There has never been a greater emphasis on policing anticompetitive behavior worldwide. Dozens of countries have instituted effective and aggressive cartel enforcement programs following a trend of increased global enforcement, and criminal antitrust fines in the United States alone exceeded $1 billion in both 2013 and 2012.  Prison sentences up to 10 years have also been sought. Average jail terms of two years have been imposed since 2010. In this aggressive enforcement environment, an effective compliance program is of paramount importance, especially given the risks of fines, jail time and civil damages that accompany cartel participation.
Any company attempting to structure a compliance program, monitor an existing compliance program’s efficacy or navigate the corporate leniency process faces numerous questions. While the related answers change as the United States Department of Justice (“DOJ”) Antitrust Division’s policies and perspectives evolve – take, for example, an evolving approach to individual executive prosecution – two speeches given recently by Division officials remove some of the related uncertainties.
In a speech on September 9, 2014, Deputy Assistant Attorney General Brent Snyder reviewed the Antitrust Division’s perspective on an effective compliance program;  in another speech on September 10, 2014, Assistant Attorney General Bill Baer reiterated many of these points and offered additional thoughts on investigative cooperation and the leniency process.
The Antitrust Division’s overarching message was twofold: in order for a corporate compliance program to reduce the risk of antitrust violations, the Division expects that certain guidelines will be met; similarly, to receive the benefit of cooperating with the Division’s investigation or of the leniency process, individuals and companies alike must meet the Division’s expectations concerning the scope of cooperation they provide. The related warning is clear. DOJ intends to prosecute antitrust violators aggressively, and mere token or transparent efforts to comply or cooperate will not be rewarded.
Elements of an Effective Compliance Program
Guiding corporations to implement a compliance program the Division deems effective was a principal thrust of each speech. Building on the elements required for minimum compliance listed by United States Sentencing Guidelines Chapter 8, the Division set out a series of principals it expects an effective program to meet:
- Engaged Senior Management – Baer and Snyder both stated that a culture of compliance begins at the top; senior directors and the board must be supportive and engaged with the company’s compliance efforts. Top management must be knowledgeable about the company’s efforts and must actively monitor the compliance program. They must provide the necessary resources for the program to operate, including devoting or assigning competent staff to oversee the company’s compliance efforts.
- Entitywide Commitment – A company must ensure that the entire organization is committed to compliance efforts. All persons with supervisory power must be educated, as should most employees. Snyder added that this responsibility may also extend to other parties who may act on behalf of the company, such as subsidiaries or agents. This also means that all members of the organization must have the ability to report violations anonymously and be enabled to seek guidance about potential anticompetitive conduct without fear of reprisal.
- Proactive Compliance – In addition to the training and feedback just discussed, a company should ensure that high-risk activities are routinely monitored and evaluated. Similarly, the company should evaluate the operation of its compliance program itself and should undertake to correct flaws when they are found. • Handle
- Individual Violators With Care – A successful compliance program will also take steps to discipline culpable individuals. While the Division stops short of requiring companies to terminate individuals found to have personally violated the antitrust laws, a company must be ready and willing to discipline such employees and, moreover, must take steps to remove such individuals from positions where they may repeat their conduct. Baer even noted “serious doubts” about a company’s commitment to compliance where such individuals remain in power.
In the best case, an effective compliance program will prevent or detect in advance anticompetitive behavior, avoiding the myriad concomitant risks. However, existence of a compliance program alone will not provide a company adequate leverage to avoid criminal antitrust charges. Simply put, if a company violates the antitrust laws notwithstanding an existing compliance program, the Division’s view is that the program was ultimately ineffective. This does not leave compliance programs without value; companies may still benefit from such programs, even if the programs fall short of preventing collusion.
An effective compliance program may also benefit a company preparing to plead guilty to antitrust violations insofar as it can reduce the need for the court to appoint a compliance monitor or to impose a compliance program as a term of probation. And as discussed further below, an effective program may aid early detection, placing the company in better stead to obtain leniency from the Division.
Corporate Leniency and the Meaning of Cooperation
Under the Division’s leniency policy, the first qualifying corporation to report a cartel, admit its role therein, identify its co-conspirators, and cooperate with the investigation will not be prosecuted by the Division. This is the best outcome for an antitrust offender. The Division’s remarks, however, made clear that there are substantive expectations attached to the award of leniency that extend beyond a quick phone call.
Chief among them, the Division signaled that it expects ample investment in time and resources to satisfy their leniency criteria. This certainly includes a thorough internal investigation, but it may also include numerous and detailed proffers concerning the conduct at issue and even witness interviews. Companies should expect to be asked to review and produce foreign-based documents and to produce suitable translations of those documents for the Division’s use. It is clear that the DOJ expects the companies to cooperate fully and completely at the Division’s behest; in AAG Baer’s words, companies that attempt to “pick and choose” how and when to cooperate “will lose their opportunity to qualify for leniency.”
