The U.S. Department of Justice, Antitrust Division's (the Division) Corporate Leniency Policy has been a central pillar of the Division's criminal cartel enforcement for nearly 30 years.1 Under the Corporate Leniency Policy, the Division provides complete immunity from criminal prosecution and related fines for the first entity to self-report a criminal antitrust violation and, thereafter, fully cooperate in the Division's investigation. Leniency also provides non-prosecution protection for the company's current officers, directors, and employees in most circumstances. Because only a single entity can obtain leniency, a company involved in a criminal antitrust conspiracy is in a race with other companies to obtain leniency.
Last week, the Division announced two important updates to the policy.2 First, the Division announced that any company applying for leniency must have "promptly" self-reported the anti-competitive conduct to the Division after discovering it. Second, the Division announced that any company applying for leniency must undertake measures to redress the harm caused by the anti-competitive conduct that is not remediated by restitution and to improve its compliance program. Both updates affect the calculus, costs, and predictability for companies that might be considering applying for leniency and how the Division is likely to implement the Leniency Policy going forward.
Background on Corporate Leniency Policy
Under the Corporate Leniency Policy, the Division provides complete immunity from criminal prosecution and related fines for the first entity to self-report a criminal antitrust violation and, thereafter, fully cooperate in the Division's investigation.3 Leniency also provides non-prosecution protection for the company's current officers, directors, and employees in most circumstances. Because only a single entity can obtain leniency, a company involved in a criminal antitrust conspiracy is in a race with other companies to obtain leniency.
To start the leniency process, a company typically contacts the Division to request a "marker." A "marker" effectively reserves the opportunity for leniency, giving the company time to present information to the Division that supports the antitrust violation (referred to as "perfecting the marker").4 Prior to the announcement last week, there was no requirement specifying when a company must seek a marker or report the conduct in order to be eligible for leniency.5 The Division had encouraged companies to seek a "marker" at "first indication of wrongdoing" and "as soon as possible" in order to avoid another company obtaining the leniency marker, but there was no expressed timing requirement for reporting.
Once the marker has been perfected, the Division issues a letter granting conditional leniency. This is "conditional" on the company meeting various requirements, including inter alia the company's full cooperation in the Division's investigation and the company making restitution with injured parties of the anti-competitive conduct (where possible).6 Prior to the announcement last week, there was nothing expressly requiring additional "remediation" of the harm caused by the conduct. The restitution requirement came closest, but in practice a company typically met the requirement by being named in civil follow-on damage suits. The Division historically has not involved itself in the amount of restitution that should be paid, to whom it should be paid, or when it should be paid. Further, the Division has not required a compliance program as a condition of leniency.7
Updates to Corporate Leniency
On April 4, 2022, the Division issued a rewritten leniency policy and "Frequently Asked Questions about the Antitrust Division's Leniency Program" and announced two key updates to the corporate leniency policy. First, to qualify for leniency, a company must promptly self-report after discovering wrongful conduct.8 The Division considers a self-report to be made promptly if, based on the facts and circumstances of the illegal activity and the size and complexity of operations of the company, the company either disclosed the conduct at the first indication of possible wrongdoing or after conducting a timely, preliminary internal investigation to confirm that a violation occurred.9 In either situation, the company bears the burden of proving that its self-reporting was prompt.10 If the company does not succeed in proving its self-reporting was prompt, then the Division will not grant leniency. The Division provided an example of when the Division will not consider a reporting to be done promptly: "a company finds out about illegal conduct, they confirm it and then they wait and wait to see if the government does anything about the illegal conduct…And then once the government opens an investigation, the company comes in and applies for leniency...that's not good corporate behavior."11
Second, to qualify for leniency, a company is now required to undertake remedial measures to redress the harm it caused and improve its compliance program.12 The Division made clear that these remedial measures are in addition to making restitution to injured parties.13 But the Division did not make clear what remedial measures will entail, explaining that it "depends on the nature of the illegal activity."14 The Division noted that "[t]his may include additional steps demonstrating recognition of the seriousness of the illegal activity, acceptance of responsibility for it, and the implementation of measures to reduce the risk of repetition of the illegal activity, including measures to identify future risk."15 The Division gave an example of conducting a "root cause analysis" and tailoring a remedy to address the root cause or taking measures to reduce the risk of that root cause.16 The Division also commented that it may consider whether the company disciplined or removed "culpable, non-cooperating personnel" when assessing whether the company met the remediation requirement.17
The Division's Assistant Attorney General (AAG) Kanter announced that these changes are designed to "further promote accountability[.]"18 For the first (prompt reporting), AAG Kanter explained that the new prompt reporting requirement will ensure that "[a] company that discovers it committed a crime and then sits on its hands hoping it goes unnoticed does not [qualify for] leniency."19 Moreover, the Division noted that "prompt reporting, rather than termination is the key" to "giv[ing] the [D]ivision the best chance to gather evidence through consensual recordings and other affirmative investigative techniques."20 For the second (remediation), the Division announced that "[t]his requirement ensures that that [sic] the applicant fully remedies the harm caused by the offense, to the extent not covered by restitution, and eliminates or reduces the risk of recidivism."21
Conclusion
While too early to know how significantly these changes will affect the Division's Corporate Leniency Policy in practice, the changes do add new requirements for companies to qualify for leniency. The changes also add uncertainty as to whether companies will be able to meet the enhanced qualifications (e.g., did the company report "promptly" enough) and what the costs will be for applying for leniency (e.g., what additional remediation will be required), which make them a significant departure from the transparent and predictable approach that has long made the Division's leniency policy a success. Wilson Sonsini will provide additional commentary soon on the potential impact, but for now it is imperative that all companies understand the Division's updates to its corporate leniency program so that they can make an informed decision on whether (and when) to seek leniency.
