November 5, 2019 / 6:55 PM / 14 days ago

U.S. Justice Dept sets up anti-price collusion 'strike force'

WASHINGTON (Reuters) - The Justice Department said on Tuesday it had created a strike force that will identify and prosecute companies that fix prices or collude to push up the cost of billions of dollars’ worth of U.S. government purchases.

FILE PHOTO: U.S. Justice Department building is seen in Washington, U.S., December 7, 2018. REUTERS/Yuri Gripas

The announcement follows the discovery that five South Korean companies had colluded in delivering oil to U.S. military bases.

The Procurement Collusion Strike Force will be made up of the department’s Antitrust Division, 13 U.S. attorneys’ offices, the Federal Bureau of Investigation and the offices of inspectors general from the Defense Department, Justice Department, General Services Administration and U.S. Postal Service.

Its creation is a follow-up to the Justice Department’s announcement last year that it would be more aggressive in pressing antitrust charges against companies that rig bids for government contracts. [nL2N1XQ1FZ]

The strike force will use data - such as selective bidding that suggests companies are splitting a market - to seek out and prosecute government contractors who collude, according to the department.

About 40% of U.S. government discretionary spending, or about $550 billion in 2018, is disbursed via contracts for goods and services, according to the watchdog Government Accountability Office.

Executives of companies caught bid-rigging can face prison time and the companies can face fines that are triple the gains made in the price fixing.

“The investigation and prosecution of individuals and organizations that cheat, collude and seek to undermine the integrity of government procurement are priorities for this administration,” said Makan Delrahim, head of the Antitrust Division. “The PCSF (strike force) will train and educate procurement officials nationwide to recognize and report suspicious conduct.”

In the most recent salient case here of procurement collusion, in November 2018, South Korean companies SK Energy Co Ltd [SKENGG.UL]; GS Caltex Corp, 50% owned by Chevron; and Hanjin Transportation Co Ltd agreed to

plead guilty to criminal charges and pay $236 million for their role in a conspiracy to fix the price of fuel sold to U.S. military bases in South Korea. [nL2N1XX00F]

Two other companies - South Korean oil suppliers S-Oil Corp and Hyundai Oilbank Co [INPTVH.UL] - made a similar settlement early this year. [nL1N2171IG]

The GSA’s Office of Inspector General and Justice Department also indicted people for rigging bids for GSA contracts.

The Justice Department official said that more than one-third of the division’s open grand jury investigations related to public procurement, or otherwise involve a government victim.

The department will also reach out to government contracting experts to teach them how to identify instances of collusion and also to government contractors to ensure they know the law.

Reporting by Diane Bartz; Editing by Steve Orlofsky and Bernadette Baum

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