Collusion permeates United States government procurement despite the strict statutory regime in place to confront it, specifically the Department of Justice (DoJ)Antitrust Division’s Leniency Program. The United States should look to other existing statutory regimes that have been successful in detecting and prosecuting other actions to supplement the Leniency Program, such as the False Claims Act (FCA). By incorporating a whistleblower program like that of the FCA, complete with a monetary incentive, the DoJ can increase instances of detecting and prosecuting collusion in government contracts by simply modifying existing centers within the Antitrust Division to process whistleblower information and qui tam suits.
In June 2021, a jury returned indictments against those intertwined in an international conspiracy involving a multi-million dollar Department of Defense (DoD) contract. Guilty of “agree[ing] in advance which company would win certain security services contracts, and the price that each would bid for the contracts,” Seris Security NV of Belgium and its executives now face potential jail time for their non-competitive actions. The Department of Justice (DoJ) ordered a fine of fifteen million dollars. Collusion of this type has long plagued American consumers and the U.S. government, with cartels exploiting billions of American taxpayer dollars each year. This is especially true in U.S. government contracts, in which bid rigging and price fixing greatly limit competition among contractors and increase the prices of goods and services for agencies. Collusive schemes are particularly burdensome given their surreptitious nature, making them extremely difficult to detect and investigate. One of the primary methods for detecting and investigating cartels is through the DoJ’s Antitrust Division’s Leniency Program. This program is a unique government investigatory tool that encourages conspirators to come forward and report their collusive schemes. What exactly is their reward for reporting? The party that comes forward first receives immunity from prosecution by the Antitrust Division, avoiding fines and jail time. However, as the program currently stands, only those actually involved in the scheme can report the collusion and receive immunity. In other words, innocent employees who inadvertently uncover such schemes receive no benefits. Further, conspirators who fail to come forward first face criminal conviction, fines, and treble damages among other consequences for their illegal actions.
Although the Antitrust Division’s Leniency Program provides an important incentive to conspirators to self-report, more can be done to address detection challenges associated with enforcement of antitrust laws. Specifically, the government should adopt a whistleblower program, like that adopted by the False Claims Act (FCA), to buttress the Leniency Program. Under the FCA’s whistleblower program, there is a monetary incentive for individuals, called relators, who report fraud and file suits on behalf of the government. Such a monetary incentive is available to anyone––not just those involved in the fraud itself. The existing qui tam program has been extremely effective in uncovering fraud. Therefore, an analogous monetary incentive to the whistleblower program utilized in the FCA could buttress current enforcement efforts in the Leniency Program by increasing the incentives for and ultimately the instances of reporting. Individuals encountering this kind of financial incentive to report wrongdoing could assist the government by monitoring the market or their place of work and reporting any collusion they encounter, thereby helping to identify antitrust violations to the DoJ. These incentives may expedite the reporting timeline, as others not involved in the antitrust activity would have the opportunity to detect collusive actions and have a stake in the matter. Further, this monetary incentive would help maintain the free and fair markets to which American taxpayers have a right, namely in the government contracts space. Relatedly, such an incentive would bolster trust in the fairness of the procurement process. With “roughly one out of every ten dollars of federal government spending [being] allocated to government contracting,” it is imperative that the DoJ look to new solutions to increase instances of reporting collusion to save billions of taxpayer dollars.
This Note will first address the issue of collusion broadly and then narrow its focus to collusion in government procurement. Next, it will discuss the existing statutory regimes and programs that confront collusion: the Sherman Act, the DoJ Leniency Program, the Procurement Collusion Strike Force (PCSF), the Antitrust Criminal Penalty Enhancement and Reform Act (ACPERA), and the Criminal Antitrust Anti-Retaliation Act (CAARA). Thereafter, this Note will assess the effectiveness of the Leniency Program and show that it has not been effective enough in combating collusion. Then, this Note will analyze the FCA, explain its purpose, and suggest how the gaps in DoJ’s approach in the Leniency Program can be filled using a whistleblower-like regime like that found within the FCA. Finally, it will present a concrete solution: the DoJ should buttress the leniency program with a monetary incentive like that of the qui tam program found within the FCA. This final section will specifically discuss the manner in which the DoJ should go about carrying out this solution: revamping existing call centers.
