The U.S. Department of Justice’s Antitrust Division (“DOJ Antitrust”) recently announced that it will no longer publicly identify executives who are excluded from the protection of corporate plea agreements and may be prosecuted by DOJ antitrust. This new policy reverses DOJ Antitrust’s prior practice of publicly naming executives who may be prosecuted. Publicly naming the individuals strongly implied that each was guilty, or at a minimum suspected, of criminal antitrust violations. This information was readily accessible via a simple internet search, causing reputational harm to the individuals and potentially subjecting them to being named as defendants in civil litigation.

The policy change puts DOJ Antitrust in accord with other divisions of the Department of Justice that refrain from publicly identifying alleged wrongdoers, unless and until the individual is actually charged with a crime. Unfortunately, DOJ Antitrust has shown no signs of amending another policy relating to its corporate leniency program, whereby it demands that any company, other than the initial amnesty applicant, plead guilty to a felony violation of the Sherman Act to resolve a cartel investigation via plea agreement. The non-prosecution and deferred prosecution agreements that other divisions of the Department of Justice routinely enter with corporations, remain unavailable under DOJ Antitrust’s policies. But a felony plea substantially undermines a company’s ability to defend itself in cartel investigations conducted in other jurisdictions or in any related civil litigation. With enforcement fines escalating and civil litigation spreading to countries from the U.K. to Korea, companies must think carefully before entering plea deals to resolve cartel investigations.

Recent Practice Under the Leniency Program

DOJ Antitrust touts as one advantage of its corporate leniency program that a company resolving a cartel investigation by plea agreement can protect all its current and former employees from criminal prosecution, with the exception of selected individuals specifically identified in the company’s plea agreement. Since the leniency program was instituted, individuals who were “carved-out” from the protections provided by the plea agreement included not only those deemed most culpable for the cartel conduct, but also those who had refused to cooperate with the investigation, and even individuals as to whom DOJ Antitrust had yet to make any prosecution decision.

DOJ Antitrust’s rhetoric, nonetheless, implied that it was only the actual wrong-doers who were carved out, i.e., individuals it was intending to prosecute. The reality, however, is far different with criminal prosecutions initiated against fewer than one-fifth of the individual carve-outs in certain, recent cartel investigations. The air cargo investigation provides a good example – approximately 20 companies have pled guilty to criminal Sherman Act violations with more than 100 executives carved out. Yet, DOJ Antitrust obtained indictments against fewer than 20. This circumstance is highly problematic, both because plea agreements resolving cartel cases must be approved by a federal court and typically are filed on the public docket, and because DOJ Antitrust’s practice is to post plea agreements on its website within hours of being entered. As a consequence, some individuals effectively have been branded with a “Scarlet Letter,” publicly identified as having been excluded from the protections of corporate plea agreements, and suffering negative employment consequences, public embarrassment, and potentially unfounded risks of being named in civil litigation.

The Policy Change

According to its announcement, DOJ Antitrust has implemented two specific changes to this policy. First, it will only carve out employees whom it has reason to believe have been involved in criminal wrongdoing. No longer will DOJ Antitrust carve out individuals merely because it has yet to decide whether it will consider charging them. Second, DOJ Antitrust will not include the names of carve-out employees in the plea agreement itself. Instead, the carve-outs will be identified in a separate appendix which DOJ Antitrust will request be filed under seal, a request that most courts are likely to grant. This new policy puts DOJ Antitrust in line with the policy of DOJ’s Criminal Division and the U.S. Attorney’s offices, which do not permit public identification of potential wrongdoers until charged with a crime.

Corporations Continue to Face Challenging Environment

While a welcome change for individuals, DOJ Antitrust continues to insist that corporations seeking to reach plea deals to resolve cartel investigations must plead guilty to a felony violation of the Sherman Act. Here, DOJ Antitrust’s policy remains an outlier compared to the policies of other divisions of the Department of Justice. For example, most corporations are able to resolve FCPA-related investigations with the Fraud Division via non-prosecution or deferred prosecution agreements. That option is unavailable in cartel matters and DOJ Antitrust has offered no public signals that it is prepared to revisit its insistence on felony guilty pleas.

But this leaves corporations facing a difficult choice in a world where more and more enforcement agencies around the world are pursuing cartel investigations with increasing financial penalties. The difficulty of the choice is compounded by the fact that the civil plaintiffs’ bar has extended its reach beyond U.S. class action litigation, with collective actions already permitted in the U.K. and Holland arising from cartel violations, and class action legislation likely to be instituted in Korea later this year. A company that enters a plea agreement with DOJ Antitrust will have great difficulty avoiding criminal or regulatory sanctions and potentially ruinous civil litigation around the world after admitting cartel violations as part of the plea. Thus, in this new global environment, companies should continue to consider carefully whether the benefits of the leniency program justify a felony plea, even with the recent policy change announced by DOJ Antitrust.