Antitrust Compliance Policy

February 23, 2023

DOJ Announces New Voluntary Self-Disclosure Program Applicable to All Corporate Crimes

Authors: Jon Cieslak and Molly Donovan

For the first time, there is a nationwide Voluntary Self-Disclosure Program applicable to any corporate misconduct prosecutable by a US Attorney. As detailed below, companies that make a qualifying Voluntary Self-Disclosure (VSD) are eligible for “resolutions under more favorable terms than if the government had learned of the misconduct through other means” – in other words, a criminal guilty plea could be avoided in exchange for a VSD.

To qualify as a VSD, the disclosure must be:

Voluntary. There must not be a pre-existing obligation to disclose pursuant to regulation, contract or prior DOJ resolution (e.g., a non-prosecution agreement).

Prompt. The disclosure must be prior to an “imminent threat” of disclosure or investigation; prior to the misconduct being public or otherwise known to the government; within a “reasonably prompt time” after the company becomes aware of the misconduct.

Substantive. The disclosure must include “all relevant facts” known to the company at the time of the disclosure, even if the internal investigation is in a preliminary stage. As new facts become known, they should be reported as the investigation unfolds.

In exchange for a VSD, the Department will not seek a guilty plea so long as:

The company “fully cooperated” with the DOJ. The terms of cooperation, including how long and to what degree cooperation is required, are not specified.

The company “timely and appropriately remediated” the conduct. Remediation includes the payment of “all restitution” to victims.

There are no aggravating factors, i.e., the conduct did not present a grave threat to national health or safety; the conduct was not “deeply pervasive” throughout the company and did not involve “current executive management.” Whether the knowledge of a corporate executive constitutes their “involvement” is not specified.

In the event of an aggravating factor, a guilty plea is not required automatically, but the DOJ will “assess the relevant facts” to determine an “appropriate resolution” on a case-by-case basis.

In the end, where the VSD is deemed satisfactory, the criminal resolution “could include a declination, non-prosecution agreement, or deferred prosecution” in lieu of a guilty plea. In the event the Department does choose to impose a criminal penalty, it “will not impose a criminal penalty that is greater than 50% below the low end of the U.S. Sentencing Guidelines fine range.”

Finally, if, by the time of the resolution, the company has implemented an “effective compliance program,” the Department will not require the imposition of a monitor. These decisions are to be made on a case-by-case basis in the USAO’s sole discretion.

As a concept and seemingly in practice, the Program shares many similarities with the DOJ Antitrust Division Leniency Policy and Procedures, under which antitrust lawyers have been operating for years, perfecting the art of timely self-disclosure and appropriate cooperation with the Department for companies that choose to self-disclose antitrust felonies. As a result, we as antitrust practitioners could bring unique experience to companies weighing the costs and benefits of participating in the new VSD Program for non-antitrust crimes and, if companies do self-disclose, how to participate and advocate within the Program effectively.

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February 16, 2023

Domestic Companies and Their Execs Plead Guilty to Criminal Price-Fixing

by Bona Law PC

Authors: Jon Cieslak & Molly Donovan

Two individuals and four of their corporate entities pleaded guilty to an antitrust conspiracy to fix the prices of DVDs and Blu-Rays sold on Amazon’s platform during the 2016-2019 time period.

According to the plea agreements, the defendants “engaged in discussions, transmitted across state lines both orally and electronically, with representatives of other sellers of DVDs and Blu-Ray Discs on the Amazon Marketplace. During these discussions, the defendant[s] reached agreements to suppress and eliminate competition for the sale of DVDs and Blue-Ray Discs . . . by fixing prices” paid by consumers throughout the United States. Further details about the operation of the conspiracy are not public.

The total affected commerce done by the six guilty-plea defendants is $2.875 million. The agreed-to fines imposed against the corporate defendants range from $68,000 to $234,000, some payable in installments. Sentencing for the individuals is forthcoming with the plea agreements specifying that the Department of Justice is free to argue for a period of incarceration to be served by each of the individuals at issue.

The action is pending in the District Court for the Eastern District of Tennessee. It serves as a reminder that the DOJ’s Antitrust Division will not excuse price-fixing by relatively small companies, even if the volume of affected commerce is also relatively small.

