The Department of Justice Antitrust Division will now consider a target company’s antitrust compliance program when determining how to resolve criminal matters. This represents a fundamental shift in the Antitrust Division’s longstanding approach to compliance programs in the context of criminal enforcement, and specifically with respect to the circumstances in which a corporation may benefit from having an effective antitrust compliance program – both as a preventative measure and also in the event the company becomes the subject of a criminal antitrust investigation. The Antitrust Division outlines its current approach in detail in a July 2019 guidance document, “Evaluation of Corporate Compliance Programs in Criminal Antitrust Investigations,” which also clarifies the Antitrust Division’s approach to compliance at the time of sentencing. These developments also were the subject of remarks delivered in July 2019, at NYU School of Law by Assistant Attorney General Makan Delrahim, head of the Antitrust Division.
The Antitrust Division’s new model is aimed at incentivizing comprehensive compliance programs and “recognize[ing] the efforts of companies that invest significantly in robust compliance programs,” according to AAG Delrahim. Companies with no antitrust programs, or with antitrust policies and training that could benefit from updating or expansion, now have concrete guidance and a significant added incentive for moving forward with this important aspect of compliance.
Antitrust Compliance Programs at the Charging Stage: An Historic Change in Antitrust Division Policy
Historically speaking, at the stage of a criminal antitrust investigation in which the Antitrust Division is considering whether to recommend charges against a corporation, the Antitrust Division Justice Manual directs prosecutors to consider several factors from the DOJ Memo, “Principles of Federal Prosecution of Business Organizations.” Among these ten factors are four relating to including corporate citizenship: (1) whether a company has implemented robust and effective compliance programs, and when wrongdoing occurs, they (2) promptly self-report, (3) cooperate in the Division’s investigation, and (4) take remedial action. Until now, however, the Division’s Justice Manual specifically barred prosecutors from giving credit for compliance programs at the charging stage.
Under the Antitrust Division’s new approach, even companies that are not “first in” under the leniency program will potentially receive credit at the charging stage if the corporate citizenship-related factors, including a robust and effective antitrust compliance program, are present. The DOJ Justice Manual provisions relating to antitrust charging decisions now mandate that compliance programs be taken into account, looking both at programs in place when the relevant conduct occurred and programs put in place by the time of the charging decision.
By specifically requiring a review of corporate antitrust compliance programs, including whether they sufficiently could have deterred criminal conduct, Antitrust Division prosecutors have more reasons to consider a Deferred Prosecution Agreement (DPA) in resolving a criminal case. In AAG Delrahim’s remarks, and in the July Guidance, the Antitrust Division has been careful to clarify that non-prosecution agreements and immunity from charges and fines will generally continue to be available only to “first in” cartel participants and that having an antitrust compliance program does not guarantee that a DPA will be available or recommended.
Along with the primary benefit of avoiding and detecting antitrust violations through effective compliance measures, the possibility of more favorably resolving a criminal investigation (perhaps through a DPA) should be a significant incentive to design, implement, and promote an antitrust compliance policy and a targeted training program. To give corporations meaningful guidance on how to structure those programs, the new Guidance the Antitrust Division set forth how it will assess a corporation’s compliance program at the charging stage, setting forth detailed criteria associated with a list of nine factors.
- Design and comprehensiveness of the program
- Whether a corporation has a meaningful culture of compliance
- Who in the corporation has responsibility for the compliance policy
- Whether the program incorporates risk assessment
- The extent of training and communication about the policy
- Whether the program has built-in periodic review, monitoring, and auditing components
- Whether there is a reporting protocol as part of the program
- What incentives and discipline measures have been incorporated into the program
- Remediation after discovery of a violation of the antitrust laws, including implementation or improvement of existing compliance programs, and whether the compliance program has resulted in discovery of a violation
While AAG Delrahim cautioned that these elements are not a “checklist,” he did explain that they should help prosecutors address three preliminary questions at the outset of every investigation: (1) does the company’s compliance program address and prohibit criminal violations, (2) did the program detect and facilitate prompt reporting of the violation, and (3) to what extent was the company’s senior management involved in the violation?
Compliance Programs at Sentencing: Credit Under the Sentencing Guidelines Clarified
With respect to sentencing, AAG Delrahim explained in his remarks at NYU, that a corporation’s antitrust compliance program will continue to be relevant in two ways. First, the Sentencing Guidelines provide for a three-point reduction in a corporate defendant’s culpability score if an effective compliance policy is in place. Second, an effective compliance program may contribute to a recommendation to the court to set a defendant’s fine within the Guidelines range or even below it.
