Government contractors may face increased antitrust scrutiny.
Last week, the U.S. Department of Justice (“DOJ”) launched the Procurement Collusion Strike Force (“PCSF”) to detect, investigate, and prosecute antitrust crimes in government procurement, grant, and program funding, at all levels of government. This interagency partnership includes prosecutors from DOJ’s Antitrust Division and U.S. Attorneys’ Offices, as well as investigators from the FBI and several Inspector General offices. PCSF will train government officials to identify and report anticompetitive conduct. Government contractors should expect increased antitrust scrutiny and more criminal antitrust investigations.
The Federal Acquisition Regulation (“FAR”) requires federal employees to report evidence of suspected anticompetitive behavior. Some state and local procurement laws have similar rules. The FAR identifies examples of potential collusion, such as market allocations, bid rigging, simultaneous price increases, and follow-the-leader pricing. PCSF’s training materials help government employees spot this conduct, identifying the “red flags” of collusion:
- Who is in the market for the award (and are there just a few vendors)?
- Are there similarities between vendor proposals?
- Have patterns developed among competing vendors?
- Have vendors demonstrated behavior that suggests they worked together?
Examples of red flags, according to PCSF, include proposals with identical information and typographical errors, a pattern of award winning that reflects contractor steering, knowledge of competitor prices, or markets in which a few vendors have a large share, among other things.
As the Federal Trade Commission and DOJ Antitrust Guidelines for Collaborations Among Competitors make clear, many competitor collaborations are lawful because they lead to procompetitive outcomes. Similarly, the FAR recognizes that contractor collaborations, even among competitors, may benefit the government. For example, the FAR endorses use of teaming arrangements, including partnerships, joint ventures, and prime-subcontractor arrangements. PCSF should not disrupt otherwise lawful collaborations, but when in doubt, companies should seek guidance about whether a collaboration follows the antitrust rules. They also should properly document any collaboration or teaming arrangement, which includes detailing the procompetitive reasons for the joint effort.
As detailed in our July 2019 Alert, DOJ recently revised its enforcement policies, enhancing the value it assigns to a company’s preexisting antitrust compliance program in making criminal prosecution decisions. Companies that regularly participate in government procurements should revisit their antitrust compliance programs to take advantage of these changes and to mitigate risk from employees that engage in anticompetitive conduct.