As if over-reaching under the False Claims Act wasn’t bad enough, government contractors will now be subject to a new area of investigation. On November 5, 2019, the U.S. Department of Justice announced its new Procurement Collusion Strike Force, focusing on ferreting out antitrust violations in the government contracts arena.

The PCSF will focus on deterring, detecting, investigating, and prosecuting antitrust crimes under government contracts. These areas include bid-rigging conspiracies and related fraudulent schemes that undermine competition in government procurement. The new strike force is composed of 13 U.S. Attorneys’ Offices, and investigators from the FBI, Office of Inspector General offices of the Department of Defense OIG, the U.S. Postal Service, and other federal agencies.

Buoyed by a guilty plea by five South Korean oil companies, which netted $156 million in criminal fines and $205 million in separate civil settlements, the DOJ Antitrust Division believes this is just the tip of the iceberg. Indeed, in a speech to the American Bar Association, Deputy Assistant Attorney General Richard A. Powers cited a study that eliminating bid rigging could reduce procurement costs by 20% or more. Government contractors, most of whom likely have a profit rate of 10% or less, will find that figure hard to believe.

The problem that government contractors will face is this:  If DOJ believes procurement costs are being inflated by 20% due to bid rigging, once DOJ starts looking for it, DOJ will find it, whether it exists or not. And DOJ is looking for criminal antitrust violations, with penalties that include up to 10 years imprisonment, steep fines, and double damages. Corporations can be fined up to $100 million.

The Sherman Act

The wellhead of antitrust law is the Sherman Act, 15 U.S.C. § 1, which has been around a long time. It became law in 1890, well before Dr. James Naismith invented basketball or Sir Arthur Conan Doyle wrote his first Sherlock Holmes story. The Act is short and to the point:

Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal.

Under the Sherman Act, the government need only prove a conspiracy to restrain trade – it does not need to prove a successful conspiracy, an actual restraint of trade, or damages. The crime is the agreement among the conspirators to restrain trade, not the actual restraint of trade. The statute of limitations is generally five years. 18 U.S.C. § 3282.

There are three primary types of conspiracies to restrain trade:  (1) price fixing; (2) bid rigging; and (3) customer/market allocation. Criminal antitrust focuses on “per se” or “hard core” violations.  The Government must show an agreement or meeting of the minds between two or more competitors to restrain interstate or foreign trade.

Price fixing agreements can take many forms. They include agreements among competitors to:  charge the same price or raise prices together; charge within a certain price range; establish a minimum price or standard pricing formula; add fees or other surcharges; eliminate discounts or have uniform discounts; and coordinate and not compete on other commercial terms (i.e., credit terms, warranties).

Bid rigging agreements include bid rotation or allocation, complementary or cover bids, and bid suppression or limitation. Allocation agreements occur when competitors agree to divide up a market, such as by geographic area, customer, or product type.

Favorable conditions for antitrust violations

DOJ’s list of favorable conditions for collusion and antitrust violations arise frequently under government procurements. These conditions include:

  • Few sellers
  • Limited number of qualified bidders
  • Difficult for new competitors to enter the market
  • Few substitute products
  • Standardized products
  • Repetitive or regularly scheduled purchases
  • Rush or emergency work
  • Competitors meet at conventions, trade association meetings
  • Competitors have joint ventures, teaming arrangements, prime/sub- contractor relationships
  • Revolving door for employees

The above conditions are often found in large government procurements, and even many smaller ones. Indeed, it would be difficult to find a significant government procurement that didn’t have one of these conditions, and many will have several of them.

DOJ Corporate Leniency Program

There is a way to obtain a get-out-of-jail-free pass, but you have to hurry. DOJ’s Corporate Leniency Program provides that immunity will be offered to the first company or individual who self-reports involvement in criminal antitrust activity.  The grant of immunity is not discretionary and is provided to the first to report. The program is thus affectionately known as “Race to the Government.”  In addition to winning that race, the applicant must also provide ongoing cooperation to assist DOJ in prosecuting co-conspirators.

Two types of corporate leniency provided. To qualify for Type A, DOJ must have had no prior information about the activity, the applicant must admit to criminal conduct and commit to provide restitution, and the applicant may not be leader or originator of the collusion. Details on the program are available at

What contractors should do now    

Now that DOJ has put government contractors on notice that it will be investigating actions that smack of collusion, it’s time to check your compliance toolkit to ensure it includes strong antitrust measures that are widely implemented within your organization. Unfortunately, there is no one-size-fits-all compliance program, which will vary based on many factors, including the size of your company, the types of products and services you sell, and how you sell and price your products and services.

A good way to assess your existing program is by comparing it to DOJ guidance on evaluating the effectiveness such programs. The factors DOJ considers include:

  1. the design and comprehensiveness of the program;
  2. the culture of compliance within the company;
  3. responsibility for, and resources dedicated to, antitrust compliance;
  4. antitrust risk assessment techniques;
  5. compliance training and communication to employees;
  6. monitoring and auditing techniques, including continued review, evaluation, and revision of the antitrust compliance program;
  7. reporting mechanisms;
  8. compliance incentives and discipline; and
  9. remediation methods.

Overall, your compliance program should demonstrate a “culture of compliance” that starts at the very top and is just as aggressively applied at the middle ranks where the risk of engaging in actual antitrust violations may be greatest.