For most organizations, the risk of violating antitrust laws is real. But when it comes to the most serious of antitrust violations, such as cartels and significant price fixing schemes, there is often an “it won’t happen here” attitude that pushes compliance efforts to the back burner.
But the U.S. Department of Justice wants organizations to take antitrust compliance more seriously. In several recent speaking engagements senior members of the DOJ have sent a strong message that antitrust compliance matters—with a heavy emphasis on the importance of prevention, detection, senior leadership involvement, effective training, and self-reporting/cooperation. You can access the full text of their remarks here:
- “Compliance is a Culture, Not Just a Policy,” Brent Snyder, Deputy Assistant Attorney General, Antitrust Division, U.S. Department of Justice, September 2014
- “Prosecuting Antitrust Crimes,” Bill Baer, Assistant Attorney General, Antitrust Division, U.S. Department of Justice, September 2014
- Remarks at the 22nd Annual Ethics and Compliance Officers Association (ECOA) conference by Leslie Caldwell, Assistant Attorney General, Antitrust Division, U.S. Department of Justice, October 2014
Reading all three of these short speeches is important; each speaker has a different tone and slightly different focus. But when it comes to common themes there is one strong one: paper compliance programs with lack-luster senior leadership support that aren’t properly communicated to employees are not worth the paper they are written on.
Key quotes excerpted from these speaking engagement below provide a solid glimpse into the DOJ’s current state of mind when it comes to antitrust compliance programs and enforcement. (And just in case you weren’t clear about their position, Bill Baer, quoting from a U.S. Supreme Court decision, noted that cartels are “the supreme evil of antitrust.”)
1) A True Culture of Compliance Is Critical
Compliance is not just about applying that law, it’s about fostering a culture of compliance and ethics.
“Companies should be fostering a corporate culture that encourages ethical conduct and a commitment to compliance with the law.” - Bill Baer
“Effective compliance programs must be embedded in a company’s culture.” - Leslie Caldwell
What does your culture reveal? Do you know what employees and managers really think about compliance? Are you saying one thing and doing something else? Have you taken the time to ask them? If not, you should because time after time we see that “culture trumps compliance”.
2) Senior Leaders and The Board Ultimately Own Antitrust Compliance
While the efforts of a compliance department are important, it is ultimately up to senior leaders and the board to not only set tone that compliance matters, but also make sure that the program itself is effective and properly resourced.
“…corporate compliance starts at the top. The board of directors and senior officers must set the tone for compliance to ensure that the company’s entire managerial workforce not only understands the compliance program but also has the incentive to actively participate in its enforcement.” - Bill Baer
“Compliance with laws of all types is the cornerstone of good corporate citizenship. Although a compliance program must be combined with a real commitment by senior management to be truly effective” - Brent Snyder
The obligation to set the tone and ensure the program is effective goes beyond the compliance department staff to senior leadership and the board of directors. They must fully support and engage with the compliance program. They must lead by example. Senior leaders must monitor for compliance, and ensure that it implemented and maintained successfully. And the board must be actively engaged in overseeing risk and the program.
3) Antitrust Compliance Training and Communication Is An Absolute Must
No doubt organizations complain about seat time and budget challenges when it comes to antitrust compliance training—and these are two pressures that compliance programs face. But leaving employees without a basic understanding of their compliance obligations—or failing to teach higher-risk employees what they need to know to avoid antitrust violations—can no longer be justified. And the burden on organizations extends beyond employees to third parties.
“Compliance programs must be put into place and—more importantly—communicated repeatedly and enforced properly throughout the entire organization…If a company is actually encouraging compliance, if its values are to be ethical and within the law, then that message must be conveyed to employees in a meaningful way. Otherwise, the Department of Justice will not view the compliance program as credible.” - Leslie Caldwell
“…a company should ensure that the entire organization is committed to its compliance efforts and can participate in them. This means educating all executives and managers, and most employees – especially those with sales and pricing responsibilities. When appropriate, it may also mean providing training for subsidiaries, distributors, agents, and contractors. And it means providing all members of the organization the opportunity to report anonymously and seek guidance about potential or actual criminal conduct without fear of retaliation.” - Brent Snyder
Unfortunately, for most organizations they will fail miserably when the DOJ asks them about their training and communication efforts. Only 29% of organizations plan to do antitrust training in the next two to three years. (Source: NAVEX Global’s 2014 Training Benchmark Report)
4) Detection Is Vital, But Prevention Is Even More Important
Organizations must focus on prevention of criminal conduct and early detection, not just proper cooperation after an antitrust violation has been detected and investigated.
"A truly well-run compliance program should prevent a company from conspiring to fix prices, rig bids, or allocate markets. Effective compliance programs should prevent that crime from beginning or, at a minimum, detect it and stop it shortly after it starts." - Bill Baer
As recent high profile cases have reminded us, it is always better to spend money on the front end for training and resources than it is to spend multiples of that money on investigations, fines, penalties—and potentially the loss of customers and reputation.