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May 4, 2022

Antitrust for Kids: The Temptations of Trade Groups

by Bona Law PC

Author: Molly Donovan

Every spring, the Trooper Girls sell cookies in their town. Although they’re all members of the same group, the girls compete against each other to be the top cookie seller of the season. The girls hold regular meetings with rules set by the troop leader based on an antitrust course she took in law school:

Discussions should stay focused on personal safety guidelines for selling cookies, and how cookie sales are going generally.
No agreements to fix cookie prices—each girl is supposed to price her own cookies individually. That’s part of the fun of competing.
No agreements to divide markets—deals along the lines of “you take this street and I’ll take that street” are prohibited. Members should vigorously compete in all relevant locations.
Any applicant under the age of 15 can be a member of Trooper Girls upon completing the online forms and having them signed by a parent or guardian.

[“I like these rules,” thinks the antitrust lawyer. The membership criteria are clear and can be fairly and objectively applied, and the meeting discussions seem appropriately restricted to legitimate subjects]

At the first meeting of cookie-selling season, the Trooper Girls were in distress. Practically no cookies had been sold because, unforeseeably, the Ranger Boys had started selling ice cream—a treat much more popular than cookies of late given the unseasonably warm weather.

The de facto ringleader of Trooper Girls—Tina—announced at the meeting, “We all know cookie sales aren’t going well and we all know why. We need to get on the same page, and reconsider cookie prices until the weather returns to normal and this crisis is over.”

The troop leader interrupted, “Tina, I think that’s enough on that. Let’s change the subject.”

[“Uh oh,” thinks the antitrust lawyer. Tina’s comments sound like an invitation to collude. I’m glad the troop leader spoke up, but the damage may be done.]

Tina winked at her Trooper Girl friends and they all basically knew what to do. Meanwhile, the specifics were worked out in whispers during social time after the meeting, and during one-on-one phone calls and text exchanges. Of course, nobody said exactly what price to charge and nobody wrote down any sort of formal agreement—the rules clearly don’t allow that. Instead, the discussions were more along the lines of “let’s think about a 10%-20% discount,” which can’t constitute an “agreement,” right? Specific prices weren’t even discussed.

[“Wrong,” says the antitrust lawyer. “Agreements” don’t have to be explicit at all. A wink and a nod could suffice. Similarly, specific prices need not be discussed—agreements about the general direction of pricing could raise antitrust scrutiny.]

The next day, each member of Trooper Girls cut their cookie prices, all in the 10-20% range, though some a little bit more and some a little bit less.

Suddenly, the weather cooled again and cookie sales took off. The Ranger Boys went out of business completely, unable to compete with the reduced price of the Trooper Girl treats.

Immediately thereafter, the Trooper Girls communicated to one another—in various ways—that it was no longer necessary to keep prices low, each member could do as she pleased, though continued cooperation to return to normal prices was appropriate.

And that’s what happened.

[“Oh no, again.” This could be deemed another anticompetitive agreement, now with indefinite and potentially long-running effects.]

Rick, a member of the Ranger Boys was very sad. For one thing, he was left with a freezer full of ice cream—couldn’t give the stuff away. For another, he had nothing to do on weekends with the Ranger Boys now essentially defunct.

Wisely, Rick did two things. He called an antitrust lawyer, suspicious that something unfair had occurred. And he petitioned the Trooper Girls to join their group.

Although the girls initially refused the application, the antitrust lawyer changed Rick’s life (as antitrust lawyers do) by threatening to sue the Trooper Girls and their individual members for violating the Sherman Act, including by refusing Rick’s application for anticompetitive reasons contrary to the membership criteria.

The Trooper Girls relented—paid Rick not to sue and admitted him in the group. Rick used the settlement money to start his own business making ice cream sandwiches. He used the ice cream leftover in his freezer and Trooper Girl cookies for the sandwich ends (genius!). In the process, Rick sold a lot of ice cream and a lot of cookies—everyone was happy.

THE MORALS OF THE STORY:

*For the Trooper Girl Types and Their Associations: In addition to having clear membership criteria, have a written antitrust compliance policy and train all members to issue spot.

