Preventing Antitrust Prosecutions and Minimizing Their Consequences: The Importance of Corporate Antitrust Compliance Programs

Preventing Antitrust Prosecutions and Minimizing Their Consequences: The Importance of Corporate Antitrust Compliance Programs
by Roni A. Elias


Introduction
In the United States and around the world, government officials are pursuing ever-more aggressive enforcement of antitrust law. As a result of these enforcement efforts, companies have faced significant fines and government monitoring of their operations, and individual executives have been removed from their positions and imprisoned. In light of these events, it is more important than ever before for companies to assure their compliance with antitrust law of all kinds.

In 2014, the United States Department of Justice (“DOJ”) published two speeches by officials from its Antitrust Division that focused on how companies could develop compliance programs as a means of both avoiding antitrust violations and mitigating penalties for any violations that might occur. 1 To a great extent, these speeches were consistent with well-established DOJ policy; but they did include some important new information about how the Antitrust Division approaches enforcement and about how companies should approach the development and implementation of compliance programs. These speeches made it clear that, when violations are found, the DOJ would pursue sentencing outcomes that would involve DOJ officials and outside monitors in matters of corporate governance on an on-going basis.

This glimpse into the DOJ’s approach to antirust prosecutions serves as an important cautionary word for companies. Simply put, if companies do not develop their own compliance programs that are in step with federal guidelines, the DOJ may impose such programs and monitor their operation as a consequence of a prosecution for an antitrust violation. If companies want to avoid this outcome and maintain their independence from on-going federal monitoring of their most fundamental governance issues, they must develop the kinds of antitrust compliance programs that the DOJ wants to see.

Recent Antitrust Enforcement Efforts Around the World
The DOJ recently announced that prosecutions by its Antitrust Division have resulted in the collection of $1.9 billion in criminal fines and penalties during the most recent fiscal year. 2 This kind of aggressive enforcement reflects a well-established prosecutorial tend. This was the third consecutive year in which fines and penalties for antitrust violations exceeded $1 billion.3

These criminal penalties included the fourth-largest fine ever obtained by the Antitrust Division. This sanction was even more notable because the DOJ sought and obtained an enhancement of the fine because the company failed to disclose the alleged antitrust conspiracy when it pleaded guilty to earlier violations. 4 In addition to the criminal fines, twenty-one individual defendants received jail terms, with an average sentence of over twenty-five months, 5 twice the length of the average sentence imposed in 2004. 6

The United States is not alone in its pursuit of companies that violate fair competition laws. Also during the most recent fiscal year, countries such as Brazil ($1.7 billion) and South Korea ($1 billion) set their own records for criminal fines and penalties for antitrust violations, and the European Union imposed more than $2 billion in total fines. While not quite reaching these levels of criminal penalties, countries such as China, India, and Japan also significantly ratcheted up their prosecution of antitrust violations.
Despite the intensity and extent of these enforcement efforts, Department of Justice officials have made it clear that they prefer not to prosecute. Rather, prosecutors view these cases as instruments to deter antitrust violations and, most importantly, to encourage compliance. As prosecutors, we are seldom positioned to stop a crime before it starts. We must rely on deterrence. This means we seek large criminal fines for corporations and significant jail time for executives who commit antitrust crimes. Certainly, compliance programs that prevent antitrust violations are far more preferable. 7

Elements of an Effective Compliance Program
The DOJ has made it clear that companies must do more than pay lip service to antitrust law by creating a compliance program that is never realized in the companies’ day-to-day operations. As Deputy Assistant Attorney General Brent Synder has noted, “[i]f senior management does not actively support and cultivate a culture of compliance, a company will have a paper compliance program, not an effective one.” 8 This kind of management support means that senior management must actively monitor the program and make clear to employees that “compliance is important and mandatory.” 9 This means that the program must provide training and a forum for feedback and that a company should make sure that at risk activities are regularly monitored and audited. 10 Moreover, the company should regularly evaluate the compliance program itself to understand what it can improve. 11

Assuring that the compliance program is effective means encouraging individual employees to adhere to it. And this means that the company must also be willing to discipline employees who either commit antitrust crimes or fail to take the reasonable steps necessary to stop the criminal conduct in the first place. 12 The DOJ makes it clear that a company’s failure to proactively discipline non-compliant employees can have dire consequences in the event of a prosecution:

