Articles Posted in Antitrust Counseling

Articles about antitrust counseling and training.

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Author:  Steven J. Cernak

Remember when UPS ran TV commercials, complete with jingles, trying to make logistics something that everyone cares about? No need now. Now, everyone knows how supply chain issues can affect toilet paper supplies, microchips for cars and, perhaps, even make Santa late with toys and decorations for Christmas.

With every supplier, distributor, retailer, and wholesaler scrambling to scrounge supplies and ship finished goods in some reasonably efficient and cost-effective manner, some harried supply chain executives might be tempted to take some bold and dangerous steps. Just as we have done a couple times during the pandemic, your friendly neighborhood antitrust lawyers are here to remind you of the old rules that still apply and speculate on how antitrust might affect these issues in the future.

Price Fixing and Price Gouging Rules Remain the Same

In a time of crisis, one tempting bold but possibly dangerous step for an executive to take is to directly contact or signal intentions to a competitor. For instance, a CEO might want assurance that any price increase to help recover increased transportation costs will be matched by the competitor. Depending on how the conversation goes, antitrust enforcers and courts could find a price fixing agreement — and, as the enforcers have made clear, price fixing is still per se illegal, even during a pandemic or other crisis. An agreement among competitors to boycott logistics providers raising their prices would meet a similar fate.

On the other hand, so-called price gouging does not violate the U.S. federal antitrust laws, as we explained here. So that CEO contemplating a price increase to cover increased transportation costs need not worry about federal antitrust issues; some states, however, do have non-antitrust laws that prohibit price gouging under certain circumstances.

Joint Ventures Might Help

Instead of jail time for price fixing, that phone call between competitor CEO’s could lead to joint efforts that could ease the business pain while staying on the right side of the antitrust laws.  As we explained here, the antitrust rules regarding joint ventures do not change in a crisis and some joint efforts among competitors, if implemented properly, do not violate the antitrust laws.  So if that CEO call will lead to joint research on new shipping methods; a new jointly-run warehouse; or lobbying the local legislature for regulatory relief, the antitrust laws likely will not stand in the way. Looks like some CEO’s are already thinking about joint ventures.

Bottlenecks Turn Out to be Monopolies?

While the antitrust laws have not changed, the changed economic conditions might lead to new outcomes. For instance, bottlenecks in the supply chain might start to look more like monopolies and so be subject to restrictions on monopolizing actions.

As we explained here, the first element in a monopolization claim under the U.S. antitrust laws is finding that the defendant is a “monopolist.” Usually, that process means defining a market and then seeing if the defendant has a high market share; however, the market share method is used more often only because the data are available to make the estimate. What a court really is trying to measure is the ability of the defendant to control its own price, that is, to price with little regard to how competitors might react. The supply chain crisis has uncovered several bottleneck companies that, at least in certain geographic areas, can name their price. As we described above, those high prices themselves would not violate the antitrust laws; however, any additional actions by that company to exclude new competition and maintain that pricing power could be a violation. Look for actions against such companies in the future.

More Merger Challenges Coming

As we have detailed here and here, the FTC is modifying their merger review processes and making it clear that they plan to challenge more mergers, irrespective of any supply chain issues.  And because the number of filings under the Hart-Scott-Rodino Act is way up, the FTC and DOJ Antitrust Division will have that many more chances to challenge mergers. So expecting more merger challenges is an easy prediction.

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Authors: Steven Cernak and Luis Blanquez

FTC Chairwoman Lina Khan keeps up her frenetic crusade to change the practice of antitrust enforcement. The new––and surely not last––change: the vertical merger guidelines.

On Wednesday, September 15, 2021, the FTC held an open virtual meeting to discuss the following:

Here, we will only discuss the first two items. For more background on these and other recent changes at the FTC, see our previous articles:

The FTC Continues the HSR Antitrust Process’s “Death of a Thousand Cuts”

FTC Guts Major Benefit of Antitrust HSR Process for Merging Parties

FTC Withdraws Vertical Merger Guidelines and Commentary

As expected, the FTC on a 3-2 vote decided to withdraw its approval of the Vertical Merger Guidelines, issued jointly just last year with the Department of Justice Antitrust Division (DOJ), and the FTC’s Vertical Merger Commentary.

According to the FTC’s press release, the guidance documents include unsound economic theories that are unsupported by the law or market realities. The FTC is withdrawing its approval to prevent industry or judicial reliance on this allegedly flawed approach. The FTC reaffirmed its commitment to working closely with the DOJ to review and update the agencies’ merger guidance.

