Navigating Antitrust and White Collar Enforcement Under the Biden Administration
On April 15, 2021, four lawyers in two highly regarded Vinson & Elkins’ practices came together to speak about how best to understand and prepare for issues involving antitrust and white collar enforcement under the Biden administration. With their combined years of experience working on the country’s most significant matters, both in the government and in the trenches with clients, the team provided great insight into what may be in store for the future. Lawyers within the Government Investigations and White Collar Criminal Defense practice, Fry Wernick and Zach Terwilliger, together with Craig Seebald and Lindsey Vaala of the Antitrust practice, shared their observations and guidance with a group of about 70 clients and other friends of the firm.
Lindsey Vaala represents companies and individuals in a wide range of competition-related investigations, litigation and counseling matters in the U.S. and abroad. She is also the co-chair of the ABA Antitrust Section’s Cartel and Criminal Practice Committee. Lindsey opened the program by discussing a number of signals that indicate we can expect a significant uptick in criminal antitrust enforcement under the Biden administration. Displaying the numbers of prosecutions and fines under the Obama and Trump administrations, Lindsey illustrated the notable nose dive between the two; but she also pointed out how the number of prosecutions since Biden’s election have increased and are gaining momentum. In addition, the new attorney general, Merrick Garland, is expected to focus on the antitrust area, having had experience with competition cases during his tenure on the D.C. Circuit Court of Appeals, among other previous positions. The attorney general has also been quoted as saying that he “absolutely” commits to “vigorously” enforcing antitrust law.
Two significant areas of focus under the new administration will likely be public procurement and labor markets.
Lindsey pointed out that, in 2019, the DOJ’s Antitrust Division created the Procurement Collusion Strike Force (the “Strike Force”), a multi-agency partnership encompassing two dozen U.S. Attorney’s offices and ten different agencies, including the Department of Justice (“DOJ”), the Department of Homeland Security (“DHS”), and the Department of Defense (“DOD”). Today, the Strike Force is searching for red flags of collusion and also training many others within the government to identify possible signs of misconduct. The operation has cast a wide net, and thus far, 10,000 government workers have been trained.
Concerning labor markets, the Department of Justice has been looking at no-poach-conduct. The government’s underlying rationale is to protect the American worker by disallowing agreements between companies regarding non-solicitation of one another’s employees or collusion on how to compensate employees. This type of enforcement dovetails well with Biden’s comments about eliminating non-competes except when trade secrets are involved.
Craig Seebald, who focuses on representing companies and individuals in investigations by the Justice Department, has 30 years of experience with the nation’s most prominent cartel investigations and is co-chair of V&E’s Complex Commercial Litigation practice. He shared seven items that he is watching.
- The government’s aggressive antitrust enforcement in the tech and health care sectors is something to keep an eye on. While much of this uptick started in the prior administration, it is gaining momentum and traction.
- The energy area is one to pay attention to as we are likely to see some investigations. The government has put a significant focus on clean energy and is putting their finger on the scale to try to push renewable forms. Other more traditional types of energy production may bear the brunt of scrutiny. In addition, any actions perceived to thwart the development of clean energy could be subjected to antitrust scrutiny.
- Academic research has described the antitrust concerns that develop with common ownership of competitors within the same industry. Craig gave the example of looking at particular ones, like railroads or airlines, where the largest shareholders of each competitor could likely be a fund, such as a Fidelity or Vanguard. Does joint ownership by large funds translate into less competition? What does this mean for private equity firms that may acquire competing companies within the same sector?
- New legislation has been fascinating and there are populist movements on both the left and the right. Antitrust activity is not a single political party prerogative. Both Republicans and Democrats seem to be focused on business concentration. There is a bill by Republican Senator Josh Hawley that states no company over $100 billion in market cap should be allowed to buy any other company.
- The Antitrust Division’s leniency program could be revitalized. This program allows that, if a company self-reports to the division, in return, they will need to comply but may get more of a free pass for the company and for employees. Not surprisingly, there have been less applications for leniency to the Justice Department in the last few years, but that could easily change.
- Deferred prosecution agreements are on Craig’s radar. “It’s a big open question if the new administration will continue to do it. But it did put the Antitrust Division much more in line with the other parts of the Justice Department,” said Craig.
- There is a brand new whistleblower law that passed in Congress at the end of the year, which provides greater protection for employees who report both internally and to the government regarding antitrust behavior. Craig states, “It’s only been in place for the past few months, but I am keeping an eye on it to see how much of an impact this has going forward.”
