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DOJ Launches Procurement Collusion Strike Force on Antitrust Crimes

November 11, 2019

The US Department of Justice (DOJ) on November 5 announced the formation of the Procurement Collusion Strike Force (PCSF). This interagency initiative will “lead a coordinated national response to combat antitrust crimes and related schemes in government procurement, grant, and program funding at all levels of government.”[1] The strike force follows an innovative “district-based task organization model” that partners with US Attorney offices.

The strike force is composed of prosecutors, attorneys, and investigators from several agencies:

  • The Antitrust Division of the DOJ, both Criminal and Civil Sections
  • 13 US Attorney offices (which likely will be expanded)
  • US Department of Defense Office of Inspector General, Federal Bureau of Investigation, General Services Administration Office of Inspector General, DOJ Office of the Inspector General, and the US Postal Service Office of Inspector General.[2]

Background

The PCSF will use criminal and civil enforcement tools. This approach was used by the Antitrust Division in November 2018 in resolving an investigation of three South Korean companies that agreed to plead guilty to criminal charges and pay a total of approximately $236 million in criminal fines and civil damages for their involvement in a decade-long bid rigging conspiracy targeting contracts to supply fuel to US Army, Navy, Marine Corps, and Air Force bases in South Korea.[3]

Antitrust Division Assistant Attorney General (AAG) Makan Delrahim emphasized this type of injury to the United States as a result of bid rigging in the context of federal agency procurement when announcing the formation of the PCSF:

We also know from our experience prosecuting these crimes that the problem is a real one.… [L]et me share one fact that informs our thinking as we move forward: today, more than one third of the Antitrust Division’s 100-plus open investigations relate to public procurement or otherwise involve the government being victimized by criminal conduct.[4]

Consequently, the Antitrust Division has recognized the need for specific tools to investigate and prevent collusion in the bidding process for government contracts in an effort to protect American taxpayers.[5] However, while the South Korean case focused on foreign collusive activity, DOJ states that, at least initially, the PCSF efforts will target domestic collusion efforts.[6]

Structure and Significance of District-Based Approach

The DOJ’s Antitrust Division has outlined two key objectives for the PCSF: (1) “to deter and prevent antitrust and related crimes on the front end of the procurement process through outreach and training,” and (2) “to effectively detect, investigate, and prosecute crimes that do occur through better coordination and partnership in the law enforcement and inspector general communities.”[7] To accomplish these goals, the PCSF will conduct targeted outreach with Inspectors General and other constituencies in organizations receiving federal funds to help them identify red flags and be able to identify potential antitrust violations before they occur in the public procurement process.[8] Similarly, it will coordinate with “government contractors, their trade associations, and public contract lawyers in order to educate them about criminal antitrust violations and associated penalties.”[9]

The most significant and innovative feature of the PCSF is its “district-based task organization model” that will partner initially with US Attorneys in 13 jurisdictions.[10] Each of the 13 offices will be paired with a trial attorney from the Antitrust Division and an FBI Special Agent from that district’s field office to serve as “PCSF Liaisons.”[11] Additionally, each US Attorney will appoint an Assistant US Attorney to serve as a PCSF Liaison. In announcing the formation of the PCSF, AAG Delhraim explained that working in collaboration with each other, “these teams will lead the outreach training in their districts, focusing on where federal dollars are being spent in each district in order to get the most mileage out of their outreach efforts.”[12] This type of coordinated approach to enforcement, with designated district liaisons, has some similarities with Affirmative Civil Enforcement (ACE) efforts that DOJ has used to coordinate procurement fraud efforts, including civil False Claims Act investigations.

Next Steps

Given the substantial criminal penalties and civil damages for antitrust violations and related offenses, and the DOJ national and local focus on procurement, companies engaged in government contracting can take steps to prevent or mitigate an enforcement action.

Companies should revisit their antitrust compliance programs based on a recent announcement and new standards by the Antitrust Division.[13] For the first time, the Antitrust Division will now consider credit at the charging stage along with the sentencing stage for companies that have adopted an effective antitrust compliance program. We have separately provided guidance on the new policy and specific steps for companies to take.[14]

Additionally, for companies that detect potential criminal antitrust liability, experienced antitrust counsel should be consulted to assess the options including consideration of the Leniency Program. Under the Antitrust Division Leniency Program, the first company or individual to self-report a criminal antitrust violation and satisfies the program requirements avoids criminal convictions, criminal fines, and incarceration of executives.[15]

Visit the PCSF website for more information.

Contacts

If you have any questions or would like more information on the issues discussed in this LawFlash, please contact any of the following Morgan Lewis lawyers:

Silicon Valley 
Mark L. Krotoski

Boston
Daniel S. Savrin

Chicago
Tinos Diamantatos

Philadelphia 
R. Brendan Fee
Steven A. Reed
Eric W. Sitarchuk

New York
Stacey Anne Mahoney
Richard S. Taffet

San Francisco 
Kent M. Roger
Colin C. West

Washington, DC
Douglas W. Baruch
J. Clayton Everett. Jr.
Mark L. Krotoski
Scott A. Stempel
Willard K. Tom



[1] Procurement Collusion Strike Force, US Dep’t of Justice.

[3] Press Release, US Dep’t of Justice, Three South Korean Companies Agree to Plead Guilty and to Enter into Civil Settlements for Rigging Bids on United States Department of Defense Fuel Supply Contracts (Nov. 14, 2018) [Hereinafter Press Release, Defense Fuel Supply Contracts Case].

[4] Remarks of Makan Delrahim, Ass’t Att’y Gen., Antitrust Div., US Dep’t of Justice, Procurement Collusion Strike Force Press Conference (Nov. 5, 2019) [Hereinafter “AAG Delrahim Remarks Announcing Procurement Collusion Strike Force”].

[5] Remarks of Jeffrey Rosen, Dep. Att’y Gen., US Dep’t of Justice, Procurement Collusion Strike Force Press Conference (Nov. 5, 2019).

[6] Spencer Parts, Anti-collusion effort is organised by district, Global Competition Review (Nov. 6, 2019).

[10] Id.

[11] Id.

[12] Id.

[13] Press Release, US Dep’t of Justice, Antitrust Division Announces New Policy to Incentivize Corporate Compliance (July 11, 2019).