The statements by the various Commissioners show the deep divisions within the FTC since Khan joined the Commission, not just about these Guidelines but more generally about how to enforce the antitrust laws and how to run the FTC.  The statement by the FTC majority asserts that the 2020 Vertical Merger Guidelines had improperly contravened the Clayton Act’s language with its approach to efficiencies. The statement explains the majority’s concerns with the Guidelines’ treatment of the purported pro-competitive benefits of vertical mergers, especially its treatment of the elimination of double marginalization.

The dissenting Statement of Commissioners Phillips and Wilson starts with a bang: “Today the FTC leadership continues the disturbing trend of pulling the rug out under from honest businesses and the lawyers who advise them, with no explanation and no sound basis of which we are aware.” The statement goes on to not only lament the confusion the withdrawal will generate but contrast the process used when the Guidelines were issued — months of public input and debate — with the process used for their withdrawal — no public input and, seemingly, no discussion even at the FTC outside the offices of three Commissioners.

The FTC pledged to work with DOJ to update vertical merger guidance to better reflect how the agencies will review such transactions in the future. Just an hour later, DOJ issued a statement explaining that they are reviewing both the Horizontal Merger Guidelines and the Vertical Merger Guidelines and, as to the latter, have already identified several aspects of the guidelines, such as the treatment of and burdens for the elimination of double marginalization, that deserve close scrutiny.  (We raised those issues when the Guidelines went through public debate last year.)  DOJ expects to work closely with the FTC to update the Guidelines so, perhaps, we will have new Guidance at some point in the future.

FTC Staff Presents Report on Nearly a Decade of Unreported Acquisitions by the Biggest Technology Companies

During the same meeting, FTC presented findings from its inquiry into the hundreds of past acquisitions by the largest technology companies that did not require reporting to antitrust authorities at the FTC and DOJ, generally because they were below HSR thresholds. Launched in February 2020, the inquiry analyzed the terms, scope, structure, and purpose of these transactions by Alphabet Inc., Amazon.com, Inc., Apple Inc., Facebook, Inc., and Microsoft Corp. between Jan. 1, 2010 and Dec. 31, 2019.

“While the Commission’s enforcement actions have already focused on how digital platforms can buy their way out of competing, this study highlights the systemic nature of their acquisition strategies,” said Chair Khan. “It captures the extent to which these firms have devoted tremendous resources to acquiring start-ups, patent portfolios, and entire teams of technologists—and how they were able to do so largely outside of our purview.”

The Commission voted 5-0 to make the report public. Chair Khan and Commissioners Chopra and Slaughter each issued separate statements. While the report did not recommend any changes to the merger review process, we expect that the FTC may utilize the report’s findings to recommend changes in the HSR process.

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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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Authors: Steve Cernak and Luis Blanquez

New management at the FTC keeps reviewing all aspects of the Hart-Scott-Rodino (HSR) premerger notification process.  On August 26, the current head of the Bureau of Competition posted a change to a long-standing FTC informal interpretation about how potential HSR filers should view debt repayments when determining if the transaction is large enough to warrant a filing.  That particular change could affect many transactions; however, perhaps more importantly, the announcement also described potential larger changes in how the FTC develops and promulgates interpretations of the complicated HSR process.  Any such changes could be more examples of the “death of a thousand cuts” for the current HSR process that at least one commissioner has decried and that we discussed recently.

As we have explained, the Hart-Scott-Rodino Act requires companies to file notice of mergers and similar transactions over a certain size before they can close the deal. The first step in complying with HSR’s notification requirements is to determine whether the transaction satisfies the size of transaction test.  Because that determination can be difficult, given HSR’s complicated rules that cannot anticipate every potential deal structure, merging parties have often sought informal interpretations from FTC Premerger Notification Office (PNO) staff.

For at least 15 years, PNO staff has interpreted HSR rules to exclude from the size of the transaction calculation of the payoff of a target’s debt by the acquiring person in transactions involving the acquisitions of voting securities and noncorporate interests (though not of assets). The rationale was that the purchaser of a majority of an issuer’s stock automatically acquires the issuer’s preexisting liabilities and so that fact presumably is reflected in the stock’s acquisition price.

Effective September 27, the FTC will withdraw that informal interpretation. According to the FTC blog post, it appears that some merging parties have structured their deals to take advantage of this interpretation and avoid an HSR filing. Target companies may take on debt shortly before the merger and then have the acquiring person retire it as part of the transaction, thus reducing the size of the transaction, perhaps to a level whereby the parties can avoid a filing.

At the margin, this change likely will result in more HSR filings. It will affect those transactions where the size of the transaction matters, such as transactions of private equity firms focused on the “middle market” near the current HSR threshold of $92M.

