Antitrust Compliance Lessons Learned from Chicken Price-Fixing investigation and Indictment (Part III of III)
The Antitrust Division’s recent indictment of the boiler chicken executives provided an important reminder to compliance officers on the importance of an effective antitrust compliance program. With last year’s Guidance on Antitrust Compliance, DOJ has provided a roadmap for compliance officers to design and implement an effective compliance program.
Executive Level Participation and C-Suite Risk Assessment: As described in the indictment, the price-fixing and bid-rigging conspiracy was carried out by executives at the respective companies. Antitrust conspiracies often involve executive level employees in order to adhere to price-fixing and bid-rigging agreements.
As a result, in most cases, an antitrust compliance program has to include a C-Suite and executive level risk assessment. It goes without saying but a bad apple or two in the C-Suite can cause significant harm and it is important to identify risks and incorporate compliance controls and monitoring strategies to mitigate and monitor those risks. Numerous FCPA and healthcare fraud cases have been carried out with the specific or implicit approval of senior executives. Antitrust risks, especially in concentrated markets, are significant and increase overall company risks.
Empowered and Independent Chief Compliance Officer: As a corollary to the C-Suite Risk Assessment point above, companies have to redouble the importance of an independent, empowered, and adequately resources compliance functions. Given the significant market pressures in today’s difficult economy, this is even more important. It is highly unlikely that any of the companies involved in the conspiracy maintained an independent compliance function. To thre contrary, the high-level misconduct among the companies reflects the absence of any meaningful commitment to ethics and compliance.
Emails and Communications Monitoring and Audits: The charged conspiracy was carried out with emails, texts and telephone calls. A review of such information during the conspiracy would have revealed numerous communications among the suppliers and discussion of pricing, bids and other sensitive information. It is critical for such reviews to include executives in the C-Suite.
Pricing and Bid Review Controls: Many companies are implementing controls around high-risk activities such as discounts, bid tenders, marketing promotion allowances and other competitive information. In the chicken conspiracy, it appears that decisions surrounding these topics could be implemented on the fly and without any controls designed to ensure that pricing decisions were properly made in response to market conditions.
To discover a possible conspiracy, compliance programs have to incorporate monitoring of pricing activities, including bids, negotiations and ultimate prices. In many cases, patterns will emerge concerning market and pricing information. This will provide valuable leads to compliance officers who can then investigate company activity further and focus on individuals involved.
Market Concentration: The higher the concentration of a market, the lower the number of competitors and the easier to implement and enforce price-fixing and bid-rigging agreements. The chicken suppliers totaled around seven, and it appears from the indictment that they were regularly in touch with each other and sharing competitive information.
Training and More Training: Antitrust compliance training has to be regularly conducted at the board, senior executive and executive levels. In the chicken conspiracy case, it is unlikely that such training of the co-conspirators would have caused them to stop their illegal activity. However, by raising awareness of the issue within the organization, such training could lead to detection or reporting by a board member, executive or employee who learns of potential price-fixing activity.