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By Nell Clement and James Allison
Nell Clement is a senior associate in Farella Braun + Martel LLP’s White Collar Crime & Internal Corporate Investigations Group in San Francisco.
James Allison is a law clerk in Farella Braun + Martel LLP’s Business Litigation Group in San Francisco.
Legislation that passed the Senate unanimously in November would create new whistleblower protections in the criminal antitrust arena. The Criminal Antitrust Anti-Retaliation Act (CAARA), S. 807, is sponsored by Sens. Chuck Grassley (R-Iowa) and Patrick Leahy (D-Vt.).
CAARA has been introduced by Grassley in multiple Congresses in response to a 2011 Government Accountability Office report that specifically recommended protections for whistleblowers in the antitrust arena. The goal is to encourage individuals with knowledge of cartel activity to come forward to regulators. In a statement introducing the bill this year, Grassley described CAARA as legislation that “encourages private sector employees to disclose criminal violations by protecting them from retaliation in the workplace for coming forward with information.”
CAARA is an amendment to the Antitrust Criminal Penalty Enhancement and Reform Act of 2004 (ACPERA). The bill is designed to encourage employees who haven’t violated antitrust law to provide information to the federal government or a supervising employer if they reasonably believe an antitrust violation has occurred. CAARA would create a civil remedy for whistleblowers who report illegal behavior and face retaliation on the part of their employers, thereby protecting individuals who have information and wish to come forward.
CAARA would prohibit an employer from “discharg[ing], demot[ing], suspend[ing], threaten[ing], harass[ing], or in any other manner discriminat[ing] against” a covered individual who provided information to the federal government or a supervisor concerning any violation of antitrust law or another criminal law committed in conjunction with a potential antitrust violation or a Department of Justice (DOJ) antitrust investigation. An employer also would be prohibited from taking any of the above employment actions against a covered individual who has filed, testified, participated, or otherwise assisted in a DOJ antitrust investigation.
The bill would provide employment protections to covered individuals for alerting authorities or supervisors about conduct that is actually illegal under antitrust laws and conduct that the individual “ reasonably believes (emphasis ours) to be a violation of the antitrust laws.” This “reasonable belief” language would extend protections to well-intentioned whistleblowers who have wrongly assessed the legal implications of the reported conduct.
“Covered individuals” is defined broadly in CAARA. The definition includes employees, contractors, subcontractors, and agents of an employer. Additionally, the definition of “employer” is broad. An “employer” under CAARA is defined as “a person or any officer, employee, contractor, subcontractor, or agent of such person.” “Person” under CAARA includes corporations and associations.
CAARA would establish a procedure by which a covered employee can bring a civil suit against an employer for retaliation based on reporting anticompetitive activity. Under CAARA, an employee who is covered by the bill and believes they have been retaliated against would have 180 days from the alleged violation to file a complaint with the U.S. Secretary of Labor. If the secretary fails to return a final decision within 180 days of the filing of the complaint, and the delay is not due to the bad faith of the claimant, the claimant could bring a civil action in a U.S. district court.
Employees who bring an action either through the U.S. Department of Labor (DOL) or in district court (if the DOL does not proceed from the action) could seek reinstatement at the same seniority status the employee would have had but for the negative employment action. Additionally, under CAARA, whistleblowing employees could seek back pay with interest and compensation for special damages sustained as a result of the retaliation such as litigation costs, expert witness fees, and reasonable attorneys’ fees.
Although certain provisions of CAARA are relatively broad, as discussed above, the bill has several significant and important limitations. First, CAARA protections would not apply to an individual who “planned or initiated” a violation or attempted violation of the antitrust laws or other criminal law in conjunction with the antitrust violation. This limitation specifically would apply to an individual who “planned or initiated an obstruction or attempted obstruction” of a DOJ antitrust investigation. Thus, CAARA would only provide protections to people who are either not involved in the potential antitrust conduct or who are involved at a lower level or to a minimal degree.
Additionally, CAARA would not provide whistleblowers with any financial reward. CAARA whistleblowers are limited to reinstatement, back pay, and special damages articulated in the text of the bill. This is a significant limitation in CAARA and sets it apart from other whistleblower statutes that provide substantial financial incentives for whistleblowers. For example, the U.S. Securities and Exchange Commission’s (SEC) whistleblower program allows for monetary rewards in the range of 10 percent to 30 percent of the money collected if the whistleblower’s reporting leads to an enforcement action in which the agency collects over $1 million. The U.S. Internal Revenue Service’s (IRS) whistleblower program allows for whistleblowers to obtain monetary rewards of up to 30 percent of the IRS collection resulting from that whistleblower’s tip. The SEC and IRS whistleblower programs are regarded as largely successful in uncovering and/or furthering the government’s investigations into unlawful conduct.
