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01 August 2019
In a historic shift, prosecutors with the Department of Justice's (DOJ's) Antitrust Division will now consider providing credit to companies in the charging and sentencing stages of an antitrust criminal investigation if they have a robust and effective antitrust compliance programme.
The division has published guidance entitled "Evaluation of Corporate Compliance Programs",(1) which sets out the nine factors that division prosecutors will evaluate when considering whether a compliance programme is sufficient to reduce criminal charges and sentences. The guidance also provides transparency and useful instructions to the business community and practitioners regarding what the division considers best practice in antitrust compliance.
Applying only to criminal antitrust violations (eg, price fixing, bid rigging and market allocation), the division's new policy provides credit at both the charging and sentencing stages of criminal prosecutions if the offending company can establish that such violations occurred while it maintained an 'effective' compliance programme, as defined in the guidance.
While the guidance sets out the nine key elements of an effective compliance programme, both the guidance and comments from division front office prosecutors made during a panel discussion at New York University School of Law following the division's announcement of the policy change strongly underscore that credit will be given only if a company promptly self-reports a potential cartel violation after this has been detected through its internal compliance measures. A failure to promptly self-report – despite a company maintaining a best-practice compliance programme – will likely result in no credit being given.
The division's guidance is a positive step towards assisting companies and their antitrust counsel in drafting and implementing an antitrust compliance programme. However, significant questions remain regarding the extent to which the opportunity for compliance credit will incentivise companies to self-report criminal antitrust violations – particularly given the enormous risk of follow-on civil litigation (both within the United States and abroad) – and how the guidance interacts with the division's leniency programme.
The division has now departed from its hard-line approach of refusing to grant credit during the charging or sentencing stages for companies with pre-existing antitrust compliance programmes. This approach was based on the theory that the occurrence of an antitrust violation meant that the company's programme was ineffective. According to Assistant Attorney General Makan Delrahim, this position reflected "an outdated view of the real world".
The division's guidance explains the elements of a robust and effective antitrust programme in considerable detail. These elements are intended to be read in conjunction with other prosecutorial guidance materials, including the "Principles of Federal Prosecution of Business Organizations" chapter in the Justice Manual and the US Sentencing Guidelines.(2)
The division has acknowledged that while it has "no formulaic requirements regarding the evaluation of a compliance program", prosecutors should ask three preliminary questions about a company's compliance efforts to focus their analysis on a case-by-case basis:
1. Does the company's compliance program address and prohibit criminal antitrust violations?
2. Did the antitrust compliance program detect and facilitate prompt reporting of the violation?
3. To what extent was a company's senior management involved in the violation?(3)
The change brings the division in line with the DOJ's position in non-antitrust matters – namely, that "no compliance program can ever prevent all criminal activity by a corporation's employees".(4) In so doing, the guidance identifies nine factors that the division should consider when evaluating a compliance programme's effectiveness at the charging stage.
Design and comprehensiveness
Division prosecutors will consider "the design, format and, comprehensiveness" of a company's programme, including:
Focus will also be placed on how often the programme is reviewed or updated.
Culture of compliance
Emphasis will be placed on whether "management has clearly articulated – and conducted themselves in accordance with – the company's commitment to good corporate citizenship". This includes considering the actions of senior management, their response to violations and personal accountability for prior failures.
Responsibility for the compliance programme
A chief compliance officer or executive should be given "operational responsibility for the program", including "autonomy, authority, and seniority within the company's governance structure". They should also be given adequate resources for training, monitoring, auditing and evaluating the programme.
The compliance programme must be tailored to the company's industry and internal business lines, including common types of misconduct. Antitrust policies should be implemented accordingly, using information or metrics to help detect violations, and reviewed to keep abreast of legal or technological advances and lessons learned.
Training and communication
The guidance directs prosecutors to consider whether a programme's training and communications help employees to understand their antitrust obligations. Communication issues include:
Training considerations include identifying:
Review, monitor and audit
Regular reviews and audits should be undertaken to ensure that the programme continues to:
The division will consider the method used to evaluate or audit the programme and the frequency of review.
The programme should utilise anonymous or confidential reporting methods that employees can use without fear of retaliation. Relevant factors include:
Incentives and discipline
The division will consider the incentive and discipline features of the programme, including the nature of any incentives for compliance (eg, bonus clawbacks or the denial of promotions) and the type of discipline inflicted for prior violations (eg, management turnover, termination or ongoing supervision).
