In recent years, “compliance” has become a buzzword in the business world and the implementation of effective corporate compliance programs a necessary element of every industry’s best practices. These developments stem – in no small part – from the substantive policies and guidelines put into place to recognize and reward companies with effective compliance programs, even if those companies later end up in the crosshairs of a criminal investigation or prosecution.
Holding itself apart from this general trend, the Antitrust Division of the U.S. Department of Justice has rigidly maintained that a compliance policy is only “effective” if it actually leads a company to detect an antitrust violation and be the first to report the violation. Recently, however, Antitrust Division representatives have made public remarks that suggest a change of perspective, if not policy. This article discusses those recent remarks in the context of past policies and practices and offers a “cheat sheet” of takeaways with respect to the elements of effective compliance programs that are most important to the Antitrust Division.
Incentives for Effective Compliance Programs
In 1991, the U.S. Sentencing Guidelines were revised to permit reduced criminal sentences for companies with an “effective program to prevent and detect violations of law,” creating an additional incentive for companies to establish effective compliance programs in advance of a violation. As modified today, these guidelines provide detailed instruction on what makes a compliance program “effective” and note that a “failure to prevent or detect the instant offense does not necessarily mean that the program is not generally effective in preventing and detecting criminal conduct.” (USSG §§ 8C2.5(f), 8B2.1)1
Since then, the Department of Justice (DOJ) also modified its prosecutorial policies to encourage “truly effective” corporate compliance programs. Recognizing that “no compliance program can ever prevent all criminal activity by a corporation’s employees,” the DOJ outlined fundamental questions to be asked in assessing the effectiveness of a company’s compliance program. If a program is “effective,” the DOJ may charge only employees and agents or mitigate the charges or sanctions against the company. (United States Attorneys’ Manual, 9-28.800.)2
More recently, the DOJ teamed with the Securities and Exchange Commission (SEC) to produce an FCPA resource guide that emphasizes the substantial benefits of effective compliance programs. In this guide, the DOJ and SEC describe the incentives under the guidelines and policies above, but also note that an effective compliance program may influence whether charges are resolved through a deferred prosecution or non-prosecution agreement, the length of such agreements, probation terms, penalty amounts and the potential need for a monitor. (FCPA: A Resource Guide to the US Foreign Corrupt Practices Act, p. 56 (Nov. 14, 2012).)3 The agencies explain:
“These considerations reflect the recognition that a company’s failure to prevent every single violation does not necessarily mean that a particular company’s compliance program was not generally effective. [The] DOJ and SEC understand that ‘no compliance program can ever prevent all criminal activity by a corporation’s employees,’ and they do not hold companies to a standard of perfection. (Id.)”
Antitrust Division Holds Itself Apart
In 1993, shortly after the first Sentencing Guideline changes above, the Antitrust Division (Division) established a leniency policy specifically for antitrust violations, which permitted companies to qualify for “corporate amnesty” in two general circumstances:
(1) a company reports illegal activity before the Division learns about the activity from another source; or
(2) although the Division learned about the illegal activity from another source, the company is the first to report and qualify for leniency for a separate unreported illegal activity and the Division does not already have sufficient evidence to convict that company on the previously reported activity.
(Department of Justice, Corporate Leniency Policy.)4
If a company qualifies for amnesty, both the company and its cooperating employees may avoid criminal prosecution and some civil penalties.
Since the establishment of the leniency policy, the Division has separated itself from the general guidance above, maintaining that its leniency policy provides a sufficient (and exclusive) means for companies to benefit from an effective corporate compliance program, maintaining that a compliance program cannot be truly “effective” if it does not enable the company to either prevent the violation or qualify for amnesty under the leniency policy.
