Written by Ted Banks and Joe Murphy, CCEP
Readers of this publication don’t need to be told about the Sentencing Guidelines for Organizations, promulgated by the United States Sentencing Commission. You probably all know about the due diligence standards, and how you may be entitled to a sentence reduction if you can show that your compliance efforts meet the criteria for an “effective” program. And you probably also know that under the US Attorneys Manual, federal prosecutors will take your program into account in deciding how to treat your company.
But you probably thought that these standards apply to enforcement and sentencing for all federal crimes. And there you would be wrong. There is one area where your compliance program does not generate any credit, whether for enforcement or sentencing. It is not an obscure corner of federal law, it is an area every one of you probably covers with a very sophisticated compliance program: antitrust.
Since the organizational Sentencing Guidelines came out in 1991, antitrust has received this unique treatment. Currently, if one looks at § 2R1.1(d) of the Sentencing Guidelines, you will find that a minimum multiplier of .75 shall be applied to computation of penalties in antitrust cases, with no possibility of credit for compliance programs. You may also know that any violation involving “substantial authority personnel” has a violation against getting any credit. But look carefully at the definition of substantial authority personnel and you will find it is written essentially to cover anyone who could possibly commit an antitrust violation. So no one ever gets credit for an antitrust compliance program. Nor, under the US Attorneys Manual, does an antitrust compliance program get any consideration. For an explanation of why this is so, we need to turn to the U.S. Attorney’s Manual, which states that
it is entirely proper in many investigations for a prosecutor to consider the corporation’s pre-indictment conduct, e.g., voluntary disclosure, cooperation, remediation or restitution, in determining whether to seek an indictment. However, 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. With this in mind, the Antitrust Division has established a firm policy, understood in the business community, that credit should not be given at the charging stage for a compliance program, and that amnesty is available only to the first corporation to make full disclosure to the government.
Goes to the “heart of the corporation’s business”? What can they possibly mean by that? How does antitrust go to the heart of the business any more than other federal crimes? Well, there may be some regulatory crimes that really may not be key to a company’s operations (e.g., failure to properly label aerosol containers transported on an aircraft), but there are certainly many others that you could think of in an instant (bribery, stock fraud, mine safety – the list goes on an and on). And this is a flat, no exceptions rule. So a bid rigging between two junior salespersons on a $2000 cow-chip extractor’s maintenance contract in What Cheer, Iowa, automatically goes to the heart of a multinational, multi-billion dollar publicly-traded company’s business.
While giving no consideration for good faith compliance attempts, the official policy of the Antitrust Division is to rely exclusively on their amnesty program as the only incentivized system to discover cartel violations. The first participant in a cartel to confess before the Division starts investigating gets a complete pass from prosecution. Relative levels of culpability are not really a factor; if you are the first one in the door you get leniency and the rest are nailed. If you are not the first in the door, but were involved in a cartel because a rogue employee disobeyed company policy and ignored compliance training, and maybe even signed a statement that he or she would abide by the antitrust laws, the Antitrust Division doesn’t care. To the Division, a sham program and a diligent one following every element of the Sentencing Guidelines are exactly the same.
So, as far as the Antitrust Division is concerned, if your compliance program does not prevent a violation, or cause your company to be first to report a violation, it is simply a “failed program,” notwithstanding the opposite conclusion of the Sentencing Guidelines. The Sentencing Guidelines recognize that people are fallible, and that no program is perfect. The Guidelines provide criteria for an “effective” compliance program, which would be one where a company exercised due diligence to try to prevent or detect criminal conduct, and otherwise promoted an organizational culture that encourages ethical conduct and a commitment to compliance with the law. The Guidelines go on to state that
Such compliance and ethics program shall be reasonably designed, implemented,
and enforced so that the program is generally effective in preventing and
detecting criminal conduct. The failure to prevent or detect the instant offense
does not necessarily mean that the program is not generally effective in
preventing and detecting criminal conduct. [emphasis added]
Thus we have the basic divide. The Antitrust Division doesn’t care what you did for compliance unless it enables you to discover a violation and report it to them before they found out from anyone else. The Sentencing Commission wants organizations to create a culture of compliance and implement a compliance program, which may not stop or detect every violation. They expect the best that any human institution can produce: due diligence, not perfection.
