The U.S. Department of Justice’s Antitrust Division has historically taken a tough stance against corporate compliance programs that arguably failed to prevent employees from committing criminal antitrust offenses, such as price fixing and bid rigging. For instance, the Division has never opted to forgo charges, file lesser charges, or impose a lower fine against a corporation on the basis that it had a generally effective compliance program. If an antitrust violation occurred at all, so the Division’s traditional position held, the corporation’s compliance program must have been ineffective, almost by definition. Such a rigid approach has been criticized as being “all stick and no carrot,” as well as being out of line with the rest of the DOJ.
In an apparent response to this criticism, the Division recently has signaled a willingness to add more “carrots” to its policy. Since 2015, the Division has imposed lower criminal fines on three separate occasions where the pleading companies “substantially” improved their compliance programs after the wrongfully conduct occurred. These cases involving post-violation compliance enhancements represent the only instances to date where the Division has provided compliance-related credit. Notably, during this time, the Division has hewed to its policy that it will not provide companies any credit—either at the charging or sentencing stages—for even exemplary compliance programs that existed before the wrongful conduct occurred.
There are strong signs, however, that the Division may soon revisit its longstanding position. For nearly a year, the Division has publicly stated that it is reevaluating whether, and if so how, to credit companies that have invested in robust pre-existing compliance programs. If adopted, such a striking policy shift could allow companies with generally effective compliance programs to substantially mitigate the penalties imposed on them during a cartel investigation.
This article discusses the principles underlying the Division’s historical “zero credit” policy toward compliance programs, the implications of recent shifts in this policy, and what broader shifts may be on the horizon. This article also discusses the factors that the Division is likely to find persuasive when determining whether to credit a corporate compliance program.
Historical Justifications for ‘Zero Credit’ Policy
Over the years, the Division has offered the following policy rationales for declining to credit compliance programs when making charging or sentencing decisions:
• Companies that participate in antitrust cartels often have “paper compliance programs” because “[c]ompanies don’t accidentally conspire to fix prices, rig bids, or allocate markets” and because “[c]artels are seldom short-lived and … [typically] aren’t limited to low level or rogue employees.” Brent Snyder, Deputy Assistant Attorney General, DOJ Antitrust Division, Compliance Is a Culture, Not Just a Policy 7 (Sept. 9, 2014) (hereinafter, Compliance Is a Culture).
• “[T]he vast majority of [antitrust] conspiracies … reflect true corporate acts” because they “primarily benefit the companies,” id., and because they typically “are committed by … high-ranking officials.” William Kolansky, Deputy Assistant Attorney General, DOJ Antitrust Division, Antitrust Compliance Programs—The Government Perspective 14-15 (July 12, 2002).
• The U.S. Attorneys’ Manual and U.S. Sentencing Guidelines make clear that companies should not receive credit for compliance programs if a sufficiently senior executive “participated in, condoned, or was willfully ignorant of, the offense,” which is true of most antitrust cartels. U.S. Sentencing Guidelines Manual §8C2.5(f)(3)(B); see also S. Attorney’s Manual §9-28.800.
• The threat of “high fines for the company; significant jail time for executives; expensive attorneys’ fees; substantial civil damages owed to customers; and exposure to further criminal investigations—not to mention the associated bad publicity and internal distraction from the actual business of the company”—provide companies with more than enough reasons to invest in robust compliance programs. Compliance Is a Culture at 2.
• The Division’s leniency program—where the company that is the first to self-report its involvement in a cartel can avoid criminal prosecution and limit its civil exposure—already rewards corporations for investing in compliance programs that enable them to promptly detect unlawful conduct. Id. at 2-3.
Moreover, Division prosecutors have sometimes pointed to a relatively obscure provision of the U.S. Attorneys’ Manual, which states that although “it is entirely proper in many investigations for a prosecutor to consider the corporation’s pre-indictment conduct,” “this would not necessarily be appropriate in an antitrust investigation, in which antitrust violations, by definition, go to the heart of the corporation’s business.” U.S. Attorney’s Manual §9-28.400 (emphasis added).
These policy rationales have engendered pushback. In short, critics have argued that the presumption that any antitrust offense goes to the heart of a corporation’s business is out of step with our modern economy where corporations are increasingly large, international, diversified, and decentralized. These critics also argue that the failure to sufficiently reward robust compliance programs disincentivizes companies from investing in such programs in the first place.
Recent Shifts in the ‘Zero Credit’ Policy
In September 2014, the Division teased that it was “actively considering” ways to “credit companies that proactively adopt or strengthen compliance programs after coming under investigation.” Compliance Is a Culture at 9. A few months later, the Division made good on its word. In May 2015, a multinational financial institution pled guilty to conspiring to manipulate the price of U.S. dollars and euros exchanged in the foreign currency exchange market. As part of this plea deal, the Division recommended a lower fine because the company had made “substantial improvements” to its compliance program during the pendency of the investigation, thereby marking the first time the Division had ever provided a company with any type of compliance-related credit.
In its sentencing memorandum, the Division explained that such an unprecedented recommendation was warranted because the company had taken “dramatic steps” to “instill a new attitude toward compliance and good corporate citizenship.” U.S. v. Barclays PLC, No. 3:15-cr-00077(SRU) (D. Ct.), Dkt. Entry 44, DOJ Sentencing Memo. at 10 (Dec. 1, 2016). Among other efforts, the company:
• “replaced its senior management with a new management team that, from the outset, emphasized the importance of compliance and remediation;”
• initiated “a truly comprehensive” and “worldwide review of its governance, operational model, and risk and control programs;”
• “implemented changes to its organizational structure, including making its Legal and Compliance functions independent of the business;” and
• changed the structure and operations of the business unit where the unlawful conduct occurred “in a manner designed specifically to address the conduct at issue.”
