Antitrust cartel cases: What companies can expect under a Trump Administration
01 March 2017
Have antitrust cases become more global in nature? What trends are you seeing?
Hellings: Purely domestic cartels were historically the primary focus in the United States. In the past ten years or so, however, the Department of Justice (DoJ) has focused on international cartels cases, and domestic cases have become more the exception than the rule. In that time, we have also seen an increase in enforcement activity outside the United States. Simply put, multi-national companies engaged in cartel conduct face an increased risk of investigation not only in the U.S., but also in an increasing number of jurisdictions across the globe.
We are also seeing an increase in hybrid cases — cases in which the U.S. DoJ is investigating both antitrust violations and corruption. DOJ has an increased awareness that frequently where there is cartel conduct there is also corruption and bribery. Frequently DOJ charges defendants with fraud and antitrust violations.
We are also seeing more investigations and cases being brought in highly regulated industries, such as the airline and pharmaceutical industries. In the past, the U.S. DoJ had been reticent to investigate highly regulated industries because these cases are frequently very complicated. Not anymore. DoJ now aggressively pursues highly regulated industries regardless of the complexities in these cases.
How has the DoJ’s Antitrust Division responded to criticism that it has focused solely on international companies and individuals?
Hellings: In the last few years, DoJ has filed a number of domestic cartel cases. While overall cartel enforcement is increasingly international, DoJ has pursued a number of domestic cartel cases, some of which have been heavily publicized. I think that this is, at least in part, a response to the criticism levied against the Antitrust Division for focusing almost solely on international companies and individuals.
A high percentage of the cases that DoJ filed in the past decade were against international companies and individuals, and I think there was a general criticism that DoJ was not investigating cartel conduct here at home. President Trump has talked about increasing infrastructure spend in the United States. If in fact that happens, there will likely be an increase in bid rigging investigations in the U.S. It is likely that the Antitrust Division is going to look at the resulting government contracts for cartel conduct. The Trump Administration will not want the U.S. government to be victimized by cartel conduct. So in that way, I think domestic cartels might still be something that DoJ is focused on under the new Administration.
Dixon: Traditionally a lot of the domestic cartel cases that the Division tended to investigate and prosecute were in public heavy construction projects — roads, bridges, and the like. So if in fact there is an increase in infrastructure spending, there will inevitably be cheating and we would absolutely expect to see the Trump Administration going after domestic companies for defrauding the government on these types of projects.
How will the Trump Administration shape the antitrust and cartel space?
Dixon: It is very difficult to predict how the trends and policies that have evolved over the past decade will play out in a Trump Administration. The President has already make some picks for antitrust leadership that suggest — consistent with his overall pro-business platform — that antitrust enforcement is going to decrease in some areas. The cartel space will be an interesting one to watch because on the one hand Trump is definitely a pro-business president but on the other hand he ran on a populist platform and the consumer protection side of antitrust enforcement is a very foundational populist belief — particularly where American consumers are being disadvantaged in some way. I can absolutely see that being something Trump would want to aggressively pursue, particularly where foreign companies are selling price-fixed products into the U.S. market. If Trump makes the foreign companies the big, bad wolf stealing from U.S. consumers, he could get a lot of mileage out of pursuing those kinds of cases.
A lot of this is up in the air. President Trump hasn’t been very vocal about antitrust policy specifically, so we can only speculate based on the planks of his overall platform and the appointments he is pursuing. Hogan Lovells has a real advantage because of our deep roots in Washington, D.C. and London. We have people in the firm who can help keep clients abreast of the political situation that’s unfolding with Brexit — which could have a huge impact on competition — and the Trump Administration. We are well positioned to advise our clients about what their exposure is moving forward across the competition space.
Has the number of countries where the threat of criminal prosecution exists increased?
Hellings: It used to be the case that when a company was under investigation, it could expect that it would be investigated by only a few cartel enforcement agencies — the U.S. DoJ, maybe the European Commission (EC), the Japan Fair Trade Commission (JFTC) — maybe a few others. In recent years, we’ve seen a real proliferation of cartel enforcement laws. Increasingly, companies are facing a real threat of severe punishment — and not just in a couple of jurisdictions. Additionally, there is an increasing threat of criminal punishment.
There are governments that are pursing these matters criminally, governments that did not pursue these cases years ago, and the potential penalties for corporations and individuals are severe.
With numerous regulators involved and an increasing number of jurisdictions with criminal sanctions and civil remedies for victims, how does this influence a company’s strategy of how, when, what, and to whom to report on the results of an ongoing internal investigation?
Hellings: It is a landmine for companies that are under investigation. It’s typically the case now that multiple jurisdictions investigate the same conduct and levy separate and severe penalties. There is a real pile-on effect. You have to really think about how to approach an investigation; you have to think about how an investigation in one jurisdiction might impact another jurisdiction. A company under investigation might find that one jurisdiction requests or requirements directly conflict with the requests and requirements of another jurisdiction. You must consistently and regularly balance the rules in one jurisdiction against the rules of another.
How do you help companies facing an investigation craft an informed global strategy?
Hellings: You have to be attuned to what the issues are from the outset. You have to be able to know what to anticipate and expect. It’s not just in the initial agency investigation, but also the inevitable follow-on civil litigation. And that litigation is no longer just in the U.S. There is a huge risk to companies from the very beginning and there are things that the investigation team can do from the outset to manage that risk.
Dixon: Because of the complexity of the hybrid cases we are seeing more of and regulations governing them that are different in each jurisdiction, you often need counsel in supporting practices in addition to a strong cartel team. This is where Hogan Lovells has a real strategic advantage over some firms. For example, in some jurisdictions there are significant data privacy issues, there are employment issues around how you deal with individuals within the company who are allegedly involved in wrong doing, and there are political and strategic issues that require the input of seasoned lawyers with experience in these legal areas in all of the relevant jurisdictions.
We have a cartel team that is forward looking and understands the complexity of these cases. We are able to identify when we need others at the firm to advise on other legal issues that will arise in conjunction with a cartel case. This is an area where we have a competitive advantage. Other firms may have more cartel lawyers but they don’t have this same level of support on the ground in all the various jurisdictions where these affiliated issues may arise.
Being able to identify the scope of the potential problem up front — whether that’s how many jurisdictions are going to be involved and how many different types of legal issues are going to be implicated — is critical so that you can properly advise the client and help them understand why an investment up front can really pay off and also save money later in the investigation.
About Megan Dixon
For more than two decades, Megan Dixon has been helping clients all over the world and across a variety of industries to identify, investigate, and strategically address potential legal exposure arising from criminal or regulatory violations within their businesses. She was working at the DoJ Antitrust Division during the 1990s when international antitrust cartel enforcement came into being, and she has continued to dedicate a significant portion of her years in private practice to advising, speaking, and writing about cartel matters.
About Kathryn (Katie) Hellings
After spending more than a decade handling international criminal investigations as a DoJ prosecutor, Hellings has developed a practice representing corporations and individuals in white collar criminal investigations, with a primary focus on international cartel and corruption investigations. She understands the global risks clients face in these investigations, and she uses her experience to help clients successfully navigate investigations and reach satisfactory resolutions.