United States: Preventative Medicine: The Benefits of an Effective Antitrust Compliance Program

In case businesses and their managers have not yet taken seriously the admonition that the development, implementation and continuous review of a comprehensive antitrust compliance program is an absolute necessity, perhaps statistics recently released by the Department of Justice (DOJ) will help drive the message home. In November 2005, the Criminal Enforcement Division of the Antitrust Division released an update of its Criminal Enforcement Program. The update includes some rather telling statistics.

What is at risk?

• In fiscal year 2005, eighteen individual defendants prosecuted by the Antitrust Division were sentenced to a total of 13,157 days in jail; the highest number of jail days in the Division’s history.

• The average prison term for antitrust offenders has risen to approximately nineteen months — more than two times the average term in the 1990s.

• The eleven longest jail sentences in the history of the Antitrust Division have been imposed in the last five years.

• Fiscal year 2005 was the third highest fine year in the Antitrust Division’s history, with over $338 million in criminal fines obtained against corporations and individuals. The Antitrust Division’s Criminal Enforcement Division is on the offensive.

The statistics in the update take on even greater significance with Antitrust Division officials publicly declaring that the Justice Department will apply the federal sentencing guidelines no differently than they were applying them prior to the Supreme Court’s decision in Blakely v. Washington.¹ In fact, since Blakely, the Antitrust Division has collected fines of $10 million or more from nine corporate defendants.

Merely having a compliance program in place is not a get-out-of-jail- free card. However, a well-designed antitrust compliance program helps prevent antitrust problems from arising and aids in detecting and resolving those that do arise. On a concrete level, if a compliance program is effective enough to detect a violation before the government does, and the offender self-reports, the self-detection will have an effect on the enforcement agency’s prosecutorial discretion equation. In addition, self-reporting in advance of the agency discovering the crime will likely result in the offender being granted access to the DOJ’s amnesty program. Aside from the benefits in a criminal context, an effective antitrust compliance program also reduces the risk of civil exposure.

An effective antitrust compliance program:

• clearly establishes compliance standards;

• assigns responsibility to oversee compliance;

• takes reasonable steps to communicate standards and procedures effectively to employees;

• consistently enforces standards through appropriate disciplinary measures; and

• takes reasonable steps when an offense occurs.

Any compliance program should include a statement of the company’s commitment to comply with the antitrust laws and a practical set of do’s and dont's. Your statement should be followed up with an active training program. Your corporate law department should regularly attend management meetings and visit with employees to detect problems. Your company should have a reporting system in place so everyone knows what to do if they think they spot a problem. Finally, your company should conduct regular audits to monitor compliance.

The compliance program should be written in plain terms that can be understood by non-lawyers. Employees should be given real examples of what types of situations can lead to a compliance problem. It may also help to coordinate the creation of the compliance program with the marketing department so that the program has more appeal to the employees and, if possible, the program can be linked with a specific product or service roll-out. The most common mistake made when creating a compliance program is not simultaneously creating a company-wide culture of compliance that goes hand-in-hand with the written program. Finally, an antitrust compliance program must be more than a booklet given to new employees or merely a portion of an employee handbook.

There are several very important principles to convey as part of any compliance program:

• Never discuss past, present, or future prices, pricing policies, bundling, discounts or allowances, royalties, terms or conditions of sale, costs, choice of customers, territorial markets, production quotas, allocation of customers or territories, or bidding on a job with a competitor.

• Be careful of your conduct. An "agreement" that violates the antitrust laws doesn’t have to be in writing. It can be inferred from conduct, discussions or communications of any sort with a representative of a competitor.

• Make every output-related decision (pricing, volume, etc.) independently, in light of costs and market conditions and competitive prices.

• Carefully monitor trade association activity. These forums frequently create an opportunity for competitors to engage in antitrust violations.

• Consult with counsel before you do any of the following: (1) refuse to sell to any customers or prospective customer; (2) enter into any new distribution or supply agreement which differs in any respect from those previously approved; (3) condition a sale on the customer’s purchasing another product or service, or on not purchasing the product of a competitor; (4) agree on a minimum or maximum resale price of your products; (5) impose restrictions on the geographic area to which your customers may resell your products; (6) require a supplier to purchase products from the company as a condition of purchasing products from that supplier; or (7) offer different prices, terms, services, or allowances to different customers who compete or whose customers compete in the distribution of commodities.

• If your company has a dominant or potentially dominant position with respect to a particular product or market, the law imposes rigorous standards of conduct upon it. Consult with counsel before selling at unreasonably low prices or engaging in any bundling practices.

• Keep management and counsel fully informed of competitive strategies and conditions in any areas where the company may have a significant market position.

• Immediately inform counsel if local, state or federal enforcement officials request information from the company concerning its operations.

While this list is far from complete, the foregoing is intended to highlight areas that should be monitored carefully for antitrust sensitivity. An effective antitrust compliance program is an essential element for minimizing risk and prudently managing your company.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.