In this context, the Division contends that antitrust defendants are exempted from Sentencing Guidelines that otherwise permit sentencing reductions based on pre-existing effective compliance programs. (Ted Banks & Joe Murphy, CCEP, Antitrust: The Compliance Area You Thought You Knew, But Don’t, Ethisphere (June 4, 2013).)5 The Division also obtained an explicit exemption from prosecutorial policies favoring effective compliance programs, with a provision providing that “credit should not be given at the charging stage for a compliance program [in an antitrust prosecution,]” and that “amnesty is available only to the first corporation to make full disclosure to the government.” (United States Attorneys’ Manual, 9-28.400.)6
Presumably, these exemptions reflect an intent to maintain the Division’s leniency policy as “the only show in town” to mitigate corporate antitrust liability. But the same exemptions may also have the unintended consequence of leaving the Antitrust Division on the outside of the ever-growing discussion surrounding best policies and practices for compliance programs.
Recent Commentary from Antitrust Division Representatives
After several years of relative silence on the issue, two Antitrust Division representatives delivered public speeches addressing compliance in September of this year. Deputy Assistant Attorney General Brent Snyder discussed the value and importance of having an effective compliance program prior to a violation (or its discovery),7 and Assistant Attorney General Bill Baer discussed the importance of instituting effective compliance policies following a conviction or guilty plea.8
Snyder’s speech is likely the more significant, as it may signal a shift in the underlying perspective of the Division. Although Snyder began his speech by reiterating the Division’s long-standing positions – i.e., that compliance programs “should prevent a company from conspiring to fix prices, rig bids, or allocate markets,” and “should prevent the crime from beginning or, at a minimum, detect it and stop it shortly after it starts” – the language Snyder used throughout the remainder of his speech was notably qualified and not absolute.
Snyder acknowledged that a compliance program would only prevent all collusion in an “ideal world.” He also appeared to concede that an effective compliance program may not always uncover cartel activity in time to win the race to report under the Division’s leniency program, stating that a company with a partially effective compliance program “should be able to discover the cartel early, increasing its chances of seeking leniency before its co-conspirators do.” Finally, Snyder concluded his speech with two “hard truths:”
(1) “The existence of a compliance program almost never allows a company to avoid criminal antitrust charges,” and
(2) “[T]he Division, like the Department of Justice as a whole, almost never recommends that companies receive credit at sentencing for a pre-existing compliance program.” (Id.)
These “hard truths” are more flexible than they might otherwise seem, since they break from the Division’s former hard-line positions by suggesting that there might be a situation where the existence of an effective compliance program does enable a company to avoid criminal charges, or where the Division does recommend credit at sentencing for a pre-existing compliance program.
It is also notable that Snyder’s entire speech equates the Division’s treatment of corporate compliance programs with the historical treatment of such programs by the DOJ as a whole. This is significant because the Division’s positions in the past appeared to be specifically designed to separate the Division from the general DOJ rewards system for effective compliance programs. Thus, although Snyder’s speech does not revise the policies or exemptions discussed above, it does appear to signal a change in perspective, including recognition that it is at least possible for an antitrust compliance program to be “effective,” even where the program may have failed to actually prevent a violation or to support an application for leniency.
Cheat Sheet: What to Take From Recent Comments from Division Representatives
The recent speeches of Snyder and Baer pinpointed certain elements considered to be of primary importance to an effective antitrust compliance program. Based on those speeches, companies should take particular note of the following themes:
- Compliance starts at the top. Executives and Board members must support and be knowledgeable about compliance efforts, laying the foundation for a “culture of compliance.”
- Educate. Executives, managers and employees with sales/pricing responsibilities must be educated in applicable law and given opportunities to report violations.
- Monitor and audit. All “at-risk” activities should be regularly monitored and audited, and the compliance program regularly evaluated.
- Discipline culpable employees. If culpable employees are retained in positions where they may repeat infringing conduct or impede an investigation, the company’s commitment to effective compliance may be questioned.
- Prevent further violations. If a compliance program fails to prevent certain criminal conduct, it must be revised to prevent similar violations in the future.