Developments in US Antitrust Criminal Enforcement—2021 Year in Review

Introduction

The Department of Justice (DOJ) Antitrust Division has been active in criminal enforcement over the last year, bringing criminal charges relating to alleged conspiracies in labor markets, pursuing cases to target collusive activity in government contracting, and entering into three Deferred Prosecution Agreements (DPAs). The Division also has a record number of criminal cases scheduled for trial. In this Advisory, we review the highlights of US criminal antitrust enforcement activity during 2021 and key recent developments in early 2022, and offer insights into what to expect later this year in criminal antitrust prosecutions and litigation.

Recent Trends and Areas of Focus

No-Poach Agreements and Labor Markets

The most prominent recent trend in criminal antitrust enforcement has been a growing focus on alleged collusion in labor markets, specifically so-called “no-poach” agreements between employers not to solicit or hire each other’s employees, as well as wage-fixing agreements. The most prominent new antitrust criminal prosecutions in 2021 have involved labor markets.

While “no-poach” agreements first attracted attention from DOJ in 2010 when a number of the largest Silicon Valley technology companies entered into civil consent agreements with DOJ relating to a series of alleged “no cold call” agreements, scrutiny of agreements between employers affecting labor markets has increased in recent years. During the Trump administration, DOJ Antitrust Division officials had emphasized their focus on non-solicit and wage-fixing agreements, repeatedly suggesting that investigations were underway and criminal charges were likely. In the meantime, civil investigations and at least one civil settlement¹ continued. DOJ explained that it was exercising its prosecutorial discretion not to pursue criminal charges for conduct that ceased before DOJ and Federal Trade Commission (FTC) released their joint Antitrust Guidance for Human Resource Professionals in October 2016.² At the very end of the administration, DOJ filed the first wage-fixing and no-poach indictments in United States v. Jindal in December 2020³ and United States v. Surgical Care Affiliates, LLC in January 2021.⁴

The emphasis on antitrust in labor markets has only expanded during the Biden Administration, including not only continued pursuit of criminal charges, but also in the civil and regulatory context. For example, in July 2021 the administration implemented an “Executive Order on Promoting Competition in the American Economy,” which includes 72 initiatives to be implemented by 14 federal agencies, including an initiative by the FTC to consider rulemaking to curtail non-compete clauses, unfair occupational licensing, improper data collection and surveillance.⁵ In December 2021, DOJ and FTC partnered to hold a Workshop titled “Making Competition Work: Promoting Competition in Labor Markets,” which included a panel on “contractual restraints that can impede worker mobility.”⁶

Labor Markets: Healthcare

Physical Therapists. On December 9, 2020, DOJ issued its first criminal antitrust indictment targeting labor markets, charging the former owner of a therapist staffing company, Neeraj Jindal, with criminal wage fixing along with obstructing an FTC investigation into the conduct.⁷ DOJ later indicted John Rodgers, the clinical director of the company, in April 2021. DOJ accused the defendants of violating Section 1 of the Sherman Act by engaging in a scheme to fix the wage rates paid to physical therapists (PTs) and physical therapy assistants (PTAs) in the Dallas-Fort Worth area in 2017. The indictment alleges that Jindal and Rodgers texted the owners of several therapist staffing companies to recruit competitors to join a conspiracy to lower the rates paid to PTs and PTAs.

Defendants moved to dismiss the wage-fixing charge and raised three primary arguments. First, they claimed that DOJ had failed to properly state a criminal offense because it did not allege a per se Sherman Act violation. They argued that because DOJ policy is to charge criminal cases only for per se violations of the Sherman Act and wage fixing is not a per se violation of the Sherman Act, the government failed to state a criminal offense. In making this argument, defendants attempted to distinguish wage fixing from price fixing, arguing that the latter involves the “price of a commodity,” and wages fall outside of that definition. Second, defendants argued that they did not have “fair warning” that their acts could lead to criminal charges in violation of their Fifth Amendment rights. Defendants’ Fifth Amendment argument relied largely on the fact that no court had previously found wage fixing to be a criminal violation, and that neither the Supreme Court nor any appellate court had found wage fixing specifically to be a per se Sherman Act violation. Third, defendants argued that applying the per se standard to the alleged conduct violated their Sixth Amendment rights because it would unconstitutionally take away from the jury the question of defendants’ intent.