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May 2, 2022

A Pandemic Slow Down Is a Good Time for an Antitrust and Competition Check-Up

by Bona Law PC

Author: Molly Donovan

Crises that disrupt distribution chains and cause supply shortages tend to prompt discussions among competitors about how to survive. Discussions may begin as relatively innocuous information exchanges but become risky when they turn to coping strategies. This topic can sometimes lead to conversations amongst competitors such as, “We’re all in the same boat, so joint efforts ought to be made to stabilize prices,” or “We, as an industry, should stay on the same page and base future price increases on the rising costs of material costs and/or distribution downstream.” As we know from history (earthquakes, tsunamic, floods), those sorts of discussions are real and prompt DOJ investigations. As difficult as it has been for some businesses, the COVID-19 pandemic will not be a defense to cartel conduct.

So now that at least some aspects of business have returned to normal, it’s an excellent time for in-house counsel to survey the relevant business units to assess whether any potentially anticompetitive conduct occurred over the last couple of years. Counsel can do this inquiry with minimal cost and minimal disruption to business: a few key interviews, a high-level but strategic sweep of emails, and a big picture look at pricing and production figures. Top leadership can deliver messages that make it clear that whistleblowers will be protected (consistent with federal law). Companies can set up a message box so employees can self-report anonymously.

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September 1, 2021

Practical Advice for In-House Counsel Amid the Antitrust Sound and Fury

by Bona Law PC

Author: Pat Pascarella

The press is awash in reports on proposed amendments to the antitrust laws and heightened, and in some instances targeted, enforcement agendas at the DOJ, FTC, and state AGs’ offices. While the specifics of each may be fascinating to antitrust attorneys and law professors, the sole question on most general counsels’ minds is whether there is “anything I need to do right now to better protect my client?” The answer is an unequivocal “not really, but…”

To start, proposed legislation, presidential orders, and enforcement agency guidelines and statements of interest are not the law. That does not mean however that one should entirely ignore this current antitrust craze. Plaintiff attorneys and certain government enforcers certainly won’t. And I expect an uptick in lawsuits and investigations based on, to be polite, creative interpretations of the antitrust laws.

What it does counsel is that, at present, the most important focus should be on ensuring that internal antitrust guidelines and procedures target not only actual violations, but also conduct that could create the appearance of a potential violation. Price increases, production slow-downs, announcements about future business plans, communications or information exchanges with competitors, and dealer or supplier terminations, are the usual suspects. But care should be taken in any instance in which an action or strategy might appear to be inconsistent with unilateral self-interested behavior in the absence of a conspiracy—or where it will have a significant impact on competitors, suppliers, or downstream market participants (a/k/a plaintiffs).

This of course is not to say that businesses should forego legal strategies or actions for fear of a frivolous antitrust investigation or complaint. But it does mean that in the case of certain activities, there likely will be steps that enable the company to avoid, or at least extract itself more quickly from, lawsuits and investigations based on overly aggressive interpretations of the antitrust laws. Sometimes the solution will be as simple as documenting the business rational for a particular activity, while at other times it could involve active and ongoing oversight by antitrust counsel.

That of course raises its own set of problems for in-house attorneys—i.e., convincing their clients to come to them before taking certain actions. Having been an in-house antitrust attorney myself for many years, I can offer a few suggestions. First, get loud and clear officer-level signoff on any new guidelines or procedures. While you may be the clients’ lawyer, those clients are far more inclined to pay attention to a directive from someone who controls their advancement and salary. Second, market yourselves. Communicate to your clients that you understand their needs both in terms of your substantive guidance as well as in the timing of that guidance. Your clients have targets and goals they are trying to achieve. They need to believe that engaging with Legal will not delay the achievement of those goals and will only result in a “no go” opinion after every viable option has been exhausted.

Plus, as I often told my clients, some day you are going to be called up to the general counsel’s office and asked, “who approved this?” How the rest of your day goes will be significantly determined by whether your answer is “me” or “our antitrust counsel.”