Government Enforcement and White Collar Developments
Fry Wernick, who conducts internal investigations and defends companies and individuals against investigations by DOJ, the SEC, and Congress, was formerly Assistant Chief of DOJ’s Criminal Fraud Section and supervised DOJ’s Foreign Corrupt Practices Act (“FCPA”) Unit. Fry also served two times at the U.S. Senate, conducting investigations and advising the Senate Judiciary on national security and criminal matters. He gave an insider’s perspective on how DOJ and the SEC have enforced the FCPA in various cases, and how the statute’s usage had changed since it was created 40 years ago. Fry pointed out the spike in global enforcement efforts and that the momentum was likely to continue under the Biden administration. As Fry said, the FCPA was largely ignored by both the DOJ and SEC for 30 years. Within those years, the two agencies had only brought 70 corporate cases, totaling $50 million in fines. It was not until 2008 that statutory enforcement began to increase. In 2016 enforcement climbed largely due to an increased commitment of resources. For example, DOJ’s FCPA has increased from 19 to 39 prosecutors since 2015. The FBI, which had no singularly tasked anti-corruption units just a few years ago, now has established four International Corruption Units signaling that FCPA cases are a large priority for the government.
Fry also discussed how DOJ has intentionally focused on building international partnerships and cooperating with foreign authorities, which also resulted in the large uptick in enforcement, and showed some statistics to demonstrate the value of this international cooperation in practice. Since 2016, there have been more than $18 billion in global penalties and 13 coordinated resolutions with foreign authorities. DOJ and the SEC have also reached out to foreign authorities, and 45 countries have sent over 200 prosecutors to train alongside them on anticorruption enforcement in 2019, building a global network and developing a pipeline of cases. Finally, Fry showed how the DOJ and SEC have allowed the foreign authorities to receive the lion’s share of the penalties from the enforcement of international corruption cases against multinational corporations, with foreign governments taking at least 50% (and sometimes up to 90%) in every global FCPA enforcement action since 2016. By doing so, the U.S. government has created a valuable incentive for global cooperation by foreign authorities.
Fry also noted that DOJ and the SEC are not just targeting companies, but high-profile individuals, as well. CEOs, GCs and directors are among the more than 125 individuals who have been charged with FCPA and related crimes over the past several years. “It’s an area that has received incredible focus and attention by the DOJ and the SEC, and a marked change from where we were five years ago.”
Zach Terwilliger has served in a number of high-ranking positions at the DOJ, including serving as the Senate confirmed United States Attorney for the Eastern District of Virginia. He was also one of the founding members of the Procurement Strike Force Lindsey discussed. Based on Zach’s observations of Attorney General Garland, Deputy Attorney General Lisa Monaco and the statements of others who have been nominated, there continues to be a focus on white collar enforcement.
He discussed several areas where he believes we will see activity. “There is generally a feeling, at least in Washington, that there are corporate entities that are doing very well at the expense of the environment.” Zach believes there is likely to be a policy overlap between white collar enforcement and environmental oversight.
Zach also referenced the Special Inspector General for Pandemic Recovery (“SIGPR”) and drew parallels between the SIGPR and the creation of previous special inspectors general such as those for Iraq Reconstruction (“SIGIR”), Afghanistan Reconstruction (“SIGAR”) and the Troubled Asset Relief Program (“SIGTARP”). “The amount of money that is being spent for the pending recovery dwarfs that from TARP, so as a result we expect that to the extent there’s going to be continued government outlays, one of the ways that this is going to get sold is that we’re going to ferret out waste, fraud and abuse,” says Zach. He expects that there will be recovery efforts to recover funds from those who received their money by lying or committing fraud. Zach said that from both an FCPA perspective and from a government contracts perspective, there is going to be a narrowing of the aperture on individuals.
Compliance programs are where an ounce of prevention comes in to play. Zach pointed out that if a company can inoculate its organization with a shot of integrity they can cause good things to flow from that. He said that if he were running a large company right now, he would make sure his compliance plan was not only up-to-date, but was effectively intercepting even small incidents via employee reporting or internal auditing. He would also be certain to know if they were to receive a grand jury subpoena that they would know who to call. He stressed the importance of having a plan of action in place, and the essential steps of making a solid compliance program part of that plan. “We talk a lot about tone from the top,” Zach said, but he pointed out that how that message gets disseminated to middle management is just as important.
Zach spoke about the Justice Department’s focus on public procurement, offering that a strong focus on the area is appropriate when one of every $10 spent by the U.S. government is going into a contract. This means there will be greater scrutiny for companies who do business with the government.
In sum – due to a variety of factors – corporate enforcement is absolutely on the rise and corporate entities need to prepare accordingly.
This presentation was recorded and current as of April 15, 2021. Content viewed after this date may no longer be current.
This information is provided by Vinson & Elkins LLP for educational and informational purposes only and is not intended, nor should it be construed, as legal advice.