New Gilded Age, New Corporate Monopoly Prosecutions?
Deputy Assistant Attorney General Affirms DOJ Is "Absolutely" Prepared Revive Underutilized Sherman Act Provision to Prosecute Monopoly Crimes
J. Pierpont Morgan circa 1900, via Wikimedia Commons
Inside Sources published a new op-ed from me on signs the DOJ is reviving one of its most powerful antitrust enforcement tools: criminal enforcement of Section 2 of the Sherman Antitrust Act.
I hope you read (and share) the full op-ed, but here’s the gist of it:
Deputy Assistant Attorney General Richard Powers sent a shockwave through the highest echelons of the white-collar defense bar when he was on an American Bar Association panel in March. He was asked whether the Justice Department is now prepared to bring criminal cases under Section 2 of the Sherman Antitrust Act.
Power’s answer: “Yes, absolutely.”
He elaborated, “Congress made violations of the Sherman Act, both Section 1 and Section 2, a crime … and Section 2 is a felony just like Section 1. … Historically, the division did not shy away from bringing criminal monopolization charges, and frequently alongside Section 1 charges, when companies and executives committed flagrant offenses intended to monopolize markets.”
For decades, a pro-corporate mindset in the federal government has relegated Section 2 to the status of an unenforced law — dormant, but not dead.
Now, as unaccountable goliaths repeatedly demonstrate the widespread harms to workers, small businesses, consumers, communities and our very democracy that result from unchecked corporate power, the era of dormancy is about to be over.
I put a picture of J.P. Morgan at the beginning of this post because I end the piece with an anecdote from Tim Wu’s excellent history of U.S. antitrust law, The Curse of Bigness:
The corporate titans in the crosshairs of this fresh prosecutorial zeal will no doubt resist in every way they can — just as corporate titans of the Gilded Age resisted the Sherman Act’s original adoption.
In 1904, J.P. Morgan confronted President Theodore Roosevelt in the White House after the Roosevelt administration filed an antitrust suit against one of Morgan’s companies. Morgan (in Roosevelt’s recounting) proposed the government’s lawyers meet with the company’s lawyers to “fix it up” — that is, to end the lawsuit in a mutually amicable way (not unlike how the Justice Department too-frequently resolves corporate cases through leniency agreements instead of bringing cases to trial).
Roosevelt replied: “We don’t want to fix it up, we want to stop it.”
Ultimately, Roosevelt prevailed at the Supreme Court and Morgan’s trust was busted.
Let’s hope that Kanter and Power — today’s trust busters — are equally inclined to prefer busting trusts over fixing them up.
Big Business Blotter News Roundup
TOP NEWS
FTC Sues to Stop “Deceptive” TurboTax “Free” Ad Campaign - ProPublica
Intuit lawyers defended the accuracy of the ads in a response filed Tuesday but also asserted that the company, in correspondence with the FTC just days ago, agreed to take down its “free” TV spots. The company said that “after meeting with FTC Chair Lina Khan and in the spirit of cooperation, Intuit informed the FTC on March 24, 2022, that it would voluntarily ‘pull down the ‘free, free, free’ TV ads for the remainder of the tax season’ in response to concerns that those advertisements were deceptive.”
Both FirstEnergy and its shareholders seek secrecy around company’s bribes - Ohio Capital Journal
The shareholders, in arguments submitted Wednesday, offered to privately tell the judge who at FirstEnergy ordered the bribes. They said they couldn’t do so publicly because doing so would breach confidentiality rules associated with discovery (the pre-trial evidence exchanging process) and mediation. The shareholders’ lawyers said their obligations are to their clients and to FirstEnergy itself — not the public. “Such public disclosure could also be harmful to FirstEnergy considering the myriad related criminal and civil proceedings, the ongoing regulatory investigations, and the securities class action pending in the Southern District of Ohio where FirstEnergy is a defendant,” they wrote.
USPS contracted with UPS to pick up U.S. mail at six locations in the United States and at various Department of Defense and State Department locations abroad, and then deliver that mail to numerous international and domestic destinations. To obtain payment under the contracts, UPS was required to submit electronic scans to USPS reporting the time the mail was delivered at the identified destinations. The contracts specified penalties for mail that was delivered late or to the wrong location. The settlement resolves allegations that scans submitted by UPS falsely reported the time and fact that it transferred possession of the mail.