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July 1, 2021

The Department of Justice Antitrust Division’s Leniency Program

by Bona Law PC

Author: Jon Cieslak

In 1993, the U.S. Department of Justice Antitrust Division created its Leniency Program by issuing its Corporate Leniency Policy. The Leniency Program provides means for a company to avoid criminal prosecution for violating federal antitrust laws—such as price fixing, bid rigging, and market allocation—by self-reporting the illegal activity to the Antitrust Division.

Since then, the Leniency Program has been a major impetus for criminal antitrust cases in the United States. In fact, because the Antitrust Division’s criminal prosecutions are almost always followed by civil litigation filed by private plaintiffs, it is widely understood (though not always confirmed) that some of the largest antitrust cases of the past thirty years started with leniency applications, including In re TFT-LCD (“Flat Panel”) Antitrust Litigation and In re Sulfuric Acid Antitrust Litigation.

Although some have lately questioned the Leniency Program’s effectiveness, the Leniency Program is widely considered a success and a key part of the Antitrust Division’s enforcement toolbox. Accordingly, any time a company discovers that it may have engaged in conduct violating the antitrust laws, it should consider participation in the Leniency Program.

How does a company qualify for the Leniency Program?

The Leniency Program provides two ways in which a company can obtain leniency, commonly referred to as “Type A” leniency and “Type B” leniency. The key difference between the two is that Type A leniency is only available before the Antitrust Division opens an investigation of the illegal activity, whereas Type B leniency can be obtained even after an investigation is opened. Flowing from this key difference, the requirements to obtain each type of leniency vary slightly.

To obtain Type A leniency, a company must:

Report the illegal activity before the Antitrust Division receives information about the illegal activity;
Take “prompt and effective” steps to end its involvement in the illegal activity as soon as it was discovered;
Report the illegal activity “with candor and completeness” and cooperate with the Antitrust Division’s investigation;
Confess to its wrongdoing on behalf of the company, “as opposed to isolated confessions of individual executives or officials;”
Provide restitution to injured parties if possible; and
Not be a ringleader or originator of the illegal activity.

Type B leniency shares some of these requirements, but has several of its own. To obtain Type B leniency, the following conditions must be met:

The company is the first “to come forward and qualify for leniency;”
The Antitrust Division does not already have evidence against the company “that is likely to result in a sustainable conviction;”
As with Type A, the company ended its involvement in the illegal activity;
As with Type A, the company cooperates with the investigation;
As with Type A, the company confesses its wrongdoing;
As with Type A, the company provides restitution; and
The Antitrust Division determines that leniency “would not be unfair to others” under the circumstances.

What are the benefits of the Leniency Program?

While the Leniency Program’s requirements are considerable—it is no small thing to self-report and admit to an antitrust crime—the program offers substantial benefits to those that qualify. First and foremost, a successful leniency application means that the Antitrust Division will not bring criminal charges against the company for the reported activity. Although there are other ways to avoid charges, such as a deferred prosecution agreement, the Leniency Program provides the surest path to immunity.

In addition, if a company qualifies for Type A leniency, all company directors, officers, and employees who admit their involvement and cooperate with the Antitrust Division’s investigation will likewise receive leniency. Under Type B leniency, the Antitrust Division will evaluate leniency for directors, officers, and employees on an individual basis, but still commonly grants leniency.

Finally, a successful leniency application provides benefits in any related civil litigation pursuant to the Antitrust Criminal Penalty Enhancement and Reform Act (ACPERA). An upcoming article will discuss those benefits in detail.

How does a company participate in the Leniency Program?

A company’s participation in the Leniency Program can vary depending on the facts and circumstances of the illegal activity and, in particular, how the Antitrust Division chooses to investigate it. But there are a few common steps you should plan on at the outset.

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April 21, 2021

Deferred Prosecution Agreements and Effective Compliance Programs in the Antitrust World: The New Married Couple

by Bona Law PC

Authors: Luis Blanquez and Jon Cieslak

Deferred prosecution agreements (“DPAs”) in the antitrust world have been a hot topic on this side of the Atlantic during the past two years. DPAs seem to be slowly becoming an efficient instrument for the Department of Justice to tackle antitrust conspiracies, and we expect this trend to continue.