This creates anomalous situations like the recent guilty plea from Bridgestone Corporation that involved both the Sherman Act and the Foreign Corrupt Practices Act. The Department of Justice noted that “[u]nder the terms of the plea agreement, Bridgestone has committed to continuing to enhance its compliance program and internal controls. As a result of these mitigating factors, the department agreed to recommend a substantially reduced fine.”  The result is so absurd it looks like a drafting error: the plea agreement contains detailed terms for an FCPA compliance program, but absolutely nothing on antitrust compliance! Note, too, that if there had only been a Sherman Act violation, and Bridgestone had been the first in the door to confess, they would have paid nothing, and had no obligation to enact any sort of compliance program thereafter.
A cynic would be tempted to say that when it comes to antitrust, the only real compliance program that should be implemented is careful monitoring of other members of a cartel to make certain that they do not beat you to the confessional. The amnesty program appears to have enticed a number of companies to confess to violations. That certainly helps enforcement statistics, but it lacks a certain moral consistency. A conspiracy ringleader without any compliance efforts who is the first to confess can get complete amnesty, while a minor player with a compliance program in place may face severe corporate punishment because of the unauthorized actions of a few employees. Worse, if the company with a program starts to audit suspect activity, this very good faith effort may be the thing that triggers the other conspirators to sprint to the government.
It seems bizarre that the Justice Department would adopt a policy for antitrust that is so much at odds with how it treats every other area of criminal responsibility. It would seem that the government should be interested in preventing violations of law, and encouraging compliance programs seems like the right place to start. But we see none of that from the Antitrust Division. There are no guidelines for antitrust compliance, and apparently nobody on staff who has any responsibility in this area.
But we are not cynics, which is why we are so concerned about this situation. The policy makes no sense, and urgently needs to be changed. Companies need to continue to be vigilant about antitrust compliance, with appropriate policies, communication, training, audits, and, where appropriate computer screening of suspicious patterns. This is done, of course, to prevent violations, not just to try to get a sentence reduction in the event of a violation. But those who are making this diligent effort certainly deserve better than abandonment by the Antitrust Division.
What about Europe?
If you have contact with EU markets then you are also exposed to competition law enforcement there as well. And what is their policy? While individual country members may disagree, the policy from the European Commission in Brussels is as bad as or worse than the Division. And they are not even original, using the exact words of the Division’s reference to “failed programs” to describe anything less than perfection.
Have a sham, cosmetic and paper program? They don’t care. Have a diligent, state-of-the-art powerful program, using audits, incentives and a fully empowered compliance officer? They don’t care. You are treated the same. In fact, practitioners report the enforcers look for information about your program to use against you.
Refer your employees to company in-house legal counsel for advice, to prevent violations? The EC demands to see all of those communications to use against you; there is no privilege for in-house counsel, even when trying to prevent cartels.
Have a diligent parent company insisting that all European operations have a strong anti-cartel compliance program? The EU can use your efforts to make the argument that the parent should also be liable.
Maybe there is a rationale behind these bizarre policies in Washington and Brussels. Like fishermen, the Antitrust Division and the EC are judged by how many big fish they haul in. Maybe the answer is simpler than we think. Maybe they just don’t want anything interfering with the supply of big fish. Maybe they do know how effective anti-cartel programs could be if the enforcers did anything significant to recognize and encourage them. Maybe, just maybe, they only care about the fine money, not preventing cartels.
About the authors:
Ted Banks and Joe Murphy are two cranky antitrust lawyers who like to complain
 Comments of Scott D. Hammond, Deputy Assistant Attorney General, at American Bar Association Section of Antitrust Law Spring Meeting, “Agency Update with the Antitrust Division DAAGs” (Washington, D.C., Mar. 30, 2011).
 United States Sentencing Guidelines, §8B2.1 (2011).
 Department of Justice Press Release (Sept. 15, 2011), http://www.justice.gov/opa/pr/2011/September/11-crm-1193.html
 Murphy, Introducing the FAST RAT Program (Oct. 31, 2011)
 The stated policy is not to grant amnesty to ringleaders, but the history suggests that this is not observed in practice.