Remediation and compliance programme's role in discovering violations
The guidance emphasises the importance of early detection and self-policing, as well as taking remedial efforts, which should enable a company to apply for leniency first. Considerations will include:
With respect to credit at the sentencing stage, prosecutors will follow the US Sentencing Guidelines, which provide for a three-point reduction in a company's culpability score if it has an effective compliance programme.(5) Similar to the charging stage, what constitutes 'effective' will be assessed on a case-by-case basis. Most importantly, sentencing credit will not be available, and a compliance programme will be deemed ineffective, if:
Although the guidance applies only to criminal cartel conduct, the division's about-face in compliance programme policy marks a significant and important shift that applies to companies of all sizes and will assist in-house counsel to craft and implement a comprehensive antitrust compliance programme. Many of the elements of a robust and effective compliance programme, as detailed in the guidance, will likely be familiar to in-house counsel or compliance officers that are already tasked with ensuring compliance with other regulatory regimes. In this respect, the guidance is a helpful reminder of the importance of compliance and will incentivise companies to review, update and modify their programmes.
The division has taken a positive step towards recognising that a company can have an effective compliance programme even in the face of a violation. In such a case, a company may still receive credit at both the charging and sentencing stages if its compliance programme is robust and effective, as described in the division's guidance.
However, simply maintaining a best-practice compliance programme will only go so far in reducing or eliminating a company's exposure and culpability under the antitrust laws. In his speech announcing the division's guidance, Delrahim emphasised that to benefit from the policy, a company must be a "good corporate citizen", which requires both an effective compliance programme and prompt self-reporting, cooperation with the division's investigation and remedial action.(6) The division has indicated that what amounts to 'prompt' self-reporting will be assessed on a case-by-case basis, but considerable uncertainty remains as to how the self-reporting requirement will play out in practice.
While credit for compliance may certainly 'increase the carrot' for companies to pursue effective compliance programmes, this incentive may be outweighed by other company considerations. Consider a situation where a company with a best-practice compliance programme detects a violation. While that company must promptly self-report in order to receive credit under the division's policy, if it is not the first to apply for leniency, notifying the division could result in potentially ruinous follow-on civil litigation by private plaintiffs, state attorneys general and other global antitrust litigation or government regulators.
Delrahim made clear that there is no intention for detrebling and other benefits of the Antitrust Criminal Penalty Enhancement and Reform Act to apply in the absence of leniency. Any benefits of prompt self-reporting, while perhaps providing credit at the charging and sentencing stages at the federal level, must therefore be weighed against the potential for additional civil and criminal liability.
It appears that maintaining an effective compliance programme will not prevent a company from being prosecuted for cartel conduct, nor will it result in the division moving from criminal prosecution to civil action. However, the division has indicated that it may consider a deferred prosecution agreement (DPA) where appropriate.(7) For a decision to proceed by way of a DPA depends not only on the effectiveness of the compliance programme, but also many other discretionary factors that the division must apply.(8) It remains to be seen whether there will be a rise in the use of DPAs and whether the availability of a DPA will encourage a company to invest in a best-practice compliance programme.
The compliance programme policy is an encouraging step towards greater transparency for businesses when determining their level of investment in internal antitrust compliance. This should provide in-house counsel and compliance officers with the support that they need to encourage senior management to invest in a company's antitrust compliance efforts. However, it is clear that a company's management will face tough decisions in determining whether the 'carrot' – that is, credit at charging and sentencing – is worth the risks that flow from prompt self-reporting. There are many competing factors at play and, in some instances, the availability of such credit may be outweighed by other interests. Despite the division's efforts, it appears that its leniency programme continues to be the ultimate incentive for early detection of antitrust violations, as it is the only way for a company and its executives to be guaranteed amnesty from criminal enforcement action.
Despite these uncertainties, the guidelines are a strong step towards recognising companies' efforts in relation to antitrust compliance and serve as a useful reminder of the importance of having a robust and effective antitrust compliance policy.
For further information on this topic please contact Robin D Adelstein or Gerald A Stein at Norton Rose Fulbright by telephone (+1 212 318 3000) or email (firstname.lastname@example.org or email@example.com). The Norton Rose Fulbright website can be accessed at www.nortonrosefulbright.com.
(1) Department of Justice's Antitrust Division, "Evaluation of Corporate Compliance Programs in Criminal Antitrust Investigations", July 2019.
(2) Department of Justice, Justice Manual § 9-28.300, "Principles of Federal Prosecution of Business Organizations". US Sentencing Guidelines, Chapter 8.
Emily Woolbank, law clerk, assisted in the preparation of this article
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