Should individuals—such as CEOs or even general counsel—be held civilly responsible for antitrust violations allegedly committed by their companies? Should they be defendants in civil antitrust lawsuits brought by the government against their employers?
These questions are becoming less hypothetical and more of a reality as the Antitrust Division (Division) of the Department of Justice (DOJ) apparently has vowed to implement the so-called Yates Memorandum—a policy statement recently issued by a key DOJ official for the entire Department. This guidance directs DOJ attorneys and investigators pursuing corporate misconduct cases to focus on identifying individuals who were responsible for the illegal conduct and holding them “accountable” for such conduct. Notably for antitrust enforcement, this policy would apply to both criminal and civil matters.
If this policy change is implemented in civil antitrust cases, it will be a sea change for defendants and will complicate the defense of government civil antitrust investigations, possibly divide executives from the common defense of their companies, and increase government leverage to force settlements and concessions.
Antitrust Division Policy Regarding Individuals
The Antitrust Division has long sought to enforce the antitrust laws against individuals in criminal cases. The stated policy of the Division is to hold the highest-level company officials criminally responsible. Company settlements in criminal cases typically carve out such individuals, and these executives face prosecution, jail time, and fines. For example, the Division’s investigation into price-fixing in the automotive parts industry has resulted in over 50 individuals being criminally charged.
In civil antitrust cases, at least in the modern era, the Division has exhibited a different policy. These cases are about corporate behavior, and unless there is a need to include some individuals to ensure effective relief—a rarity, to be sure—the Division focuses on enjoining corporate behavior. In fact, the Division’s Policy Manual does not address including individuals in civil cases.
The Division, however, does have the power to sue individual executives in civil cases. While civil actions against individuals in the modern era are rare, it was more routine in the early days of antitrust enforcement for the government to name corporate officers as individual defendants. In landmark cases such as United States v. Standard Oil and United States v. American Tobacco, the government sued scores of executives. Corporate officers even were exposed to the risk of being named as individual defendants in early civil actions to enjoin mergers as late as the 1940s.
The Yates Memorandum and Civil Suits Against Individuals
In September, a policy statement released to all Department of Justice attorneys and authored by Deputy Attorney General Sally Quillian Yates—dubbed the Yates Memo—called for an increased focus on identifying individuals responsible for corporate misconduct in both criminal and civil cases. While the idea of deterring or punishing corporate wrongdoing by focusing on individual executives is not new, fully implementing such a policy in civil antitrust matters would be transformational. Recent statements by Assistant Attorney General William Baer, the highest-ranking Antitrust Division official, show the Division is considering doing just that—using civil liability against corporate officers, directors, or other executives as a new tool in civil cases. In a recent speech at the American Bar Association’s Fall Antitrust Forum, Baer spoke in favor of the policies espoused by the Yates Memo. He further warned that the Antitrust Division was prepared to bring such actions against “high-level” individuals for antitrust violations:
We will be looking, going forward, at whether there ought to be individual accountability. It doesn’t mean we’re going to do it, but it is I think a fair thing for the deputy attorney general to ask all components [of the DOJ] to look at [whether] there is an additional deterrent effect that comes with holding responsible the individuals who adopt a policy that is in violation of the antitrust laws or some other federal standard.
As the new developments at the Antitrust Division signal, we may soon return to a bygone era when the government, in civil antitrust cases, marched directors and officers into court along with their companies.
These policy changes, if implemented, would represent a deliberate Antitrust Division strategy to align the interests of a corporate entity against its executives. By focusing on individual misconduct from the outset of an investigation, Antitrust Division attorneys could look to use their leverage to put a wedge between corporations and their executives. If implemented, these changes will dramatically affect the manner in which high-level employees and corporations may approach civil investigations.
Moving forward, corporations and executives must be aware of their potentially adversarial relationship at the outset of an investigation. While cooperation and full disclosure of certain facts may reduce a corporation’s potential liability, it could also simply shift the burden of accountability to an executive. Cooperating with government investigations into possible antitrust violations could become more divisive, as executives will be wary of the legal ramifications of admitting to involvement in potentially illegal activity. Ultimately, the competing interests of executives and employers could make antitrust investigations more expensive and create irreconcilable tension between executives and their companies.
Individual executives may also be forced to take action to respond to the changing landscape. Executives may decide to retain their own counsel from the outset of an investigation to ensure that they have representation that adequately protects their interests. Executives—and their employers—should have a thorough understanding of any indemnification agreements they have in place. Without such protection, executives could be faced with a difficult choice at the outset of an investigation between personally bearing the cost of representation, or risking serious damage to their defense.