This update discusses existing trends related to domestic and international cartel cases and offers a perspective on what could happen under the Trump administration. It also explores the factors that make these cases so complex and the importance of having the right cartel team in place to craft an informed global strategy.
Historically, purely domestic cartels were the primary focus in the United States. However, in the past 10 years the Department of Justice (DOJ) has focused on international cartel cases, and domestic cases have become more the exception than the rule. In that time, there has also been an increase in enforcement activity outside the United States. Simply put, multinational companies engaged in cartel conduct face an increased risk of investigation not only in the United States, but also in an increasing number of jurisdictions across the globe.
There has also been an increase in hybrid cases – that is, cases in which the DOJ is investigating both antitrust violations and corruption. The DOJ has an increased awareness that where there is cartel conduct, frequently there is also corruption and bribery. The DOJ often charges defendants with fraud and antitrust violations.
There are also more investigations and cases being brought in highly regulated industries, such as the airline and pharmaceutical industries. Previously, the DOJ had been reticent to investigate highly regulated industries because these cases are frequently complicated. However, the DOJ now aggressively pursues highly regulated industries regardless of the complexities in these cases.
In the past few years the DOJ has filed a number of domestic cartel cases. While overall cartel enforcement is increasingly international, the DOJ has pursued a number of domestic cartel cases, some of which have been heavily publicised. This appears to be, at least in part, a response to the criticism levied against the DOJ Antitrust Division for focusing almost solely on international companies and individuals.
A high percentage of the cases filed by the DOJ in the past decade were against international companies and individuals, and there was general criticism that the DOJ was not investigating domestic cartel conduct. President Trump has talked about increasing infrastructure spending in the United States. If that happens, there will likely be an increase in bid-rigging investigations in the United States. It is also likely that the Antitrust Division will look at the resulting government contracts for cartel conduct. The Trump administration will not want the US government to be victimised by cartel conduct. Thus, in that way, domestic cartels may still be something on which the DOJ focuses under the new administration.
Traditionally, many of the domestic cartel cases that the Antitrust Division investigated and prosecuted were in public heavy construction projects (eg, roads and bridges). So, if there is an increase in infrastructure spending, there will inevitably be cheating and the Trump administration is expected to go after domestic companies for defrauding the government on these types of project.
It is difficult to predict how the trends and policies that have evolved over the past decade will play out under the Trump administration. The president has already made some picks for antitrust leadership that suggest – consistent with his overall pro-business platform – that antitrust enforcement will decrease in some areas. The cartel space will be an interesting one to watch because on the one hand, Trump is 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 foundational populist belief – particularly where US consumers are being disadvantaged in some way. This is highly likely to be something that Trump will wish to pursue aggressively, particularly where foreign companies are selling price-fixed products into the US market. If Trump makes the foreign companies the 'big bad wolf' stealing from US consumers, he could get a lot of mileage out of pursuing these cases.
Much is still up in the air. Trump has said little about antitrust policy specifically, so there is much speculation based on the planks of his overall platform and the appointments that he is pursuing.
Previously, when a company was under investigation it could expect to be investigated by only a few cartel enforcement agencies – for example, the DOJ, the European Commission and the Japan Fair Trade Commission. However, in recent years, there has been a proliferation of cartel enforcement laws. Increasingly, companies are facing a real threat of severe punishment, and not just in a couple of jurisdictions. In addition, there is an increasing threat of criminal punishment.
Some governments which did not pursue these cases years ago are now pursing these matters criminally, and the potential penalties for corporations and individuals are severe.
With numerous regulators involved and an increasing number of jurisdictions with criminal penalties and civil remedies for victims, a company may need to reconsider its strategy of how, when, what and to whom to report on the results of an ongoing internal investigation. This field is a landmine for companies that are under investigation. Typically, multiple jurisdictions investigate the same conduct and levy separate and severe penalties, which creates a 'pile on' effect. A company must carefully consider how to approach an investigation, and how an investigation in one jurisdiction might affect another jurisdiction. A company under investigation might find that one jurisdiction's requests or requirements directly conflict with the requests and requirements of another jurisdiction; it must consistently and regularly balance the rules in one jurisdiction against the rules of another.
In order to form an effective global strategy, a company facing investigation must be attuned to the issues from the outset. It must know what to anticipate and expect, not just in the initial agency investigation, but also the inevitable follow-on civil litigation – which no longer takes place only in the United States. Companies face huge risk from the beginning and the investigation team can take steps to manage this risk from the outset.
These hybrid cases are complex and governed by different regulations in each jurisdiction, meaning that a company often needs counsel in supporting practices in addition to a strong cartel team. For example, in some jurisdictions there are significant data privacy issues, in others there are employment issues around how to deal with individuals within the company who are allegedly involved in wrongdoing, while in others there are political and strategic issues that require the input of seasoned lawyers.
Being able to identify the scope of the potential problem upfront – whether this is how many jurisdictions will be involved or how many different types of legal issue will be implicated – is critical so that a company understands why an investment upfront can pay off and save money later in the investigation.
For further information on this topic please contact Megan Dixon at Hogan Lovells US LLP's San Francisco office by telephone (+1 415 374 2300) or email (firstname.lastname@example.org). Alternatively, contact Kathryn Hellings at Hogan Lovells US LLP's Washington DC office by telephone (+1 202 637 5600) or email (email@example.com).The Hogan Lovells US LLP website can be accessed at www.hoganlovells.com.
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