USAA fined $140M for AML compliance failures - Compliance Week
USAA Federal Savings Bank (FSB) must pay $140 million as part of two separate consent orders reached with the Financial Crimes Enforcement Network (FinCEN) and Office of the Comptroller of the Currency (OCC) for the bank’s “willful” failure to implement and maintain a Bank Secrecy Act/anti-money laundering (BSA/AML) compliance program.
ENFORCEMENT POLICY
"Repeat offenders take many forms. The worst type of repeat offender violates a formal court or agency order, especially egregious because they often consented to the terms as part of a settlement. They clearly understand the laws and provisions to adhere to, but failed to comply due to dysfunction or they took a calculated risk. Another type of repeat offender is one that has multiple violations of law across different business lines, but the violations stem from a common cause. For example, I have found that violations across business lines often relate to problematic sales practices incentives or a failure to properly integrate IT systems after a large merger. In other words, the company may have dealt with some symptoms but didn’t do anything about the disease. We must forcefully address repeat lawbreakers to alter company behavior and ensure companies realize it is cheaper, and better for their bottom line, to obey the law than to break it."
Fuel economy penalties soar under new rule - E&E News
President Biden is cracking down on automakers who fail to meet fuel economy standards by charging them more for violations. In a final rule released late last week, the National Highway Traffic Safety Administration bumped its corporate average fuel economy, or CAFE, penalty from $5.50 per tenth of a mile per gallon to $14 — a significant increase. The move restores the Obama-era rate, whose implementation was delayed by former President Trump, and could cost manufacturers hundreds of millions of dollars in new fines.
DOJ Quietly Releases “Declination With Disgorgement” Letter Involving JLT - FCPA blog
“Consistent with the FCPA Corporate Enforcement Policy, the Department of Justice, Criminal Division, Fraud Section (the “Department”) has declined prosecution of your client, Jardine Lloyd Thompson Group Holdings Ltd., formerly Jardine Lloyd Thompson Group plc (“JLT” or the “Company”) for violations of the Foreign Corrupt Practices Act (the “FCPA”), 15 U.S.C. §§ 78dd-1, et seq.’ We have reached this conclusion despite the bribery committed by an employee and agents of the Company and its subsidiaries.
SCOTUS
The U.S. Supreme Court heard oral arguments on Monday in a case about a railroad worker who suffered serious injuries after slipping on an oily passageway onboard a locomotive while it wasn’t moving and sued Union Pacific under an obscure federal law.
The employee in this case (Angie Moriana) sought relief under PAGA against Viking River Cruises, alleging that the company failed to pay all wages due, failed to pay overtime, and committed other violations. Viking argued that the action should fail because Moriana’s employment agreement called for individualized arbitration of all disputes about her employment with Viking and explicitly waived her right to assert such claims through PAGA.
AMAZON
Amazon was fined $60,000 for "knowingly putting workers at risk of injury" at a Kent fulfillment center, according to the Washington Department of Labor & Industries. L&I ergonomists found that workers were required to perform repetitive, physical work like twisting, lifting, and carrying at "such a fast pace" that it increased the risk of injury.
Amazon Antitrust Lawsuit Thrown Out by DC Court - CNET
The suit, filed last May by DC Attorney General Karl Racine on behalf of the District of Columbia, alleged that Amazon has too much control over how much outside vendors can charge for their products, driving up prices and harming consumers. On Friday, though, a DC Superior Court judge granted Amazon's motion to dismiss, The Wall Street Journal reported. Court records didn't give a reason for the dismissal, according to The New York Times, but Law 360 said the court found a lack of evidence that Amazon's policies lead to higher prices.
FOOD DELIVERY / ANTITRUST
DC sues Grubhub, claiming its app is full of hidden fees and jacked-up prices - The Verge
The newly filed lawsuit argues that Grubhub’s promises of “free” online orders — and “unlimited free delivery” for Grubhub Plus — are misleading. While customers can make pickup orders for free, the company charges delivery and service fees for standard orders and service fees for Grubhub Plus orders, displaying the service fee until recently as part of a single line with sales taxes. “Grubhub misled District residents and took advantage of local restaurants to boost its own profits, even as District consumers and small businesses struggled during the COVID-19 pandemic,” said Racine in a statement. “Grubhub charged hidden fees and used bait-and-switch advertising tactics — which are illegal.”
Third-party delivery companies sued by diners for anti-trust violations - Nation's Restaurant News
Third-party delivery companies are facing more legal scrutiny as a New York federal judge allowed a lawsuit accusing Uber Eats, Postmates, and Grubuhb of menu price exploitation to move forward. The anti-trust lawsuit was originally filed in July 2020 and accused the third-party delivery companies of monopolizing delivery prices by not allowing restaurants who contract with them to sell menu items to consumers at lower prices on other platforms, including direct delivery platforms.
