“In the past, the Antitrust Division was sometimes defined by what it did not do or by which parts of the law it had decided not to enforce. Today’s Antitrust Division defines itself based on the actions it takes to enforce the law...” – United States Assistant Attorney General for the Antitrust Division Jonathan Kanter (21 May 2024).

We are in a time of new government’s new legal theories (largely unsuccessful); it was a time of tried-and-true legal theories. This is an age of antitrust uncertainty; there was an age of antitrust consistency. Charles Dickens would be proud. Yet, it is a season of hope, an epoch when it is epic to be an antitrust cartel lawyer. Here is what’s new in United States cartel enforcement.

Cartel Enforcement Trends

On one hand, cartel enforcement levels have dropped in the United States. In 2023, the Department of Justice Antitrust Division charged twenty-two individuals and just two companies with violations, down from the thirty-one individuals and nine companies charged in 2022. See Department of Justice, Criminal Enforcement Trends Charts Through Fiscal Year 2023 (updated 24 October 2023), available here.

On the other hand, despite the decrease in the number of charges brought in 2023, enforcement efforts are continuing and, in some cases, increasing. Total criminal fines and penalties are on the upswing; in 2023, the Department collected USD267 million in fines and penalties – a significant increase from the mere USD2 million collected in 2022.

Indeed, the Department recently reported it had conducted 154 grand jury investigations in 2023 – the most in 30 years – and, as of 1 January 2024, had 156 active grand jury investigations. See here.

The Department also reported an increased focus on criminal enforcement under Section 2 of the Sherman Act which, as the Department noted, until recently had not been prosecuted criminally since the 1970s. The Department’s first Section 2 case since the 1970s is set to go to trial later this year.

What caused the large drop in cartel enforcement levels in the US? Why the rise in criminal fines and penalties this past year? What is happening with cartel enforcement in the United States? To perhaps begin to understand, we first need to recall how cartel enforcement and the Leniency Program operate in the United States.

In the United States, the Department of Justice’s Antitrust Division has exclusive responsibility for criminally enforcing the antitrust laws at the federal level. See Department of Justice, Antitrust Division Manual (5th ed. 2015). The Sherman Act, specifically Section 1 (prohibiting price fixing conspiracies and other agreements in restraint of trade), is the primary criminal statute enforced by the Department, although the Department has recently pursued criminal enforcement under Section 2 (monopolisation, including conspiracy to monopolise). See 15 U.S.C. Sections 1, 2.

Consequences for violating the Sherman Act are high – individuals can be imprisoned and companies can be liable for millions in criminal fines. Additionally, private plaintiffs often bring follow-on civil suits through which they can also recover hefty damages (which are then trebled).

Although the Sherman Act does not itself provide criteria for determining whether a violation is more appropriately addressed as a criminal or civil violation, the Department has had a long-standing policy of seeking criminal indictments only in cases involving per se violations. See Richard A. Powers, Remarks at Cartel Working Group Plenary: Big Data and Cartelization, 2020 International Competition Network Annual Conference (17 September 2020), available here.

Historically, the Leniency Program has driven criminal enforcement. Under the Leniency Program, the Department encourages self-reporting of antitrust crimes by offering complete immunity from criminal prosecution and related fines for the first entity (and only the first entity) to self-report a criminal antitrust violation and, thereafter, fully co-operate in the Division’s investigation. Leniency also provides non-prosecution protection for the company’s current officers, directors, and employees, in most circumstances. Because only a single entity can obtain leniency, a company involved in a criminal antitrust conspiracy is in a race with other companies to obtain leniency.

In 2022, the Department modified the Leniency Policy. The Department now requires that a company applying for leniency must have “promptly” self-reported the conduct to the Department after discovering it. See Antitrust Division Leniency Policy and Procedures, available here. Additionally, the Department now requires a company applying for leniency to take measures to redress the harm caused by the anticompetitive conduct that is not remediated by restitution and to improve its compliance programme.

With these changes to the Leniency Program, the Department hopes to make “the rules of the road ... clear so the business community knows what to expect and appreciates the costs of losing the race for leniency.” See Press Release, Department of Justice, Antitrust Division Updates Its Leniency Policy and Issues Revised Plain Language Answers to Frequently Asked Questions, (4 April 2022), available here. But clarity is not necessarily convincing – or incentivising.