Full and open competition is a fundamental keystone of government contracting. Unfortunately, government contracting is susceptible to collusion, which directly impedes the full and open competition upon which a successful procurement program relies. Collusion in government procurement often arises in the forms of bid rigging and price fixing.
Conducting a full and open competition using procedures considered “competitive” by the Federal Acquisition Regulation (FAR) is essential in U.S. government procurement. With limited exceptions, the FAR calls for government procurement procedures to be free and fair to ensure innovative solutions at low prices by fostering competition. Congress first established the full and open competition principle within the Competition in Contracting Act (CICA) in 1984, which it enacted as a precursor to the FAR itself. CICA encourages all eligible contractors to submit bids or offers to increase competition and provide the best price for the U.S. government and the American people. Although a number of “noncompetitive” procedures satisfy CICA, this Note will focus on illegal instances of noncompetitive behavior within government procurement—specifically collusion. The FAR’s emphasis on and mandate for full and open competition demonstrates the importance of minimizing corruption in the procurement process. These values, which are foundational to our entire procurement system, are under threat by widespread collusion and fraud.
Collusion is a great concern in government procurement, and the U.S. government has sought to confront it through a number of statutory schemes and enforcement programs. At its most basic level, collusion involves “firms act[ing] in unison to raise the prices that they charge their customers, or to lower the price that they pay to acquire goods or services, or to otherwise inhibit competition.” When such firms act in unison, it is referred to as a “cartel.” As demonstrated by the enactment of the Sherman Antitrust Act of 1890, the U.S. government has made it a priority to confront collusion in our markets by “prohibit[ing] agreements among competitors to fix prices, rig bids, or engage in other anticompetitive activity.” Americans expect full and open competition with government use of its taxpayer dollars, which is why the DoJ criminally prosecutes collusive actions like price fixing and bid rigging.
Collusion is extremely difficult to detect because the bad actors often go to great lengths to conceal their illegal agreements with one another from the government. When entities directly communicate with one another with regard to a collusive scheme, they engage in “explicit collusion.” Actors can also engage in collusion without direct communication by analyzing the actions of other firms and market outcomes. This is referred to as “tacit collusion.” The government can detect collusion using direct or indirect evidence, namely “suspicious bid patterns, travel and expense reports, telephone records, and business diary entries.” Some indicators of collusion include “identical . . . individual line items or lump sum bids,” prices well “above the agency’s estimate for the value of the contract or way above comparable bids,” subcontracting agreements with losing bidders, late changes to bids, unbalanced bids, and a large margin in price between the lowest offer and other bids. Generally, if patterns in procurement seem to indicate that the actors knew of one another’s prices and acted thereafter, then there is cause to suspect potential collusion . It is important to note that these indicators in isolation do not prove collusion outright. Rather, they serve as warnings that collusion may be occurring and call for further investigation. Criminal antitrust violations can only be assessed and prosecuted when proof of an illicit agreement comes to light, requiring an explicit agreement. The Antitrust Division only “prosecute[s criminal] conspiracies between horizontal competitors to fix prices, rig bids, or allocate markets.” Horizontal competitors are those firms that compete at an equal level. It is easy for these firms to collude in choosing a winner, inflate prices, and limit competition because they bid simultaneously and are often repeat players in their field. For all of these reasons, collusion is extremely difficult to detect and prosecute.
Collusion detrimentally impacts full and open competition—a pillar of U.S. government procurement. If collusion were eliminated, the U.S. government estimates that it would save billions of dollars each year. For example, in 2019, the U.S. government could have saved taxpayers $117 billion in detecting and eliminating collusive schemes.
