Thanks to a major policy change at the Department of Justice Antitrust Division (the “Division”), companies under investigation for criminal antitrust violations will now have the opportunity to avoid prosecution even if they are not a leniency applicant. Effective immediately, the Division will offer mitigation credit at the charging phase for companies with robust and effective compliance programs in effect at the time of the misconduct. Companies can obtain a deferred prosecution agreement as the award for corporate compliance efforts that pass muster. Equally significant, for the first time in its history, the Division has released public guidance discussing criteria for assessing corporate compliance programs. The comprehensive and detailed guidance is an invaluable resource as companies look to improve their antitrust compliance programs.
Winds of Change
In a July 11 speech, Assistant Attorney General Makan Delrahim announced that “the time has now come” for the Division to change its approach and “recognize the efforts of companies that invest significantly in robust compliance programs.” Prior to Delrahim’s announcement, the Division’s approach to compliance had remained largely unchanged since the early 1990s, and largely did not consider whether a company had a corporate compliance program in place at the time of the alleged criminal antitrust violation.
The practical significance of this policy shift is that winning the race for leniency (under the Division’s Corporate Leniency Program) is no longer the only way for a company to avoid criminal prosecution. Under the Leniency Program, the Division would not prosecute a company that was the first to self-report anticompetitive conduct. Under the new policy, a company that self-reports misconduct, but is not first in the door to self-report, may be eligible to obtain a deferred prosecution agreement if its compliance program resulted in the detection and remediation of the violation and if the company then cooperates with the Division’s investigation. Generally, under a deferred prosecution agreement, the Division agrees not to bring charges against the company in exchange for the company’s agreement to abide by certain negotiated obligations or conditions. Deferred prosecution agreements have been rarely used by Division prosecutors.
In his July 11 remarks, AAG Delrahim stated that the Division will no longer abide by outdated notions that a corporate compliance program that fails to prevent every antitrust violation should be considered ineffective. The change in the Division’s approach is “a recognition that even a good corporate citizen with a comprehensive compliance program may nevertheless find itself implicated in a cartel investigation.”
Concrete Guidance, at Long Last
Merely having a corporate compliance program in place will not guarantee a deferred prosecution agreement. The Division’s newly released guidance on assessing corporate compliance programs directs Division prosecutors to conduct fact-specific inquiries into whether an individual company’s program “is adequately designed for maximum effectiveness in preventing and detecting wrongdoing,” and acknowledges prosecutorial discretion in evaluating corporate compliance efforts and making charging decisions.
Prompted in part by calls from antitrust compliance professionals and counsel who have long sought written, concrete guidance from the Division, the 17-page guidance document offers comprehensive and detailed directions to prosecutors evaluating corporate compliance programs to determine eligibility for credit. While consistent with the updated compliance guidance issued in April by the Criminal Division, this guidance specifically addresses compliance questions in the criminal antitrust context and is intended to complement the Division’s hallmark Leniency Program. Division prosecutors are directed to consider the following general categories, with the guidance outlining targeted inquiries for each:
- Design and comprehensiveness of the program;
- Culture of compliance within the company;
- Responsibility for, and resources dedicated to, antitrust compliance;
- Antitrust risk assessment techniques;
- Training and communication to employees (and tailored based on an employee’s position and relative antitrust risk);
- Monitoring and auditing techniques (including continued review, evaluation and revision);
- Reporting mechanisms;
- Compliance incentives and discipline; and
- Remediation methods.
Notably, the guidance does not impose a “one size fits all” approach to compliance, instead recognizing “that a company’s size affects the resources allocated to antitrust compliance and breadth of the company’s compliance program.”
Self-Reporting and Senior Executive Conduct Are Paramount
During a panel discussion following Delrahim’s July 11 announcement, DOJ officials emphasized that two threshold questions will be whether the company self-reported cartel conduct to the government “promptly” after detection and whether senior executives at the company were involved in or willfully blind to the misconduct. A failure in either of these factors alone likely would disqualify a corporate compliance program from being eligible for mitigation credit. In response to audience questions further probing the parameters of “prompt” disclosure, DOJ leadership declined to put a concrete timeline on the reporting requirement, but made clear that companies that “sit on the sidelines” and do not self-report, will not make the cut.
To be deemed “robust and effective,” corporate compliance programs should include features to address these two threshold considerations. Employees should have readily accessible and well-publicized channels to report potential violations and investigations of reports should be timely and thorough to give the company the best opportunity to self-report if a violation is detected. Senior executives should be provided strong direction and training on antitrust compliance and be held accountable for missteps by them and their teams. The guidance also gives significant air time to the importance of a strong compliance program — directing prosecutors to assess the rank, compensation, stature and respect afforded company compliance leaders and personnel.
More Reason than Ever to Improve Antitrust Compliance
The Division plans to make public details of future deferred prosecution agreements awarded to companies as the result of a compliance evaluation. Such case studies will give companies more insight into ways to improve their antitrust compliance programs and increase their chances of obtaining a deferred prosecution agreement in a criminal investigation.
The upshot of this policy change is that there is now more reason than ever for companies to invest thoughtfully and meaningfully in antitrust compliance. Leniency no longer is the exclusive mechanism for avoiding prosecution in the face of a violation — a strong compliance program plus prompt reporting may also qualify for credit even if the company loses the leniency race and finds itself second or third in the door. Moreover, a company seeking mitigation credit for its compliance program will have to be prepared to present evidence to the Division to demonstrate that the program is indeed robust and effective. It will be important to affirmatively demonstrate how good the program really is, including the extent of the company’s efforts and investment to detect and prevent criminal antitrust behavior. The guidance document instructs prosecutors to begin testing the merits of a company’s compliance program promptly, even before a formal compliance presentation, and to ask company witnesses about the effectiveness of the company’s efforts.
On the flip side, the ramifications for failing to construct a robust compliance program may now be more strident. Indeed, companies that fail to follow the Division’s guidance roadmap and do not promptly report misconduct before a government investigation begins may be subject to harsher treatment, including probation, compliance reporting obligations and third-party monitoring.