As I write this post, Sens. Chuck Grassley (R- Iowa) and Patrick Lahey (D – Vermont) continue to push bipartisan legislation to encourage antitrust whistleblowers to step forward. (More on that below.) Some recent cases, however, suggest that cash rewards for inside information about antitrust violations may already be available under the federal False Claims Act.
The False Claims Act is the granddaddy of all whistleblower laws. Passed during the 1860’s (U.S. Civil War), it provides cash rewards to folks with inside information about fraud involving government programs or funds.
Whistleblowers who file a sealed complaint are eligible for rewards of between 15% and 30% of whatever the government recovers from wrongdoers. To date the over a billion dollars of rewards have been paid.
Many consumers have never heard of antitrust laws, but when these laws are effectively and responsibly enforced, they can save both taxpayers and consumers billions of dollars a year in illegal overcharges. Most states also have antitrust laws.
These laws prohibit business practices that unreasonably deprive consumers of the benefits of competition. No competition means higher prices and often inferior products and services. Examples of antitrust behavior include price fixing, bid rigging, customer allocation schemes, monopolies and illegal cartels.
The three major antitrust laws are the Sherman Antitrust Act, the Clayton Act and the Federal Trade Commission Act.
The Sherman Antitrust Act has been on the books since 1890 and prohibits all contracts, schemes and conspiracies that unreasonably restrain interstate and foreign trade. The law also prohibits monopolies.
The Clayton Act prohibits mergers or acquisitions that materially diminish competition. Section 4A of the Clayton Act allows the government to recover treble damages for antitrust violations when the government itself is the victim. It is here where we believe most whistleblower reward opportunities exist as the False Claims Act also requires harm to a government program or loss of government funds.
The final piece of legislation in the government’s antitrust arsenal is the Federal Trade Commission Act. It prohibits unfair methods of competition.
Traditionally, the antitrust laws are enforced in three ways: criminal and civil actions brought by the Justice Department, enforcement actions by the Federal Trade Commission and civil suits brought by private plaintiffs who have lost money because of antitrust violations. In the section titled Antitrust Cases under the False Claims Act, we discuss the newest model of private whistleblowers bringing actions on behalf of the government and keeping a percentage of any recovery as reward for stepping forward.
Congressional Efforts to Support Antitrust Whistleblowers
Congress has struggled for years to pass a meaningful antitrust whistleblower statute. In 2017, the U.S. Senate passed the Criminal Antitrust Anti-Retaliation Act sponsored by Sens. Chuck Grassley (R- Iowa) and Patrick Lahey (D – Vermont). Passed in the Senate in 2017, the law died in the House.
The Act was reintroduced in July 2019 but has not even been heard by committee. (Grassley and Lahey have introduced the bill continuously since 2013.)
The Act would prohibit discharging or discriminating against a whistleblower in terms and conditions of employment because the whistleblower either provided information about a potential antitrust violation to the government or assisted in an investigation relating to such a violation.
In re-introducing the legislation, Sen Grassley said,
“Violations of our antitrust laws hurt consumers, often in the form of less choice and higher prices. Without the help of industry whistleblowers, these sorts of violations often fly under the radar. This legislation incentivizes private sector employees to disclose criminal violations by protecting them from retaliation in the workplace after coming forward with information. It also can be a real deterrent to those who are thinking about committing fraud in the future. We’ve seen how whistleblower protections can be a real tool to helping root out waste, fraud and abuse. Just as whistleblower protections for government employees help root out waste, fraud and abuse, they can also help prevent misconduct in the private sector.”
While we certainly support whistleblower anti-retaliation measures, there are still powerful incentives to induce whistleblowers to report antitrust violations. We believe that the False Claims Act already provides for cash rewards and recent events support that conclusion.
Antitrust Cases under the False Claims Act
Illegal cartels by their very nature are hard to detect. For years the Justice Department has relied on its leniency program to induce wrongdoers and cartel members to step forward. That effort only has limited effectiveness, however. A comprehensive strategy of leniency for those who voluntarily step forward, whistleblower rewards and whistleblower anti-retaliation protections are the best defense against antitrust violations. In this section, we examine cash rewards for whistleblowers.
In November 2018, the Justice Department’s Antitrust Division secured the largest settlement ever obtained under section 4A of the Clayton Act. Prosecutors charged three South Korean companies to rig fuel contracts in an effort to overcharge the U.S. military for fuel. The companies paid $82 million in criminal fines and an additional $154 million in civil penalties.
What was noteworthy was the Justice Department’s decision to use the civil antitrust laws in conjunction with the False Claims Act.
The case involved claims that SK Energy Co. Ltd., GS Caltex Corp. and Hanjin Transportation Co. Ltd. Engaged in an illegal bid-rigging scheme that targeted U.S. military bases in South Korea. The case is notable since it was brought by a whistleblower. [The government did not publish the amount of the reward but it is estimated to be between $23,100,000 and $30,800,000.]