Two of the main ways in which cartels exploit the American taxpayer through the U.S. government procurement system are bid rigging and price fixing. Bid rigging “is an agreement among competitors as to who will be the winning bidder” in a government contract. It manifests in different forms, namely through bid suppression, complementary bidding, bid rotation, and market allocation. Bid suppression involves “one or more competitors agree[ing] not to bid, or withdraw a previously submitted bid, so that a designated bidder will win.” Typically, the non-bidder in this situation becomes a subcontractor of the winning bidder or receives a payment for their actions. Subcontracting is seen frequently throughout bid rigging schemes, as it results in lucrative rewards for those individuals who agree to lose the contract. Relatedly, complementary bidding involves conspirators “submit[ting] token bids which are intentionally high or which intentionally fail to meet all of the bid requirements in order to lose a contract,” creating a façade of competition. Next, bid rotation involves repeated bid submissions by the same actors, with each actor in the group getting their chance to win a contract in a series of contracts. Lastly, customer or market allocation occurs when “co-conspirators agree to divide up customers or geographic areas” and “will not bid or will submit only complementary bids when a solicitation for bids is made by a customer or in an area not assigned to them.”
A notable, classic example of bid rigging is JTC Petroleum v. Piasa Motor Fuels, Inc. from the Seventh Circuit, in which the road contractor defendants “had agreed not to compete with one another in bidding on local government contracts . . . .” The result of this agreement was a cartel, created to eliminate competition for local government contracts in the road paving industry. The Court declared such cartel to be per se violations of the Sherman Act. As JTC Petroleum Co. demonstrates, bid rigging is an issue that greatly impacts U.S. government contracts because dishonest bid submissions limit competition and, as a result, exorbitantly inflate the cost of goods and services, such as the essential service of road paving. The false appearance of competition denies the government and American taxpayers the full benefits of vigorous competition including better quality goods/services and innovation. Cartels agree to keep the prices of the goods and services they provide at a high rate, which benefits them greatly in being paid a higher than market rate over a long period of time.
Like bid rigging, price fixing is a common form of collusion that influences procurement, particularly in the case of purchase orders and direct purchases. Price fixing occurs when competitors “agree to raise or fix prices they will charge for their goods or services, set a minimum price that they will not sell below, or reduce or eliminate discounts.” Some suspicious patterns that likely implicate price fixing occur when “competitors . . . announce their price increases at the same time for the same amount or have staggered price increases with some pattern, such as appearing to take turns going first.” Further, if actors “reduc[e] or eliminat[e] discounts at about the same time” or if actors’ prices are generally the same and refuse to budge on their prices, price fixing may be at hand.
A landmark case of price fixing is United States v. Trenton Potteries, in which the U.S. Supreme Court found that twenty-three companies agreeing upon the sale prices for government bathroom pottery had violated the Sherman Act. The agreement among the companies “to fix and maintain uniform prices for the sale of sanitary pottery” was explicit and undisputed by the parties. This outcome stood despite the companies’ argument that such price fixing made the prices in question reasonable. This holding underscores the importance of maintaining full and open competition in government contracting because, even though the agreed upon prices were arguably reasonable, the companies’ price fixing was nonetheless a violation of the Sherman Act. This case demonstrates how easily collusion can arise in the case of government contracts, particularly in the form of price fixing, and how the government does not tolerate such illegal conduct under the Sherman Act.
Though more can be done to increase instances of reporting, a sizable legal framework is in place to confront collusion. The U.S. government has a longstanding robust regime for addressing the issue of collusion through the Sherman Act of 1890. Currently, the DoJ’s Leniency Program, which the DoJ revamped in the 1990s and updated more recently in April 2022, is the primary way that the government fights collusion. The Antitrust Division’s Deputy Assistant Attorney General for Criminal Enforcement, Richard A. Powers, referred to the Leniency Program as the Antitrust Division’s “most important prosecutorial tool for the last [twenty-six] years, particularly when it comes to international cartels.” Other entities and legal frameworks that address collusion today are the PCSF, ACPERA, and CAARA.
The Sherman Act dictates that, when a collusive scheme is detected, it is a criminal per se violation of the law. This means that collusive actions to bid rig or price fix are automatically deemed illegal. Parties cannot explain away their actions by arguing they led to reasonable prices or left competition untouched. Such a harsh determination under the Sherman Act seeks to encourage actors to engage in the market fairly. Any criminal violation of the Sherman Act is a felony, subject to ten years imprisonment with “a $1 million fine for individuals and a fine of up to $100 million for corporations.” If found guilty of collusion, delinquent individuals and corporations “may be ordered to make restitution to the victims for all overcharges,” with the victims “seek[ing] civil recovery of up to three times the amount of damages suffered.” Further, the statute of limitations for each form of collusion is five years. The U.S. government does not take to collusion lightly and expects “competitors to set prices honestly and independently” in the bidding process and beyond.
