wall posters sold online through Amazon Marketplace.  The matter is United States v. Topkins, No. 15 Cr. 201 (N.D. Cal.).

The Supreme Court has been urged to resolve a circuit split concerning the reach of the Foreign Trade Antitrust Improvements Act (FTAIA) to foreign conduct that may affect U.S. commerce. Motorola this week filed a petition for certiorari in a Seventh Circuit case interpreting the FTAIA as barring Sherman Act claims arising out of the foreign conduct of an alleged liquid crystal display (LCD) panel cartel. 

Bill Baer, the Assistant Attorney General in charge of the DOJ Antitrust Division, spoke about the DOJ’s antitrust enforcement priorities last Friday, February 6, at a speech in Miami. AAG Baer emphasized three priorities: exercising patience with market flux due to new disruptive new industry sectors, giving meaningful guidance to the business community, and crafting structural remedies as part of their merger enforcement efforts.  

Drug manufacturers Impax Laboratories and Lannett Company have come under public scrutiny and, more recently, criminal investigation for their recent generic drug price increases.  The companies disclosed in recent SEC filings that the U.S. Department of Justice has issued grand jury subpoenas to Impax and Lannett employees seeking information related to their communications with competitors concerning “the sale of generic prescription medications.”   

This is the first in what we expect to be a series of updates on DOJ criminal actions in the cartel area.  Here, we look at highlights over the last six months in the DOJ’s investigations of the auto parts industry, LIBOR, and municipal real estate auctions.  

The plaintiffs’ antitrust claims in the New Jersey municipal tax lien auction bid-rigging class action may proceed, the federal judge presiding over the litigation has ruled.

On September 29, 2014, we asked: "Does a Compliance Program Matter to U.S. Antitrust Enforcers?" After concluding that compliance programs still provide tangible benefits, we offered five factors that companies should consider as they develop their own programs.

As we noted earlier this month, one factor that may contribute to the increase in criminal antitrust fines over the past ten years is the Antitrust Division’s focus on anticompetitive conduct that is international in scope.  Indeed, the Antitrust Division’s chart listing Sherman Act violations yielding a corporate fine of $10 million or more shows that nearly all of the investigations resulting in fines greater than $10 million are international.

With DOJ’s Antitrust Division and the FTC ramping up antitrust enforcement, it is critical for companies to take a hard look at their compliance programs and update them on a regular basis to avoid potential antitrust violations and discover antitrust malfeasance early on so a company can have the option of self-reporting and applying for leniency under DOJ’s leniency program. The United States Sentencing Guidelines provide guidance to companies in the organization of their corporate antitrust compliance programs; Guidelines considerations include establishing standards and procedures to prevent and detect criminal conduct and monitoring, auditing and periodically evaluating compliance with the program, including providing anonymous or confidential means for reporting potential breaches.  In addition to these threshold requirements, it is important that any antitrust compliance program provide guidance in a number of areas that present potential pitfalls.  Today, we discuss guidance on communications with competitors and dealing with customers and suppliers. 

Last month, we were excited to publish our article, The Use of Expert Witnesses for Penalty Determinations in Criminal Antitrust Cases: A Study of United States v. AU Optronics, in Antitrust Magazine.  The article examines the use of expert testimony during the trial in AU Optronics, No. 09-cr-110 (N.D. Cal), and discusses several strategic issues for practitioners to consider in responding to expert testimony in criminal cartel cases.

As luck would have it, just days after our article was published, the Ninth Circuit issued its long-awaited AU Optronics decision addressing the requirements of the Foreign Trade Antitrust Improvements Act (“FTAIA”). 

We are pleased to announce the launch of Antitrust Update, Patterson Belknap’s new resource for the latest news and happenings in the antitrust and competition law arena. 

Further to our previous post, The Principles of Federal Prosecution of Business Organizations, by contrast, which the Criminal Division and the various United States Attorney’s offices employ to assess corporate liability and determine an appropriate resolution, speak more generally about corporate cooperation with respect to securing the cooperation of corporate executives.