Federal antitrust violations can lead to civil and criminal investigations and severe penalties. In 2019, the Antitrust Division of U.S. Department of Justice (DOJ) announced a new policy that incentivizes proactive compliance efforts, and it provided specific guidance on what companies need to do in order to avoid prosecution.
Establishing compliance with federal antitrust laws is an essential aspect of implementing an effective corporate compliance program. These laws are enforced by the U.S. Department of Justice (DOJ) and the Federal Trade Commission (FTC), and both of these agencies devote substantial resources to investigating, targeting, and prosecuting companies suspected of a broad range of antitrust violations. With the potential for both civil and criminal enforcement, companies and their executive leaders can face substantial penalties for non-compliance.
Antitrust Compliance: Avoiding Scrutiny from the DOJ’s Antitrust Division and the FTC
In 2019, the DOJ’s Antitrust Division announced the implementation of a new policy that is designed to incentivize corporate compliance in the antitrust realm. This new policy gives companies “credit” for “invest[ing] in and instill[ing] a culture of compliance.” In conjunction with announcing the new policy, the DOJ’s Antitrust Division also released an 18-page guidance document, entitled “Evaluation of Corporate Compliance Programs in Criminal Antitrust Investigations,” that explains what the Antitrust Division will be looking for when deciding whether (and to what extent) to pursue charges and sentencing in cases of non-compliance.
While the Antitrust Division’s guidance is intended to assist companies in avoiding criminal sanctions for antitrust violations, the publication of the guidance also means that companies have little excuse for falling short of the DOJ’s expectations. While companies that adhere to the guidance will receive credit for doing so, companies that do not adhere may face even greater admonition for not taking advantage of the resources that are publicly available.
In addition, as the FTC’s website explains, its antitrust enforcement efforts largely target different issues than those monitored by the DOJ’s Antitrust Division: “In some respects [the FTC’s and Antitrust Division’s] authorities overlap, but in practice the two agencies complement each other.” While the Antitrust Division tends to focus its enforcement efforts in the areas of general corporate compliance and anticompetitive practices with criminal implications, the FTC, “devotes most of its resources to certain segments of the economy, including those where consumer spending is high.” This includes, but is by no means limited to:
- Food and drugs
- High technology
- Energy and utilities
- Professional services
The DOJ’s Antitrust Division conducts its enforcement efforts in these and other industries as well; and, while investigations targeting large-scale mergers and intentional price-fixing schemes make headlines, there are numerous aspects of companies’ day-to-day operations that can have antitrust implications.
The Antitrust Division’s Antitrust Compliance Guidance
Rather than explaining what companies should include in their antitrust compliance programs, the DOJ’s Antitrust Division’s guidance explains how companies should structure and implement their programs in order to effectively mitigate the risk of their personnel engaging in anticompetitive conduct and pursuing relationships with competitors and other entities that trigger Sherman Act and other antitrust liability. Determining the substantive scope of a company’s necessary antitrust compliance efforts requires a critical assessment of the risks exposed by the company’s operations, and at Oberheiden, P.C. we work closely with our clients to identify the specific issues that need to be addressed.
Once we know what issues we need to cover, then we can assist your company in taking the steps necessary to satisfy the Antitrust Division that it has undertaken (and is continuing to undertake) good-faith efforts to comply with all applicable federal antitrust laws. In doing so, we will focus on the nine specific factors identified in the Antitrust Division’s guidance:
- The Design and Comprehensiveness of the Program – In assessing the validity and value of an antitrust compliance program, the Antitrust Division examines, “the design, form, and comprehensiveness,” of the program, with particular emphasis on the program’s ability to be implemented practically on a company-wide scale.
- The Culture of Compliance Within the Company – According to the Antitrust Division, “Support of the program from the company’s top management is critical to the success of an antitrust compliance program. . . . [E]mployees should be ‘convinced of the corporation’s commitment to [the compliance program].’” In other words, companies must not merely establish a compliance program, but they must also foster a culture of compliance within their workforce.
- Responsibility for, and Resources Dedicated to, Antitrust Compliance – A company’s antitrust compliance program must assign operational responsibility to appropriate senior personnel, and the program must establish adequate means of ensuring their accountability. The program must also make clear that these senior personnel have “adequate resources” to fulfill their duties.