As the business community becomes increasingly global – and cartels do as well – the effects of the Department’s changes to the Leniency Program will be tested. And as the difficulty of qualifying for and obtaining the benefits of leniency increases – and as monetary exposure increases in United States civil litigation and overseas administrative and civil proceedings– the incentives to seeking leniency may not look at enticing as in the past.

Bridging Borders and Agencies

As companies are increasingly global operations and cartels increasingly crossing jurisdictional lines, the Department has sought to strengthen its relationships with competition enforcers abroad. Earlier this year, in January 2024, the Department met with antitrust enforcers from around the world to discuss enforcement priorities and strategise about enhanced co-operation.

On 16 January 2024, the Department and the European Commission released a joint video message, promising to intensify their combined efforts to crack down on cross border cartels (available here). They also shared their plans to strengthen co-operation on investigations outside of the leniency system, encouraging individuals and/or companies with suspicions of collusion to come forward and make a report.

About a week later, on 23 January 2024, the Department and the Federal Trade Commission met with both Mexico’s Federal Economic Competition Commission and Canada’s Competition Bureau, where they discussed topics related to the technology and labour markets. See Press Release, Federal Trade Commission, Federal Trade Commission and Justice Department Hold Trilateral Meeting with Competition Enforcers from Mexico and Canada (23 January 2024), available here.

The next month, in February 2024, the Department and South Korea’s Fair Trade Commission met and discussed ways to enhance bilateral co-operation. See Korean, US antitrust regulators discuss ways of stronger co-operation, The Korea Times (28 February 2024), available here. The agencies updated each other on price-fixing, fraud, and other antitrust matters, including those related to the digital economy.

The Department’s efforts to build bridges with different competition enforcers may take on additional weight as the Department continues to investigate cartels that cross borders. As Deputy Assistant Attorney General Manish Kumar noted in January 2024, “over one third of the [Department’s active] investigations have an international angle. This reflects the fact that globalisation has led to an increase in sophisticated international cartels that threaten markets for key products and services, including [the] supply chain. Economic crime doesn’t confine itself neatly within borders[.]” Speech, Dep’t of Justice, Deputy Assistant Attorney General Manish Kumar Delivers Introductory Remarks on the Evolution of International Cartel Enforcement Coordination for the New York State Bar Association, (16 January 2024), available here.

As the calendar pages turn in 2024, we anticipate additional cross-border efforts from the Department seeking to bridge borders and strengthen relationships with enforcement agencies in other jurisdictions.

Labour Markets

Despite a series of losses in court, the Department remains committed to criminally prosecuting alleged no poach and wage-fixing agreements.

In September 2023, Assistant Attorney General Jonathan Kanter, who leads the Antitrust Division, affirmed that the Department is “committed to protecting workers from the harms that result when they face too little competition for their labor.” Jonathan Kanter, Assistant Attorney General Jonathan Kanter Delivers Remarks at the 2023 Georgetown Antitrust Law Symposium (19 September 2023). On another occasion, AAG Kanter also told an audience that the Department is “not part of the Chickenshit Club ... We’re going to stick with it.” Guy Rolnik, Asher Schecter, & Brooke Fox, DOJ Antitrust Head Jonathan Kanter: We Are Making It Very Clear: We’re Going to Hold Individuals Accountable, ProMarket (28 April 2022), available here.

And, Principal Deputy Assistant Attorney General Doha Mekki recently shared a similar view, telling an audience that the Department “look[s] forward to charging more no-poach and wage-fixing cases.” David Mamone, Mekki: DOJ bringing more no-poach and wage-fixing cases, Glob. Comp. Rev. (7 December 2023).

Whether leadership’s commitment will translate into indictments, guilty pleas, and convictions, however, remains to be seen. For more views and perspectives on antitrust and labour markets, including the evolution of the antitrust laws as applied to labour markets, types of alleged antitrust violations in labour markets, and a comprehensive overview of recent labour market investigations and litigations, see Jordanne M. Steiner & Kenneth R. O’Rourke, Working Hard or Hardly Working? Antitrust Labor Markets: An Update from the United States, to be published this summer by the International Bar Association Antitrust Committee in its Competition Law International publication.

Artificial Intelligence/Algorithmic Information Sharing/Price-Fixing

The Department’s current leadership informed the public that the use of pricing algorithms and other artificial intelligence tools will be considered criminal violations when they are used to achieve price-fixing agreements, even if there are no direct communications between competitors. The Department’s position is that if a human engaging in conduct that would have violated the antitrust laws, then it remains unlawful when performed by artificial intelligence or an algorithm.

On 15 February 2024, the Department warned companies that the Department was closely investigating the use of artificial intelligence and algorithms and that companies could face criminal liability for improper sharing of information with competitors. See Information Exchanges: What is Safe?, American Bar Association; Antitrust Law Section, 14 February 2024.

The Department has also noted that it expanded the scope of markets it is criminally investigating and emphasised that small companies and members of decentralised markets need to reassess their criminal antitrust exposure.

Consistent with the Department’s increased focus on artificial intelligence, in March 2024, Deputy Attorney General Lisa Monaco authorised all Department prosecutors to seek sentencing enhancements when an offense involves the use of artificial intelligence because, in the Department’s view, it presents more serious risks to victims and the public at large. See Speech, Department of Justice, Deputy Attorney General Lisa Monaco Delivers Keynote Remarks at the American Bar Association’s 39th National Institute on White Collar Crime, (7 March 2024), available here.

In addition, the Department described how it views intent in artificial intelligence and algorithmic situations, stating that, in such a situation, intent means (a) an agreement with a competitor to use the same algorithm and to share price or other competitively sensitive information; or (b) a company discovers an algorithm that it uses may allow it to collude with competitors. See Information Exchanges: What is Safe?, American Bar Association; Antitrust Law Section, 14 February 2024. 

The Department has also been active in civil algorithmic cases. On 1 March 2024, the Department, along with the Federal Trade Commission, filed a joint Statement of Interest in the RealPage litigation related to the alleged use of price algorithms to artificially inflate multifamily rental prices. In their Statement, the agencies noted that “competitors may not agree to fix the starting point of pricing (eg, agree to fix advertised list prices) even if the actual charged prices vary from the starting point.” Statement of Interest, Duffy v. Yardi Systems, Inc., No. 2:23-cv-01391-RSL (W.D. Wash. 1 March 2024), available here.

Whether a court will adopt the agencies’ views remains to be seen.

Ephemeral Messages

In January 2024, following several high-profile disputes regarding document preservation, the Department and the Federal Trade Commission issued joint guidance regarding the use of collaborative and ephemeral messaging services. See Press Release, Department of Justice, Justice Department and the FTC Update Guidance that Reinforces Parties’ Preservation Obligations for Collaboration Tools and Ephemeral Messaging (26 January 2024), available here.

The agencies announced that they are updating language across their investigatory tools (ie, preservation letters, voluntary access letters, grand jury subpoenas, and second requests) to emphasise the obligation to preserve and produce documents from ephemeral sources. Notably, Deputy Assistant Attorney General Manish Kumar remarked that, “failure to produce such documents may result in obstruction of justice charges.”

Whether, and if so, how, the Department will carry through on that warning may play out later this year or next.

Procurement Collusion Strike Force Claims Successes

In 2019, the Department created the Procurement Collusion Strike Force (“PCSF”) to lead a coordinated national response to combat antitrust crimes in government procurement, grant, and programme funding at all levels of government (see here). So far this year, the PCSF has claimed a number of successes.

In January 2024, the Department announced four additional guilty pleas in its ongoing investigation into alleged bid-rigging in the asphalt industry in Michigan. See Press Release, Department of Justice, Four Additional Defendants Plead Guilty to Bid Rigging in Michigan Asphalt Industry (31 January 2024), available here.

That same month, the Department obtained another guilty plea when a former project manager for government contracts plead guilty to conspiring to inflate project costs and pay kickbacks in connection with contracts for commercial flooring services at an Alaskan Army facility. See Press Release, Department of Justice, Project Manager Pleads Guilty to Kickback Scheme to Defraud a U.S. Army Facility, (30 January 2024), available here.

Then, two months later, in March 2024, the Department announced that it had reached a plea agreement with yet another concrete company and its former owner, following indictments for alleged price-fixing, bid-rigging and market allocation in Georgia. See Parker Quinlan, Feds Cement Plea Deals in Ready-Mix Bid Rig Case, Law360 (12 March 2024), available here.

As the PCSF continues its work, the Department may announce more successes, whether through plea agreements or trial wins.

