On July 11, 2019, the Antitrust Division of the Department of Justice announced a substantial shift in its policy for incentivizing and rewarding the use of corporate compliance programs. For the first time, the Division will now consider the adequacy and effectiveness of a company’s antitrust compliance program in its charging decision—even when a company loses the race to be first under the Corporate Leniency Policy—and in appropriate cases will permit the use of deferred prosecution agreements instead of indictments or guilty pleas.
A Substantial Policy Shift
For over 25 years, the Corporate Leniency Policy was the sole mechanism by which compliance programs could benefit a corporation in a criminal antitrust investigation. If a compliance program helped a company “win the race for leniency”—i.e., if it promptly detected misconduct, allowing the company to be the first to self-report and satisfy the requirements of the Leniency Policy—the benefits were substantial, including immunity from criminal charges and penalties, non-prosecution protection for covered cooperating employees, and avoiding treble damages in related civil litigation. If the company did not win the race for leniency, however, the Division would insist that it plead guilty to a criminal charge.
As Assistant Attorney General Makan Delrahim explained, this was an “all-or-nothing philosophy” that ignored the role of compliance programs. Indeed, the Justice Manual expressly stated that “credit should not be given at the charging stage for a compliance program.”
The Division has now radically changed its approach. Reversing its “all-or-nothing philosophy,” the Division will no longer require a guilty plea for every company that does not win the race for leniency. Instead, it will allow prosecutors to enter into deferred prosecution agreements (“DPAs”), which can enable companies with robust compliance programs to avoid a criminal conviction even if they are not the first to self-report. The language in the Justice Manual prohibiting credit for compliance programs has been deleted; prosecutors will now consider the adequacy and effectiveness of a compliance program as a relevant factor in every charging recommendation.
Evaluating Compliance Programs at the Charging Stage
When weighing criminal charges against a corporation, Division prosecutors will now evaluate all of the factors in the DOJ’s Principles of Federal Prosecutions of Business Organizations—including “the adequacy and effectiveness of the corporation’s compliance program at the time of the offense, as well as at the time of a charging decision.”
The Division also published detailed guidance that explains how the adequacy and effectiveness of antitrust compliance programs will be evaluated (the “New Guidance”). Prosecutors will start by asking three preliminary questions: “(1) Does the company’s compliance program address and prohibit criminal antitrust violations? (2) Did the antitrust compliance program detect and facilitate prompt reporting of the violation? (3) To what extent was a company’s senior management involved in the violation?”
Next, prosecutors will consider nine factors: (1) the design and comprehensiveness of the program; (2) the culture of compliance within the company; (3) the responsibility for and resources allocated to antitrust compliance; (4) the program’s antitrust risk assessment techniques; (5) compliance training and communication to employees; (6) monitoring and auditing techniques; (7) reporting mechanisms; (8) compliance incentives and discipline; and (9) remediation methods. This is obviously a very fact-specific inquiry, and no single factor is dispositive.
Considering all of these factors, prosecutors will analyze the adequacy and effectiveness of a company’s compliance program and take it into account in their charging recommendation. In appropriate cases, this could make a critical difference in determining whether a company enters into a DPA or faces criminal charges.
AAG Delrahim emphasized that the new policy “should not be misconstrued as an automatic pass for corporate misconduct.” First, the mere existence of a compliance program does not guarantee a DPA; instead, there must be a detailed inquiry into whether it is truly effective. Moreover, the effectiveness of a compliance program is just one factor in the charging decision. If other “hallmarks of good corporate citizenship”—such as prompt self-reporting, cooperation with the investigation, and remedial action—are not present, then the existence of an effective compliance program alone will be insufficient to warrant a DPA.
He also explained that the Division will continue to disfavor non-prosecution agreements with companies that do not receive leniency, “because complete protection from prosecution for antitrust crimes is available only to the first company to self-report and meet the Corporate Leniency Policy’s requirements.” In other words, although DPAs will be allowed in certain cases, the Leniency Policy will remain the only path to secure full immunity.
Credit for Compliance Programs at Sentencing
The New Guidance also discusses three scenarios in which prosecutors may give credit for antitrust compliance programs at sentencing.
First, the Sentencing Guidelines permit a three-point reduction in culpability score for an effective compliance program. As at the charging stage, the effectiveness of a compliance program is a fact-specific inquiry, but certain minimal requirements are set forth in U.S.S.G. § 8B2.1. The three-point reduction does not apply, however, if the company “unreasonably delayed” reporting the misconduct, and there is a rebuttable presumption that a compliance program is not effective if certain “high-level” or “substantial authority personnel” participated in or condoned the violation.
Second, the existence of a compliance program is relevant to whether prosecutors will recommend corporate probation under U.S.S.G. § 8D1.1. If a company did not have a pre-existing compliance program at the time of the violation, prosecutors will consider whether an effective program was subsequently adopted. If not, the Division may recommend probation. It will also analyze whether an external monitor is necessary to ensure implementation of an effective compliance program.
Third, prosecutors will consider whether a company’s post-violation compliance efforts warrant a fine reduction. In deciding whether to recommend a reduction, prosecutors will consider: (1) management’s “tone at the top” regarding culture change and future compliance; (2) improvements made to any pre-existing compliance program; (3) the creation of a robust compliance program if none previously existed; and (4) disciplinary measures employed or created following the violation.
AAG Delrahim said that the Division “has yet to recommend credit for a defendant’s ‘pre-existing’ antitrust compliance program under the Guidelines’ three-point reduction provision,” but it has credited “extraordinary ‘prospective’ compliance efforts in certain cases, and advocated for a reduction in the corporate fine” where a company “changes its corporate culture and instills a new attitude toward compliance and good corporate citizenship.”
What This Means for Companies
The Division’s policy change and New Guidance underscore the importance of designing and maintaining effective antitrust compliance programs. Obviously, a strong compliance program can help prevent violations in the first place. If a violation does occur, a robust compliance program can still have substantial benefits in the criminal enforcement context. If it detects the misconduct early, it may help the company win the race for immunity under the Leniency Policy. Even if the company does not qualify for leniency, an effective compliance program can potentially make the difference between a DPA and an indictment or guilty plea. It also can help the company secure a reduced fine or avoid probation. Now more than ever, companies have every incentive to invest in a robust antitrust compliance program.