For the first time, the Department of Justice has described what makes a company-imposed antitrust compliance program effective enough to earn a recommended lowering of the antitrust fine under the United States Sentencing Guidelines.
In theory, the Guidelines already take compliance programs into account, but many antitrust defense counsel believe that the DoJ has not given existing programs enough meaningful credit.
The statements made in a recent DoJ sentencing memorandum should give corporations current guidance that will help them design and implement an antitrust compliance program. This can be of real help if the company finds itself with an antitrust violation.
Clients should consider checking their existing antitrust compliance programs to make sure they meet the criteria that the DoJ cited.
THE CASE: U.S. v. KAYABA INDUSTRY COMPANY
Kayaba makes shock absorbers for use in cars and motorcycles. From the mid-1990s to 2012, its employees had engaged in price fixing, bid rigging and market allocations. Kayaba pleaded guilty to these offenses.
The DoJ, in its sentencing memorandum, calculated that the volume of commerce affected was $324 million, and that, after applying culpability scores, the antitrust fine should be in the range of $103.68 million to $207.36 million.
But the DoJ recommended a reduced fine of $62 million, with no restitution and no probation. This recommended sentencing reduction was based in part of the company’s cooperation with the government, and in part on its institution of an effective compliance program. We are interested here in what the DoJ had to say about effective antitrust compliance programs.
A "CULTURE-CHANGING" COMPLIANCE PROGRAM
The DoJ emphasized that, from the time the violation was discovered, Kayaba "conceived and implemented" what was:
"a comprehensive and innovative compliance policy. That policy, at the direction of the Defendant’s senior management, sought to change the culture of the company to prevent recurrence of the offense."
The DoJ sentencing memorandum observed that the company’s "compliance policy has the hallmarks of an effective compliance policy including direction from top management at the company, training, anonymous reporting, proactive monitoring and auditing, and provided for discipline of employees who violated the policy."
Among the compliance program’s specific non-exhaustive "highlights" that the DoJ cited were these elements:
- "Training of senior management and all sales personnel. In addition to classroom training, it provided one-on-one training for personnel with jobs, such as sales people, where there is a high risk of antitrust crimes"
- Testing the effectiveness of the training by examining the "employees' awareness of antitrust issues before and after the training"
- "Prior approval, where possible, of all contacts with competitors and reporting of all contacts with competitors." The reports are to be audited by in-house counsel
- A requirement that sales personnel certify that all the company’s prices were independently set, and that they had not exchanged pricing information or agreed with any competitors on a price
- establishment of an anonymous hotline to report violations
- disciplining of violators.
In closing this section of its memorandum, the DoJ observed that "Senior management’s efforts set the tone at the top and made compliance with the antitrust laws a true corporate priority."
THE BOTTOM LINE: "SEPARATE RHETORIC FROM REAL COMMITMENT"
Kayaba’s reduced fine was based in part on the company’s admission of guilt and its cooperation, and in part on its establishment of an effective antitrust compliance program that actually delivered − in the DoJ’s eyes − not just words, but rather a company-changing difference.
The DoJ statements in its Kayaba sentencing memorandum should be read along with the statements of Deputy Assistant Attorney General Brent Snyder at a speech before the Sixth Annual Chicago Forum on International Antitrust, held in Chicago in June 2015. Discussing compliance programs, Snyder said:
"The Antitrust Division is willing to consider compliance efforts in reaching a fine recommendation in cases where a company makes extraordinary efforts not just to put a compliance program in place but to change the corporate culture that allowed a cartel offense occur."
In making this comment, he drew a distinction between existing compliance programs (that failed to prevent or detect the crimes) and newly imposed ones established after discovery of the criminal activity. But he also emphasized that even newly imposed compliance programs may not necessarily make the grade. To the contrary, "[o]nly compliance efforts that go further, that reflect in some way genuine efforts to change a company’s culture, will receive consideration in calculating a company’s fine."
What does this mean exactly? Snyder emphasized that "[p]aper compliance programs" don’t meet this test. To the contrary, what does meet the test is a program, developed and enforced from the top, that imposes both the spirit of antitrust compliance and actual practices that make the compliance program work. In measuring your own antitrust compliance program, it is worth considering Snyder’s own rhetorical comments as a guide:
"Paper compliance programs do not bring about culture change. Senior executives who lead by example and hold themselves and others accountable bring about culture change. Senior executives who create a zero tolerance compliance environment bring about culture change. And companies that make responsible personnel decisions about culpable employees – those who will be carved out of the company’s plea agreement and do not accept responsibility – bring about culture change. That is what we will be looking for."
What this means may vary from company to company. But, however abstract these comments sound, it is clearly worthwhile to develop antitrust compliance programs that meet these goals and that actually give the DoJ what it tells us it is looking for.