Why having an antitrust compliance program is more important than ever
Prosecuting price-fixing cartels is a major priority of the Antitrust Division of the Department of Justice (DOJ). The DOJ was active in a wide range of investigations in 2019, bringing criminal charges in 8 different industries, ranging from packaged seafoods to generic pharmaceuticals. In its larger cartel investigations, the DOJ collected more than $217 million in criminal fines and obtained guilty pleas from 12 individuals.
In the midst of this enforcement activity, recent changes to DOJ policy have made effective antitrust compliance programs more important than ever.
Under the new policy, the DOJ will consider a company’s compliance program when making charging decisions. The new approach allows prosecutors to offer a deferred prosecution agreement where appropriate. Previously, the DOJ only considered a company’s compliance program at the sentencing stage. Additionally, the DOJ’s updated guidance outlines the key questions the DOJ considers when evaluating compliance programs and clarifies the criteria that the DOJ applies to determine if a compliance program is adequate.
The benefits of an antitrust compliance program
The consequences of antitrust violations are severe. A criminal antitrust violation can expose companies to fines of up to $100 million or double the loss or gain from the offense. Individuals face fines of up to $1 million (or double the loss or gain) and ten years in prison. Follow-on private litigation exposes companies to treble damages.
Because of these serious consequences, companies must ensure that they have an effective antitrust compliance program in place. An antitrust compliance program helps companies by:
- Educating employees about conduct that violates antitrust laws and the related potential penalties.
- Providing employees and executives with an efficient way to report suspected violations.
- Encouraging early detection of any violations that do occur, allowing the company to consider applying for amnesty from criminal prosecution. Successful amnesty applicants can also avoid treble damages in private follow-on actions.
- Mitigating potential criminal liability under the Federal Sentencing Guidelines, if the company does not qualify for amnesty.
- Potentially allowing the company to avoid charges by entering into a deferred prosecution agreement.
Core elements of a strong compliance program
Any corporate compliance program should, at a minimum, meet the requirements described in the Federal Sentencing Guidelines to qualify for mitigation, which provide a useful starting point for identifying a compliance program's essential elements. An effective program not only meets all these requirements but also implements them in the most effective manner for each individual company. The program should also adopt additional measures to address special areas of legal risk identified by the company's legal officers.
The Sentencing Guidelines' minimum requirements for an effective compliance program include:
- Setting up standards and procedures
- Appropriately assigning and excluding responsibility for the program
- Communicating the standards and procedures
- Undertaking measures to ensure compliance
- Consistently enforcing the program
- Following up on detected offenses
While the DOJ has emphasized that there is no checklist or formula for evaluating the effectiveness of a corporate compliance program, prosecutors ultimately consider three fundamental questions: Is the corporation's compliance program well designed? Is the program being applied earnestly and in good faith? Does the corporation's compliance program work?
The DOJ's new guidance includes an additional series of detailed considerations. The guidance identifies nine areas that the DOJ will consider in evaluating the effectiveness of a compliance program, including:
- The design and comprehensiveness of the program.
- The culture of compliance within the company.
- Responsibility for, and resources dedicated to, antitrust compliance.
- Antitrust risk assessment techniques.
- Compliance training and communication to employees.
- Monitoring and auditing techniques, including continued review, evaluation, and revision of the antitrust compliance program.
- Reporting mechanisms.
- Compliance incentives and discipline.
- Remediation methods.
In addition to the existence of a robust and effective compliance program, the DOJ has said that it will examine how the company reacts once wrongdoing occurs, including whether the company promptly self-reported, cooperated in the DOJ investigation, and took remedial action.
This article was excerpted from information and resources contained in the Antitrust Compliance Toolkit. The full toolkit, one of more than 65,000 resources, is available at the Thomson Reuters Practical Law website.