On November 29, 2021, the court denied defendants’ motion to dismiss, rejecting each of their arguments.⁸ The court rejected defendants’ “narrow” view of what constitutes price fixing, noting that price fixing takes many forms and the Supreme Court has made clear the Sherman Act applies equally to buyer-side and supplier-side collusion. The court found that wage fixing is a form of price fixing and held that DOJ had properly alleged a per se violation of the Sherman Act. Second, the court determined that defendants’ Constitutional rights were not violated by a prosecution, as defendants’ “unlucky status” as the first two individuals criminally indicted for wage fixing did not mean they lacked fair notice. Even if it accepted the claim that wage fixing was not literally price fixing, the court found that defendants still had notice that their conduct was at least “perilously close” to a line that could lead to criminal indictment. Finally, the court rejected the defendants’ Sixth Amendment argument on the basis that an intent to fix prices (wages) equates to an intent to restrain competition, providing the necessary criminal intent required under the Constitution.⁹

Outpatient Healthcare Employees. On January 5, 2021, DOJ indicted a subsidiary of UnitedHealth Group, Surgical Care Affiliates (SCA), which owns and operates outpatient surgery centers, for allegedly participating in a conspiracy with competing employers not to solicit each other’s senior-level employees.¹⁰ According to the indictment, SCA also monitored compliance with the agreements by requiring senior-level employees to provide notice when applying to work for alleged conspirator companies, even taking steps to remedy violations of the agreement. In its motion to dismiss, currently pending in the Northern District of Texas, SCA argues that the indictment fails to state an antitrust violation because no court has previously found that non-solicitation agreements are per se illegal.¹¹ SCA also argues it did not have fair notice that its conduct was criminal because no court had found that non-solicitation agreements are per se illegal, violating its Due Process rights.

On July 14, 2021, DOJ indicted DaVita Inc, another outpatient healthcare provider and a former senior executive for allegedly participating in a conspiracy with SCA to “suppress competition between [competitors] for the services of senior-level employees by agreeing not to solicit each other’s senior-level employees,” allegedly enforcing this agreement by requiring job applicants to “notify their current employer that they were seeking other employment in order for their applications to be considered,” and allegedly conspiring with other un-named companies to, “not solicit DaVita employees.”¹² Defendants moved to dismiss the charges, and on January 28, 2022, the District Court of Colorado denied defendants’ motion.¹³ In considering whether these alleged non-solicitation agreements should be considered per se anticompetitive for purposes of the motion, the court analogized employee non-solicitation agreements to two types of horizontal market allocation: agreements not to solicit customers¹⁴ and agreements not to hire employees.¹⁵ The court took a middle ground approach and concluded that not all no-poach agreements are per se illegal market allocations, but that DOJ’s indictment had sufficiently alleged illegal market allocation in this case.

The court, however, disagreed with DOJ’s argument that all non-solicitation agreements and all no-hire agreements constitute horizontal market allocation agreements and are thus per se unreasonable. Instead, it concluded that if such agreements “allocate the market, they are per se unreasonable.” The court also observed that defendants could still avoid per se treatment, and thus criminal liability, by establishing that the alleged agreement was ancillary to a legitimate business relationship, rather than a “naked agreement,” or one whose “main purpose was stifling competition,” an issue not raised in the defendants’ motion. The court also noted that in order to prevail, DOJ also will need to prove at trial that the “defendants entered into an agreement with the purpose of allocating the market.”¹⁶

These recent decisions, while still only at the motion to dismiss stage, may embolden DOJ in pursuing additional labor-market cases.

Other Recent Healthcare Labor-Market Enforcement Actions:

In the last year, DOJ has also brought no-poach and wage-fixing cases against several other entities in the healthcare sector. These cases include allegations similar, or related, to those described above, and the motions to dismiss currently pending in the Northern District of Texas and the District of Nevada include some of the same arguments recently rejected by the District of Colorado.

School Nurses. On March 26, 2021, DOJ charged Ryan Hee and Advantage On Call (now VDA) with participating in a conspiracy to fix nurses’ wages and to not compete for nurses.¹⁷ In its motion to dismiss, currently pending in the District of Nevada, VDA argues that the indictment fails to state an antitrust violation because no court had previously found that non-solicitation agreements are per se illegal, and that the rule of reason is the proper standard in the present case.¹⁸ Additionally, VDA argues that it did not have fair notice that its conduct was criminal because no court had found that non-solicitation agreements are per se illegal, violating its Due Process rights.