What is a DPA?

A DPA is a legal agreement between a prosecutor and a defendant where the former eventually drops any charges against the latter, if the terms of such agreement are met. In other words, a DPA is a contract to resolve a criminal enforcement action without the prosecution of charges.

If the defendant––either a company or an individual––complies with all the terms of the DPA during a period of time (usually two to three years), despite being initially charged, the prosecutor will dismiss the charges and the defendant will avoid a conviction. DPA terms commonly require a defendant to pay a fine, implement certain remedial measures to alleviate the wrongdoing, or take steps to ensure future compliance.

While DPAs are almost universally considered a positive outcome for the defendant, they do carry some risk. By agreeing to a DPA, a defendant admits to wrongdoing and waives any right to challenge a set of agreed facts that are sufficient to sustain a conviction. Accordingly, if a defendant fails to comply with the terms of a DPA, it will face prosecution and almost certain conviction.

The Role of DPAs in the DOJ Criminal and Antitrust Recent Guidelines

Until recently, if an antitrust defendant did not win the race for leniency, the DOJ Antitrust Division’s approach was to insist that the company plead guilty to a criminal charge with the opportunity to be an early-in cooperator, and potentially receive a substantial penalty reduction for timely, significant, and useful cooperation. This all-or-nothing philosophy highlighted the value of winning the race for leniency.

But all that changed in July 2019, when the Antitrust Division announced a new policy to incentivize antitrust compliance. These new guidelines were presented by AAG Makan Delrahim on July 11, 2019, at the Program on Corporate Compliance and Enforcement at the New York University School of Law: Wind of Change: A New Model for Incentivizing Antitrust Compliance Programs.

Delrahim explained that, unlike in the past, corporate antitrust compliance programs will now factor into prosecutors’ charging and sentencing decisions, allowing companies to qualify for DPAs or otherwise mitigate exposure, even when they are not the first to self-report criminal conduct.

In particular, Delrahim highlighted three important points.

First, that the adequacy and effectiveness of a compliance program is but one of the ten factors the Justice Manual directs prosecutors to consider when weighing charges against a corporation. Among the “Factors to Be Considered”, four in particular stand out as hallmarks of good corporate citizenship: (1) implement robust and effective compliance programs, and when wrongdoing occurs, they (2) promptly self-report, (3) cooperate in the Division’s investigation, and (4) take remedial action.
Second, that the DOJ’s new approach would allow prosecutors to proceed by way of a DPA when “the relevant Factors, including the adequacy and effectiveness of the corporation’s compliance program, weigh in favor of doing so.” DPAs, as the Justice Manual recognizes, “occupy an important middle ground between declining prosecution and obtaining the conviction of a corporation.”
Third, that the mere existence of a compliance program does not necessarily guarantee a DPA. Instead, “Department prosecutors are directed to conduct a fact-specific inquiry into “whether the program [at issue] is adequately designed for maximum effectiveness in preventing and detecting wrongdoing by employees. In making a charging recommendation, Antitrust Division prosecutors will evaluate the compliance program’s effectiveness or lack thereof, and holistically, consider it together with all the other relevant Factors.”

This marked a substantial policy shift for the Antitrust Division, which previously never considered DPAs as an option to resolve antitrust conspiracy cases. Under the DOJ’s existing leniency program, the antitrust Division was allowing full immunity exclusively to leniency applicants.

That’s not the case anymore––but make no mistake––only so long as the offending party has, as explained above, a truly robust and effective compliance program in place. And for that purpose, the recent Revised Guidance from the Criminal Division issued in June 2020 on the Evaluation of Corporate Compliance Programs is the last piece of this puzzle. The new Guidance provides additional information to assist prosecutors––both in antitrust and other investigations––in making informed decisions as to whether, and to what extent, a corporation’s compliance program was effective at the time of the offense. You can read more about it on our previous post:

The Department of Justice Policy and Guidance on Antitrust Compliance Programs and Antitrust Criminal Violations

A Detailed Look at the First Eight DPAs Under the New Policy Incentivizing Compliance

As a result of the new DOJ’s guidance on antitrust compliance programs and criminal investigations, we are starting to see an increased use of DPAs by the Antitrust Division. Let’s have a close look at the ones made public so far.