Id. at 10-12.
About four months later, a Japanese company pled guilty to conspiring to fix the prices of parts sold to U.S. automobile manufacturers. The Division recommended a lower fine because the company implemented during the investigation “a comprehensive and innovative compliance policy” that sought to “ensure that it would never again violate the antitrust laws.” U.S. v. Kayaba Industry Co., Ltd., No. 1:15-cr-00098-MRB (S.D. Oh.), Dkt. Entry 21, DOJ Sentencing Memo. at 10 (Oct. 5, 2015).
In its sentencing memorandum, the Division complimented “[s]enior management’s efforts [to] set the tone at the top” by making “compliance with the antitrust laws a true corporate priority,” including by creating a program that had:
• mandatory and carefully tailored “training [for] senior management and all sales personnel;”
• meaningful measurements of the “effectiveness of the training” by “testing employees’ awareness of antitrust issues before and after the training;” and
• “[a]n anonymous hotline” for reporting possible violations.
Id. at 7-8.
Finally, in May 2018, the Division recommended for a third time in its history that a corporation receive sentencing credit for actions to remediate the wrongdoing and other improvements to an existing compliance program. In its sentencing memorandum, the Division cited the company’s “significant changes to its overall corporate culture regarding compliance,” including by:
• restructuring the “compliance function to be separate and independent from its business lines;”
• “add[ing] substantially to the number of compliance personnel;” and
• significantly changing the structure and operations of the business units in which the unlawful conduct occurred, which included implementing surveillance tools focused on monitoring communications that raise greater antitrust risks.
U.S. v. BNP Paribas USA, No. 1:18-cr-00061-JSR (S.D.N.Y.), Dkt. Entry 7, DOJ Sentencing Memo. at 8 (May 22, 2018).
These developments were generally well-received in the bar and business community as reflective of greater prosecutorial flexibility and transparency. The question emerged, though: If the Division was willing to acknowledge a company’s efforts to transform its compliance culture after the wrongdoing, why not acknowledge similar efforts prior to the conduct?
Antitrust Division Signals More Changes to ‘Zero Credit’ Policy
In April 2018, the Division convened a roundtable where defense attorneys and in-house counsel argued that corporations would be more willing to invest in comprehensive antitrust compliance programs if they knew that the Division would be open to providing them greater credit. About one month later, the Division announced that it was examining under what circumstances it might be appropriate to consider pre-existing compliance programs when making charging decisions and sentencing recommendations. The Division subsequently suggested that it could announce the results of this internal review later this year.
The possibility that the Division might consider the strength of a pre-existing compliance program as a charging or sentencing factor would have been difficult to imagine to many in the Division’s career ranks a few years ago. But now that the Division has opened the door to crediting, in certain situations, improvements in compliance post-dating the wrongful conduct, it seems only natural in limited circumstances that it would consider the strength of a company’s pre-conduct compliance culture as well. Such a policy shift would be in line with the Division’s expressed commitment to rewarding excellence in compliance and a more general recent trend to bring certain aspects of the Division’s criminal enforcement program into greater conformity with traditional DOJ-wide practice.
If the Division moves to embrace a more open-ended consideration of corporate compliance programs, this policy shift could provide companies with another potentially powerful advocacy tool when seeking to convince the Division to forego criminal charges, bring lesser charges, or recommend the imposition of a lower fine. For instance, companies could argue that they should not be overly penalized for the conduct of low-level or rogue employees where the evidence shows that the company’s leadership sought to promote a culture of compliance, the company took all reasonable measures to prevent and detect anticompetitive conduct, and acted promptly to terminate and remediate the wrongdoing. Under such circumstances, the Division’s prosecutors, like their counterparts in other DOJ components, should be willing to credit the company’s compliance program.
What Makes an Antitrust Compliance Program Effective?
The Division has declined to identify a “check list” for implementing an effective antitrust compliance program because it believes that such programs “should be designed to account for the nature of a company’s business and for the markets in which it operates.” Compliance Is a Culture at 4. Nonetheless, the Division has given several clues regarding what it considers to be important elements of an effective compliance program. The Division has repeatedly emphasized that a company’s compliance program—no matter how robust—is doomed to fail if the most senior leaders do not champion and participate in the program given that “true compliance starts at the top.” Id. at 9. The Division has also identified the following factors as being fundamental to an effective program:
• the creation of legal and compliance units that have adequate resources and are independent from the business units they oversee;
• mandatory training for senior executives, business managers, and “high antitrust risk” employees (i.e., sales and pricing personnel) that is carefully tailored to reflect their roles and duties;
• an anonymous hotline where potential violations can be reported without fear of retaliation;
• a comprehensive process for monitoring and auditing business activities that create enhanced antitrust risks, as well as other specific measures designed to prevent recurrence of prior anticompetitive conduct; and
• a regular process for assessing the program’s effectiveness and identifying potential improvements, including through participant feedback.
Id. at 4-7.
Companies that bolster their compliance processes on these fronts will position themselves well in light of the likely imminent change in the Division’s treatment of pre-existing compliance programs.
Juan Arteaga is a partner in Crowell & Moring’s antitrust and white-collar and regulatory enforcement groups. He is a former Deputy Assistant Attorney General for the U.S. Department of Justice’s Antitrust Division, where he served between 2013 and 2017. Benjamin Sirota, a litigator at Kobre & Kim, is a former prosecutor with the Antitrust Division.