If the main reason for the change is that the FTC is seeing transactions structured as described in the blog post, it is not clear why application of 801.90 is insufficient. That regulation allows the FTC to disregard any device used for the purpose of avoiding the HSR filing obligation.  Indeed, the PNO staff pointed to 801.90 last September as it modified a bright-line rule regarding extraordinary dividends into a more “holistic review” to determine reportability. A similar change could have been made here, suggesting that the more important reason for the change simply is an FTC change in policy about the interpretation.

Such changes in informal interpretations happen often, but a few aspects of last week’s post hint at potential larger future changes.

Last week’s post states that the FTC is in the process of reviewing “the voluminous log of informal interpretations [by PNO staff] to determine the best path forward.”  Implicit in that statement and the rest of the post is that one “path forward” would be to eliminate the informal interpretations and rely only on the formal rules and interpretations approved by commissioners and created with assistance from the Department of Justice.  Any such move would be unfortunate.

While the informal rules do not have the force of law (as the post correctly notes), they do represent the best current thinking of the PNO staff, who reviews the thousands of filings and related questions each year. The formal rules regulating the HSR process are already very complicated and it seems foolhardy at best to think any set of humans, especially if they do not regularly deal with HSR intricacies, will be able to anticipate all potential HSR questions in devising new rules.

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Author:  Steven J. Cernak

In addition to being a full-time antitrust attorney at Bona Law PC, I have taught at least one antitrust course every year since 2009 at three different Michigan law schools. As I prepare for another semester, I had reason to return to an article I wrote six years ago. There, I captured my thoughts on the practical benefits to all future lawyers, not just members of the antitrust community, from taking a well-taught antitrust course. In that article — Antitrust Courses Can Teach Valuable Practical Skills – If Taught Well — I made the case for using hypothetical materials to teach both the law and practical counseling and advocacy skills that any new lawyer can use.

In the intervening six years, I have continued that practice in many seminar and survey courses, always using my Antitrust Simulations book and its hypothetical materials based on some of my past antitrust matters. I still think my original conclusions in the article are valid; however, other aspects of teaching antitrust law have changed, as I explain below.

Six years ago, one of my premises was that law schools, under pressure from employers and accreditation bodies to graduate students more “practice-ready,” would be incorporating experiential learning in many more of their classes. Based on comments from my admittedly small sample of students, that trend seems to have slowed. At least at schools where the majority of the faculty are not current or former practitioners, students have commented that my class is the most practical one they have taken. It appears that experiential learning is still being outsourced exclusively to legal practice classes and clinics. If so, that is too bad, for the reasons explained in my original article — after all, most graduates even from top schools will spend their careers counseling clients and meeting with regulators, not writing law review articles and clerking for justices.

One unfortunate trend among some students is what I call “the Google-ization of legal thinking.”  I refer to the idea that all legal matters can be easily solved by simple application of rules or black letter law or that a perfectly formed query will spit back “the” answer. Such an attitude is especially troublesome in antitrust where more than a century of shifting caselaw based on short statutes turns most questions outside of naked price fixing into grey areas requiring extended consideration.

I try to counter this tendency in two ways. First, I quote Prof. Daniel Crane and his reaction to students who complain he did not teach enough antitrust black letter law: “This is the marker of the student who has not ‘gotten it.’ There is relatively little black letter law in antitrust law.  (Some would say there is relatively little law in antitrust law.)”

Second, discussion of the hypothetical material allows the students to see that changing the facts slightly can lead to a different conclusion. For instance, all my classes end up discussing a hypothetical set of facts and whether it adds up to an “agreement” under the antitrust laws. After the students have reviewed the facts, I “poll the jury” and ask a few students which fact was the one that convinced them. I then ask if their opinion would change if that fact were absent or changed. The students then begin to understand that answers to some questions require gathering and evaluating various bits of evidence, not searching for the one right answer.

Another unfortunate trend among still a minority of students is the “Twitter-ization of legal thinking.” Here, some students will start from a strongly held premise that can be described in under 280 characters (“all government intervention is bad”; “I don’t like that unfair result so antitrust law should change it”) and then reason backwards so that all matters are consistent with that premise. This development seems to be correlated with, and perhaps caused by, the increased amount of questionable “anti-trust” coverage in the general media in the last six years.  Here, discussion of the hypothetical material and a polling of the class (in-person or virtually) can at least show that other students have different opinions and good reasons for them.

