Complimentary Bidding/Anti-Trust Violations
While a relatively wide variety of crimes exist under the general definition of anti-trust activities (some form of improper "collusion" between companies in a position to dominate some form of market place), the fact that many such charges are somewhat dependent on the defendant companies being large enough to at least achieve a "monopoly" size within a "relevant market" (both phrases being words of art dependent on the industry, markets served, availability of substitute products and similar issues) the more frequent targets of Federal prosecutions in Iowa tend to be road contractors or other construction companies that involve themselves in projects (often with Governmental Agencies) that are obtained by competitive bidding thereby giving rise to the possibility of claims of complimentary bidding (Company A provides a "high" bid on Company B’s project in exchange for Company B providing a high bid, on Company A’ project), allocation of territory or other collusion claims involving the claimed use of subcontractors or suppliers.
By definition the potential targets of such prosecutions need to be the larger competitors in the area since presumably the smaller competitors can not impact price or contracts since if they are not competitive they will not get the work. Often the cost of bringing in equipment or sourcing raw products (such as gravel in road construction) eliminate from competition all but relatively large companies close to the proposed project thus allowing criminal behavior in a situation that would initially appear full of competitors. In these situations it is often times the smaller competitors that are the source of the initial complaints to the Government either based on simply being disgruntled over work obtain (and feeling there is more than competition at work) or disgruntled employees of the major competitors that provide the information to the smaller competitors or, directly to the Government.
Regardless of the source of the initial information, when the Federal Government is involved it often will be a criminal investigation and as resources are applied and time consumed, it will become a case that is increasingly difficult to walk away from without convictions. As such, the use of wires and wiretaps is not uncommon. Approaching perceived "weak links" in the assumed conspiracy group to try to convince them of the wisdom of cooperation is a common approach with the idea of working their way up the food chain (with statements like the "train is leaving the station and if you do not cooperate someone else will be on the train and you will be left to be run over"). When confronted with information (and perhaps with a feeling that there is some basis for prosecuting them) and understanding the full consequences of such a prosecution on them, cooperation often comes to the Government but unfortunately with it may come an incentive to damage the remaining competitors and to deliver as much as possible to assure the best possible deal down the road.
With that in mind, two important points need to be understood. First, what can happen to a defendant in an anti-trust situation that is convicted (individual or company)? Secondly, what does the Government have to prove in a typical case involving contractors?
- The "Consequences": Depending on the years involved, Sherman Act violations can result in corporate fines up to $100 million dollars or under 18 U.S.C. 3571(d) an alternative fine of not more than twice the gross gain or loss resulting from the unlawful conduct. For individuals fines of up to $1,000,000 and up to 10 years in jail with significant "enhancements" under the sentencing guidelines beyond just the obvious damages. In addition note below some of the additional charges that typically come along with the general prosecution. Finally, depending on who is the "victim" of the crime, there can be debarment from bidding on future projects with the government (a near fatal sentence for a major road contractor).
- The "Basics" of proof:
The basics of anti competitive prosecutions often start with the definitions contained within Section 1 of the Sherman Act which generally describes contracts or conspiracies in restraint of trade as illegal. The courts then have added judicial gloss to the concept by, in effect, providing that it is "unreasonable" contracts or agreements that are illegal but also providing that certain types of things are normally presumed to be illegal (so called per se violations) which is where most prosecutions begin. Per se violations include: (a) agreements to fix prices; (b) agreements to allocate markets; and (c) agreements to allocate customers or rig bids. The Government does not have to prove that the scheme was successful nor normally to show any overt act. Further, it is not a defense to claim that all thought the conduct was lawful or had good results.
The Government must be able to prove: (a) the "agreement" to do the illegal acts described in the indictment was knowingly formed and in existence at the times alleged; (b) the particular defendant knowing and intentionally became a member of this "conspiracy"; and (c) the conspiracy impacted goods or services in interstate commerce.
Bid rigging and market allocation are generally relatively easy to understand (although the extent of the relevant market not necessarily so), but in particular, price fixing (a classic per se violation) can result in violations that might not first be thought to involve violation of the law as it includes things like agreements to: (a) raise prices; (b) agree to uniform discounts; (c) eliminate discounts (or eliminate discounts for some class of customers); (d) follow certain pricing formulae’s; (e) not to advertise prices or prices below a certain amount; (f) agreements not to participate in bidding processes; (g) fix credit terms or similar items impacting pricing.
One of the additional problems in typical anti-competitive prosecutions is the fact that so many other "crimes" can also be charged such as: (a) mail fraud (18 U.S.C. §1341); (b) wire fraud (18 U.S.C. §1343); (c) false statements (lying to an agent even though you are not under oath is a felony under 18 U.S.C. §1001); (d) witness tampering (18 U.S.C. §1512(b)); (e) document destruction 18 U.S.C. §1512(c) and 1519); and (f) perjury (18 U.S.C. §§1621-1623). These violations can add potential jail times of anywhere from 5 to 20 (or more) years per violation.