A company’s retention, however, of culpable employees in positions where they can repeat their conduct, impede a company’s internal investigation and cooperation, or influence employees who may be called upon to testify against them, raises serious questions and concerns about the company’s commitment to effective antitrust compliance. 13

Assuring compliance does not stop at the boundaries of company property. Not only must companies assure that their own employees understand and follow the requirements of the compliance program, they also must assure that the parties with whom they contract are willing to follow those requirements as well. 14 This means that compliance training must be given to subsidiaries, distributors, agents, and contractors – anyone who is the agent or ostensible agent of the company. 15

Fortunately, companies need not develop their compliance programs in a vacuum. The elements of an effective compliance program have been outlined by the federal government in the United States Sentencing Guidelines, which defines a benchmark for determining whether or not a company charged with antitrust crimes has an effective compliance program. These elements are not only relevant to sentencing decisions, however. They can also provide a baseline for the definition of an effective compliance policy.

The two most essential objectives of any compliance policy are: (1) that it must permit the company to “exercise due diligence to prevent and detect criminal conduct;” and (2) that it “otherwise promote an organizational culture that encourages ethical conduct and a commitment to compliance with the law.” 16 The Guidelines go on at length to explain what is required to accomplish these two objectives. Among other things, these requirements include:

  • • Assuring that “[t]he organization's governing authority shall be knowledgeable about the content and operation of the compliance and ethics program and shall exercise reasonable oversight with respect to the implementation and effectiveness of the compliance and ethics program.” 17
  • • Delegating to specific individuals within the organization “day-to-day operational responsibility for the compliance and ethics program.” These individuals “shall report periodically to high-level personnel and, as appropriate, to the governing authority, or an appropriate subgroup of the governing authority, on the effectiveness of the compliance and ethics program.” This delegation must include giving these individuals “adequate resources, appropriate authority, and direct access to the governing authority or an appropriate subgroup of the governing authority.” 18
  • • Assuring that positions of substantial authority within the company are not filled by “any individual whom the organization knew, or should have known through the exercise of due diligence, has engaged in illegal activities or other conduct inconsistent with an effective compliance and ethics program.” 19
  • • Maintaining “effective training programs and otherwise disseminating information appropriate to such individuals' respective roles and responsibilities” in connection with the compliance program. 20
  • • Having and publicizing “a system, which may include mechanisms that allow for anonymity or confidentiality, whereby the organization's employees and agents may report or seek guidance regarding potential or actual criminal conduct without fear of retaliation.” 21
When a company has a compliance program that meets these requirements, as well as the others set forth in the Guidelines, it will be better positioned to avoid violating antitrust law. In addition, if and when a violation does occur, the company will be in a position to minimize the wrongdoing and its own liability, both criminal and civil. In this connection, the encouragement of self-reporting is especially important.

When Compliance Programs Fail
The DOJ is eager to encourage self-reporting because of its value in promoting a culture of compliance within a company and because of its value in uncovering wrongdoing. Towards this end, the Antitrust Division has a “Corporate Leniency Program.” 22 Under this program, companies may self-report their participation in illegal cartels. 23 “In exchange for self-reporting the illegal conduct, and for complete cooperation with the resulting investigation, a corporate leniency applicant will not be prosecuted by the Division.” 24 This policy applies to both the entity itself, and to individual employees. Self-reporting and conformity to the requirements of the Leniency Program may also reduce the risk that a company will be subject to treble damage awards in civil lawsuits that typically follow DOJ criminal investigations. 26

The DOJ emphasizes that qualification for leniency requires more than a profession of acceptance of responsibility. To the extent that anti-competitive conduct involves persons outside of a company, that company is entitled to leniency when it both accepts its own responsibility and aids the criminal investigation of others involved in the antitrust conspiracy:
Companies that approach us early and advance our investigations in meaningful ways will see that cooperation credited in our approach to their sentences. But, as with corporate leniency, promises to cooperate are not enough. Significant reductions in criminal sentences for substantial assistance will be reserved for those companies that actually help us investigate and prosecute antitrust crimes . . . . 27

Demonstrating an acceptance of responsibility and a commitment to compliance also involves cooperation from individual employees, not just the company as a whole. If an employee is involved in antitrust conduct and refuses to accept personal responsibility, he or she must be removed from a position involving any significant responsibility. As one Assistant Attorney General put it:

