Antitrust Compliance and Credit for an Effective Compliance Program

antitrustcompliance4The Antitrust Division and practitioners live in their own world.  It is part of the fabric when you work in the Antitrust Division – it is an entity unto itself within the Department of Justice.  For years, the Antitrust Division has been able to fend off greater control by the DOJ heirchy by arguing that protecting competition and markets is a very specialized mission, requiring a unique expertise.

The Antitrust Division’s attitude is shared by many antitrust practitioners – once indoctrinated by the Antitrust Division, practitioners sing the same song of specialized knowledge and expertise, partly to preserve their own position in the marketplace and fend off their own competitive threats.

This same attitude has extended into the compliance arena.  For some reason, while aggressive FCPA enforcement has had a significant impact on the development of anti-corruption compliance programs, tools and resources, the same has not occurred in the antitrust compliance field.  This is a very interesting anomaly.

Part of the explanation for this phenomena has been the government’s unwillingness to credit companies for implementing “effective” antitrust compliance programs.  The Antitrust Division has argued for years that companies which engage in cartels or other criminal horizontal agreements should not be eligible to earn credit under the Sentencing Guidelines for an “effective” antitrust compliance program.

The Antitrust Division’s argument is twofold: first, that companies already have sufficient incentives to earn enforcement reductions through its well-established” leniency program under which a company can earn immunity or significant reductions in penalties.

Second, the Antitrust Division claims that companies which engage in cartel behavior antitrustcompliance3should be disqualified from earning a reduction for an “effective” antitrust compliance program because a cartel or other horizontal agreement, by definition, involves senior management officials from the company.   In other words, to be successful, a cartel has to include affirmative cartel agreement and enforcement to carry out a cartel and senior management has to turn a blind eye to this misconduct since a cartel typically increases corporate profits by restricting output and raising prices.

The response to the Antitrust Division’s arguments by compliance practitioners is persuasive.  The Antitrust Division’s record of cartel enforcement is very impressive but we have not seen any decline in cartel activity.  The Antitrust Division has enforced the antitrust laws against companies and individuals, resulting in significant increases in fines and jail sentences.  On average, three individuals from each company in a cartel is prosecuted.

Compliance professionals contend that if companies received some “credit” for its effective compliance program even when a company participates in a cartel, companies will increase compliance and detect and prevent more cartels.

The question boils down to the concept of marginalism (a favorite of economists and antitrust professionals) – would the increased benefit from credit for an effective compliance program cause companies to increase spending on antitrust compliance and thereby reduce cartel behavior in the economy?

antitrustcompliance2Even putting aside this question, companies still have an incentive to design and implement an effective antitrust compliance program – the ability to prevent and detect cartel activity is a significant benefit to companies, whether or not they receive credit for an “effective” compliance program.

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