The DOJ’s Antitrust Division announced updates late last week to its Civil Investigative Demand (CID) form, explicitly codifying its intent to potentially use materials received in response to CIDs to launch secondary investigations or refer matters to other government enforcement authorities or agencies. In-house lawyers should be sensitive to three key takeaways.
Key Takeaways
- First, expansive enforcement actions can arise from unrelated investigations. Costly investigations and even criminal prosecutions have recently arisen from routine civil conduct investigations. The Antitrust Division may refer cases to other divisions within the DOJ or even other government agencies.
- Second, the approach companies’ take in responding to CIDs can reduce their risk. Responding to a CID can involve lengthy negotiations with the government over the scope of the demand. Having counsel who know your business, understand what the government is looking for, and have experience negotiating the scope of CIDs can reduce the cost of responding to a CID as well as the risk that the investigation will pull in irrelevant documents leading to additional investigations.
- Third, the possibility of secondary investigations arising from a CID response compounds the risk of inadequate antitrust compliance. Even a routine merger investigation or third party CID response can lead to unrelated violations being uncovered. The best way to protect against that scenario is to make sure company employees understand the shifting landscape of antitrust enforcement.
Assistant Attorney General Makan Delrahim of the DOJ’s Antitrust Division announced updates late last week to the DOJ’s Civil Investigative Demand (CID) form and deposition process. CIDs are requests for information (which may encompass documents, testimony, and/or interrogatory-style questions) that the DOJ issues when investigating potential antitrust violations. First, the DOJ will include new CID language clarifying that it can and will share information that it receives in response to the CID in other proceedings.1 Second, and relatedly, DOJ attorneys taking depositions will ask questions on the record to ensure that witnesses understand the ways in which the information they provide can be used.
These updates formalize longstanding practices about how the DOJ uses the information it obtains in antitrust investigations. In-house lawyers should be sensitive to three key takeaways.
1. Expansive Enforcement Actions Can Arise from Unrelated Investigations
Costly investigations and litigation—and even criminal cases carrying jail time for company executives—have increasingly arisen out of routine civil investigations into unrelated conduct. Many of these investigations are never made public, but a number of high-profile antitrust cases in recent years began with seemingly-innocuous civil investigations:
- An expansive criminal prosecution of price-fixing in the packaged seafood industry arose following an investigation into a merger between two industry participants. As part of that proceeding, the former CEO of one large packaged seafood manufacturer was recently sentenced to 40 months in prison.2
- An investigation into a “no-poaching” arrangement between three rail equipment companies arose out of the DOJ’s investion of a merger between two of the companies.
- Following an investigation into the potential merger of two television station ownership groups, the DOJ launched a separate investigation into whether communications between the merging parties constituted separate antitrust violations.
The DOJ’s guidance, however, is not limited to referrals within the Antitrust Division. For example, attorneys at the Antitrust Division can refer information received from a CID to a local U.S. Attorney’s office to investigate potential violations of the False Claims Act. There are also examples of the Antitrust Division referring matters to the Securities and Exchange Commission for investigation. In short, you should not expect that an antitrust investigation will necessarily stay an antitrust investigation.3
2. Companies’ Approach to Responding to CIDs Can Help Reduce Risk
Given the emphasis from the DOJ Antitrust Division that it will follow-up on any perceived antitrust violation it comes across—or refer other unlawful conduct to other divisions of the DOJ or even other government agencies—it is critical to respond to CIDs carefully. CIDs often include broad requests for documents and information, often with little attention given to the burden imposed on the responding company. Responding to a CID can involve lengthy negotiations with the government about the structure of the company and where the investigating agency is likely to find the information it seeks to obtain. Having counsel who know your business, understand what the government is looking for, and have experience negotiating the scope of CIDs can dramatically reduce the cost of responding to a CID. As importantly, narrowing the scope of the investigation helps reduce the risk that the investigation will pull in irrelevant documents that could lead to additional investigations or unnecessary scrutiny of side issues that delay the completion of the initial investigation.
Because criminal investigations and potential prosecutions may arise as a consequence of information obtained in civil antitrust investigations, there may be strategic determinations to be made about when and how to invoke Fifth Amendment rights against self-incrimination in the course of a civil investigation. Partnering with counsel that have experience in recognizing such risks and making such determinations can be critical to the success of any follow-on criminal defense.
3. Broad Antitrust Compliance Initiatives Can Further Reduce Risk
In-house counsel may not always know that an antitrust violation is occurring, especially when committed by lower-level employees that in-house lawyers do not interact with on a regular basis. The DOJ opening secondary investigations based on conduct it uncovers when reviewing CID materials compounds the risk of inadequate antitrust compliance. A routine merger investigation, or even providing documents as a third party in an unrelated matter, can lead to the discovery of unrelated violations. The best way to protect against that scenario is to make sure company employees understand the shifting landscape of antitrust enforcement and that the company maintains a robust antitrust compliance program, customized to the specific risks faced by the company. That way, the DOJ will not find anything warranting a follow-up investigation regardless of what documents or testimony are provided in response to a CID.
Footnotes
1) Specifically, CIDs will now note that: “The information you provide may be used by the Department of Justice in other civil, criminal, administrative, or regulatory cases or proceedings. Individuals may refuse, in accordance with the rights guaranteed to them by the Fifth Amendment to the Constitution of the United States, to produce documents and/or answer any question that may tend to incriminate them.”
2) See https://www.justice.gov/opa/pr/former-bumble-bee-ceo-sentenced-prison-fixing-prices-canned-tuna
3) The Antitrust Division Manual explains that: “Sometimes a particular matter more properly should be investigated by another Federal agency or a state or local prosecutorial agency rather than the Division. A matter that involves an issue that is not of direct antitrust significance may be referred to a more appropriate authority (e.g., a state consumer protection agency). If the matter is an antitrust matter that impacts a relatively small geographic region and involves a relatively small amount of commerce, the Division may refer the matter to the antitrust section of the appropriate state attorney general’s office.”
See Page III-11.