Personal Support Specialists. On January 27, 2022, DOJ indicted managers of home health care agencies in Maine, alleging a wage-fixing and no-poach conspiracy taking place during the pandemic. Echoing the charge in VDA, DOJ alleges that in virtual and in-person meetings and in group messages, defendants discussed “fixing the hourly rates for PSS [Personal Support Specialist] workers and refraining from hiring each other’s PSS workers.”¹⁹

Labor Markets: Aerospace

In December 2021, a Connecticut district court unsealed a criminal complaint and affidavit alleging that an aerospace company executive, along with managers and executives of several suppliers of engineering services, engaged in an eight-year antitrust conspiracy to restrict hiring and recruiting of engineers and other skilled workers.²⁰ At the same time, DOJ announced the charges and the arrest of the defendant executive.

The aerospace company allegedly had outsource arrangements with five different engineering suppliers, whereby each supplier would assign engineers and other skilled workers to complete projects for the company. DOJ alleges that the aerospace executive and co-conspirators from the engineering suppliers agreed to allocate employees working on projects for the company by restricting the hiring and recruiting of engineers and other skilled workers between and among the various suppliers of engineering services.²¹

The case is notable because it is the first labor-market criminal case outside the healthcare context. It is also notable for the vertical relationship between the aerospace company and each of the engineering suppliers allegedly involved in the conspiracy. DOJ previously has acknowledged that under the “ancillary-restraints doctrine” non-solicit or no-hire agreements that are reasonably necessary to a separate legitimate business collaboration, including with suppliers, vendors, or consultants, are not per se unlawful (and therefore potentially criminal), but rather are subject to the “rule of reason” standard. The alleged conduct in this case suggests that DOJ takes a narrow view of the applicability of the doctrine, and that DOJ views the market for workers as separate from the market for products and services. Defendants are likely to argue that the doctrine precludes per se—and thus criminal—treatment. Consequently, this case could provide greater clarity on how the ancillary-restraints doctrine applies in a labor-market antitrust case.²²

Procurement Collusion Strike Force (PCSF)

The PCSF was established in November 2019 as an interagency partnership led by DOJ Antitrust Division. The PCSF focuses on collusive activity in government contracting and is comprised of U.S. Attorney’s offices, the Federal Bureau of Investigation, and multiple agency inspectors general. The PCSF expanded to include 11 new partners in November 2020, and in March 2021, DOJ announced plans to apply PCSF internationally.²³

Security Services. In June 2021, Belgian security firm G4S Secure Solutions NV agreed to plead guilty to a criminal antitrust violation and pay a $15 million criminal fine.²⁴ G4S admitted to participating in a conspiracy with Belgian security services providers to rig bids and fix prices for contracts for security services in Belgium, including with the US Department of Defense. This was the PCSF’s first guilty plea involving a foreign company. In October 2021, PCSF also secured guilty pleas against two former G4S executives for the same conduct.²⁵ In a related case, Seris Security NV and three executives were indicted in June 2021 for an antitrust conspiracy involving security services provided to the US Department of Defense. These cases are pending in the District of Columbia.²⁶

PCSF was also active domestically in 2021, securing guilty pleas against an engineering firm and a Minnesota concrete contractor, as well as a trial conviction against an individual.

Aluminum Structures. In October 2020, Contech Engineered Solutions LLC (Contech) and its employee Brent Brewbaker were indicted for an alleged decade-long bid-rigging and fraud scheme targeting aluminum structure projects for the North Carolina Department of Transportation (NCDOT).²⁷ In June 2021, Contech pled guilty and agreed to pay a $7 million criminal fine plus $1.5 million in restitution. Contech admitted to conspiring with one of its customers to submit bids for the same projects at higher rates than its customer so that the customer would win the bid, and so that Contech could supply necessary materials for, and therefore profit from, the contracts.²⁸ Brewbaker opted to go to trial and was recently found guilty on all counts.²⁹

Concrete Construction. In September 2021, a Minnesota contractor, Clarence Olson, pleaded guilty to rigging bids on public concrete repair and construction contracts in violation of Section 1 of the Sherman Act.³⁰ Olson is now awaiting sentencing.