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Author: Jon Cieslak

I recently wrote about the DOJ Antitrust Division’s Leniency Program, and the benefits it can provide to a company engaged in criminal antitrust conduct. Those benefits can extend beyond a company’s immunity agreement with the DOJ to the civil litigation that frequently follows a DOJ investigation. The civil law benefits of a successful leniency application are provided by the Antitrust Criminal Penalty Enhancement and Reform Act, Pub. L. No. 108-237, § 213(a)-(b), 118 Stat. 665, 66-67 (2004), commonly referred to by its acronym, ACPERA.

Originally passed in 2004, and made permanent by Congress in 2020, ACPERA provides additional incentives for companies engaged in criminal antitrust conduct to participate in the Leniency Program. ACPERA does so by altering the damages that can be recovered from a successful leniency applicant in two ways:

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Author: Jarod Bona

Sometimes parties will enter a contract whereby one agrees to buy (or supply) all of its needs (or product) to the other. For example, a supplier and retailer might agree that only the supplier’s product will be sold in the retailer’s stores. This usually isn’t free as the supplier will offer something—better services, better prices, etc.—to obtain the exclusivity.

If you compete with the party that receives the benefit of the exclusive deal, this sort of contract can seem quite aggravating. After all, you have a great product, you offer a competitive price, and you know that your service is better. Then why is the retailer only buying from your competitor? Shouldn’t you deserve at least a chance? Isn’t that what the antitrust and competition laws are for?

Maybe. But most exclusive-dealing agreements are both pro-competitive and legal under the antitrust laws. That doesn’t mean that you can’t ever bring an antitrust action and it doesn’t mean you won’t win. But, percentage-wise, most exclusive-dealing arrangements don’t implicate the antitrust laws and are uncontroversial.

You can read our article about exclusive dealing at the Bona Law website here.

It is important that I deflate your expectations a little bit at the beginning like this because if you are on the outside looking in at an exclusive-dealing agreement, you are probably angry and you may feel helpless. From your perspective, it will certainly seem like an antitrust violation. And your gut feeling about certain conduct is a good first filter about whether you have an antitrust claim. What I am trying to tell you is that with regard to exclusive dealing, your gut may offer some false positives.

Of course, the market is full of exclusive or partial-exclusive dealing agreements and there are relatively few of these that turn into federal antitrust litigation. So if you see an exclusive-dealing claim in federal litigation, it may be one of the rare instances of an exclusive-dealing antitrust violation. We receive a lot of calls about exclusive-dealing agreements that are antitrust violations or close to antitrust violations. And we counsel clients on their own exclusive-dealing agreements. But people don’t call us for most varieties of exclusive dealing, which is perfectly legal under the antitrust laws.

So what is an exclusive dealing agreement?

An exclusive dealing agreement occurs when a seller agrees to sell all or most of its output of a product or service exclusively to a particular buyer. It can also occur in the reverse situation: when a buyer agrees to purchase all or most of its requirements from a particular seller. Importantly, although the term used in the doctrine is “exclusive” dealing, the agreement need not be literally exclusive. Courts will often apply exclusive dealing to partial or de facto exclusive dealing agreements, where the contract involves a substantial portion of the other party’s output or requirements.

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Author:  Steven J. Cernak

Submitting the form and documents required under the Hart-Scott-Rodino premerger notification system can be complicated. If only the initial submission must be made, however, the pain and expense can be short-lived. If, on the other hand, the parties receive a “second request” for information at the end of the thirty-day waiting period, the parties and their executives are in for months of discovery, questioning, and plenty of quality time with antitrust lawyers instead of  their customers. To give themselves a chance to avoid that fate, parties should consider taking a few basic steps before and immediately after the initial HSR filing.

HSR Basics

As we discussed in prior posts, HSR requires the parties to certain large mergers and similar transactions to submit a form and certain documents to the two U.S. antitrust agencies prior to closing the transaction.  If the antitrust agencies fear the transaction will cause antitrust problems, they can sue to stop it; if not, they allow the transaction to move forward. After the parties complete their submission, the agencies have thirty days to decide if they need more information to make that determination.

HSR was the first premerger notification scheme when it was passed in 1976. Since then, dozens of other jurisdictions have passed similar, but far from identical, schemes. HSR remains simpler (not simple) in two key-ways. First, the HSR form does not require any market, share, or similar information that would go into an antitrust analysis; instead, the parties must merely describe themselves and the transaction. Second, the HSR process does not require any pre-filing consultation with the agency to ensure the submission is complete; instead, the parties can just upload the submission and wait to be told if anything is missing.

That is not to say that submitting the HSR form and documents is simple. Like most tax forms, the form itself is only a few pages long but the instructions, definitions, rules, and interpretations necessary to correctly fill in the blanks run to hundreds of pages. And some of the information required can be obscure—for instance, many companies do not have ready their U.S. revenues classified by North American Industry Classification System codes. (Those of us who have been filing for decades appreciate that the FTC has simplified the form. For example, it no longer requires a base year of revenues or a list of added and deleted products since that base year.)