TECH
A judge approved an $18 million settlement between Activision Blizzard and the U.S. Equal Employment Opportunity Commission Tuesday that resolves the federal sexual harassment lawsuit faced by the video game publisher. The company still faces multiple suits from shareholders, former employees and the California Department of Fair Employment and Housing.
Lawsuit accuses Google of fostering systemic bias against Black employees - Engadget
A new lawsuit against Google accuses the company of fostering a "racially biased corporate culture" that offers Black employees lower pay and fewer opportunities to advance than their white counterparts, reports Reuters. Filed on Friday with a federal court in San Jose, California, the complaint alleges the company subjected former diversity recruiter April Curley and other current and former Black employees to a hostile work environment.
Former TikTok content moderators file lawsuit over ‘psychological trauma’ - TechCrunch
The lawsuit alleges that TikTok and ByteDance violated California labor laws by failing to provide Velez and Young with adequate mental health support in spite of the mental risks of the “abnormally dangerous activities” they were made to engage with on a daily basis. It also claims that the companies pushed moderators to review high volumes of extreme content to hit quotas and then amplified that harm by forcing them to sign NDAs so they were legally unable to discuss what they saw.
WORKER SAFETY
A 29-year-old industrial insulation installer who loved the outdoors and was engaged to be married died after he fell through the top of a compartment and was electrocuted at a Tennessee power plant last year. Now his employers are facing hundreds of thousands of dollars in federal fines. The Occupational Safety and Health Administration, or OSHA, proposed more than $167,000 in fines and issued several violation notices to Williams Specialty Services, GUBMK Constructors and the Tennessee Valley Authority, which the agency said left workers vulnerable to falls and electrocution hazards.
COAL & CORRUPTION
Former Corsa Coal exec charged in Egyptian bribery scheme - Pittsburgh Post-Gazette
A former top executive of a Western Pennsylvania coal company was arrested in Tennessee Thursday as part of an international FBI investigation involving millions in bribes paid to Egyptian government officials to secure and maintain $143 million in coal shipment contracts with an Egyptian company. The case had previously yielded a guilty plea from another coal company executive who is awaiting sentencing in Pittsburgh.
One informant told authorities that Rex. G. Fought worked with others to steal millions of dollars between 2014 and September 2019, according to a sworn statement in the case. A federal grand jury indicted Fought last week on one charge of conspiracy to defraud the U.S. by obstructing tax collection efforts, punishable by up to five years in prison. TOP ARTICLES Kentucky state trooper shoots a man who was armed, state police say The indictment said Fought, 64, was the manager of Catalyst Resources, Rockhampton Energy and Covol Fuels No. 3 during the alleged conspiracy.
OPIOIDS
Florida secures $860M from CVS, others to settle opioid case - ABC News
Florida Attorney General Ashley Moody said CVS Health Corp. and CVS Pharmacy Inc. will pay the state $484 million. Teva Pharmaceuticals Industries Ltd. agreed to pay $195 million and Allergan PLC more than $134 million.
COMMENTARY / ANALYSIS
Report: California Utilities are the Most Heavily Penalized in the Nation - Good Jobs First
California’s $8 billion total is largely the result of cases brought against Pacific Gas & Electric, which has been hit with $5 billion in penalties, primarily for helping cause devastating wildfires in the state by failing to maintain its power lines properly. Southern California Edison has paid $842 million in wildfire cases as well as for other offenses, such as submitting falsified data to the California Public Utilities Commission. New York ranks second in penalties, with a total of $896 million. More than half of that figure is linked to Consolidated Edison, which has paid $528 million for offenses such as failing to prepare adequately for severe storms.
Biden Gave Most Corporate Crimes A Pass This Winter, New Analysis Shows - Revolving Door Project
The Biden administration pursued at least 24 prosecutions and rulemakings to crack down on white-collar crime this winter, but took no action against at least 48 crimes or abuses, a new data set from the Revolving Door Project shows. The data set is the first in a new series the Revolving Door Project will release in coming months tracking the administration’s pursuit of corporate crime, and its equally-important efforts to publicize doing so. Every two weeks, the Project will release round-ups of white-collar crimes pursued and ignored.
Thanks to Public Citizen which provided me with the link to this MOST interesting organization.