Criminal Antitrust Enforcement: The Success Of The Leniency Program

by Michael Volkov

crimanti2With all the attention paid to anti-corruption enforcement and compliance, it always amazes me how successful the Department of Justice criminal antitrust enforcement program has been and will continue to be.  Starting in the 1990s and continuing year-after-year, the Antitrust Division has built a significant record of corporate and individual prosecution of cartel criminals.  In fiscal year 2012, the Antitrust Division collected a record $1.1 billion in fines and penalties.

The Antitrust Division has a number of important ongoing criminal investigations, including the auto supplier industry, and the LIBOR price-fixing prosecutions.  The Antitrust Division has built its success on its long-time leniency program, which provides significant incentives for cartel members to disclose their participation in a cartel.  It has been a resounding success.

Criminal prosecutions of individuals have also increased and courts have been imposing more severe punishment for defendants convicted of criminal antitrust offenses.  Forty-five executives were sentenced to prison in 2012.

The leniency program rewards the first company that discloses the cartel and cooperates.  The first-in company has to cease participation in the cartel quickly after discovering the conduct, admit a criminal violation, cooperate (for years) in an ongoing investigation against other members of the cartel (and in any other criminal activities it may be participating in or aware of).  The first-in award cannot be given to a company that is the organizer and leader of the cartel, and cannot be awarded if the government has an existing investigation of the cartel.  A successful leniency applicant can receive a “pass” from the government, meaning no plea or fine, and earn protection of payment of only single damages in a collateral civil class action.

Members of a cartel that cannot earn the “first-in” status have an incentive to report and cooperate in a cartel investigation in order to secure significant reductions in criminal penalties.  Companies may earn “first-in” status in a related market and “second-in,” or “third-in” status in related product markets.crimanti3

There are a number of permutations to the leniency program depending on situations where the company applies for leniency in one product market and later learns about cartel activity in a related product market.

The race for leniency can be very valuable since it can mean the difference between no penalty and a criminal plea and substantial fine.  Companies always have a strong incentive to cooperate in a criminal antitrust investigation given the discounts available from penalties which may be imposed.

If the cartel operates internationally, the calculation and race for leniency can occur simultaneously in a number of countries.  Competition authorities around the globe have created significant benefits to companies which disclose cartels and cooperate.  Even after an investigation begins, companies are given discounts in other countries for cooperating.

crimantiThe United States, however, stands out as the most aggressive country to pursue criminal penalties against individual executives.  While several countries have criminal laws applicable to individuals for antitrust violations, the United States prosecutes more individuals and sends more individuals to jail for criminal antitrust violations.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Michael Volkov, The Volkov Law Group | Attorney Advertising

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Michael Volkov

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