- Antitrust Risk Assessment Techniques – While the unique aspects of a company’s business are relevant to all aspects of antitrust compliance, the Antitrust Division explicitly references appropriate tailoring of company’s compliance efforts with regard to risk assessment: “A well-designed corporate compliance program is ‘designed to detect the particular types of misconduct most likely to occur in a particular corporation’s line of business.’”
- Compliance Training and Communication to Employees – As with all aspects of corporate compliance, internal training and communication are key aspects of demonstrating good-faith efforts to comply in the antitrust realm: “An effective antitrust compliance program will include adequate training and communication so that employees understand their antitrust compliance obligations.”
- Monitoring and Auditing Techniques – Companies’ monitoring and auditing efforts should be designed to ensure that their compliance programs, “continue to address the company’s antitrust risks . . . [and] ensure that employees follow the compliance program.” Companies must conduct periodic audits and ad hoc assessments as necessary, and they must have procedures for effectively monitoring compliance and determining when alternate, additional, or remedial measures may be required.
- Reporting Mechanisms – In relation to fostering a culture of compliance, companies should implement and internally publicize mechanisms for employees to report potential or suspected federal antitrust violations. Employees should have the option to report this information confidentially, and companies should, “periodically analyze reports . . . for patterns or other red flags of a potential antitrust violation.”
- Compliance Incentives and Discipline – The Antitrust Division also advises that companies should adopt “systems of incentives and discipline” that are designed to promote compliance. It further advises that these systems should be “well-integrated” into companies’ operations and corporate culture.
- Remediation Methods – Finally, the Antitrust Division’s guidance states that companies need to have appropriate mechanisms in place to remedy any identified antitrust violations. During an investigation, the Antitrust Division will consider both (i) whether the company’s remedial efforts are timely and adequate, and (ii) whether they indicate an inadequacy in the company’s antitrust compliance program. s
Structuring Transactions and Commercial Relationships to Satisfy the FTC
Within the industries listed above (among others), the FTC primarily focuses its antitrust enforcement efforts in five specific areas. In addition to developing a compliance program that is designed to meet the Antitrust Division’s requirements with regard to the company’s operations generally, companies must also proactively address the potential antitrust implications of the various types of transactions and commercial relationships that are scrutinized by the FTC:
1. Dealings with Competitors
While there are various legitimate reasons why competitors may choose to transact business, agreements between competitors will almost invariably raise red flags at the FTC. Since it may not be possible to avoid FTC scrutiny (particularly in scenarios where reporting is required), companies must structure their transactions with the specific goal of satisfying the FTC in mind. This is true for agreements involving the following types of issues, among others:
- Advertising restrictions
- Business associations
- Contract bidding
- Group boycotts
- Market division and customer allocation
- Price fixing
2. Dealings in the Supply Chain
Vertical price fixing (or “resale contract maintenance”), manufacturer restrictions, exclusive dealing clauses, refusals to deal, and other terms of trade in the supply chain can raise antitrust implications as well. Supply chain issues are often not as straightforward as issues involved in agreements between competitors, and this means that companies must often place particular emphasis on structuring their relationships with specific federal antitrust law provisions in mind.
3. Single Firm Conduct (Monopolization)
Companies that become successful enough to dominate their markets can suddenly find themselves facing challenges with regard to monopolization. Under federal antitrust laws, if a company’s success means that it is not subject to competitive pressures, then it must adopt affirmative measures designed to ensure (and convince the FTC) that its pricing and purchase terms are not unreasonable and not specifically designed to thwart competition.
4. Price Discrimination
The FTC acknowledges that, “Price discriminations are generally lawful, particularly if they reflect the different costs of dealing with different buyers or are the result of a seller’s attempts to meet a competitor’s offering.” However, there are still various circumstances under which disparate price offerings can have antitrust implications.
5. Mergers and Acquisitions
Depending on the specific circumstances involved, corporate mergers and acquisitions can have a host of antitrust compliance implications. When preparing to execute these types of transactions, companies must affirmatively address these implications, potentially working in conjunction with the FTC. Our lawyers have significant experience in all aspects of transactional antitrust compliance, and we can assist your company in working independently or with the FTC to satisfy the requirements of the Sherman Act and other applicable laws.
Schedule a Complimentary Initial Consultation at Oberheiden, P.C.
If you would like to speak with one of our federal attorneys about implementing an antitrust compliance program or addressing the antitrust implications of a proposed or pending transaction, we encourage you to get in touch. For a complimentary initial consultation, please call 888-680-1745 or inquire online today.