The flailing economy has forced companies to cut nonessential costs. But, this is “not the time to be taking funds from corporate compliance.” Those are the words of then Acting Chief of the Justice Department’s Antitrust Division, Scott D. Hammond, March 27, 2009, during the final session of the 57th Spring Meeting of the American Bar Association’s Section of Antitrust Law in Washington, D.C. John Liebowitz, Federal Trade Commission Chairman, echoed that sentiment by warning that the FTC plans “to use all the tools that we have in our arsenal…to try and stop anticompetitive behavior.” Christine Varney, who was confirmed April 21, 2009 as Chief of the Department of Justice (“DOJ”) Antitrust Division, has expressed a view consistent with both Hammond and Liebowitz. One of her initial goals for the DOJ is to “rebalance legal and economic theories in antitrust analysis and vigorously enforce the law.”1 Ms. Varney promises that “the law will be vigorously enforced” under her supervision.”2 And, on May 11, 2009, Ms. Varney announced the withdrawal of the DOJ Section 2 Report, which reflected the previous administration’s enforcement policy. Ms. Varney has clearly announced a more aggressive enforcement policy, including enforcement against dominant companies. So, ask yourself:
- Does your company have a written Antitrust Compliance Program???
- If so, is the program up to date—??i.e., does it reflect your current operating procedures, the global expansion of your business and the current judicial interpretations of the law?
- Are employees in fact complying with the standards set forth in the ??program—indeed, do they even recall its contents?
If the answer to any of the above questions is “no,” the statements of the FTC and DOJ chiefs should give you cause for concern. In the words of founding father Benjamin Franklin: “An ounce of prevention is worth a pound of cure.” Establishing and implementing an antitrust compliance policy is a relatively inexpensive endeavor when balanced against the potential cost of dealing with a government criminal investigation or defending against a civil lawsuit, not to mention the potential fines or damages that may result from violations of the antitrust laws.
One need only open a newspaper or peruse the Internet to learn about the enormous fines that the DOJ has collected from companies under criminal investigations in the past 18 months alone. In the Spring 2009 issue of the DOJ Antitrust Division Update, the Division reported that it filed 54 cases in fiscal year 2008 affecting numerous products and industries. Significantly, the DOJ had 137 pending grand jury investigations at the close of that year. Further, while the Division collected more than $700 million in fines during fiscal year 2008—the second largest amount of fines obtained in a single year—it has already obtained more than $745 million in fines in the first four months of fiscal year 2009. Further, the average prison sentence obtained by the DOJ in fiscal year 2008 was 25 months; 18 months for foreign nationals. An effective corporate compliance program is an important factor in reducing liability under the United States Organizational Sentencing Guidelines (the “Guidelines”).
To ignore the risks of antitrust violations is naïve. Every company faces potential exposure. For example, many company executives and employees participate in trade association activities, including serving on trade association committees. International cartels often use trade associations as a “cover” for their illegal activities. That was the case with the lysine cartel and the citric acid cartel. “Unofficial” trade association committee meetings provided an opportunity and explanation for meetings among competitors. Such activities may seem perfectly legitimate and lawful on the surface. Absent clear guidance, employees may not realize the risk at which they place themselves and their employers because of conduct at trade association meetings. When discussing cartel cases and the use of trade associations as “cover” in a 2002 presentation before the Corporate Compliance 2002 Conference, former Deputy Assistant Attorney General William J. Kolasky noted that the DOJ cases “repeatedly found that even the largest companies have become sloppy about their antitrust compliance programs and that they are not doing all they should to educate managers about the risks at which they put themselves and their companies by engaging in cartel activities.” A company should not only have clear written standards about the do’s and don’ts of conduct at trade association meetings (as well as in communications with vendors and customers), but it should provide adequate training of employees on those standards as well.
There also exists the potential for unwitting violations of the antitrust laws within a company. Antitrust issues are often complex, and there can be a fine line between aggressive, vigorous competition and anticompetitive conduct. This is particularly true as industries have consolidated over the past few decades, resulting in fewer larger competitors. Further, evidence of possible cartel activity often appears in the numerous emails that company sales people exchange with customers, or that procurement employees exchange with suppliers. Employees often are unaware that the information they request from customers and suppliers may be viewed as tools that would enable them to police compliance with cartel activity. Off-the-cuff or sarcastic comments in emails can easily be taken out of context. Such documents all too often appear as Exhibit A in an antitrust class action lawsuit.
To protect against the risk of antitrust violations, many firms retain counsel to draft and implement an antitrust compliance program, alone or together with in-house counsel. An effective antitrust compliance program should be designed with two objectives in mind: (1) to protect against the commission of antitrust violations and (2) to detect wrongdoing as early as possible in order to minimize the damage. The federal sentencing guidelines define an “effective” program as one that has been reasonably designed to achieve these two objectives. The hallmark of an effective program is one in which the organization exercises due diligence to prevent and detect criminal conduct by employees and agents. According to the Guidelines, a compliance program must satisfy seven minimum requirements in order to qualify for sentence mitigation:
- Establish compliance standards and procedures
- Assign responsibility for overseeing compliance to high-level executives in the organization
- Exercise due care by not delegating substantial discretionary authority to employees for sales or for preparing quotes or bids
- Communicate standards and procedures effectively to employees (through training)
- Take reasonable steps to achieve compliance with the standards (i.e., by monitoring and publicizing a reporting system whereby employees can report violations without retribution)
- Consistently enforce standards through appropriate disciplinary mechanisms??
- Take prompt reasonable steps to respond and report violations if they occur??
An effective antitrust compliance program will identify antitrust scenarios that may occur in the particular organization or industry, so that employees will recognize them and know when to seek the assistance of counsel about questionable activities. It is important to make the program understandable in the context of the business in which the employees conduct their daily activities, and which accounts for the peculiarities of the industry in which they operate.
Fines for corporate criminal antitrust violations can reach $100 million or more. In addition, if the organization derives pecuniary gain from the violation, or if a person suffered a pecuniary loss as a result of the violation, the corporation can be fined two times the gross gain or twice the gross loss. In addition, a corporation may be subject to monetary damages in private individual or class action lawsuits brought by persons who suffered antitrust injury. In light of these risks, it makes good business sense to ensure that you have an effective, current antitrust compliance program in place.