The DoJ primarily confronts the issue of detecting collusion through the Antitrust Division’s Leniency Program This program is an investigatory tool that “provides non-prosecution protection to the first organization or individual to self-report its participation in a criminal conspiracy.” The DoJ most recently updated the program in April 2022. The Leniency Program is tailored to the unique nature of collusion, which is concealed from all but the parties involved, such that the first corporation or individual to come forward to the DoJ and admit their own involvement in an antitrust crime receives leniency for the crime in question.
Notably, the conspirator also must cooperate in full with the DoJ after admitting their involvement or leniency will not be granted. This first come, first served nature of the Leniency Program places the bad actors in a race with one another to report collusion, putting pressure on all conspirators involved to come forward in a timely manner. Under the current program, only those within the scheme itself can come forward and report the collusion to receive some form leniency or “reward.” In other words, “an individual who has knowledge of illegal activity, but no personal involvement in that activity, may still report it to the Division and is encouraged to do so . . . [but] does not qualify for or need the protections of individual leniency.” For an individual to receive leniency under the program, the DoJ cannot have already received information about the criminal activity. In addition to cooperating in full with the DoJ through the investigative process, the actor must not have “coerc[ed] another party to participate in the illegal activity and clearly was not the leader in or originator of the activity.”
DoJ offers different immunity conditions to corporations depending upon when the DoJ has received information and begun an investigation; such conditions were updated in April 2022. The DoJ grants “Type A” leniency to corporations that self-disclose “before the Antitrust Division has begun an investigation,” so long as at the time of the report “the Antitrust Division has not received information about the illegal activity from any other source.” Companies that meet these conditions receive non-prosecution agreements, providing immunity for the company and current directors, officers, and employees. If a corporation fails these to meet these conditions, the DoJ may grant “Type B” leniency. The DoJ may grant this leniency should a corporation self-disclose before the DoJ has evidence that, “in [its] sole discretion, is likely to result in a sustainable conviction against” the corporation, and that “granting leniency to the applicant would not be unfair to others.” Under the April 2022 update for Type B corporate leniency, the DoJ’s “non-prosecution protection [of a corporation’s] current directors, officers, and employees . . . for the illegal activity” is not guaranteed. These changes, implicating new reporting requirements, indicate that corporations may have difficulty earning leniency from the DoJ.
In addition to the Leniency Program, the DoJ recently created a strike force—known as the Procurement Collision Strike Force (PCSF)—to directly confront procurement collusion. This initiative “leads a coordinated national response to combat antitrust crimes and related schemes in government procurement, grant, and program funding at all levels of government—federal, state, and local.” Launched in 2019, the PCSF is made up of “the Antitrust Division of the U.S. [DoJ], multiple U.S. Attorneys’ Offices around the country, the Federal Bureau of Investigation (FBI), and the Inspectors General for multiple Federal agencies.” PCSF also has an international branch called “PCSF: Global” to combat procurement collusion involving the United States and American taxpayer dollars, but occurring outside the country. To illustrate the kind of work being done by PCSF, see the bid rigging scheme described, supra, involving a multi-million dollar DoD contract and Belgium-based security company Seris Security NV. PCSF detected this bid rigging and price fixing scheme, leading the defendants to be charged with a criminal violation of the Sherman Act.
APCERA complements the Leniency Program by further encouraging corporations to report their illegal involvement in antitrust cartels, limiting the damages that the government can seek against the reporting entity. Specifically, APCERA limits civil damages to “actual damages” so long as the company “provides . . . timely and satisfactory cooperation.” This limit seeks to minimize the prospect of treble damages as a deterrent for reporting collusion in addition to incentivizing cooperation among the parties involved. While treble damages serve an important deterrent role in other contexts, APCERA’s limitation on damages strikes a balance that both encourages increased reporting and deters illegal conduct.
