Yesterday I had the good fortune to attend the 8th Annual Georgetown University Law Center Global Antitrust Enforcement Symposium. I was invited to attend by Bates White, a leading economic consulting firm. Bates White is a sponsor of the program. The agenda covered all areas of antitrust enforcement including merger enforcement, abuse of dominance and IP and high-tech issues. But in keeping with the theme of this blog, I’d like to comment on the star of the program—Cartel Enforcement—”the supreme evil of antitrust.”
Bill Baer, Assistant Attorney General for the Antitrust Division was the keynote speaker. Baer focused his remarks completely on cartel enforcement. A copy of his speech is available here.
Compliance was in the air. Both Baer, and another Antitrust Division leader, Brent Snyder, Deputy Assistant Attorney General for Criminal Enforcement, emphasized the need for corporations to have strong and effective compliance programs. Baer pointed out that the average jail term for an individual convicted of price fixing or bid rigging is now at 25 months. And, courts have fined corporations as much as $1.4 billion in a single year. Baer emphasized, “effective compliance programs minimize the chance that companies will conspire to fix prices. And they maximize the chance for a company guilty of price fixing to find out about the conspiracy early enough to qualify for corporate leniency or otherwise cooperate with our investigation.”
What Baer did not say, that may disappoint many corporate counsel, is that the Antitrust Division would change its policy of not giving credit to corporate defendants for having an antitrust compliance program. In the view of the Antitrust Division, the cases they prosecute involve senior executives of a company—executives in the plural. In these situations, the company has a failed compliance program according to the guidelines set out in the United States Sentencing Guidelines. The Division considers its leniency policy the benefit for those companies whose compliance efforts fall short in preventing a violation, but are able to detect the violation as a result of an effective compliance program. Leniency provides a complete pass for the first company to self-report and cooperating executives can also gain immunity through cooperation.
There may have been a slight shift, however, in the Antitrust Division’s policy regarding compliance programs. The Division has been criticized for never giving credit to a convicted company for a compliance program because, by definition, the program has failed. In his remarks yesterday, Baer said “It is unlikely that a corporate defendant’s pre-existing compliance and ethics program will be considered effective enough to warrant a slap on the wrist when it failed to prevent the company from violating the antitrust laws.” “It is unlikely” is a step (a very small one) from never.
Brent Snyder was on a panel “Cartel Enforcement and Policy” and echoed the remarks regarding the importance of ethics and compliance programs. A day earlier, Snyder had given a talk to the International Chamber of Commerce and US Council of International Business (here). He empathized that international companies have to worry not only about prosecution by the USDOJ, but enforcement agencies world-wide, many of which have adopted US–styled leniency programs. Snyder remarked: “The existence of a compliance program almost never allows the company to avoid criminal antitrust charges. Why? Because a truly effective compliance program would have prevented the crime in the first place or resulted in its early detection. This has been the Division’s position for at least the last twenty years, and it isn’t likely to change.” (my emphasis).
In another interesting comment is his speech, Snyder said “In addition, we are actively considering ways in which we can credit companies that proactively adopt or strengthen compliance programs after coming under investigation. Although we have not finalized our thinking in this area, any crediting of compliance will require a company to demonstrate that its program or improvements are more than just a facade.” The speeches Division officials give are carefully thought out and vetted so this is a serious remark. One thing Snyder could be alluding to is that a defendant company in this position will not face the burden of being put on probation and having an external court appointed compliance monitor imposed. The Division has sought external motors only in rare cases but it may be considering seeking that remedy more often. Companies with a strong compliance program would be spared this additional penalty.
Some Tips on Compliance
The Antitrust Division declined to comment on what an effective compliance program should like noting that compliance professionals are the experts and clear guidance is given in the U.S.S.G Sentencing Guidelines §8B2.1. Effective Compliance and Ethics Program. But, I will add my own observations. First, antitrust compliance should make a distinction between what is often called “hard-core” conduct such as price fixing and bid rigging” and other potential violations that depend very much on factors such as market share. Executives who commit cartel violations have not unintentionally stepped into an uncertain area of law. They know they are violating the law and take steps to hide their conduct. Compliance in this area has to focus on “scaring the daylights” out of senior executives so they understand that this conduct does not benefit the company and may well destroy it. Individuals if caught, and with leniency programs there is a good chance they will be, also bring personal devastation to themselves and their families. The people I have prosecuted in my career are generally good citizens who would correct the cashier if they were given too much change, but simply don’t appreciate the dire consequences of engaging in price fixing. There are other types of violations such as abuse of dominance and resale price maintenance, which may or may not be a violation of the law depending on certain facts—including what country you are operating in. It is a huge snooze-fest, and futile anyway to try to train employees in detail on these types of violations. A good compliance program will instead educate sales people about antitrust red flags and encourage them to call counsel when straying into a danger zone to talk it through.
Given these two types of antitrust concerns—hard-core conduct and everything else, two different types of training are warranted. First, after a screening identifies those in a company with the authority to commit to price fixing, face-to-face training is paramount. This training focuses not so much on what you can’t do—they already know that—but why you would be crazy to do it. War stories of companies and lives ruined capture attention and personalize the dangers. This also sets the tone at the top—a culture of compliance. But for a wider audience, particularly in large companies, video training is also appropriate. There is nothing wrong with off the shelf training if it is good training. [Full disclosure: I work on antitrust compliance materials with Emtrain, a leading provider of online business and ethics compliance training programs].
Compliance is in the air and I’ll have more to say in future posts about the Antitrust Division’s recent comments on antitrust and ethics compliance.
Thanks for reading.
Bonus Material If You Have Read This Far: