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Antitrust Violations, COVID-19, and the False Claims Act

Posted  April 23, 2020

As the federal government spends trillions of dollars to fight the coronavirus pandemic and alleviate its economic fallout, we can expect to see large chunks of that money misused and misappropriated by bad actors.  Now more than ever, we’ll need whistleblowers to come forward to report what they see on the ground, whether it’s an unqualified company seeking Paycheck Protection Program funds intended for small businesses, or unscrupulous healthcare providers charging Medicare for bogus COVID-19 testing.

But what about companies that engage in anticompetitive conduct related to COVID-19?  There’s reason to believe that whistleblowers may soon be coming forward to report COVID-related antitrust violations.  On March 9, the Department of Justice announced that it will be on “high alert” for collusive practices by companies “in connection with the manufacturing, distribution, or sale of public health products such as face masks, respirators, and diagnostics,” particularly where federal, state, or local agencies are the ultimate purchaser.  DOJ specifically identified price fixing, bid rigging, and agreements among competitors to allocate consumers of public health products as areas of concern.  This dovetails with the Department’s recently created Procurement Collusion Strike Force, a joint effort by DOJ’s Antitrust Division, the FBI, agency Inspectors General, and various U.S. Attorneys’ Offices to target collusive procurement practices related to COVID-19 and beyond.

Would-be antitrust whistleblowers—who may speak up at great risk to their careers, particularly  during this uncertain time—should know that their courageous actions may be rewarded financially if they report suspected antitrust violations by bringing a qui tam action under the federal False Claims Act.  The False Claims Act has been used as a vehicle to enforce the antitrust laws for some time.  Just last year, the federal government—tipped off by a whistleblower—fined several Korean companies more than $300 million for rigging bids to supply fuel to the Department of Defense.  While this was the largest recovery ever under Section 4A of the Clayton Act, which gives the government the right to bring claims for damages incurred as a result of anti-competitive conduct, the whistleblower brought the allegations to the government through a qui tam action and will receive up to 25% of the civil fines obtained by the government.  Last year, DOJ also reached multi-million dollar settlements with several pharmaceutical companies accused of fixing prices for generic drugs, which artificially inflated prices paid for those drugs by programs like Medicare and Medicaid.  Those settlements likewise involved allegations brought under the False Claims Act.

Whistleblowers should also come forward if they see blatant price gouging.  While the antitrust laws don’t necessarily penalize excessive pricing, or price gouging, where there’s smoke there may be fire.  If the excessive prices are a result of collusive practices—say, competitors agreeing to sell face masks to the government only at a certain price—they may run afoul of the antitrust laws.

At bottom, a company doing business with the government during the pandemic needs to obey long-standing antitrust laws.  These laws not only protect competition, they ensure that scarce resources are allocated efficiently and effectively—a moral imperative in the midst of a public health crisis.  If you think you’ve witnessed anticompetitive conduct related to COVID-19, we’re here to help.

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Tagged in: Bribery and Bid-Rigging, COVID-19, FCA Federal, Importance of Whistleblowers, Pricing Fraud, Whistleblower Eligibility, Whistleblower Rewards,