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December 18, 2020

A Federal Antitrust Investigation Can Cause an Antitrust Blizzard

by Bona Law PC

Author: Jarod Bona

I am from Minnesota, so I am quite familiar with blizzards. They may be interesting to watch through a window from a room warmed by a fireplace, but you don’t want to get caught in one. The same is true for an antitrust blizzard: They are interesting to watch, but they can destroy you. Like driving a car through a winter blizzard, you have to pay close attention, make sure you do the right thing, and in the end, you could crash.

In case you get hit by one, you should be prepared: Create and follow an antitrust compliance policy. You may even get bonus points from the Department of Justice if you have (and follow) the right antitrust policy.

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November 11, 2020

The Department of Justice Policy and Guidance on Antitrust Compliance Programs and Antitrust Criminal Violations

by Bona Law PC

Author: Luis Blanquez

If you read our articles regularly, you know an antitrust compliance policy is a strong tool to educate directors and employees to avoid risks of anticompetitive conduct. Companies articulating such programs are in a better position to detect and report the existence of unlawful anticompetitive activities, and if necessary, be the first ones to secure corporate leniency from antitrust authorities.

Antitrust Compliance Programs in the US and the European Union

But make no mistake––not any antitrust compliance policy is sufficient to convince the Antitrust Division of the Department of Justice (DOJ) that you are a good corporate citizen. You must show the authorities how your compliance program is truly effective and meets the purpose of preventing and detecting antitrust violations.

And how do you do that? As a start, you should get familiar with the following key documents.

Make sure you read them carefully because they have significantly changed the way DOJ credits compliance programs at the charging stage; and how it evaluates them at the sentencing stage. But that’s not all. For the first time, they also provide public guidance on how DOJ analyzes compliance programs in criminal antitrust investigations.

In this article, we focus on the new DOJ Policy for incentivizing antitrust compliance, as well as the 2019 and 2020 Guidance Documents. We also provide an overview of the most recent Deferred Prosecution Agreements (DPAs) and indictments from DOJ.

If you also want to review the new changes to the Justice Manual, you can see them here. In a nutshell, the new revisions impact the evaluation of compliance programs at the charging and sentencing stage. In the past the Justice Manual stated that “credit should not be given at the charging stage for a compliance program.” That text has now been deleted. The new additions also impact DOJ processes for recommending indictments, plea agreements, and the selection of monitors.

If you discover or suspect your company is under investigation for antitrust violations, you should, of course, consider hiring your own antitrust attorney.

The 2019 DOJ New Policy for Incentivizing Antitrust Compliance

In the past, if a company did not win the race for leniency, the DOJ’s approach was to insist that it plead guilty to a criminal charge with the opportunity to be an early-in cooperator, and potentially receive a substantial penalty reduction for timely, significant, and useful cooperation. This all-or-nothing philosophy highlighted the value of winning the race for leniency. The new Policy departs from this approach.

In July 2019, the DOJ announced the new policy to incentivize antitrust compliance.

Antitrust News: The Department of Justice Wants You to Have a Strong Antitrust Compliance Policy

The new policy was presented by AAG Makan Delrahim on July 11, 2019, at the Program on Corporate Compliance and Enforcement at the New York University School of Law: Wind of Change: A New Model for Incentivizing Antitrust Compliance Programs. Delrahim explained that, unlike in the past, corporate antitrust compliance programs will now factor into prosecutors’ charging and sentencing decisions and may allow companies to qualify for deferred prosecution agreements (DPAs) or otherwise mitigate exposure, even when they are not the first to self-report criminal conduct.

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September 24, 2020

Department of Justice Civil Investigative Demands and Hidden Risks

by Bona Law PC

Author: Jon Cieslak

The United States Department of Justice Antitrust Division recently announced changes to its Civil Investigative Demand (CID) forms and deposition process. While these changes are cosmetic—the Antitrust Division acknowledges that the changes “are consistent with long-standing division policies”—they serve as a good reminder of risks that always exist when communicating with the government.

Background on Civil Investigative Demands

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