Enacted in 2020 and sponsored by Senator Charles “Chuck” Grassley, CAARA provides protection to employees who report their employers for involvement in antitrust violations. Specifically, it “prohibit[s] employers from taking punitive actions against whistleblowers for reporting these violations to their employer or assisting a federal government investigation into a criminal antitrust violation.” Importantly for government procurement in which numerous levels of contractors and subcontractors are involved in any given contract, CAARA provides protection to “employees, contractors, subcontractors and agents of the employer.” This Act has served as an important tool for the Antitrust Division to lift pressure off employees in reporting criminal antitrust violations for fear of termination or otherwise.
Through the Leniency Program, the government has made great strides in combatting collusion. However, gaps in detection and execution of the Leniency Program remain because the U.S. government loses tens of billions of dollars to government procurement-related collusion each year.
The Leniency Program’s system of fining and deterring conspirators, in addition to offering leniency to those who come forward, has been relatively effective in preventing collusion over the last few decades. The DoJ has stressed that its Leniency Program is successful because it imposes “the threat of severe and significant sanctions,” creates “a heightened fear of detection,” and maintains “transparent and predictable enforcement policies.” The DoJ employs the most “severe and significant sanctions available for cartel activity” in order to deter future collusion for individual actors. These sanctions are also employed with corporations. The DoJ is extremely unforgiving to those individuals who fail to report illegal antitrust activity in a timely manner. For example, “the division has prosecuted executives at the highest levels of their companies after their employers missed leniency by a matter of days or even hours.” This time-oriented mechanism creates immense pressure to report collusion quickly.
The DoJ imposes large criminal fines to “punish companies by divesting some of their ill-gotten gains,” as “corporate fines should be commensurate with the harm to U.S. consumers and businesses caused by cartels.” Further, if fines are severe enough, companies will not be able to ignore them in entering deals. In other words, these fines “cannot easily be written off as one of ‘the costs of doing business,’” forcing actors to be conscious of their actions. The potential for immense fines and jail time act as “sticks” for bad actors to come forward. These “sticks” complement the “carrot” of leniency: the Program offers forgiveness to those actors who self-report in addition to maintaining the threat of fines and jail time for those bad actors who fail to self-report. To maintain this balance between the carrot and stick, the Antitrust Division “has steadily expanded its arsenal to include traditional criminal enforcement tools such as informants, search warrants, subpoenas, consensual monitoring, audio and video tape recordings, and, more recently, undercover agents and wiretaps to investigate cartels.” While the Leniency Program’s carrot and stick model of deterring bad actors and rewarding those asking for forgiveness has proved to be relatively effective, it leaves much to be desired because of the estimated tens of billions of dollars at risk in leaving government procurement-related collusion undetected.
Despite the strides that DoJ has made using the Leniency Program and other associated statutory tools to detect collusion, cartels that take advantage of the American people and government are the status quo in government procurement––to the tune of billions of taxpayer dollars. In fact, eliminating bid rigging alone would reduce the cost of government contracts costs by nearly twenty percent. Because the government spends hundreds of billions of dollars on government procurement costs each year, twenty percent is no small sum.
Thus, the successes of existing amnesty programs such as this are overshadowed by the monstrous unknown: “The total harm inflicted by . . . price fixing [and other forms of collusion are] impossible to estimate accurately because, by definition, successful cartels are never detected.” While the U.S. government estimates that it loses tens of billions of dollars to government procurement-related collusion each year, it is difficult to even know the true approximation given the surreptitious nature of the crime. The U.S. government must do more to detect and prosecute cartels that take advantage of our nation’s government procurement regime.
While robust statutory schemes are in place to address collusion, the U.S. government’s current approach is lacking. One statute with marked success in terms of reporting is 31 U.S.C. §§ 3729––the False Claims Act (FCA). With the DoJ “obtain[ing] more than $5.6 billion in settlements and judgments from civil cases involving fraud and false claims against the government in . . . 2021,” this statute and its qui tam whistleblower provision are instructive for the DoJ in how to increase reports of collusion in the Leniency Program. This Section will discuss the basics of the FCA and its qui tam provision in addition to demonstrating why the statute has been so successful. Additionally, the Section will touch on the whistleblower program employed by the U.S. Securities and Exchange Commission (SEC), which is separate from the FCA, but nonetheless important to the legal landscape of whistleblower programs today.
