A company is only as successful as it is trustworthy. And nothing breaks that trust more swiftly than a public investigation into alleged anticompetitive practices. The key for any company to survive such an investigation is to act decisively and do so early. While taking steps to minimize the chances of engaging in anticompetitive behavior is far preferred, there are also steps a company can take when it is already too far down the antitrust road—at least by the government’s measure. Here are 12 tips companies should keep in mind to protect themselves from the occurrence or effects of anticompetitive practices.
Companies should provide their employees with routine instruction on what constitutes anticompetitive practices. They owe it to their shareholders and employees to help avoid the problem areas that cost businesses millions in fines, civil damages and legal fees each year. An investigation takes its toll on a company’s daily operations, its productivity and morale and ought to be avoided at all costs. Routine instruction helps ensure a corporate atmosphere that discourages anticompetitive practices and the appearance of impropriety so that an investigation is not even a question.
It is important that a company knows what its employees are doing, especially as it relates to competitors. Cartels often arise from seemingly innocent competitor contacts that spawn collusive behavior. Many investigations have begun when an industry’s customers complained of “cartel-like” behavior in the marketplace. As authorities listen to customer complaints, companies would be wise to do the same. Listen to customers and stay informed about the industry through trade publications and the news media. When one company comes under investigation for alleged anticompetitive behavior, assume that others in the industry will be next.
3. Accept the Subpoena.
Most investigations begin with the service of a grand jury subpoena seeking documents pertaining to the served company’s business. No one at the company should have a substantive conversation with the government agents; simply accept the subpoena and let the agents leave. Typically, the government provides 30 days to respond to such a subpoena. Sometimes, however, the government will not serve a subpoena but instead execute a search warrant. FBI agents arrive without notice, execute the warrant by searching the premises, and do not leave until they have documents, computers and backup tapes in hand. If such a search occurs, stay calm and do not interfere with the search. But, at the same time, company personnel are under no obligation to sit for an interview with the agents or present a defense. If possible, get some legal counsel “boots on the ground” as quickly as you can.
4. Lawyer Up. Immediately.
Regardless of how it begins, it is imperative that a company under investigation retain counsel to represent its interests. If a subpoena is quietly served, accept it and start looking for a lawyer. In the case of a search warrant, a company should call a lawyer immediately. Until a lawyer arrives, the company is under an affirmative duty to identify the location of documents the agents are authorized by the warrant to seize but should provide no substantive information.
5. Find Proper Counsel.
A company in the throes of an antitrust investigation should only hire counsel with experience defending others in the same forum. Selecting the proper counsel is the single most important decision a company will make during an investigation. Lawyers are not fungible. Whomever a company hires should have antitrust and white collar criminal defense experience at the highest level the company can afford. It is also important to select a law firm with a broad range of talent to help staff the defense. The firm should be in a position to call on the reserves during periods when the workload is heaviest.
6. Retain, Retain, Retain.
Once a company has notice of an investigation, it must immediately cease all routine and ad hoc destruction of company documents and information. It must stop the deletion of emails from the company computer system and the routine overwriting of computer backup tapes. Employees must also be instructed to retain documents and information in their possession. Even if sources may prove duplicative, they must be preserved to comply with the investigation.
It is important that a company inform its employees about a pending investigation. Employees should be given specific instructions about the retention of documents and information. They should be cautioned against speaking to the media and others about an ongoing investigation. They should know whom to contact with questions. A key step is addressing employee concerns, so employees understand the company is responding to the investigation in a responsible and prudent manner.
8. Beware the Border.
The United States federal government maintains a watch list of people who are connected to criminal investigations. At the U.S. borders, agents may stop foreign nationals who work for U.S. companies and interview them, subpoena their appearance before a grand jury, subpoena documents and information they possess, hold them as material witnesses, or arrest them. Documents and information entering the country will be subject to U.S. jurisdiction and, if responsive to a grand jury subpoena, are discoverable. It is best to avoid these kinds of issues by educating implicated, non-U.S. employees about potential pitfalls.
9. Evaluate Liability.
One uncomfortable but necessary task for a company to accomplish early in an investigation is to assess accurately the company’s potential criminal liability. If a problem is uncovered, it is in the company’s best interest to give serious consideration to seeking amnesty in exchange for cooperation with the federal government. Amnesty avoids criminal fines, jail time and can even eliminate treble damages in the inevitable civil litigation. Amnesty is available to only one corporate defendant in each investigation, which can extend protection to cooperating employees. The first company to offer cooperation is the one to be offered amnesty.
When mounting a defense to an investigation, a company should first determine what a worst-case scenario would mean to the bottom line. Antitrust fines are based on the amount of “affected commerce”: the total amount of commerce that has been affected by the anticompetitive behavior (if proven). A company’s share of the affected commerce is its market share in the industry. That is what a company seeks to protect and what it should bear in mind when calculating defense costs.
11. Help the Defense.
Antitrust investigations are fact intensive. Employees should be prepared to educate a company’s lawyers about the business, its customers, competition, sales dynamics, competitor contacts and products. Information should flow freely and the lines of communication should remain open throughout the investigation. Depending upon the complexity of its business and the amount of responsive material subject to the subpoena, a company should consider the costs and benefits of technology to help in gathering responsive documents and information.
12. Begin Immediately.
The development of an effective, coordinated defense begins at the inception of an investigation. As soon as a lawyer understands the business and marketplace, he or she can start building a defense to any potential charges. To ensure a coordinated defense, companies should also retain Canadian and European counsel if their markets extend to those geographic regions. Many U.S. investigations will spur parallel inquiries in those jurisdictions and it is important to present a united defense.
Being the subject of a U.S. Department of Justice antitrust investigation is one of the most daunting positions a company can be in. Keep these suggestions in mind and prevent—or at least alleviate—the problems brought on by anticompetitive conduct. From reputational harm to serious financial consequences, an antitrust investigation rarely leaves a company unscathed. So, put these suggestions into practice and remember: The best defense is a good offense.