Useful news for anyone working at a company involved in an illegal cartel or other vast criminal conspiracy: the Justice Department’s Antitrust Division has updated its leniency policy for corporate offenders, with new emphasis on prompt self-disclosure of the violations and remediation to prevent repeat offenses.
The Antitrust Division has long allowed the first individual or company involved in a cartel to avoid prosecution if that party cooperates with the division’s ensuing investigation and prosecutions. The updated policy, announced Monday, now also requires that a corporate applicant “promptly self-report after discovering its wrongful conduct” and undertake remedial measures to prevent future offenses.
“It’s important for the rules of the road to be clear so the business community knows what to expect and appreciates the costs of losing the race for leniency,” Jonathan Kanter, assistant attorney general of the Antitrust Division, said in a statement. “Corporate boards and executives, and the counsel advising them, should understand that sitting on their hands after detecting an antitrust crime will have real ramifications — losing out on leniency means severe consequences.”
The policy updates affect both types of leniency that corporate offenders are eligible to receive: Type A leniency, available to corporations that self-disclose violations where the Antitrust Division had no prior knowledge of the misconduct at all; and Type B leniency, available in cases where the division had at least some knowledge of the misconduct, but no participants had self-disclosed yet.
To win leniency under either category, a company must meet the following criteria:
- Upon discovery of the illegal activity, the company promptly reports the issue to the Antitrust Division;
- The company reports its participation in the illegal activity “with candor and completeness and makes a confession of wrongdoing that is truly a corporate act,” as opposed to isolated confessions of directors, officers, and employees;
- The company provides timely, truthful, continuing, and complete cooperation that advances the Antitrust Division’s investigation;
- The company uses best efforts to make restitution to injured parties, to remediate the harm caused by the illegal activity, and to improve its compliance program to mitigate the risk of engaging in future illegal activity;
- The company did not coerce another party to participate in the illegal activity and clearly was not the leader or originator of that activity.
To secure Type A leniency, it would also need to be true that the Antitrust Division has received information about the illegal activity from any other source.
To secure Type B leniency, it would need to be true that:
- The Antitrust Division does not yet have evidence against the company that is likely to result in a sustainable conviction; and
- The company is the first to qualify for leniency for the illegal activity reported and the Antitrust Division determines that granting leniency would not be unfair to others.
The rest of the policy updates involve leniency for individuals, as well as the process for a company to apply for leniency and then receive confirmation from the Antitrust Division that, yep, you secured your place in line ahead of all the other co-conspirators who might turn state’s evidence instead. The updates are available in the Antitrust Division’s chapter of the Justice Department Enforcement Manual.
A Few Antitrust Thoughts
First, we should not be terribly surprised by this update. Senior Justice Department officials have been telling us for some time that they want to see a true spirit and culture of compliance from corporate offenders. That means prompt, voluntary, self-disclosure of misconduct. A company can’t do otherwise and still say it embraces the spirit of ethics and compliance; embracing the spirit of ethics and compliance means confessing your misconduct, even when you know that’s going to bring some degree of scrutiny and pain.
I was also intrigued to see the language that a company should “make a confession of wrongdoing that is truly a corporate act, as opposed to isolated confessions of directors, officers, and employees.” To me, that suggests that your company should have a formal, written policy in favor of self-disclosure. A policy sends a powerful signal that the company has a bias in favor of disclosure, rather than a bunch of executives calculating possible consequences on a case-by-case basis.
I mean, sure, you can still do the calculating too; but a written policy is something you can slide across the table to prosecutors. That sends a message about corporate values, which is what the Justice Department wants to see.
We also have that language where the company must “improve its compliance program to mitigate the risk of engaging in future illegal activity.”
Now, I’m all in favor of a company making improvements to its compliance program, and of delaying settlements until the Justice Department deems that the offending company’s compliance program is now effective. But how would this criterion from the Antitrust Division square with last week’s news from the Criminal Division that prosecutors might ask compliance officers to certify the effectiveness of their compliance program?
After all, antitrust is very much a sin of collusion. Even the best policies and internal controls can have a tough time stopping groups of people determined to collude and commit misconduct. If I were a compliance officer asked to certify the effectiveness of my antitrust program, I’d be very uncomfortable with that demand.
So already we have examples of why the Criminal Division needs to say much more about this CCO certification idea, since it could have implications in antitrust matters and lord knows what else. Let’s hope the brass at the RFK Building give such guidance sooner rather than later.