Enacted in 1863 by President Lincoln during wartime fraud, the FCA makes any person who submits a false claim against the government liable for fraud. Although the FCA has been amended many times since its enactment, its main purpose of preventing fraud in U.S. government procurement remains. Examples of actions that constitute fraud under the FCA include “charging the government for more than was provided, fraudulently seeking a government contract, submitting a false application for a government loan, demanding payment for goods or services that do not conform to contractual or regulatory requirements, requesting payment for goods or services that are defective or of lesser quality than were contracted for, submitting a claim that falsely certifies that the defendant has complied with a law, contract term, or regulation, [and] attempting to pay the government less than is owed.” Those who violate the FCA are liable for treble damages and other costly civil penalties. The language in the FCA is extremely broad and encompassing, applying to procurement fraud outside the United States, as long as federal funding is involved, and to criminal cases as well as civil.
The FCA is particularly effective because of its qui tam provision. Meaning “in the name of the king,” qui tam actions allow individuals called “relators” or “whistleblowers” to directly sue those parties who have committed fraud against the government on behalf of the government. What is most unique about the qui tam provision is who can bring a lawsuit: anyone with evidence of fraud against the government. These relators who bring suit are able to earn between fifteen to thirty percent of the total recovery. Informing the government about the potential fraud does not meet the DoJ’s threshold for relators to earn a percentage of the recovery; the relator must file a lawsuit, and the government must recover from the suit. Such a monetary incentive for whistleblowers is a large part of why the FCA has seen such success in instances of reporting. Coupled with the opportunity for anyone to report this fraud, the monetary incentive provided by the FCA allows the government to locate fraud that it would not be able to otherwise.
Relators cannot bring a suit if another party has already sued using the same evidence. This rule encourages relators to come forward with their suit quickly, or else they will lose out on the opportunity to earn a percentage of recovery. Further, relators must bring suit “within the later of the following two time periods: [s]ix years from the date of the violation of the Act; or [t]hree years after the government knows or should have known about the violation, but in no event longer than ten years after the violation of the Act.” Like the “first to file” rule found within the Leniency Program, this statute of limitation rule incentivizes timely filing of suits. Additionally, the FCA contains protections and provides relief for employees who are discriminated against for their actions in pursuance of a claim. This protection breaks down any barriers an employee may face in deciding to file a suit on behalf of the government. The FCA and its qui tam provision have proven to be extremely effective in detecting fraud and serves as a model for similar programs of its kind.
The FCA has recovered billions of dollars for the government. In 2020 alone, the government recovered $2.2 billion from FCA suits of which over $1.6 billion can be attributed to suits filed on behalf of the government by whistleblowers. Equally impressive is that, since 1986, individuals bringing qui tam suits “have brought in $46.5 [billion] to the U.S. Treasury through [fiscal year] 2020. Of that amount, $7.8 [billion] was paid in rewards for whistleblowers.” Specifically related to government procurement, “whistleblowers [since 1986] were responsible for [seventy-two percent] of the funds recovered in contracting or procurement fraud cases.” With this success in mind, qui tam lawsuits have only been increasing in numbers, with an average of thirteen new cases filed every week. One can only imagine the impact the FCA will continue to have in the decades to come. These statistics highlight how indispensable the FCA and whistleblowers are to the U.S. government in detecting fraud.
While the FCA’s whistleblower provision is the focus of this Note, the SEC has seen similar successes with its own whistleblower program. Created by Congress in 2011, this program monetarily rewards whistleblowers who report information regarding potential violations of U.S. securities laws. Like the FCA’s monetary reward, this reward likely acts as a catalyst for eligible whistleblowers to report information regarding violations of securities laws, helping the SEC increase its detection efforts. Since its creation just over ten years ago, the SEC has issued more than $1 billion in awards to whistleblowers. Despite its importance as a statutory framework in the whistleblower legal landscape today, the DoJ should not adopt the SEC’s whistleblower provision for its Leniency Program because its reporting process is more complicated and burdensome than that of the FCA. Specifically, it involves a ten-step process in which whistleblowers submit tips and the SEC intensely analyzes the tips over a long period of time. For the DoJ Leniency Program, an elaborate reporting process such as this one would be inappropriate because it would likely disincentivize reporting and clog up the processing system. Notwithstanding the complicated procedural aspects of the SEC whistleblower program, its successful track record for identifying instances of fraud and abuse demonstrate the large impact DOJ Leniency Program reporting mechanisms can have.