[1] See, e.g., Richard Powers, Acting Assistant Att’y Gen., U.S. Dept. of Justice, Antitrust Division, Remarks at Organisation for Economic Co-operation and Development (OECD) (June 5, 2018), https://www.justice.gov/opa/speech/acting-deputy-assistant-attorney-general-richard-powers-delivers-remarks-organisation (describing leniency as the Division’s “most effective investigative tool against cartels”); Scott Hammond, Dir. of Crim. Enf., U.S. Dep’t of Justice, Antitrust Division, Detecting and Deterring Cartel Activity Through an Effective Leniency Program (Nov. 21, 2000), https://www.justice.gov/atr/speech/detecting-and-deterring-cartel-activity-through-effective-leniency-program (stating that leniency is “the single greatest investigative tool available to anti-cartel enforcers”).
[2] See Jonathan Kanter, Assistant Att’y Gen., U.S. Dept. of Justice, Antitrust Division, Assistant Attorney General Jonathan Kanter Delivers Opening Remarks at 2022 Spring Enforcers Summit (April 4, 2022) (hereinafter Kanter Remarks), https://www.justice.gov/opa/speech/assistant-attorney-general-jonathan-kanter-delivers-opening-remarks-2022-spring-enforcers.
[3] Although the Division first adopted a corporate leniency policy in 1978, the policy did not take this form until 1993, when revisions were made, limiting the Division’s discretion in its application of the policy and extending the company’s immunity to its current directors, officers, and employees.
[4] See Antitrust Division Leniency Policy and Procedures, https://www.justice.gov/atr/page/file/1490246/download.
[5] The previous requirements for Corporate Leniency are identified on pages 4-5 of the Frequently Asked Questions, published January 2017, available at https://www.justice.gov/atr/page/file/926521/download.
[6] See id.
[7] See id.
[8] See Antitrust Division Leniency Policy and Procedures, https://www.justice.gov/atr/page/file/1490246/download; see also Kanter Remarks, https://www.justice.gov/opa/speech/assistant-attorney-general-jonathan-kanter-delivers-opening-remarks-2022-spring-enforcers.
[9] See Frequently Asked Questions About the Antitrust Division’s Leniency Program (April 4, 2022), https://www.justice.gov/atr/page/file/1490311/download; see also Lewis Crofts, Speed of disclosure of cartels to be evaluated based on company characteristics, U.S. DOJ enforcer says, mLex (April 6, 2022) (quoting Marvin Price as saying, regarding promptness, “We look at all the facts and circumstances of the situation. We consider the scope and complexity of the operations of the company.”).
[10] See id.
[11] Lewis Crofts, Speed of disclosure of cartels to be evaluated based on company characteristics, U.S. DOJ enforcer says, mLex (April 6, 2022) (quoting Marvin Price).
[12] See Antitrust Division Leniency Policy and Procedures, https://www.justice.gov/atr/page/ file/1490246/download; Kanter Remarks, https://www.justice.gov/opa/speech/assistant-attorney-general-jonathan-kanter-delivers-opening-remarks-2022-spring-enforcers.
[13] See Antitrust Division Leniency Policy and Procedures, https://www.justice.gov/atr/page/ file/1490246/download.
[14] See Frequently Asked Questions About the Antitrust Division’s Leniency Program (Update Published April 4, 2022), https://www.justice.gov/file/1490271/download.
[15] Id.
[16] Id.
[17] Id.
[18] See Kanter Remarks, https://www.justice.gov/opa/speech/assistant-attorney-general-jonathan-kanter-delivers-opening-remarks-2022-spring-enforcers.
[19] Id.
[20] Max Fillion, Quicker leniency requests from cartelists will boost U.S. DOJ’s evidence-gathering, Powers says, mLex (April 6, 2022) (quoting Richard Powers).
[21] See Frequently Asked Questions About the Antitrust Division’s Leniency Program (Update Published April 4, 2022), https://www.justice.gov/file/1490271/download.
