Since its formation in November of last year, the efforts of the U.S. Department of Justice’s (“DOJ”) Procurement Collusion Strike Force (“Strike Force”) continue to bear fruit.  On March 9, 2020, DOJ announced the guilty pleas of two commercial flooring executives charged with participation in a bid rigging conspiracy that targeted public entities.  The guilty pleas and DOJ’s ongoing criminal investigation into the commercial flooring industry come at a time when the DOJ’s Antitrust Division is becoming increasing focused on public procurement.  The Antitrust Division has since confirmed it has opened multiple criminal investigations in connection with that initiative.

Background

According to DOJ’s announcement, Robert A. Patrey Jr. and Kenneth R. Smith conspired to rig bids and fix prices for commercial flooring services and products sold in the United States from at least 2009 until at least June 22, 2017.  DOJ alleges that the co-conspirators agreed with each other to submit complementary bids designed to ensure that certain companies would win certain bids.  Five individuals and at least one corporation have now pleaded guilty in connection with the Antitrust Division’s commercial flooring investigation.

“This scheme among commercial flooring contractors in the Chicago area victimized American taxpayers by targeting public institutions, including vulnerable public schools operating in a resource-constrained environment,” said Assistant Attorney General Makan Delrahim in the press release announcing the guilty pleas.  “The Antitrust Division and its law enforcement partners are committed to protecting taxpayer dollars and bringing to justice executives involved in these harmful bid-rigging cartels.”  The defendants are cooperating with DOJ’s ongoing investigation, and according to Delrahim, “The recent guilty pleas are the latest in the government’s investigation, and they won’t be the last.” 

In November 2019, the Antitrust Division announced the formation of a nationwide Strike Force designed to identify and prosecute criminal antitrust violations related to government procurement.  The Strike Force includes prosecutors from the Antitrust Division and 13 U.S. Attorneys’ Offices, as well as investigators from various partner agencies.    

Takeaways

There is every indication that DOJ will continue to ramp up its focus on the public procurement space in the future.  In February, the Antitrust Division announcement the indictment of a Missouri man—the third individual to be charged in that investigation—for participation in a conspiracy to rig bids submitted to the General Services Administration at online auctions for surplus equipment.  Deputy Assistant Attorney General (“DAAG”) Richard Powers has publicly confirmed that more than one third of the Antitrust Division’s open investigations relate to government procurement or other criminal conduct harming the government.  In fact, DOJ cited to the work of the Strike Force in a recent request for increased funding and additional attorneys.  “When U.S. federal government discretionary spending (of taxpayer dollars) is in the neighborhood of $500 billion annually, we must make this a priority area on par with other large scale domestic and international cartel enforcement efforts focused on private sector spending,” DAAG Powers stated as part of prepared remarks at a conference in February.

While DOJ appears to be focused on prosecuting individuals involved in the alleged commercial flooring conspiracy, charges against additional individuals or companies may be forthcoming.  To that end, all companies supplying products or services to public entities should be mindful that DOJ is prioritizing enforcement of the antitrust laws in the public procurement space.  The Antitrust Division has devoted significant internal resources to the effort and forged relationships with state and local enforcement personnel.  On Monday, DOJ warned that the Strike Force would be on “high alert” for antitrust crimes involving the sale of public health products to government agencies.  Consequently, any vendor to a federal, state, or local agency should assess compliance with the antitrust laws as soon as possible and ensure its antitrust compliance programs are up-to-date.  The stakes are high: past companies who pleaded guilty to big rigging schemes that harmed the U.S. government have paid hundreds of millions of dollars in criminal fines and civil settlements with the Antitrust Division.