A new analysis of cartel enforcement in 2019 finds that corporate penalties continued to remain low at the end of the 2010s, even as the number of cartel enforcement actions seems to be holding steady — which might suggest that regulators’ shift to more cooperation and compliance is paying off.

That’s one inference to draw from the report, published Wednesday by law firm Simpson Thatcher. To be clear, nobody is sure that better compliance is causing the downward trend; in all likelihood, it’s one of several factors, including shifting political views on regulatory penalties and the natural cycle of when ongoing investigations reach resolution. 

Still, we do know that penalties for cartel misconduct are hovering near historic lows. We also know that players such as the U.S. Justice Department are both cracking down on public procurement fraud and offering more leniency and cooperation credit for antitrust violations. 

Add all those things together, and they fit the broader strategy we’ve seen for enforcement against corporate misconduct in recent years: more reward for cooperation and compliance; fewer penalties for the bad acts themselves. 

Let’s start with the penalty numbers. The Justice Department closed out 2019 with $353.8 million in penalties from the Antitrust Division. Yes, that’s more than triple the $102 million imposed in 2018 and $120 million from 2017 — but it’s still well below the trend we saw in the first half of the 2010s, where fines flirted with or exceeded $1 billion several times. See chart, below. 

Source: Simpson Thatcher

Globally, the big cartel enforcers were Europe, Japan, and the United States. All three stepped up their penalties in 2019 sharply. Europe led the way with $1.7 billion, Japan with $401 million, and United States that $353.8 million mentioned already. Other major countries such as China, Mexico, Australia, South Korea, Brazil, and India all saw their penalties decline in 2019 relative to the prior two years. 

We shouldn’t get too hung up on total annual penalties anyway, because one big enforcement action can skew the curve for everyone else. For example, $1.07 billion of Europe’s total came from one settlement with five banks dabbling in foreign exchange nonsense. Another $413.8 million came from another action against car safety equipment manufacturers. So 87 percent of Europe’s 2019 total came from only two resolutions.

The largest enforcement action in the United States was a $100 million fine slapped against Starkist for fixing the price of canned tuna. 

For compliance officers, however, the important stuff is the general direction of antitrust enforcement, and how you can emphasize the importance of a strong culture of compliance to avoid nasty legal penalties further down the road. The Simpson Thatcher report has some morsels of insight on that subject, too.

Enforcement Themes and Trends

For example, antitrust enforcers all over the world are looking at Big Tech: Google, Amazon, and Facebook above all, with plenty of others probably in the frame too. The United States and South Korea both have wide-ranging investigations underway into whether those online giants are abusing their power. 

Europe is taking an even more muscular posture, with Margrethe Vestager starting a second term as the EU competition commissioner and head of digital services — a huge amount of power we’ve not seen combined before. Several months ago I had guest column for NAVEX Global about Vestager’s appetite for enforcement, and suffice to say she will not hesitate to use the power she has.

I have two questions about the U.S. antitrust investigation into Big Tech. 

First, what would be the legal rationale for action against any of these firms? Traditionally the Justice Department has focused on harm to consumers as evidenced through higher prices. For most of Big Tech, the product is free for consumers. So if we want to pursue an argument about market dominance — how will that look, exactly? 

Delrahim

For example, when Facebook paid that $5 billion penalty to the Federal Trade Commission last July, the settlement included a line that Facebook will not need to create any mechanisms in the future to encourage competition. Would the Justice Department decide to overrule that? Makan Delrahim, assistant attorney general for the Antitrust Division, gave a speech last June where he laid the groundwork for antitrust enforcement against Big Tech and I don’t doubt we could devise enforcement actions around market dominance, somehow. I just look forward to the fact pattern and legal arguments that demonstrate how.

Second question: Once we do get a better sense of cartel enforcement against Big Tech, what will that mean for compliance functions tasked with implementing the settlement? Will it mean more or new attention to competition risks when your company is looking at an acquisition? Will you need a better ability to freeze questionable business practices during an inquiry, or to duplicate compliance programs if the company is split up? 

We don’t know yet. I bet we will in the next few years. 

Antitrust Compliance Here & Now

OK, for everyone else not in Big Tech — what else do we need to watch for antitrust enforcement? 

Well, we know that a crackdown on government procurement fraud is coming, because Delrahim and deputy attorney general Jeffrey Rosen said so in November. They announced the creation of a Procurement Collusion Strike Task Force, complete with a dedicated website where whistleblowers could report suspected collusion and bid-rigging in public contracts. 

Public contracting is a huge business ($550 billion spent by the government annually on goods and services), and encompasses an enormous number of industries and firms. So while Big Tech is busy pushing the boundaries of enforcement theory, the rest of us have nuts-and-bolts questions about ethics training, internal reporting, and even data analytics for fraud detection that we’ll need to keep current.

And just this week, Delrahim was quoted in the Wall Street Journal saying he wants to pursue criminal cases against abusive non-poach agreements among companies that keep employees from getting better jobs. So there’s another front for compliance officers to investigate, which can be especially tricky if the “agreements” are unwritten promises mid-level managers make to each other. 

There’s also that business of new cooperation credit for antitrust issues. In July the Antitrust Division released new guidance about how it would evaluate corporate compliance programs in antitrust issues. For the first time, that guidance included cooperation credit for companies that had “effective” antitrust compliance programs. 

So all the advocacy for strong compliance programs, all the need for C-suite leadership that telegraphs the importance of compliance — that’s here to stay too. 

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