5) The Risks Have Increased Significantly For Those with a Lackluster Antitrust Compliance Program
If you choose to “check the box” to create your antitrust compliance program, the consequences may be severe.
“Compliance is especially important because the risk of detection and punishment has never been higher. Today dozens of countries have effective and aggressive cartel enforcement programs. An increasing number of them have followed the U.S.'s lead and criminalized anticompetitive conspiracies.” - Brent Snyder
“Those who conspire to subvert the free market system and injure U.S. consumers are prosecuted vigorously and penalized appropriately. Our record demonstrates that corporations that commit these crimes face serious consequences, including significant criminal fines and, in appropriate cases, tough probation terms. Individual wrongdoers risk lengthy sentences. Courts have imposed criminal fines on corporations totaling as much as $1.4 billion in a single year; the average jail term for individuals now stands at 25 months, double what it was in 2004.” - Bill Baer
In addition, both Baer and Snyder warn that antitrust failures can result in years on probation and the appointment of a corporate monitor—consequences that carry heavy organizational costs and obligations.
6) Failing To Hold Antitrust Violation Perpetrators Accountable (Including Top Executives) Will Undermine All Efforts To Create An Effective Program
The DOJ has grown tired of organizations that keep violators (especially senior executives) in place and/or fail to effectively discipline them.
"It is hard to imagine how companies can foster a corporate culture of compliance if they still employ individuals in positions with senior management and pricing responsibilities who have refused to accept responsibility for their crimes and who the companies know to be culpable. If any company continues to employ such individuals in positions of substantial authority; or in positions where they can continue to engage directly or indirectly in collusive conduct; or in positions where they supervise the company’s compliance and remediation programs; or in positions where they supervise individuals who would be witnesses against them, we will have serious doubts about that company’s commitment to implementing a new compliance program or invigorating an existing one." - Bill Baer
Keeping violators around or in a position of authority undercuts all the hard work the compliance department and senior managers have done to create an effective antitrust compliance program. Ensure that your organizations responds swiftly, appropriately and fairly when violations are detected.
7) A Great Compliance Program Is Only The Start; The DOJ Expects Self-Reporting and Full Cooperation
An organization should not be looking for a pat on the back simply because they have a great program in place—a great program is a minimal requirement for organizations today. Your organization will need to do more to get any credit for its efforts.
“The existence of a compliance program almost never allows the company to avoid criminal antitrust charges. Why? Because a truly effective compliance program would have prevented the crime in the first place or resulted in its early detection.” - Brent Snyder
“…the Division, like the Department of Justice as a whole, almost never recommends that companies receive credit at sentencing for a preexisting compliance program. The Sentencing Guidelines allow companies to receive lower culpability scores, and thus lower fines, if they have “effective” compliance programs. Eligibility for this credit requires discovery and self- reporting before the offense is discovered or likely to be discovered outside of the company.” - Brent Snyder
“…for a company to receive credit for its compliance program, it must have demonstrated effectiveness, with messages about compliance that come from the top and echo throughout the corporate hallways. And for a company to receive full cooperation credit, it must uncover the misconduct, identify the responsible individuals, and fully disclose the facts to the department.” - Leslie Caldwell
It’s truly amazing how quickly the compliance function has evolved in five short years. It has gone from a task assigned to legal, into a full professional discipline. Compliance programs are under pressure to keep up and elevate efforts based on the new norm. The message from the DOJ is that having an effective, well-funded and embedded compliance program is not something special that will be rewarded, it’s the new norm. Without it you don’t have a fighting chance.
“The purpose of having an effective compliance program is to be a good and responsible corporate citizen. The purpose of having an effective compliance program is to avoid ever being the subject of a criminal antitrust investigation. The purpose of having an effective compliance program is the prospect of early detection and leniency. Each of these reasons for having a compliance program is a carrot – a very valuable carrot. And, if the stick becomes necessary, it is the company’s conduct and how it responds to the investigation that will determine what the stick looks like.” - Bill Baer
The good and bad news is that there is no “one size fits all” compliance template. As you upgrade your antitrust compliance program be sure to understand your own organization and its unique risk profile (this means you need to conduct a risk assessment), benchmark against respected peer companies and check out resources like:
- United States Sentencing Guidelines for Organizations (which outlines minimum requirements of an effective compliance and ethics program)
- The ICC Antitrust Compliance Toolkit (cited by the DOJ as providing good guidance on antitrust compliance program fundamentals)
- DOJ Warning About Corporate Compliance Programs, Probation, and External Compliance Monitors, by Mark Krotoski, partner with Morgan Lewis