HSR Second Requests

Most parties submit the filing, let out a sigh of relief, and try not to think of HSR again. Usually that course of action is correct.  After all, the vast majority of all HSR filings are cleared in the first thirty days. If the reviewing antitrust agency believes it needs more information to decide the transaction’s likely effects, however, it will issue a “second request” for information.

A second request is a long list of document requests and interrogatories that can take months to fulfill. In the meantime, the parties and their lawyers, executives, and expert economists will debate the meaning of all that information. At the end of the process (often about a year later), the agency will decide if it should sue to stop the transaction from closing. If the agency challenges the transaction, the parties must then decide to either abandon the transaction or spend several more months, at least, defending it in court.

An HSR Second Request—Will You Get One?

Therefore, parties to an HSR filing need to predict if their filing will be one of the minority that receive a second request. If so, they must then decide which steps, if any, to take to try to head it off.

There is no set of questions to ask that will unfailingly predict the receipt of a second request; however, a positive response to several of the following questions makes it much more likely that the reviewing agency will want more information than is contained in the initial HSR submission:

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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:

  1. Report the illegal activity before the Antitrust Division receives information about the illegal activity;
  2. Take “prompt and effective” steps to end its involvement in the illegal activity as soon as it was discovered;
  3. Report the illegal activity “with candor and completeness” and cooperate with the Antitrust Division’s investigation;
  4. Confess to its wrongdoing on behalf of the company, “as opposed to isolated confessions of individual executives or officials;”
  5. Provide restitution to injured parties if possible; and
  6. 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:

  1. The company is the first “to come forward and qualify for leniency;”
  2. The Antitrust Division does not already have evidence against the company “that is likely to result in a sustainable conviction;”
  3. As with Type A, the company ended its involvement in the illegal activity;
  4. As with Type A, the company cooperates with the investigation;
  5. As with Type A, the company confesses its wrongdoing;
  6. As with Type A, the company provides restitution; and
  7. 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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Authors: Jim Lerner and Luis Blanquez

Both of the U.S. government agencies responsible for antitrust enforcement (the Department of Justice– “DOJ” and Federal Trade Commission – “FTC”) have review mechanisms available for companies seeking guidance on whether they are likely to take antitrust enforcement action against a proposed agreement or course of conduct: the DOJ has a Business Review process and the FTC has an Advisory Opinion process.

From a practical perspective (and putting aside mandatory Hart-Scott-Rodino merger filings), it is uncommon in the U.S. for parties to submit their agreements to the competition authorities for review before entering the agreement or undertaking the proposed conduct. Except in particular circumstances—such as with complex antitrust and intellectual property issues—most parties decide that the potential antitrust-enforcer guidance is not worth the time and effort involved in seeking such review.

But there are instances in which it does make sense to seek antitrust agency review, so we describe the processes here.

With respect to the DOJ Business Review process, while there has been expedited treatment for collaborations directly related to COVID, the “traditional” Business Review process tends to be lengthy (it can regularly take up to 6 months or more to get through the entire process) and complicated. Applicants for a Business Review letter must make a complete disclosure of all the necessary information about the agreement or collaboration for which a review is requested. This requires background information about the parties and industry, copies of any/all operative documents, detailed statements of any/all collateral oral understandings, and any additional information the Division requests. Depending on how the Division responds, it doesn’t necessarily result in any guarantees about what the Division will or will not do if the described conduct/collaboration goes forward. One other big downside is that the process is truly prospective––that is, it requires that the parties not start their proposed activities until after the Division responds.

The use of FTC Advisory Opinion process is similarly infrequent, also due to narrow set of conditions under which the Commission or the Commission Staff will actually consider such a request. At the linked document set out, the Commission will only consider an Advisory Opinion when (1) the matter involves a substantial or novel question of fact or law and there is no clear Commission or court precedent, or (2) the subject matter of the request and consequent publication of Commission advice is of significant public interest. The request for an advisory opinion must concern a course of action that the requesting party proposes to pursue. That is, the requesting party must intend to engage in the proposed conduct; hypothetical questions or questions about conduct that is already ongoing will not be answered. Furthermore, a proposed course of action must be sufficiently developed for the Commission or its staff to conclude that it is an actual proposal rather than a mere possibility, and to evaluate the proposal based on the description and supporting information provided with the request. At the same time, however, the parties cannot have started their requested conduct. As you can tell, the scope of this tool is very limited.

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