In addition to criminal penalties, conduct that is the focus of PCSF prosecutions may also be subject to additional penalties and fines based on parallel enforcement actions. For example, conviction for violating the antitrust laws poses serious risk of suspension and debarment for government contractors, which would prevent those businesses from receiving federal contracts or subcontracts. Companies prosecuted by PCSF may also face parallel civil damages actions by injured customers (including the federal government), including for violations of the Clayton Act, investigated by the Antitrust Division civil enforcement sections, and the False Claims Act, investigated by the Civil Division Fraud Section.³¹

Deferred Prosecution Agreements (DPAs)

In August 2021, then-Acting Assistant Attorney General Powers indicated that the Antitrust Division considers all Filip Factors when making corporate charging decisions, and is willing to resolve cases through DPAs when those factors counsel in favor of a DPA. This speech clarified the Division’s approach on DPAs, since earlier guidance was focused on compliance and the earliest examples were based primarily on collateral consequences. In 2021, DOJ Antitrust Division entered into three DPAs, and unlike DPAs in 2019 and 2020, none of the three DPAs in 2021 were based on collateral consequences.

Ready-Mix Concrete. On January 4, 2021, the Division entered into a DPA with concrete manufacturer Argos for price fixing, bid rigging, and market allocation for the sale of ready-mix concrete in Georgia from October 2011 through July 2016, with a corporate fine of $20,024,015 and a compliance-program reporting requirement. The Argos DPA was not based on its pre-existing compliance program and was a departure from previous DPAs considering collateral consequences. This DPA suggests that the Division may credit efforts to improve compliance programs between the time of the violation and the time of charging and is also notable in that it required Argos to implement an enhanced, forward-looking compliance program, and to report to the Division regarding “remediation and implementation of the Company’s compliance program.” Argos’ DPA included an appendix detailing minimum requirements of its future compliance program, including concrete features, such as periodic risk-based reviews, an antitrust compliance training program, an internal monitoring structure, and policies for discipline and remediation, as well as more amorphous features, such as fostering “a culture of compliance throughout the organization.” During the three-year term of the DPA, Argos is also required to conduct a total of three reviews accompanied by three reports to DOJ.³²

Language Services. On January 19, 2021, the Division entered into DPAs with language service providers to the National Security Agency (NSA): one with Berlitz Languages, Inc., and one with Comprehensive Language Center Inc. Both DPAs were based on the same conspiracy between these two companies and un-named co-conspirators to rig bids for contracts to provide language services to the NSA from March 2017 to December 2017.

The Berlitz DPA included detailed requirements for an enhanced compliance program including features such as periodic risk-based reviews, developing an antitrust compliance training program, an internal monitoring structure, and policies for discipline and remediation.³³ Unlike Argos, the DPA did not include a compliance reporting requirement. Comprehensive Language Center Inc. (CLCI) had ceased doing business by the time of the DPA, but CLCI’s DPA also outlined provisions for an enhanced compliance program in the event it resumed doing business. The fact that CLCI had ceased doing business was one of four factors included as “relevant considerations” in entering into the DPA.³⁴

What to Expect in 2022

Upcoming Trials

We expect several criminal antitrust trials in 2022. In addition to the labor-market cases discussed above, the Division will try cases in the broiler-chickens and cancer-treatment industries.

United States v. Penn et al. (Broiler Chickens). In June 2020, following its intervention in a class action complaint in an Illinois federal court, DOJ indicted four current and former executives from two major broiler chicken producers (Pilgrim’s Pride Corp. and Claxton Poultry Farms) for conspiring to fix prices and rig bids for broiler chickens.³⁵ In October 2020, DOJ brought a superseding indictment charging six additional defendants for the same conspiracy. The case against all ten defendants, including two former CEOs, went to trial in October 2021, and the jury was unable to reach a verdict. The court declared a mistrial on December 16, 2021, and a new jury trial is scheduled for February 22, 2022.³⁶ This trial follows Pilgrim’s Pride’s guilty plea in February 2021, where it was sentenced to a criminal fine of approximately $107 million.³⁷ DOJ has redoubled its efforts to police competition in agricultural markets and recently unveiled a website where parties can report alleged anticompetitive conduct.³⁸

United States v. Harwin (Cancer Treatment). In September 2020, DOJ charged Dr. William Harwin, former President and Managing Physician Partner of Florida Cancer Specialists (FCS), with participating in a conspiracy to allocate the provision of medical and radiation cancer treatments in southeastern Florida.³⁹ This indictment follows FCS’s DPA in April 2020, where it agreed to pay a $100 million criminal penalty.⁴⁰ Health care is another antitrust enforcement priority under the Biden Executive Order, so DOJ may pursue additional scrutiny of health-care providers and drug manufacturers.

