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.