Government Contractors Beware: DOJ Signals Increased Use of Parallel Criminal and Civil Antitrust Remedies in Cases where Government is the Victim
On November 14, the DOJ’s Antitrust Division announced a resolution in a noteworthy case that marks the use of Section 4A of the Clayton Act for only the fourth time in decades. Under Section 4A, if the government itself is the victim of an antitrust violation, the United States may step outside of its typical enforcement role and into the shoes of an injured plaintiff to obtain treble damages — on top of criminal fines. In this case, three companies were allegedly involved in a conspiracy to rig bids on contracts to supply fuel to the U.S. military in South Korea. The companies agreed to plead guilty to criminal antitrust charges and to enter into settlements to resolve civil antitrust and False Claims Act violations, resulting in $236 million in criminal fines and civil damages.
When the government brings non-merger antitrust enforcement actions, it typically makes a choice between criminal and civil enforcement based on the facts of the case. Bid-rigging, the anti-competitive act at issue in this case, is generally prosecuted criminally as a per se violation of the Sherman Act, so it is no surprise that the government sought criminal penalties. However, because the contractors here injured the U.S. government, Section 4A allowed the United States to collect on civil damages on behalf of U.S. taxpayers. The availability of treble damages is a big stick for the government to bring to the bargaining table. In this instance, the settlement amount was not the full three-times damage figure, given the defendants’ cooperation, but the DOJ disclosed in its press release that the amount was higher than the overcharge suffered by the military.
The resolution of this case coincides with a newly announced policy of the Antitrust Division to seek parallel criminal fines and civil damages under Section 4A where available. In a statement on the case, Assistant Attorney General Makan Delrahim noted that “Section 4A of the Clayton Act is a powerful yet historically underused enforcement tool that empowers the United States to obtain treble damages for anti-competitive conduct when the government is itself the victim.” The day after the fuel supply cases were announced, Delrahim used the majority of his speech to the ABA Antitrust Section’s Fall Forum to discuss the history of Section 4A and to commit to its use going forward: “[t]he American Taxpayer deserves to see a revitalization of the government’s Section 4A authority. This week’s settlements are only the first in that direction. Going forward, the Division will exercise 4A authority to seek compensation for taxpayers when the government has been the victim of an antitrust violation.”
Government contractors, by virtue of their participation in competitive bidding for government projects, are naturally at an increased risk of engaging in conduct that results in harm to the government. Companies should be aware of this policy and the associated scrutiny that it brings.
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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.