Continued Focus on Labor Markets

2022 should bring greater clarity to the application of antitrust laws in labor markets. For example, although the court denied defendants’ motion to dismiss in the DaVita case, it left open several questions that may be resolved this year. As discussed above, the issue of ancillary restraints was not addressed at the motion to dismiss stage. Application of this doctrine will have implications for several aspects of the case, including for example, which party bears the burden of proof in presenting evidence of the ancillary nature of the restraint, and whether defendants will be permitted to present evidence of pro-competitive reasons for the restraint. These issues are rarely litigated in the criminal context, so this case is likely to create precedent for future labor-market cases.

The court also held that not all non-solicitation agreements amount to market allocation. This holding appears to allow defendants to argue that the objective of the non-solicit agreement was not market allocation and to advance an alternative rationale. Although the per se rule typically bars evidence of actual competitive effects as well as pro-competitive justifications, this trial is likely to include some evidence of effects–whether to address the ancillary-restraints issue discussed above or to determine whether the alleged non-solicitation agreement constitutes market allocation. As a result, this case is likely to test the evidentiary limits set by the per se rule.

Motions to dismiss are pending in the other no-poach cases (United States v. Surgical Care Affiliates and United States v. Hee), but DOJ will no doubt attempt to capitalize on its recent victories by citing those decisions. Nevertheless, although DOJ has won the initial legal battles, its theories have not been tested in front of juries, which must still find the defendants guilty of the alleged crimes, or by the courts of appeal. Jury verdicts in these cases are anticipated soon, with DaVita currently scheduled for trial in March, Jindal in April, SCA in May, and VDA in July.

Digital Markets

In the digital markets space, DOJ has filed criminal cases involving sellers in the Amazon Marketplace, with an individual Amazon Marketplace seller pleading guilty to fixing the prices of DVDs and Blu-Ray discs sold on the Amazon Marketplace in July 2021 and three additional individual pleading guilty to price fixing DVDs and Blu-Ray Discs in the Amazon Marketplace in January 2022. These recent pleas suggest that the Division may place greater emphasis on online markets and platforms in the next year, particularly with the administration’s focus on competition in the technology industry.

Prosecutorial Approach

In 2022, we expect a continued emphasis on individual accountability and corporate compliance. The Division historically has been aggressive in prosecuting individuals, and, as the ten-defendant trial in the Broiler Chickens case demonstrates, that approach is expected to remain in place. Moreover, in the past the Division generally pursued company cases first, then individual cases afterwards. Recently this practice has been reversed in some notable investigations such as Broiler Chickens and Aerospace, with individuals being prosecuted first. Accordingly, individual subjects of antitrust investigations should be prepared for an accelerated pace.

Corporate compliance considerations will also continue to take a key role in any case resolutions with the Division. The Division first issued compliance guidance in July 2019, but has not yet entered into any DPAs based on an effective compliance program. So it remains to be seen what compliance measures will be credited by the Division at the charging stage. However, the Deputy Attorney General may have raised the bar on DOJ’s compliance expectations in October 2021, when she indicated in a speech that DOJ would not provide cooperation credit to a company unless all culpable individuals are identified; that DOJ will look more broadly into a company’s history of misconduct, including civil and regulatory violations; and that independent compliance monitors will no longer be disfavored.⁴¹

In addition, we expect greater convergence with DOJ Criminal Division’s approach to cases. Along with the hiring of experienced attorneys from the Criminal Division, the Antitrust Division has recently adjusted some of its practices, including: (1) DPAs, where the Division now considers all “Filip Factors” at charging; (2) leniency, where the Division has decreased its reliance on leniency applications and diversified its sources of case leads, such as PCSF data analytics, merger reviews, and private litigation; and (3) cooperation expectations, such as consensual monitoring for individuals as well as heightened expectations for corporate cooperation, including timeliness, thoroughness, and non-contradiction of admissions in plea agreements.

Finally, we expect an increased emphasis on litigation over negotiation. This approach is foreshadowed by Assistant Attorney General Kanter’s January 2022 speech where he indicated an increased focus on litigation over settlements.⁴² Although the speech was focused on merger on monopoly enforcement, this aggressive approach is likely to carry over into cartel enforcement. Indeed, the Division is understood to have more criminal cases scheduled for trial than at any time in recent decades.

*Elizabeth Porfido contributed to this Advisory. Ms. Porfido is a graduate of Brooklyn Law School and is employed at Arnold & Porter's New York office. She is not admitted to the practice of law.

© Arnold & Porter Kaye Scholer LLP 2022 All Rights Reserved. This Advisory is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.