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Antitrust Compliance Programs: Risk-Benefit Analysis

Andrea L. Hamilton and Joseph F. Winterscheid, Law360, July 20, 2012

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Recent developments in the global legal landscape point to the inevitable conclusion that having an effective antitrust compliance program in place is now more important than ever.

The marked increase in cooperation and coordination between antitrust enforcement agencies around the globe over the last decade has been widely reported. So it is surely no coincidence that we have witnessed an unprecedented chorus of commentary on the importance of antitrust compliance programs by a number of antitrust enforcement agencies over the last several months.

In November 2011, the European Commission issued its first-ever guidance on competition law compliance programs entitled “Compliance Matters: What Companies Can Do Better to Respect EU Competition Rules.” In February 2012, the French Competition Authority released its “Framework Document on Antitrust Compliance Programmes.” And on June 11, 2012, the Chilean Competition Agency published its “Guidelines on Competition Law Compliance Efforts.” These most recent examples of the antitrust enforcement community’s new preoccupation with antitrust compliance programs followed publications on the same subject by the enforcement agencies in the United Kingdom and Canada in 2010.

The issuance of these guidance notes is reason enough for companies to revisit the sufficiency of their antitrust compliance efforts to assess how they measure up to the enforcers’ views on “best practices.” But these recent enforcement agency pronouncements are just the tip of the iceberg.

Over the past few years, there have been numerous developments in the global legal landscape that have impacted the risk-benefit analysis associated with antitrust compliance programs. On the one hand, these changes have dramatically heightened the risks associated with antitrust violations. At the same time, certain developments have underscored the benefits of effective antitrust compliance programs. Collectively, these developments point to the inevitable conclusion that having an effective antitrust compliance program in place is now more important than ever.

Antitrust Compliance: Risks and Benefits

Antitrust compliance programs benefit companies by helping their employees avoid antitrust violations, the devastating consequences of which include heavy fines, criminal prosecution of the company and individual employees, and private damage actions — and, very often, all of the above. Apart from avoiding inadvertent antitrust violations in the first place, antitrust compliance training also has other salutary effects.

These include facilitating early detection of possible antitrust violations and assisting company personnel to identify situations where the company itself might be the victim of antitrust violations. Antitrust awareness can also be an important business tool both in assisting employees to know what they can do and in providing legal “cover” in business negotiations (e.g., when major customers seek to obtain preferential pricing in contravention of price discrimination rules).

Heightened Risks

As noted above, the risks associated with noncompliance with the antitrust laws are severe. But these risks are even more pronounced today, especially in the area of cartel enforcement. First, companies have been tagged with unprecedented fines in the United States (with a record-setting $1 billion in fines assessed in 2009 and on track to eclipse that record this year), the European Union (over €2.8 billion in fines assessed in 2010) and EU member states, such as France, Germany, Italy and the United Kingdom, which have a long record of aggressive antitrust enforcement. Similarly, the 90 criminal antitrust cases filed by the U.S. Department of Justice in 2011 was the largest number in more than two decades, and the average jail time for defendants sentenced in criminal antitrust cases (just under 17 months) was more than double the average jail time served in the 1990s.

Moreover, these serious antitrust risks are no longer confined to the United States and Western Europe. To the contrary, antitrust enforcers around the globe are now aggressively enforcing their antitrust laws, whether newly enacted (e.g., China) or historically largely ignored (e.g., Japan). And the enforcement tools being brought to bear by enforcement agencies in a growing number of jurisdictions — including the United Kingdom, Brazil, Denmark, Ireland, Japan and Korea — now include potential criminal prosecution and jail time for individuals.

The international enforcement community is also actively supporting the pursuit of follow-on civil damage actions — including class action-like “collective redress” actions — by the victims of antitrust violations, a phenomenon that had heretofore been largely confined to the United States.

But perhaps the most profound change in the antitrust risk calculus is the dramatically heightened risk of detection brought about by the increasing prevalence of leniency programs around the world. Under these programs, a cartel member is insulated from fines and/or criminal prosecution if it discloses the existence of the cartel to the enforcement agency and thereafter cooperates with the agency in prosecuting the remaining members of the cartel. In the 1990s, only the United States and a handful of other jurisdictions had leniency programs in place.

Today, however, there are antitrust leniency programs in place in more than 50 countries around the world. Cartel members are therefore now at risk of being “flipped” by one of their co-conspirators in return for immunity from prosecution in virtually every industrialized nation around the globe.

The impact that leniency programs have had on cartel detection and prosecution cannot be overstated. In 2010, the U.S. Department of Justice Antitrust Division reported that of the approximately 50 international cartel investigations pending at that time, over half had been initiated, or were being advanced, by information received from a leniency applicant.

Perhaps even more striking is the fact that in 2011, the Japanese Fair Trade Commission received 143 leniency applications — more than 10 applications a month — surely an unsettling statistic for companies that erroneously assume cartel activity continues to be an accepted business practice in Japan. And the effectiveness of these national leniency programs in detecting and prosecuting cartels has been turbo-charged by the increasingly close cooperation among the international antitrust enforcement agencies.

Enhanced Benefits

On the other side of the coin, recent developments have also enhanced the potential benefits of having an effective antitrust compliance program in place. First, the existence of such a program may be taken into account as a “mitigating factor” that may result in a reduction in the level of fines in the event that an antitrust violation does occur. This has long been the case under the United States Sentencing Guidelines, and similar policies have now been adopted in numerous other countries, including the United Kingdom, France, Australia, the Netherlands, Canada, Israel and India.

Second, the proliferation of leniency programs around the globe puts an even greater premium on the value of early detection that is facilitated by antitrust compliance programs. Companies with proactive compliance training and internal reporting mechanisms will most often be in the best position to be the first company to get a leniency “marker” down so as to achieve the maximum benefits available to the first mover under these programs. Conversely, companies that fail to detect violations at an early stage are likely to face exposure to substantially higher fines.


Given these developments, companies that have been “on the fence” about the need for a comprehensive antitrust compliance program should surely take a fresh look at their risk-benefit math. Moreover, companies that have antitrust compliance programs in place should re-examine them, both to ensure that they take account of the potential impact of new antitrust legislation and changes in enforcement policy on their international operations and to ensure that they are hitting the mark vis-a-vis their effectiveness.

As to the latter point, the enforcement agencies’ fine reduction policies discussed above make clear that it is not enough to simply go through the motions. Rather, these policies variously confine qualifying compliance programs to programs that are “effective,” “credible,” “bona fide” and/or “genuine.” The elements of an “effective” antitrust compliance program are variously described in the antitrust enforcement agencies’ individual guidance notes and policy statements, and they consistently emphasize that there is no “one-size-fits-all” solution. The common key elements, however, include:

• senior management involvement and support;
• corporate compliance policies and procedures;
• training and education;
• monitoring, auditing and reporting mechanisms; and
• consistent disciplinary procedures and incentives.

Unless an antitrust compliance program includes these basic elements, it is unlikely that the program would be taken into account in considering a possible fine reduction. But even more to the point, antitrust compliance programs that lack these essential attributes are unlikely to achieve their primary objective: avoiding antitrust violations in the first instance.

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