Since the early 1990s, criminal investigations and prosecutions by the Department of Justice’s Antitrust Division have focused on massive price-fixing cartels, resulting in billions of dollars in corporate fines and many years of prison time for top-level executives.
The cartels involved industries such as air and sea cargo, vitamins, dynamic random-access memory computer chips, liquid crystal display computer monitors, and most recently a wide array of automobile parts. The defendants were often multinational corporations such as Samsung, Air France/KLM, F. Hoffman-LaRoche, and Mitsubishi Electric. Antitrust prosecutions seemed to be light years away from the day-to-day business practices of small and mid-sized businesses in the DMV region.
Think again. For many decades, the Antitrust Division has criminally prosecuted per se violations of the Sherman Act. Conduct such as bid-rigging, price-fixing, and market allocation is presumed to result in unreasonable restraint of trade. Most prosecutions involve concerted action to increase prices, but the government has also prosecuted concerted action to decrease bids in manner that cheats sellers, such as in auctions of foreclosed real estate. Until recently, however, the Antitrust Division did not bring criminal prosecutions involving recruitment and hiring matters that are generally presumed to involve employment law, not antitrust.
In 2016, the Antitrust Division and the Federal Trade Commission publicly announced that the Division would criminally prosecute no-poach agreements and other forms of collusion in the labor market. The agencies pointedly warned the business community: “Going forward, the DOJ intends to proceed criminally against naked wage-fixing or no-poaching agreements.” Wage-fixing – agreements among firms to fix salaries at a certain level or within a certain range – was identified as tantamount to price fixing. No-poach agreements – agreements among firms not to solicit each other’s employees – was viewed as just another form of an agreement not to competitively bid. Over the next four years, the agencies continued to issue warning, and the Division began criminal investigations.
In December 2020, DOJ announced an indictment against a former owner of a therapist staffing company for conspiring with competing therapist staffing companies to agree to lower wages for physical therapists. Earlier this year, a grand jury indicted two individuals and SCA, a unit of UnitedHealth Group and the owner and operator of outpatient medical care facilities across the country, for entering into two separate conspiracies with other healthcare companies to suppress competition between them for the services of senior-level employees. And in July 2021, a grand jury indicted DaVita Inc. and its chief executive officer, Kent Thiry, for similar offenses related to two conspiratorial agreements, one with SCA and its executives, the other with an unnamed healthcare company.
As is so often the case in white-collar prosecutions, the government took full advantage of the conspirators’ inability to refrain from memorializing their crimes in emails. Apparently none of these executives took to heart the classic episode of “The Wire” in which Stringer Bell reprimands a subordinate for putting pen to paper and asks, “is you taking notes on a criminal f—— conspiracy?”
In the SCA case, for example, one co-conspirator’s CEO emailed its employees: “I had a conversation w [SCA’s CEO] re people and we reached agreement that we would not approach each other’s proactively.” A co-conspirator wrote to SCA’s CEO: “Just wanted to let you know that [recruiting company] is reaching out to a couple of our execs. I’m sure they are not aware of our understanding.” And an HR employee at one company emailed a recruiter to say that a candidate looked promising, but that her firm “can’t poach her” because the candidate worked for SCA. In the recent DaVita indictment, the conspiracy with SCA included an email in which an employee of SCA wrote that “I thought there was a gentlemen’s agreement between us and DaVita re: poaching talent.” An executive for SCA replied: “There is. Do you mind if I share with [Individual 1], who has most recently addressed with Kent [Thiry].” Individual 1 relayed the instance of recruitment to Thiry, who replied “Will check it out.” On or about July 10, 2016, Thiry forwarded the communication to a co conspirator with the comment: “Pls put in our next agenda.” In the second DaVita conspiracy, a co-conspirator emailed Thiry that “You also have my commitment we discussed that I’m going to make sure everyone on my team knows to steer clear of anyone at DVA and that I’ll come back to you and talk before ever get anywhere near a point that could contemplate someone else.”
Under the Sherman Act, corporations can be fined under to $100 million, or twice the gain or loss related to the conspiracy. Individuals face up to 10 years in prison. After analyzing the advisory sentencing guidelines and statutory factors governing sentencing, judges rarely impose maximum sentences – but the sentences they do impose can be painful enough. On top of that, criminal charges can result in collateral consequences such as class action civil suits and suspension or debarment from competing for government contracts.
Even before taking office, President Biden stated his support for crackdowns on no poach agreement and non-compete clauses. With antitrust agencies focused on anticompetitive conduct in labor markets, businesses need to ensure that they identify red flags and manage antitrust risk regarding labor markets. They should review current non-solicitation provisions and non compete clauses with antitrust counsel. And they should make sure to have in place a robust antitrust compliance program. Not only can such a program prevent crimes from occurring, it can also serve as a mitigating factor at sentencing – or even as grounds to ask the government to decline prosecution or enter into a deferred prosecution agreement. To quote another police program from an earlier era, “let’s be careful out there.”
Stuart Berman served for 28 years with the Department of Justice as a line and supervisory Assistant United States Attorney and as a trial attorney with the Antitrust Division. He has assisted many of the firm’s business clients with presenting fraud cases to federal and state law enforcement authorities, leading to cases where defendants received lengthy prisons sentences and were ordered to repay victims. He can be reached at 301-657-0729 or [email protected].