The DoJ could detect and prosecute collusion more effectively by supplementing the Leniency Program with a qui tam provision that includes a monetary incentive like the FCA’s qui tam provision. This incentive mitigates the risk whistleblowers face in coming forward with sensitive criminal information. Combining criminal and civil schemes that consider the perspectives of prospective whistleblowers will result in more favorable outcomes for the DoJ. The DoJ should use the existing tip centers of Citizen Complaint Center (CCC) and PCSF to create a solution that aligns with these powerful incentives and uncover instances of corruption.
Detecting and prosecuting collusion remains a challenge for the Antitrust Division. The barriers for reporting are extremely high given the potential threats of jail time, unemployment, fees, and more. Further, the DoJ has finite resources available to eradicate collusion. Only those engaged in illegal antitrust acts are able to come forward to the DoJ to get leniency. If there were more opportunities for reporting and prosecuting collusion, and an incentive to do so, it is likely more cartels would be exposed and removed from the procurement process.
This Note suggests that the implementation of a whistleblower bounty like the FCA could be the answer. The collusive practices commonly used by cartels in government procurement, such as price fixing or bid rigging, are particularly susceptible to being exposed by whistleblowers because of the sheer number of actors—both corporations and individuals—involved in the formation and performance of government contracts. Some of the biggest government contracting entities, namely Raytheon Technologies, the Boeing Company, and Lockheed Martin, employ 174,000 140,000, and 114,000 individuals, respectively. From contractors and subcontractors to executives and low-level officials, many individuals may learn of an illegal antitrust activity despite no direct involvement. Under the current statutory regime, these individuals have no clear path or incentive by which to report and, thereby, support the Antitrust Division’s enforcement efforts.
Currently, staff, customers, and some lower ranking officials do not qualify for “leniency” under the Antitrust Division’s Leniency Program because they are not involved in a given collusive scheme. However, this is the Program’s primary motivation, and it is only available to a limited group of people. Additionally, those involved in the cartel sometimes view the rewards of price fixing or bid rigging as more valuable than coming forward to the DoJ, further concealing the cartel’s actions despite the risk of fines and jail time. Most significantly, no monetary reward is available for these individuals should they report the collusive acts. It begs the question, what’s in it for them?
Under the current statutory regime, these individuals may weigh the costs of reporting the collusive acts, such retaliation or termination, more heavily than the benefits of reporting the actions, which are virtually nonexistent. While CAARA seeks to protect these individuals from employer retaliation, the everyday employee may be unaware of this Act, afraid to challenge their employer, or may question how much protection they are afforded from the Act. The desperation from the cartels to keep their actions hidden, coupled with a lack of monetary reward or other incentive for innocent insiders to report, leaves a gap in the detection and prosecution of illegal antitrust actions. If more opportunity for reporting collusion existed, along with an incentive to do so, more cartels would be exposed.
In buttressing the Leniency Program with a qui tam provision analogous to the FCA, this Note must reconcile how to mesh a civil statutory scheme with a criminal one. As discussed supra, the Leniency Program prosecutes criminal antitrust actions while the FCA covers civil fraud actions. Although this Note does not suggest complete civil enforcement of criminal laws, it proposes that the DoJ reform the Leniency Program to permit some private assistance in enforcing criminal statutes through the use of bounties. By using civil remedies to address criminal actions, the DoJ can implement a whistleblower program similar to that of the FCA to see increased success in terms of reporting collusion. This Note urges further dialogue on the topic of meshing civil and criminal legal schemes, as it is one of contested debate today.
CAARA hints at the notion of an antitrust whistleblower program, upholding the idea that employees who report their employers for involvement in criminal antitrust violations deserve protection. In addition to this protection, the DoJ should consider a monetary reward for those who report and help to bring successful suits against criminal cartels. Robert Connolly, a former Antitrust Division attorney of nearly thirty years, has spoken to this idea on his blog. Connolly makes two important points regarding the valuable potential of enacting a monetary incentive feature to the Leniency Program. First, he argues that “offering a potential whistleblower reward to a single cartel member . . . leaves a target[-]rich enforcement of culpable executives to focus on . . . .” Second, he asserts that it is costly to be a whistleblower and that a monetary incentive would serve as a motivation for many individuals to come forward. This Note has touched on these ideas already, and such ideas confirm the valuable source whistleblowers present in detecting collusion in government procurement.
