Question: Can a company have both an effective antitrust compliance program and an antitrust violation?

DOJ before June 11, 2019: Nope.

DOJ today: Yes, and your company may even get a deferred prosecution agreement if your program is good enough.

For decades, the conventional wisdom was that the primary value of an antitrust compliance program was to prevent violations or to at least detect a violation early enough so that the company could win the race in applying to the U.S. Department of Justice (“DOJ”) for leniency. Although the DOJ rewarded self-reporting companies for their cooperation and, on rare occasions, for implementing subsequent remedial measures, it almost never gave companies any credit for having an existing compliance program.

That all changed on July 11, 2019. In a speech delivered at NYU School of Law, the DOJ’s antitrust chief, Makan Delrahim,¹ announced a new policy that allows companies to receive credit for existing antitrust compliance programs even when they fail.² The new policy could result in substantial benefits, including the possibility of deferred prosecution agreements for companies that were not the first to report the violation. To help facilitate the policy, the DOJ also issued a guidance document to help companies structure their compliance programs with the criteria the DOJ deems important (the “Guidance”).³

This development offers an opportunity for in-house counsel to examine their antitrust compliance programs to determine how they stack up against the new Guidance and to make any appropriate adjustments to best position the company to get the benefit of the credit should a violation occur. On the other side of the coin, a failure to review programs for consistency with the new Guidance is not only a lost opportunity, but risks enhanced scrutiny and a less favorable exercise of the DOJ’s prosecutorial discretion.

The New Regime: Effective Antitrust Compliance Programs Can Now Merit a Deferred Prosecution Agreement and Other Benefits

One of the more attractive carrots offered by the DOJ’s policy is the potential for a company to obtain a deferred prosecution agreement (“DPA”) by showing that the company had an effective antitrust compliance program in place at the time of the violation. A DPA allows a company to defer a criminal prosecution, but only if it complies with certain terms and conditions. So while, as Delrahim emphasized, a DPA is not a non-prosecution agreement (“NPA”), it can have the same practical effect by enabling companies to avoid prosecution if they fully comply with the articulated conditions. In the past, the prospect of avoiding prosecution altogether was only available to companies that were first to report the violation.

But merely having an antitrust compliance program “does not guarantee a DPA.” The DOJ made clear that it will closely examine each program on a case-by-case basis to determine whether it is “adequately designed for maximum effectiveness in preventing and detecting wrongdoing by employees,” and, of course, the prosecutors retain discretion.⁴

That case-by-case evaluation of the efficacy of compliance programs will also factor into how the U.S. Sentencing Guidelines are applied. For example, the program might influence the amount of any corporate fine, the need for an external monitor, and the calculation of the defendant’s culpability score.⁵

DOJ’s New Guidance Points to the Necessary Elements of an Effective Antitrust Compliance Program

Previously, the DOJ had provided little insight into what it would deem an adequate compliance program. While the new Guidance does not prescribe the details of an adequate program, it lays out a series of detailed questions that prosecutors should ask in evaluating the effectiveness of any program, which effectively provides a roadmap for the criteria the DOJ values. These questions center on the (1) the design and comprehensiveness of the program; (2) the culture of compliance within the company; (3) responsibility for, and resources dedicated to, antitrust compliance; (4) antitrust risk assessment techniques; (5) compliance training and communication to employees; (6) monitoring and auditing techniques, including continued review, evaluation, and revision of the antitrust compliance program; (7) reporting mechanisms; (8) compliance incentives and discipline; and (9) remediation methods.⁶

For example, questions include:⁷

• How often is the program reviewed and refreshed for recent developments?
• To what extent is the program tied to internal controls? Does the company track business contacts with competitors? Are these records monitored?
• Are employees trained to understand the company’s specific risks? Do they know not to destroy documents?
• Have senior managers tolerated antitrust violations in pursuit of new business, greater revenues, or maintaining customers? Is senior leadership setting the tone?
• Does the compliance officer report to the Board of Directors, audit committee or other independent body? Who reviews the effectiveness of the program?
• Is the company’s antitrust compliance program tailored to the company’s various industries/business lines and consistent with industry best practice?
• What information or metrics has the company collected and used to help detect antitrust violations?
• Is there a publicized system in place whereby employees may report or seek guidance about potentially illegal conduct?
• What incentives does the company provide to promote performance in accordance with the compliance program?
• What role did the antirust compliance program play in uncovering the antitrust violation?

A synthesis of the DOJ’s questions reveals that static or cookie cutter compliance programs will be disfavored. Programs and training will need to be customized to the unique risks posed by the company’s commercial relationships and competitive dynamics in each of its lines of business. Because these factors change over time, as do antitrust policy and enforcement priorities, programs will need periodic assessments for effectiveness.

Ambiguity Remains

Despite the utility of the Guidance’s detailed questions in helping companies understand the questions prosecutors will focus on in evaluating programs, the DOJ has deliberately declined to recommend a specific compliance program structure or to create any safe harbors. Delrahim repeatedly emphasized that effectiveness will be determined by a review of the nine relevant factors on a case-by-case and holistic basis. This leaves prosecutorial discretion squarely intact and ample room for reasonable minds to differ.

The Guidance also applies only to prosecutorial discretion in criminal actions. It is not clear whether an effective antitrust compliance program would benefit a company facing a civil enforcement action from the DOJ.

Opportunities for In-House Counsel

The new policy allowing credit for effective programs and the Guidance highlighting the criteria DOJ will focus on in evaluating them nonetheless provide a good opportunity for in-house counsel to reevaluate their antitrust compliance programs to ensure that they are designed with the goal of providing the greatest protection for the company.

In making that assessment, in-house counsel should consider the evolving nature of antitrust policy, changed competitive dynamics in their industry, and their company’s relationships with competitors, suppliers, and customers.

Footnotes

1) Makan Delrahim, Assistant Attorney General for the Antitrust Division of the U.S. Department of Justice.

2) U.S. Dep’t Justice, Press Release, Assistant Attorney General Makan Delrahim Delivers Remarks at the New York University School of Law Program on Corporate Compliance and Enforcement (July 11, 2019).

3) U.S. Dep’t Justice, Criminal Div., Evaluation of Corporate Compliance Programs in Criminal Antitrust Investigations, (July 2019).

4) U.S. Dep’t Justice, Criminal Div., Evaluation of Corporate Compliance Programs in Criminal Antitrust Investigations, (July 2019), citing Justice Manuel § 9-28.800.

5) U.S. Dep’t Justice, Press Release, Assistant Attorney General Makan Delrahim Delivers Remarks at the New York University School of Law Program on Corporate Compliance and Enforcement (July 11, 2019).

6) U.S. Dep’t Justice, Press Release, Assistant Attorney General Makan Delrahim Delivers Remarks at the New York University School of Law Program on Corporate Compliance and Enforcement (July 11, 2019).

7) U.S. Dep’t Justice, Criminal Div., Evaluation of Corporate Compliance Programs in Criminal Antitrust Investigations, (July 2019).