On March 31, 2015, a federal court issued a summons to AU Optronics Corporation ("AU Optronics") to respond to allegations that it violated its probation for a criminal price-fixing conviction through failure to implement an effective antitrust compliance program. Corporate defendants can be subject to probation as part of their criminal sentences for antitrust violations. This development highlights the U.S. Department of Justice Antitrust Division's recent focus on the importance of antitrust compliance programs and should encourage all companies to review the current state of their antitrust compliance efforts.
Following a jury trial, in September 2012 the Northern District of California federal court convicted AU Optronics, a Taiwan-based producer of liquid crystal displays ("LCDs"), and two of its top executives of criminal price fixing. According to the DOJ complaint, between 2001 to 2006, AU Optronics participated in monthly meetings with competitors in conference rooms, karaoke bars, and tea rooms around Taiwan, where the parties agreed on prices of LCD displays.
The court fined AU Optronics $500 million, placed the company on probation for three years, and imposed fines and prison sentences on two company executives. In addition, the court required that AU Optronics implement an antitrust compliance program to establish "standards and procedures to prevent and detect criminal conduct" and to hire at its own expense an independent corporate compliance monitor to ensure compliance with the court's order. The specific conditions of probation relating to antitrust compliance required AU Optronics to "develop, adopt and implement an effective compliance and ethics program." AU Optronics further was required to notify its employees and shareholders of the conviction and its new compliance program, with quarterly reports to be submitted by the company's probation officer.
AU Optronics' probation officer recently submitted a Petition for Summons to the court, stating that the company failed to implement an effective compliance program. According to the probation officer, AU Optronics had not hired a full-time Chief of Antitrust Compliance officer or devoted meaningful time or attention to overseeing the antitrust compliance program. The company's board of directors met with a part-time compliance officer for only 30 to 60 minutes over 17 months. The report also claimed that AU Optronic's board had not exercised sufficient oversight and monitoring of the company's antitrust compliance program and the company and its part-time Chief of Antitrust Compliance "have not proactively monitored the compliance program or responded to detected risks of noncompliance."
DOJ focus on antitrust compliance programs
AU Optronics will have the opportunity to respond to these allegations later this month. This is just the latest in a series of recent DOJ initiatives highlighting the agency's focus on antitrust compliance programs. Most recently, in March 2015, the DOJ and New York Attorney General resolved litigation seeking to reverse the merger of two New York City tour bus companies. The government required divestiture and disgorgement and that the companies establish and maintain for five years an antitrust training program. The settlement requires that each bus company appoint an antitrust compliance officer, who shall institute a compliance program, which shall provide at least two hours of antitrust training annually for any employee with pricing or decisionmaking responsibility.
In a speech to the International Chamber of Commerce in September 2014, Deputy Assistant Attorney General Brent Snyder warned companies that the DOJ is on the lookout for antitrust violations. He emphasized that an effective compliance program is one that actually prevents antitrust violations: A "truly well-run compliance program should prevent a company from conspiring to fix prices, rig bids, or allocate markets." He stressed that company senior leadership must support and be engaged in the antitrust compliance program to ensure that the entire organization commits to the policies. The AU Optronics case should be a lesson about the importance of an effective antitrust compliance program and that the DOJ "will take a similarly hard line with companies that do not take their compliance programs seriously."
The DOJ's recent focus on antitrust compliance programs is a reminder for companies to review the status of their compliance efforts. If a compliance program is operating on autopilot or it has been years since there was any review or direct involvement by senior leadership (especially the board of directors), now is the time to remedy that situation. The DOJ has made clear that merely having an antitrust compliance program on the books is not enough. It has raised the bar for companies and will look to senior leadership to ensure that the company's compliance program was effective and had the ability to detect and prevent potential antitrust violations before they occur.
The Petition for Summons for AU Optronics can be found here.