CAARA’s limitations regarding who can seek its protections and the lack of a whistleblower reward minimize the bill’s likely effectiveness as an investigative tool for antitrust enforcement. First, it is often the planners and/or organizers who, by nature of their level of involvement, can provide law enforcement with the detailed information most useful in building a criminal antitrust case. By limiting protections to innocent individuals or those whose involvement is nonexistent or minimal, CAARA would limit the likelihood that whistleblowers would have this detailed information. Second, without the potential for monetary awards for whistleblowers, CAARA may not provide enough of an incentive for individuals to choose to alert authorities.
These limitations underscore CAARA’s focus as solely anti-retaliation legislation compared to other whistleblower programs that have a clear focus on investigation building. Some legal commentators have criticized CAARA in this regard for not going far enough. However, the DOJ antitrust division already has a powerful investigative tool in its leniency program, which provides leniency for the first corporation and/or individual to self-report anticompetitive activity and often allows that corporation or individual to avoid criminal prosecution.
The antitrust division has successfully used its leniency program to unearth numerous cartel conspiracies, and the program is flexible in that it allows for corporations and individuals who are not the first to report a certain cartel conspiracy to still obtain leniency credit by self-reporting a separate antitrust conspiracy.
ACPERA further extends the DOJ’s leniency program into the civil antitrust arena by limiting civil damages exposure to participants in the program if that participant cooperates with civil plaintiffs. Given the antitrust division’s strong leniency program and the ACPERA civil damages limitations, the need for CAARA as an investigative tool decreases significantly.
This is the fourth iteration of CAARA, as it was introduced in 2012, 2013, and 2015. A nearly identical version of the bill was unanimously passed by the Senate in 2015, yet the House never took up the bill.
In early November, the Senate Judiciary Committee unanimously approved CAARA, and it passed the full Senate Nov. 15. It is uncertain whether the House will take up the bill. The House will have until the end of the 115th Congress, which ends on January 2, 2019, to vote on it. If no vote occurs before that date, Grassley and Leahy would have to reintroduce the bill in 2019, again starting with the Senate Judiciary Committee.
CAARA’s bipartisan support in the Senate and the fact that it provides relatively standard and non-controversial anti-retaliation protections weigh in favor of the bill’s enactment into law. However, Congress’s focus on broader and high-profile legislation, such as tax, immigration, and health care reform may prevent legislators from taking up the bill.
If CAARA is enacted into law, corporate employers should take a careful look at their antitrust compliance programs to ensure they are robust and sufficient in a number of ways.
Train on antitrust. First, corporate employers should confirm that the training aspect of their antitrust compliance program is sufficient to ensure that all employees are knowledgeable about conduct that violates federal antitrust laws. Antitrust compliance training will decrease the likelihood of employees engaging in conduct that violates antitrust law. It will also help prevent a scenario in which an employee who does not have a sufficient grasp of the antitrust laws exposes their employer to an investigation based on that employee’s “reasonable belief” that certain conduct violates antitrust law. Additionally, the broad definition of “covered individual” under CAARA to include contractors, subcontractors, and agents demonstrates that employers should ensure each of these categories of individuals receive antitrust compliance training.
Create reporting channels. Second, corporate employers should confirm that their antitrust compliance programs have clear reporting mechanisms in place. Because CAARA allows direct reporting to the federal government (without a requirement of first attempting to report internally), corporations are at risk of a scenario in which they first learn of criminal antitrust conduct within their ranks from the federal government. Corporate employers can minimize this risk by making reporting channels for potential antitrust violations clear and well known to employees. This chain of reporting should be a central piece of a corporate employer’s antitrust training for employees, contractors, subcontractors, and agents.
Self-police. Third, a corporate employer’s antitrust compliance program should include a self-policing component in which a routine internal review of pricing and bid processes is used to identify any red flags suggesting conduct that could violate antitrust laws. A self-policing component will decrease the risk of an employee reporting to the federal government without an employer’s knowledge.
Additionally, self-policing will often allow a corporate employer to conduct its own internal investigation ahead of the federal government investigation, and it will allow the employer to be proactive instead of reactive with federal investigators. Getting ahead of a federal investigation is especially important for corporate employers in the antitrust context given the antitrust division’s leniency program.
Decreased culpability. Finally, a robust antitrust compliance program can have a positive mitigating impact on a corporation’s sentence under the U.S. sentencing guidelines if a corporation ends up being prosecuted for antitrust violations. An employer’s “effective ethics and compliance program,” as well as an employer’s self reporting (possibly triggered by the compliance program), can have a significant impact on a corporation’s culpability score, which acts as a fine multiplier for corporations under the sentencing guidelines.
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