Guilty companies sometimes want to continue to employ culpable senior executives who do not accept responsibility and are carved out of the corporate plea agreement, while at the same time arguing that their compliance programs are effective and their remediation efforts laudable. That creates an obvious tension. It is hard to imagine how companies can foster a corporate culture of compliance if they still employ individuals in positions with senior management and pricing responsibilities who have refused to accept responsibility for their crimes and who the companies know to be culpable. 28

The DOJ makes it clear that there are severe consequences for both the failure to have an effective compliance program and the failure to bolster a compliance program after an investigation has begun. These consequences are illustrated in the DOJ’s prosecution of AU Optronics, a manufacturer of liquid crystal displays (“LCDs”), the kinds of screens used in computers and many flat-screen televisions. 29 The company, its U.S. subsidiary, and several of its executives were indicted in 2009 for their participation in a long-running conspiracy to fix the price of LCD screens, which had a profound effect on numerous sectors of the American economy. 30 The company had no compliance program in place before the conspiracy started, and, after the DOJ’s investigation revealed the conspiracy, the company did little to promote its own compliance or assist in the investigation. 31 This intransigence continued even after the company’s criminal conviction. 32

As part of AU Optronics’ sentence, the DOJ asked the district court to put the company on probation and to appoint an independent monitor to oversee the implementation of an appropriate compliance program at the company. 33 This monitor would provide regular reports on the company’s compliance to the United States Probation Office. Despite AU Optronics’ strenuous objections, the district court agreed with the DOJ and ordered both a three-year sentence of probation and the appointment of an independent monitor. 34

Conclusion
In the policy pronouncements it has recently made, the DOJ unequivocally established its position about the importance of antitrust compliance programs: if a company does not and will not implement a meaningful compliance program in conformity with the requirements set forth in the Sentencing Guidelines, the government will not hesitate to involve itself in fundamental matters of corporate governance as part of the sanction for antitrust activity. Thus, there can be no question that every company must make a serious commitment to the creation of a corporate culture that actively promotes compliance with antitrust law. The failure to make such a commitment could ultimately mean the loss of corporate self-determination and the imposition of a kind of government stewardship over company business that every shareholder, executive, and employee would undoubtedly abhor.

Endnotes
1Bill Baer, Prosecuting Antitrust Crimes, Remarks as Prepared for the Georgetown University Law Center Global Antitrust Enforcement Symposium, available at http://www.justice.gov/atr/public/speeches/308499.pdf (last visited September 1, 2015); Brett Snyder, Compliance is a Culture, Not Just a Policy, Remarks as Prepared for the International Chamber of Commerce/United States Council of International Business Joint Antitrust Compliance Workshop (September 9, 2014), available at http://www.justice.gov/atr/public/speeches/308494.pdf (last visited September 1, 2015).
2Christopher Gordon, Getting Your Antitrust Compliance House in Order, Corporate Counsel (April 20, 2015), available at www.corpcounsel.com/id=1202723984951/Getting-Your-Antitrust-Compliance-House-in-Order?slreturn=20150802120404 (last visited September 2, 2015).
3Id.
4Id.
5Id.
6Baer, supra note 1, at 1.
7Snyder, supra note 1, at 2.
8Id. at 4.
9Id. at 5-6.
10Id. at 6-7.
11Id.
12Id.
13Snyder, supra note 1, at 7.
14Id., at 6.
15Id.
16United States Sentencing Commission, 2014 Guidelines Manual, § 8B2.1, available at www.ussc.gov/guidelines-manual/2014/2014-chapter-8 (last visited September 2, 2015).
17Id. at § 8B2.1(b)(2)(A).
18Id. at § 8B2.1(b)(2)(C).
19Id. at § 8B2.1(b)(3).
20Id. at § 8B2.1(b)(4)(A).
21Id. at § 8B2.1(b)(5)(C).
22UNITED STATES DEPARTMENT OF JUSTICE, CORPORATE LENIENCY POLICY, available at www.justice.gov/atr/corporate-leniency-policy (last visited September 2, 2015).
23See id.
24Snyder, supra note 1, at 2.
25Id.
26Id.
27 Baer, supra note 1, at 5.
28Id. at 8.
29Snyder, supra note 1, at 10.
30Id. at 10-11.
31 Id.
32 Id.
33Id. at 11.
34 Id.

select
select
select
select

Connect With Us...