On January 17, 2017, the Antitrust Division of the U.S. Department of Justice (“Antitrust Division”) issued an update to its 2008 “Frequently Asked Questions about the Antitrust Division’s Leniency Program and Model Leniency Letters” (the “2017 Leniency FAQs” and the “2008 Leniency FAQs,” respectively). The thirty-three FAQs in the 2008 Leniency FAQs provided guidance to companies and individuals (Corporate Applicant and Individual Applicant respectively; collectively “Applicants”) so that Applicants that are first to report a criminal antitrust violation could avoid criminal convictions, fines and incarceration. The guidance provided included, among other subjects: confidentiality standards; the process for applying for leniency; the standard for obtaining leniency; and the standards for conditional, unconditional and final leniency letters.
The 2017 Leniency FAQs continue to provide the same form of guidance but they reflect the consolidation of the relevant policies and statements issued by the Antitrust Division since the 2008 Leniency FAQs. They also substantially increase the risks involved in seeking a marker before a full investigation of the suspected activity has been completed. The Antitrust Division also updated its company and individual model leniency letters.
While the Leniency Program was launched in 1978, it did not gain prominence as an effective tool for drawing out criminal antitrust violations until it was significantly revised in 1993. As revised, leniency was available as follows:
- If there was no pre-existing investigation and the Corporate Applicant met the other qualifying requirements, it would receive automatic leniency (“Type A Leniency”);
- If there was an ongoing investigation and the Corporate Applicant met the other qualifying requirements, it would be eligible for discretionary leniency (“Type B Leniency”);
- If Corporate Applicant executives and employees cooperated with the investigation they would also receive leniency.
The Antitrust Division expanded its program to Individual Applicants the following year along similar standards.
The 2017 Leniency FAQs added and/or revised several items, notably:
- A Corporate Applicant now must disclose its identity when requesting a marker, thus raising the risk that an identified business will be required, in effect, to admit its participation in an antitrust violation before it learns whether it has filed first-in-line. In contrast, the 2008 Leniency FAQs set forth a process that allowed for an anonymous request for a marker by the Corporate Applicant’s counsel.
- It clarifies that current cooperating directors, officers or employees of a Corporate Applicant for Type A (automatic) leniency will be subject to purportedly stricter, Individual Applicant-like standards requiring ‘full” cooperation with the investigation, thus not affording them the automatic inclusion that they received under the 2008 Leniency FAQs. The potential carve out of executives is consistent with the Antitrust Division’s efforts to prosecute highly-culpable individuals in compliance with the September 2015 Department of Justice memorandum on Individual Accountability for Corporate Wrongdoing (the “Yates Memo”) and subsequent statements. Type B (discretionary) leniency, which is applicable if the Antitrust Division has already learned about the crime from “an anonymous complainant, a private civil action, or a press report,” may still be available to Corporate Applicant executives and employees if they cooperate fully with the investigation. The new FAQs make clear that Type A leniency is not available if the Antitrust Division has already learned about the action from any such sources.
- It further clarifies and expands upon the previous FAQs that a conditional leniency letter from the Antitrust Division does not protect Applicants from state and/or federal prosecutions for other alleged non-antirust crimes, such as Criminal Division investigations of conspiracy or Foreign Corrupt Practices Act prosecutions. The 2017 FAQs, nevertheless, urge Applicants to disclose all potential crimes when applying for leniency with the Antitrust Division. The Antitrust Division, in the 2017 Leniency FAQs, attempts to reassure Applicants that federal prosecutorial history suggests that “other prosecuting agencies do not use other criminal statutes to do an end-run around leniency.”
- Relatedly, it incorporates the Antitrust Division’s “Penalty Plus” policy, which states that, if an Applicant for leniency fails to report another antitrust violation, the government will seek more severe penalties against the Applicant in connection with other crime for which leniency was not sought or granted. The severity of the penalties for the second crime will depend on the reason an Applicant failed to report it.
- It states that fully cooperating current directors, officers and employees may be included in a company’s conditional leniency letter, but former directors, officers and employees are “presumptively” not included. The Antitrust Division, however, may enter into individual agreements with certain former directors, officers and/or employees to solicit evidence relevant to the antitrust investigation (either against another target of the investigation or in support of the Corporate Applicant’s application for leniency).
- Finally it provides additional information as to what Applicants need to do to comply with the Antitrust Criminal Penalty Enhancement and Reform Act in order to limit civil damages claims in subsequent antitrust litigation.
Any company or individual that is considering the Leniency Program should consult with counsel to understand all of the requirements and ramifications that are involved with applying for leniency.
Click here to view 2017 Leniency FAQs.
Click here to view 2017 Model Corporate Leniency Letter.
Click here to view 2017 Model Individual Leniency Letter.