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The Justice Department is considering whether it may be time to trim fines or other punishments for cartel participants if those companies had internal anti-price fixing compliance plans during the time of the violation.
Regulators want to improve voluntary antitrust compliance in U.S. companies to prevent violations, but the DOJ to date has never given credit for existing compliance programs in cartel cases. Antitrust lawyers have long argued that because there is no chance to receive leniency for internal compliance plans, top-notch compliance often eludes companies until after they have a violation.
Giving credit for excellent compliance programs would help line up the internal incentives for companies and help prevent problems in the first place, Andrea Murino, a partner in Goodwin Procter LLP’s Washington office, told Bloomberg Law. “As a guiding principle, companies want to do the right thing,” she said.The DOJ hasn’t reduced penalties for cartel violators because the sentencing guidelines call for such leniency only for “effective” compliance programs. The DOJ’s position for years has been that if a company is caught in criminal cartel, especially involving officers of the corporation, then clearly their compliance program was ineffective.
But Principal Deputy Assistant Attorney General Andrew C. Finch told antitrust lawyers May 2 that the agency is reconsidering its long-standing position barring credit for compliance programs that were in place when a cartel violation is discovered.
“Whether and under what circumstances” to allow a reduction in fine or otherwise credit an existing program is under review, he told a Concurrences Review conference on antitrust issues in the financial sector at Fordham University Law School.
The DOJ is mulling what it learned at its April 9 roundtable on promoting compliance, Finch said. At that event, industry participants requested broader credit for compliance programs that were in place when a cartel violation happened. The DOJ has several ongoing investigations into cartel activity, including in the packaged seafood and generic drug industries. It’s not clear what, if any, compliance programs were in place for the investigated companies such as Bumble Bee Foods, which pleaded guilty to price fixing last year and paid a $25 million fine.
Robert Tarun, a Baker McKenzie partner and former antitrust compliance monitor, said he thinks the government should give credit for some compliance programs designed to prevent price fixing. Recognizing those efforts would “encourage companies to implement quality compliance programs before there is a problem — and get credit for it,” he told Bloomberg Law.
Tarun served as the first criminal antitrust compliance monitor in U.S. history, appointed in 2012 to oversee probation for AU Optronics Corp. following its conviction for participating in the LCD screen cartel. The court assigned the company three years of probation under Tarun’s guidance, fined it $500 million, and sentenced two executives to three-year prison terms.
A criminal price-fixing offense doesn’t necessarily mean a company’s compliance program is a failure, Tarun said, especially if the company self-reports the violation. The compliance program was strong enough to detect a problem, he said, and thus the company should be eligible for some credit.
In big, multinational corporations that have done all they could to comply with the law, holding the whole corporation hostage for the violation of a few people doesn’t always make sense. Detecting a cartel offense is difficult inside a company, he said. At least half of the cartel-related offense goes on at one or more of the company’s competitors, and the parties to an illegal deal carefully cover their tracks.
The DOJ, on rare occasions, has given companies credit for a systematic overhaul of compliance programs after they were caught in a cartel prosecution. But even that policy is relatively new, and only a few companies have managed to meet the high standard for penalty reductions.
The first company to get credit for a complete turnaround following a cartel violation was Barclays PLC in 2015 in connection with the foreign exchange cartel investigation. The DOJ asked the Connecticut federal court in 2016 to reduce Barclays’ fine based on its wholehearted embrace of compliance after its participation in the forex cartel came to light. The court followed the DOJ’s recommendation in 2017 and imposed a reduced fine.
The second such reduction was for Kayaba Industry Co. Ltd., an auto parts maker involved in the sweeping, industrywide cartel investigations first announced in 2011.
The DOJ has repeatedly said it looks for “compliance culture” within corporations, not just check-the-box “paper” compliance. Such a compliance culture comes from the top of an organization and demands accountability of everybody in the chain of command below — not just to follow the rules, but adhere to a corporate ethics ideal, officials said.
That kind of program should prevent a further violation if a company is caught, Murino said. “The penalties for a criminal violation are very severe. No company is interested in repeating that.”
But, credit for an existing program would be helpful in preventing missteps in the first place, she said. It would be attractive to companies to know that, if they invest heavily to put rigorous programs in place, there is a possibility of credit from authorities should something nefarious happen.
No large company can control the conduct of all of its employees all the time. “But if you teach your employees what your values are, you can avoid putting yourself in that position to begin with,” Murino said.
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