The DoJ currently uses the CCC to field public concerns regarding potential antitrust violations. The Center should implement a system under which whistleblowers can report criminal antitrust activity and begin to file suit. Currently, the first “step” in using the CCC requires individuals to describe their concern. The DoJ provides a list of questions to guide the individual in accurately describing a possible criminal antitrust violation. The next step is to simply submit this written report by email, phone, or physical mail. The CCC then makes a record of the submission, reviews the submission, and refers the submission to the Antitrust Division if the information is promising. Finally, the CCC reaches out to the individual if they need more information, but the Center also notes that it may not respond to the submission at all if there is a sizeable volume of submissions.
This system is the first step in creating a whistleblower program within the Leniency Program. Because the Antitrust Division already has the CCC in place to filter these submissions, it would be relatively simple to modify the program to process whistleblower tips and handle qui tam suits. When a whistleblower brings forward valuable information leading to criminal activity and begins to file a suit, the whistleblower should be paid a bounty of a certain percentage like the FCA. By providing the DoJ with valuable information on criminal antitrust cartels and stating the grounds for suit, whistleblowers assist the DoJ with detection and prosecution of antitrust crimes and deserve a monetary reward. The CCC should provide materials to the public on how to file a suit along with details of the monetary reward. The CCC should also have a robust website complete with these materials, making them easily accessible to the public. Further, the DoJ should bolster the CCC with more employees to process such whistleblower tips and suits, given that the CCC struggles with volume already. Although providing more staffing to the CCC would impact the DoJ’s budget, the DoJ would likely see ample returns in government funds by running an effective Leniency Program. The structure of this program is a promising starting point for filling collusion detection gaps.
A similar complaint center exists within the PCSF. Because this Note focuses on rooting out collusion in the government procurement space, meshing the CCC with the PCSF Tip Center as well is another possible solution for creating an entity to process qui tam suits and complaints. Currently, the DoJ splits these centers to hear different types of complaints. Individuals only report collusion related to government procurements, grants, and funding to the PCSF. All other tips go to the CCC. The DoJ should view both the CCC and the PCSF Tip Center as a valuable foundation for implementation a robust whistleblower program, particularly in the pooling staffing and other resources to process complaints.
Collusion is unfortunately commonplace in government procurement. It is the government’s duty to uphold free and fair competition in our nation’s markets and government procurement procedures. From bid rigging to price fixing, government contractors and the American people have experienced the negative effects of corruption from cartels for far too long. While the U.S. government has taken a number of steps to address the ubiquitous nature of collusion, more can be done to detect and prosecute cartels engaging in anticompetitive criminal actions. First and importantly, the Sherman Act declares collusive schemes to be per se violations of the law. The focus of this Note, the Antitrust Division’s Leniency Program, serves as another important tool for the DoJ in detecting and prosecuting collusion. This Program creates an incentive for those parties involved in illegal antitrust acts to self-report, as it provides criminal leniency to those parties who self-report their involvement, avoiding hefty fines and jail time. In addition to the Leniency Program, the government also has the PCSF, ACPERA, and CAARA at its disposal. However, there are holes in the government’s current approach and this Note suggests that looking to other statutory schemes may be the solution.
The FCA has been extremely successful since its enactment nearly 160 years ago, part and parcel because of its unique whistleblower feature. The monetary reward earned by relators in bringing suit on behalf of the U.S. government will drive a high detection rate. While a reward is only provided to relators if the suit is successful, it is the detection of fraud and the surveillance by the public that has served an invaluable tool. By supplementing the DoJ leniency program with a whistleblower program, complete with a monetary incentive, individuals would increase the instances of collusion reporting. The DoJ and its statutory tools and programs alone have been the primary force for detecting and prosecuting collusion. Further opening up the financial rewards of collusion detection to prospective whistleblowers could provide the DoJ with another critical resource in the fight to detect and prosecute collusion—a detrimental force to the American economy, everyday taxpayers, and the government procurement system as a whole.