Even companies that fail to qualify for leniency may still profit by taking actions that reduce their culpability score under the sentencing guidelines. One such reduction exists for companies that accept responsibility; a truthful acknowledgement by the company that it has broken the law and agrees to plead guilty will lower a company’s culpability score and therefore reduce the company’s fine range. In the opposite case, a refusal to accept responsibility risks adverse consequences such as increased fines, the imposition of a court-imposed compliance monitor or, in the case of an individual, the risk of a substantial term of incarceration.
A related avenue that reduces exposure is substantially assisting the Division’s investigation. Although full leniency is necessarily timing-dependent, latecomers that provide substantial assistance in the investigation and prosecution of antitrust crimes may achieve significant reductions in criminal sentences. This represents a change to Departmental procedure, as the Division’s sentencing recommendations will now be based on the value of the cooperation they receive, not simply on the order in which they receive it, especially where a company is able to expand the scope of the Division’s investigation or report an entirely new conspiracy.
Finally, the Division expounded on its treatment of executive “carve-outs,” or those executives individually identified in corporate plea agreements as unprotected. Baer reaffirmed the Division’s policy shift from 2013, stating that carve-outs remain limited to those individuals who they believe were involved in criminal wrongdoing. He further noted that the most culpable executives will be forced to plead guilty or face indictment and trial. Such decisions will be made on an employee-by-employee basis and will no longer be tied to the order in which companies accept responsibility. Instead, he notes that decisions to carve out will be governed by the Principles of Federal Prosecution of Business Organizations, weighing such factors as the role an individual played, his or her seniority and the assistance he or she can provide to the Division’s investigation.
By contrast, for executives who are “carved-in” to the plea agreement and thus protected, Baer reiterated the Department’s emphasis on “full” cooperation, noting that individuals must be prepared to admit to all collusive conduct and/or “be candid and credible witnesses at trial.” Those individuals who fail to do so will be subject to prosecution.
Several of these principles leave questions unanswered. One positive development is that the Division acknowledged a search for ways to credit companies that impose or strengthen a compliance program during a pending investigation. Under the present rubric, popular sentiment is that the Division’s approach is “all stick and no carrot” – and that creating a reward for such positive actions would be a big step in reversing this perception. While this idea is far from final, it is clear that any crediting of compliance would require a company to demonstrate that its program or improvements are more than blue smoke and mirrors. Should this practice materialize, the importance of implementing and maintaining an effective compliance program will only escalate.
A second issue is the treatment of other criminal offenses. Baer clarified that the leniency program governs only the Antitrust Division; it does not prevent other DOJ components from prosecuting non-Sherman Act offenses. Although leniency will not reach beyond the Sherman Act, self-disclosure and cooperation are two ameliorative elements that the Division factors into charging decisions under the Principles of Federal Prosecution – and therefore leniency applications and cooperating corporations may still reap some benefit outside the antitrust arena. Some uncertainty in this area persists over exactly how this may operate.
Third, the Division announced an important change in the treatment of timing for cooperating companies. On one hand, Baer clarified that “[s]ignificant reductions in criminal sentences for substantial assistance will be reserved for those companies that actually help us investigate and prosecute” antitrust crimes. Timing of a company’s cooperation no longer factors explicitly into charging decisions; it is not a listed factor under the Principles of Federal Prosecution. Neither will timing play any role in the Division’s decision regarding the number of individual carve-outs. In the same breath, however, Baer assured his listeners that the Division “take[s] early acceptance of responsibility and meaningful cooperation into account” in criminal enforcement.
This new approach has serious consequences for the “second-in” corporation and represents a marked departure from past practice. Such a shift will reduce incentives for early cooperation by leaving a “second-in” cooperator with no assurance of greater fine reduction than for the fourth or fifth company in line. It potentially allows a later actor to qualify for a greater reduction. Moreover, any incentive for early cooperation derived from a limitation on the number of carved-out individuals has been nullified. It is not clear what effect this may have in practice. And for those firms where cooperation bridges the change, treatment is uncertain. Firms that began cooperating before this shift in policy, when timing remained an allegedly weighted factor with respect to evaluating carve-outs and cooperation-based fine reduction, face uncertainty. While it would seem just to treat such firms under the policy as it existed at the time they began cooperating, there has been no indication of what to expect on this question.
In sum, compliance programs are an important tool for companies to avoid the risks of cartel activity. They simultaneously minimize the chance of illegal activity and maximize the chance that a company may qualify for leniency; they may even allow companies to earn additional cooperation discounts during the plea process.