Justice Department Offers New Antitrust Guidance With Lessons for Nonprofits, Associations, and Other Member-Owned and Operated Organizations
What’s the Change?
The “Division has had a longstanding policy ‘that credit should not be given at the charging stage for a compliance program and that [leniency] is available only to the first corporation to make full disclosure to the government’ in the prosecution of an antitrust crime,” said Assistant Attorney General Makan Delrahim during remarks on July 11. If a company did not “win the race for leniency,” then the Division has required that company to plead guilty to the antitrust crime with an opportunity to receive a reduced penalty for its compliance efforts at sentencing. According to Assistant Attorney General Delrahim, the time has come to revise this “all-or-nothing philosophy” and “recognize the efforts of companies that invest significantly in robust compliance programs.”
Going forward, the Division will now consider measures that detect and prevent antitrust violations when deciding whether to bring criminal charges against a company, a move that reverses its long-standing refusal to give credit for effective compliance measures during the charging stage of antitrust investigations.
Along with its announcement, the Division published a guidance document that sets forth the key elements of an effective compliance program. The “adequacy and effectiveness of a compliance program” will be one of several factors that the Division will consider when deciding how “to resolve criminal charges against a corporation,” including whether to proceed by way of a deferred prosecution agreement (DPA), said Delrahim.
Delrahim was careful to point out that that the Division’s new approach “should not be misconstrued as an automatic pass for corporate misconduct,” reaffirming that complete immunity from antitrust prosecution is only available to the first company that fully discloses the violation and satisfies the other requirements of the Corporate Leniency Policy. “Precisely how much weight and credit to give a compliance program will depend on the facts of the case,” according to Delrahim. The guidance document provides a number of considerations to assist prosecutors in making these case-by-case determinations during both the charging and the sentencing phases.
Elements of an Effective Compliance Program
The new guidance instructs prosecutors to assess corporate compliance programs with three “fundamental” questions in mind: (1) is the program is well designed? (2) is it applied earnestly and in good faith? and (3) does it work? Though no “checklist or formula” exists to answer these questions, the guidance identifies nine elements of an effective antitrust compliance program to help guide prosecutors’ analyses. Key elements, along with questions for prosecutors to consider for each, include:
1. The Design, Format, and Comprehensiveness of the Program
Prosecutors are to consider the adequacy of the compliance program’s integration into business operations, as well as the accessibility of antitrust compliance resources within the business. Prosecutors may investigate the company’s implementation and format of the compliance program, including how often the program is updated and reviewed. Prosecutors may also question the company’s antitrust procedures, including whether the company has certain internal controls that, for example, monitor and track “business contacts with competitors or attendance at trade association meetings, trade shows, and other meetings attended by competitors.”
2. Responsibility for, and Resources Dedicated to, the Compliance Program
An effective compliance program requires that “those with operational responsibility for the program must have sufficient autonomy, authority, and seniority within the company’s governance structure, as well as adequate resources for training, monitoring, auditing and periodic evaluation of the program.” The guidance lists a number of questions relating to the structure of the compliance program for prosecutors to consider, including the job responsibilities, accountability, and chain of command of antitrust compliance personnel, and whether the company devotes sufficient antitrust compliance resources towards employee education or training programs.
3. Antitrust Risk Assessment
A “well-designed” antitrust compliance program must be tailored to account for antitrust risk within the company’s specific industry and lines of business. Prosecutors may question whether the program complies with industry best practices, and may further investigate the company’s efforts to implement and modify any “antitrust-related policies and procedures that reflect and address the antitrust risks it faces, including legal and technical changes in the way the company conducts business.” Prosecutors may consider whether “specialized antitrust compliance training” was provided for human resources personnel and executives in the areas of recruitment and hiring.
4. Compliance Training and Communication to Employees
The program must adequately train employees so that they “understand their antitrust compliance obligations.” Employees should be warned of the antitrust risks that are present during certain discussions with competitors, particularly those that are “not part of a legitimate joint venture or other procompetitive or competitively neutral collaboration.” An effective training program should caution employees against sharing competitively sensitive business or pricing information with competitors, and should also inform employees about how to report suspected antitrust violations. When evaluating the adequacy of the company’s training practices, prosecutors may investigate the manner in which the company communicates antitrust policies and procedures to employees, whether and to whom the company provides antitrust training, and the frequency and timing of such training, including whether it is “required prior to attendance at trade shows or trade association” meetings.
5. Remedial Efforts
Prosecutors may also consider a company’s “remedial efforts and improvements to the company’s compliance program,” which are relevant to assess the effectiveness of the program at the time of the violation, charging decision, or sentencing recommendation. Whether and how the company revised its antitrust compliance policies to reflect lessons learned from prior antitrust violations are relevant to this analysis.
Key Lessons for Membership Organizations
DOJ’s guidance presents a roadmap for associations and other member-owned and operated companies to develop and implement antitrust compliance measures. Since associations and membership organizations are comprised of competitors joined together for a common business purpose, the guidance serves as a reminder to these entities of the importance of investing in robust programs that detect, prevent, and, if necessary, promptly remedy or disclose potential antitrust violations.
Organizations should review their policies and procedures to address at least these high-priority items:
- Industry-wide events, meetings and conferences—including board and annual member meetings—should be accompanied by the organization’s antitrust policies and procedures and conducted in strict compliance with those policies to inhibit discussion about competitively sensitive topics.
- Regular training should be provided to association staff, governing boards, and volunteer committees to educate them to properly facilitate discussions among members and protect against unintentional violations of the antitrust laws. Training should be documented.
- Association policies should clearly inform staff, volunteers, and board members on when and how to report suspected antitrust issues, and procedures should be implemented to respond to reported incidents.