Private Cartel Litigation is the Second Principal Enforcement Tool

In the United States, private cartel-related cases are a powerful enforcement tool separate from the Department of Justice’s criminal prosecutions. The private civil cases generally take the form of class actions brought on behalf of direct and indirect purchasers of the affected products. Often, but not always, a civil case will be filed following an announcement of an antitrust criminal investigation, criminal trial or plea. In those instances, the parties often settle the civil cases prior to the civil trial.

Defendants are often motivated to settle because (a) damages awarded at trial are trebled by statute; (b) where multiple defendants are found to have conspired, they are jointly and severally liable for the total damages caused by the conspiracy, so any defendant that does not settle can be left holding the bag for trebled damages caused by all defendants (minus the settlement amounts paid to plaintiffs by the settling conspirators); (c) plaintiffs, after prevailing, are also entitled to recover their reasonable attorneys’ fees and costs, which can be huge sums in these complex class action cases that sometimes last a decade; and (d) lengthy civil discovery proceedings and trials are both costly and may be significant distractions to management’s pursuit of its business goals. On the other hand, companies that believe they are improperly targeted by civil plaintiffs or being forced to pay extravagant settlements may resist to the end as a matter of principle, not principal.

Private plaintiffs have been particularly active in asserting violations in labour markets and alleging algorithmic information sharing/price-fixing, bringing follow-on class action litigation related to a number of the criminal labour markets cases as well as separate litigations in the algorithmic information sharing/price-fixing space. For a detailed discussion of follow-on civil class action litigation in labour markets, see Jordanne M. Steiner & Kenneth R. O’Rourke, Working Hard or Hardly Working? Antitrust Labor Markets: An Update from the United States, to be published this summer by the International Bar Association Antitrust Committee in its Competition Law International publication.

As one example, in November 2023, the plaintiffs in Gibson v. Cendyn Group LLC, filed an amended complaint, alleging that a group of hotel entities and a pair of software providers for the hotel management industry entered into a hub-and-spoke conspiracy and that the vertical agreements between the hotels and software providers had the effect of artificially inflating hotel room prices. See Gibson v. Cendyn Group LLC, No. 2:23-cv-00140-MMD-DJA (D. Nev. 24 October 2023), at Dkt. 144. More specifically, plaintiffs alleged the software providers recommended hotel room prices for individuals and for groups and conferences, collecting public pricing information and using that as a factor in setting recommended prices.

Defendants moved to dismiss in February of this year (see Dkts. 160-61). Following briefing and a hearing, in May 2024, the Court granted defendants’ motion to dismiss with prejudice, holding that plaintiffs failed to allege a tacit agreement to use the pricing algorithm software to raise hotel room prices. See Order, Gibson v. Cendyn Group LLC, No. 2:23-cv-00140-MMD-DJA (D. Nev. 8 May 2024). Without an agreement there could be no violation. Indeed, the Court noted that the amended complaint failed to allege that the hotel operators agreed to use the pricing algorithm software’s recommendations and charge the same room prices.

Although private plaintiffs in this case may not have succeeded, we anticipate similar suits may be filed in different industries and that those plaintiffs will take the lessons from the Gibson case to heart, trying to shore up their allegations accordingly.

Conclusion

Although there was a big enforcement dip in 2023, the situation is starting to change; we may be on an upswing in cartel enforcement. Moving ahead, we anticipate seeing additional cartel cases brought by the Department and private plaintiffs alike, likely focused on labour markets, artificial intelligence, and algorithmic pricing and information sharing.

Additionally, as companies increasingly turn to communication applications that automatically delete messages, we anticipate the Department will argue, whether through seeking obstruction of justice charges or filing spoliation motions, that defendants have violated their duties to preserve these communications during investigations or litigation.

Perhaps more likely, the preservation of so-called ephemeral messaging may come to play a role in the Department’s calculation of whether a leniency applicant has met its co-operation obligation; the Department may argue that by failing to preserve and produce ephemeral messages, the applicant has not co-operated fully with the Department, particularly if the failure occurs after the discovery of the cartel.

And, as the Department’s investigations increasingly involve cross-border conduct, we anticipate additional co-operation efforts between the Department and other competition enforcers.

While the Department is coming off a down year, private enforcers are continuing apace with their pursuit of private civil litigation. Yet there is ample reason to think both antitrust enforcers (public and private) will be active in the months and years to come. Those watching public and private enforcement of the antitrust laws in the United States may find this to be the best of times.