Time to Dust Off Your Antitrust Compliance Efforts? Major DOJ Policy Shift Designed to Reward Companies that Do
Antitrust Law Update
Date: July 23, 2019
The Antitrust Division of the U.S. Department of Justice has announced a policy change to incentivize companies to invest in effective antitrust compliance programs. Importantly, for the first time, the Antitrust Division will give consideration to companies’ compliance efforts at the critical charging stage in criminal investigations and allow Division prosecutors to enter into deferred prosecution agreements with companies that are not eligible for leniency. Compliance programs will also become an important and formal part of plea negotiations. In addition to announcing this change, the Antitrust Division also issued a lengthy guidance document setting forth how prosecutors should evaluate compliance programs. While Antitrust Division criminal cases will continue to have a lot of stick, this carrot to reward compliance efforts is a welcome change.
The Catch-22 of Rewarding Only “Effective” Programs
The logic of the former Antitrust Division policy, now repudiated, was simple. DOJ would only give credit – including the three-point reduction mandated by the U.S. Sentencing Guidelines – if a company’s antitrust compliance program was deemed effective. But according to DOJ, a program was ineffective by definition if a company’s personnel participated in a criminal price-fixing or bid-rigging conspiracy. This logic applied even if the violation was committed by a rogue employee, occurred in a company that just had been acquired, or was just contrary to the company’s policy and the wishes of its management executives. While compliance efforts may have played some informal role in negotiating pleas and fines, the official line was that compliance would be rewarded only if a program detected a problem and allowed the company to apply successfully for leniency – thus avoiding any criminal charges. Conspirators that did not get leniency were always subject to charges and massive fines under a somewhat rigid formula based on when they pled to the violation (first in, second in, etc.).
The New Carrot
The new policy aims to promote stronger corporate antitrust compliance programs with the goal of deterring antitrust violations and rewarding what the head of the Antitrust Division calls “good corporate citizenship.” Under the new policy, DOJ will now consider a company’s compliance programs at all stages of a criminal matter – including during the process of deciding whether to pursue charges – rewarding companies that have robust antitrust prevention programs in place at the time a violation occurs. Even a company that is not an initial whistleblower may be able to negotiate a deferred prosecution agreement. And companies that plead and negotiate a fine will be able to argue for some reduction, or even a below-Guidelines fine, if they are able to demonstrate robust and good faith compliance efforts. The guidance even gives some explicit consideration to whether post-investigation efforts may be credited.
The Antitrust Division also released written guidance to help prosecutors evaluate compliance programs (the Guidance), and the DOJ Justice Manual has been updated to remove language stating that “credit should not be given at the charging stage for a compliance program.”
In assessing a company’s compliance program, prosecutors are to consider three “fundamental” questions:
- Is the program well-designed?
- Is the program being applied earnestly and in good faith?
- Does the program work?
More specifically, prosecutors are supposed to assess a program’s design and comprehensiveness as well as the company’s culture of compliance and program oversight, its efforts to assess and address risks, its training and communication efforts, whether it performs periodic reviews of the program and monitors effectiveness, and whether it has mechanisms in place to audit or test the program’s effectiveness. Prosecutors are directed to explore each area based on the specific facts that address the effectiveness of the antitrust compliance program in deterring and detecting criminal antitrust conduct. The Guidance acknowledges that there is no such thing as a one-size-fits-all policy and any program should be designed to fit a company’s actual risk profile. But it also suggests that DOJ will expect greater effort from deep-pocketed companies or those that operate in industries with higher antitrust risk.
The Danger of Stale, Dusty, or Paper Antitrust Compliance Programs
This change in policy highlights the value of corporate antitrust compliance policies, and companies should evaluate their policies to ensure they harmonize with DOJ’s new guidance. Programs can become stale, out of date, or essentially forgotten or ignored; the DOJ guidance urges companies to monitor and assess their programs actively. It also emphasizes that a company that makes little or no effort to ensure compliance, or simply relies upon a make-weight program with little substance, thought, or emphasis, will be at a huge disadvantage if later embroiled in a criminal investigation.
The best compliance program is one that results in employees following the law and avoiding situations that might suggest otherwise. Companies that act now to ensure their compliance programs reflect DOJ’s new guidance will be well-positioned to benefit should an investigation occur. For anyone trying to convince company management to invest more time and effort in antitrust compliance, the DOJ has provided a convincing new set of justifications.
FOR MORE INFORMATION
For more information, please contact:
Daniel Ferrel McInnis
Mark R. Butscha, Jr.
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