The July 2019 Guidance focuses on how the Antitrust Division will continue to consider a company’s compliance efforts at the sentencing stage, using a “rebuttable presumption” that a compliance program in place at the time of an antitrust violation was not effective, pursuant to the Sentencing Guidelines. A defendant can rebut that presumption by showing that individuals with responsibility for the compliance program reported directly to the governing leadership of the company, the compliance program detected the antitrust violation in a timely fashion, the company promptly reported the violation to the Antitrust Division, and no one responsible for the compliance program “participated in, condoned, or was willfully ignorant” of the antitrust violation. In other words, if a company can demonstrate the program was designed to prevent and catch violators, yet actors were particularly devious in defeating an otherwise meaningful program, the company will get credit for its efforts.
The new Guidance also notes that “remedial efforts are also relevant to whether the compliance program was effective at the time of a charging decision or sentencing recommendation.” AAG Delrahim underscored the importance of a corporation’s efforts to implement or improve a compliance program after discovery of a violation by noting, in his July remarks, that the Antitrust Division had to date never recommended the three-point departure for a compliance program under the Sentencing Guidelines but had recommended for credit and a reduction in fines due to remediation efforts.
The new Guidance sets forth how the Antitrust Division will approach the question of whether a company’s remediation efforts post-violation should be considered in determining whether a reduction in criminal fines is warranted. The factors to be considered include the following:
- Tone at the top, and whether compliance priorities were adopted and communicated by leadership
- Improvements to pre-existing compliance programs, and whether the company assessed areas of antitrust compliance weakness
- Creation of an antitrust compliance program, to the extent one was not in place
- Whether the company disciplined employees who contributed to antitrust violations or set up mechanisms to do so in the future
Because these measures could result in significant reductions in criminal penalties for a corporation, moving quickly and deliberately to implement meaningful remediation measures should be a priority for any company that finds itself faced with a potential antitrust violation.
The Antitrust Division has also clarified its approach to determining whether or not to recommend probation at sentencing for corporations that have accepted responsibility and cooperated with the Antitrust Division’s investigation. The new Guidance clarifies that the Antitrust Division will not seek probation for cooperating defendants except in limited circumstances, for instance, when a company has left culpable individuals in positions of authority. The Guidance also directs prosecutors to determine whether a company that did not have a pre-existing antitrust compliance program has put one in place that meets the Sentencing Guidelines criteria for effectiveness. For companies that do not do so, the Division may recommend probation with periodic reporting requirements and an external monitor. Avoiding this kind of ongoing supervision should provide additional motivation for companies faced with antitrust violations to immediately take remedial steps to demonstrate adoption of effective compliance policies and best practices.
Conclusion and Recommendations
The shift in the Antitrust Division’s approach to giving credit for effective antitrust compliance programs at the charging stage, and the clarification of how and when effective antitrust compliance will matter to antitrust defendants at sentencing, highlights the value of having a comprehensive corporate antitrust policy and an ongoing, targeted antitrust training program.
The recent Antitrust Division Guidance puts companies on notice that simply having a “canned” or outdated antitrust policy, or training that is not specifically designed to detect and deter violations tailored to all relevant areas of a company’s business, will not result in a company receiving credit at the charging or sentencing stages of a criminal antitrust investigation. As underscored by the Antitrust Division’s Guidance, best practices in assessing and improving existing policies include taking the following practical steps:
- Ask whether a company’s legal and compliance functions have a current understanding of which business practices or job functions present the greatest antitrust risk. For instance, if a company has not undergone a recent audit or evaluation of sales force practices, joint ventures, and trade/industry association participation to ensure that they are being conducted in a compliant way, it would be worthwhile to consider taking that step.
- Ask whether a company’s antitrust policy and training “speak to” the company’s business and specific areas of risk in a manner that will be understood and absorbed by the relevant employees. If there is a need for targeted training based on current problems, questions, or market conditions, it would be prudent to consider scheduling specific training by department or business function.
- Ask whether a company has an effective reporting mechanism for all employees to bring potential violations to the attention of the compliance or legal departments. All employees should know how to come forward with information about potential antitrust violations and should be on notice that failure to do so could result in consequences related to their employment.
- Ask whether a company’s antitrust compliance “culture” is “top-down” and whether responsibility for overseeing antitrust compliance is in the appropriate hands. Merely having a policy and training module in the books is likely not sufficiently robust from the perspective of the Antitrust Division. Antitrust compliance should be a leadership priority and should receive adequate resources within the compliance and legal functions.
Based on the feedback collected in response to these inquiries, a company should determine with antitrust counsel what steps should be taken to bring antitrust compliance programs in line with the current DOJ Guidance.