United States: US Department Of Justice Announces Incentives For Robust Antitrust Compliance Programs

Last Updated: July 25 2019
Article by Beth Kramer, William H. Stallings, J. Bradley Keck and Stephen Medlock

Executive Summary. On July 11, 2019, Assistant Attorney General Makan Delrahim announced important changes in how the Antitrust Division of the US Department of Justice (Division) would make a charging decision in criminal antitrust cases. For decades, the Division had employed an all-or-nothing approach, granting corporate leniency to the first company to report and document wrongdoing. Under the Division's new policy, companies with robust compliance programs may be eligible for deferred prosecution agreements (DPAs)—even when they lose the race to report antitrust offenses. This policy change creates a significant new incentive for companies to implement robust antitrust compliance programs.  

Background. The Division has exclusive authority to bring criminal charges against companies and individuals that engage in "hard core" violations of US antitrust law, such as agreements between competitors to fix prices, rig bids or allocate markets. Since 1993, the Division's Corporate Leniency Program has incentivized companies to provide the Division with information regarding criminal antitrust violations. In particular, the first company to confess to wrongdoing, fully cooperate with the Antitrust Division's investigation, and meet the other conditions specified in the Corporate Leniency Policy is eligible for corporate leniency (i.e., immunity from criminal charges for both the company and its employees and protection from treble damages in follow-on civil litigation). 

The point of the Corporate Leniency Program was to create a race between companies to report violations. To emphasize the urgency around reporting, the Division has long insisted that any culpable company that "loses" the race plead guilty to a criminal charge—whether or not they had an effective compliance program. This policy was codified in the Department of Justice's Justice Manual, which stated that "credit should not be given at the charging for a compliance program" and that "the nature of some crimes, e.g., antitrust violations, may be such that national law enforcement policies mandate prosecution of corporations notwithstanding the existence of a compliance program."

The New Policy. Assistant Attorney General Delrahim announced four changes that take effect immediately:

  1. The Justice Manual has been amended to delete the provision suggesting that credit will no longer be given for the existence of an antitrust compliance program. Now, prosecutors must consider the effectiveness of a company's antitrust compliance program when making a charging decision.
  2. The Division clarified that if a company has an effective antitrust compliance program, it can receive two benefits at the sentencing stage of a criminal case: potential reductions in (a) the company's criminal fine and (b) any corporate probation recommendation.
  3. The Division now has the option of entering into a deferred prosecution agreement with a company that does not receive corporate leniency if that company has an effective antitrust compliance program. 
  4. The Division issued its first guidance outlining factors for evaluating a company's compliance efforts at both the charging and sentencing stages.1 These factors include: "(1) the design and comprehensiveness of the program; (2) the culture of compliance within the company; (3) responsibility for, and resources dedicated to, antitrust compliance; (4) antitrust risk assessment techniques; (5) compliance training and communication to employees; (6) monitoring and auditing techniques, including continued review, evaluation, and revision of the antitrust compliance program; (7) reporting mechanisms; (8) compliance incentives and discipline; and (9) remediation methods." 

Assistant Attorney General Delrahim explained that this policy change is intended to "encourage companies to further invest in compliance efforts."2 Noting the improvement in antitrust compliance programs since the Division's Leniency Policy was first implemented in 1993, Assistant Attorney General Delrahim stated that "[i]t is important . . . that the Division's practices and policies evolve to ensure we have the right framework for maximizing deterrence and detection." 

However, Assistant Attorney General Delrahim emphasized that compliance programs will be evaluated on a "case-by-case basis" and the guidance is "not a checklist or formula." Instead, he highlighted three key questions to guide prosecutors when evaluating a company's compliance program: 

  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 the company's senior management involved in the violation?"

These questions also build on the framework laid out in the Justice Manual for assessing compliance efforts. Like the Division's new guidance, the Justice Manual provides three "fundamental" questions for prosecutors to consider: "[1] Is the corporation's compliance program well designed? [2] Is the program being applied earnestly and in good faith? [3] Does the corporation's compliance program work?"3 Assistant Attorney General Delrahim noted that the Division's guidance was designed to elaborate on these questions in the context of antitrust compliance. 

Although these changes bring the Division's policy in line with guidance offered by other divisions of the Department of Justice, detection and self-reporting are still key. As Assistant Attorney General Delrahim underscored during his speech, the Division's Corporate Leniency Policy has been integral to the investigation of antitrust crimes, and non-prosecution agreements will remain available only to the first company to self-report. Instead, this policy change is "a recognition that even a good corporate citizen with a comprehensive compliance program may nevertheless find itself implicated in a cartel investigation. Precisely how much weight and credit to give a compliance program will depend on the facts of the case."  

Implications. The Division's policy change emphasizes the fact that antitrust compliance programs are a good investment. Not only can these programs ensure that antitrust violations do not occur in the first place, they can also detect conduct that can be the basis of a corporate leniency application or, under the Division's new policy, provide a company with a basis for seeking a deferred prosecution agreement or a substantial reduction in a criminal fine.

Footnotes

1. US Dep't of Justice, Antitrust Division, Evaluation of Corporate Compliance Programs in Criminal Antitrust Investigations (July 2019), available at https://www.justice.gov/atr/page/file/1181891/download

2. Mark Delrahim, Assistant Attorney General, US Dep't of Justice, Wind of Change: A New Model for Incentivizing Antitrust Compliance Programs (July 11, 2019), available at https://www.justice.gov/opa/speech/assistant-attorney-general-makan-delrahim-delivers-remarks-new-york-university-school-l-0

3. Justice Manual § 9-28.800, available at https://www.justice.gov/jm/jm-9-28000-principles-federal-prosecution-business-organizations#9-28.800

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