In announcing the record settlement, a senior Justice Department official noted,
“Section 4A of the Clayton Act is a powerful yet historically underused enforcement tool that empowers the United States to obtain treble damages for anticompetitive conduct when the government is itself the victim. The Antitrust Division has a long history of vigilantly protecting the interests of American consumers through civil and criminal antitrust enforcement. Going forward, it is my goal to apply that same vigilance to protect the interests of American taxpayers. When a firm cheats the United States by rigging bids, the Division will insist on robust civil settlements like those announced today.”
The door is certainly open for more whistleblower actions in other price fixing schemes in which the United States is a victim. If there is any doubt as to mood of the government under the current administration, on November 15, 2018, the head of the Antitrust Division, Assistant Attorney General Makan Delrahim, told an audience of the American Bar Association, “The American Taxpayer deserves to see a revitalization of the government’s Section 4A authority. Going forward, the Division will exercise 4A authority to seek compensation for taxpayers when the government has been the victim of an antitrust violation. We hope that these efforts will also deter future violations.”
Will the government stay focused on antitrust whistleblower cases?
The answer is yes. In May of 2019, the government charged Heritage Pharmaceuticals of Eatontown, New Jersey with “conspiring with its competitors to fix prices, rig bids, and allocate customers,” all of which are significant antitrust violations.
Makan Delrahim commented on this case as well, “American consumers have the right to generic drugs sold at prices set by competition, not collusion. It is particularly galling that, when
healthcare prices in the United States are already high, certain generic pharmaceutical companies and executives engaged in collusive conduct at the expense of individuals who depend on critical medications. Heritage and its coconspirators cheated and exploited vulnerable American patients to pad their bottom line.”
What does this have to with the False Claims Act? Plenty!
Heritage Pharmaceuticals paid just $225,000 to settle the antitrust violations. Separately they paid $7.1 million under the False Claims Act to settle related price fixing claims.
Remember, by far the biggest purchaser of prescription pharmaceuticals in the United States is the federal government and the states. Medicare, Medicaid and Tricare spend billions of dollars each year on drugs. When a company fixes drug prices, the government is invariably a victim.
Raising prices on generic drugs hurts not only taxpayers but consumers as well. A well placed insider can help stop this illegal conduct, save millions for consumers and taxpayers and earn a cash reward as well.
Although there are no antitrust whistleblower anti-retaliation remedies in the law as of this writing, the federal False Claims Act has anti-retaliation measures including double lost wages and attorney’s fees.
Pay to Delay Schemes as Antitrust Whistleblower Opportunities
We have already discussed two recent schemes in which the whistleblower laws have successfully been used to prosecute antitrust violations. Pay to delay schemes raise yet another opportunity.
This spring, Illinois based Astellas Pharma U.S. agreed to pay a $7.3 million penalty under the False Claims Act whistleblower statute.
In the Astellas Pharma case, a private citizen whistleblower filed a whistleblower claim on behalf of the government against Astella and generic drug giant Ranbaxy, Inc. [Less than a decade ago, Ranbaxy paid hundreds of millions of dollars in another whistleblower case, that case generated a $48,687,254.01 whistleblower reward.]
In the newest Ranbaxy case, Ranbaxy was getting ready to market a generic form of Flomax, the flagship prostate medication under patent to Astellas. Fearing competition once the drug became available in generic form, Astellas offered to pay Ranbaxy a large sum of money to delay its generic Flomax medication.
Obviously, preventing generics from entering the market keeps drug prices sky high.
A whistleblower filed a sealed complaint under the False Claims Act alleging that Medicare and Medicaid were harmed by Astellas’ anticompetitive behavior and actions to sustain its monopoly on Flomax and keep out competition. But for Astellas paying for Ranbaxy to delay its generic equivalent (“pay-to-delay”), the cost of the drug to consumers and the government alike would have been much lower.
[Astellas and pharmaceutical company Amgen paid a whopping $124.75 million in April of 2019 in a separate False Claims Act case.]
Whistleblower Rewards for Customer Allocation Schemes
A final example is a customer allocation scheme. In the typical customer allocation scheme, a group of companies or individuals conspire to fix prices or rig bids by having only one company bid on a particular customer. With only one bid per customer, the company bidding can charge much higher prices.
In 2015 and 2016, several shipping company executives were indicted for fixing prices on ocean freight shipping coming through the Port of Baltimore.
According to the indictments, the Justice Department said the conspirators had regular meetings where they agreed to allocate customers and routes to certain carriers. Instead of having free choice, only a specified carrier would bid on certain business. The lack of competition caused prices to increase.
Since the government is a big user of ocean freight services, there is certainly a possible whistleblower reward opportunity.
Seeking Antitrust Whistleblowers
The whistleblower lawyer at Mahany Law are seeking anyone with knowledge of illegal price fixing, bid rigging or pay to delay schemes. Even if there is no loss to the government (hence no whistleblower reward), we may still be able to help consumers and put an end to this illegal and greedy behavior. Obviously if there is a loss to the government, we may be able to collect a large cash reward for you.Rewards are paid to the first to file so don’t delay!
To learn more, contact us online, by email or by phone 202-800-9791. We take cases anywhere in the United States. All inquiries are protected by the attorney – client privilege and kept strictly confidential.