On Monday, Assistant Attorney General Jonathan Kanter announced significant updates to the DOJ Antitrust Division’s (“the Division”) Leniency Program. While speaking at the joint Federal Trade Commission / Division Enforcers Summit, AAG Kanter explained that with these changes the Division aimed to make the Leniency Program more accessible and straightforward, so that it can be understood by lawyers and laypersons alike, and to encourage more companies of all sizes to avail itself of the Leniency Program. Some of these changes, however, are more than just “reader-friendlier,” and represent notable changes from the prior regime.
The new Guidance is reflected in the updated FAQs for the Leniency Program that was released Monday as well as in the Justice Manual section on Antitrust Enforcement. (Justice Manual, 7-3.000). The FAQs are intended to serve as a key resource to understand how the Division plans to implement the Leniency Program going forward. This most recent update features an additional 50 questions and answers updating the prior release in 2017. Many of these new FAQs provide additional context and information to topics that were covered in the previous version of the FAQs, but there are some key new additions reflecting significant changes in policy.
In his remarks, AAG Kanter highlighted that one of the changes made to the Program guidance documents was to require as a precondition to leniency that the applying company report the anti-competitive conduct to the Division promptly after discovering the violation. Companies cannot wait to report in the hope that the conduct will not be detected. The Division will assess “the facts and circumstances of the illegal activity and the size and complexity of operations of the corporate applicant” to determine whether a company has met this new “promptness” requirement. The updated guidance also allows for companies to conduct a timely preliminary internal investigation to confirm the violation occurred before reporting the violation to the Division. (See FAQ No. 22).
The updated FAQs appear to increase the categories of people who are responsible for reporting violations. While the previous version of the FAQs stated that a company became aware of a violation when either the board of directors or counsel for the company learned of the conduct, the updated FAQs now describe this category of people as any “authoritative representative of the applicant for legal matters,” and specifically note that this category includes the company’s board of directors, any counsel, or any compliance officer. It remains to be seen what other individuals the Division would consider to fall into the category of “authoritative representative for legal matters,” but this factor could cause concerns for a company if allegations or evidence of potential misconduct are not properly reported within a company. (See FAQ No. 21).
The updated FAQs also impose another new precondition to obtaining leniency: remediating the problem and addressing the compliance shortcomings that contributed to the reported misconduct. While the previous FAQs did not touch on this topic, the updated FAQs clearly highlight the need for companies to improve their compliance programs before leniency is granted. The importance of this requirement is also noted in the Justice Manual, which now expressly includes the need for companies to improve compliance programs after detecting conduct as one of the factors necessary for receiving Leniency. (Justice Manual, 7-3.410). This focus on enhanced compliance efforts follows on the heels of the DOJ’s strong push for compliance over the last few years. Most notably, in July 2019, the Antitrust Division adopted a new approach to compliance that instructed Division prosecutors to consider the strength of a Company’s Compliance programs at both the charging and sentencing stages. (See Steptoe Alert, July 15, 2019). In addition, to avoid concerns of recidivism, leniency applicants will need to conduct a root cause analysis and undertake remedial efforts meant to resolve the problems uncovered by this analysis.
The updated FAQs also now provide guidance on restitution and how companies can qualify for the benefits that inure to leniency recipients under the Antitrust Criminal Penalty Enhancement and Reform Act (ACPERA). The new FAQs appear to strengthen the requirement for leniency applicants to pay restitution. While the previous version of the FAQs required companies to make restitution “where possible,” the revised FAQs require companies to make “best efforts” to pay restitution. And with regard to ACPERA specifically, the previous version of the FAQs only noted that restitution is resolved in civil litigation with private plaintiffs and that ACPERA may limit the amount of restitution owed by companies who receive leniency. The new guidance includes nine questions and answers on ACPERA, and includes information on how a leniency applicant may seek the benefits of ACPERA, what qualifies as “satisfactory cooperation” with civil plaintiffs – explaining that leniency applicants should not be denied the benefit of ACEPRA if a plaintiff makes unreasonable requests, and how leniency applicants can navigate continuing obligations to the Division and discovery requests in civil litigation. Although the ultimate ACPERA determination is made by courts, these additional FAQs will provide companies with greater clarity as to the civil litigation benefits that seeking leniency confers beyond immunity from criminal prosecution.
In addition, the updated FAQs now include a question regarding the Criminal Antitrust Anti-Retaliation Act of 2019 (CAARA). CAARA prohibits retaliation against employees who report potential violations of the antitrust laws or participate in government investigations into these violations. The new FAQ explains that whistleblower protections exist for individuals and that although an individual may not qualify or need the protections of individual leniency, they may be able to qualify under CAARA for whistleblower protection. (See FAQ No. 18). The implementation of CAARA also adds to the necessity for companies seeking leniency to promptly report any potential criminal conduct before a whistleblower reports that conduct to the government.
The Division also notes the document production concerns that arise when foreign companies seek leniency. Many foreign countries have restrictive data protections laws that often come into conflict with the Division’s cooperation obligations requiring companies to produce all relevant data regardless of where it is located. The revised FAQs note this concern and explain that in the Division’s experience companies can “comply with privacy laws and regulations in other jurisdictions while fully cooperating with the Division’s investigation.” (FAQ No. 30).
In addition to updating the FAQs, the Division also released new model corporate and individual leniency letters. These revised letters aim to meet the Division’s new goal to issue more straightforward and clear guidance to applicants regarding the requirements of and benefits conferred under the Program. While many of the changes in the letter were created to clarify and streamline the letters, one specific change to note is that the updated Corporate Leniency Letter has added a section on “Public Statements by Applicant.” This new section requires that leniency applicants do not “make any public statement, in litigation or otherwise, contradicting Applicant’s acceptance of responsibility.” This new language could become the subject of disputes between civil litigation plaintiffs and leniency applicant defendants who do not contest a violation of the Sherman Act but who dispute issues relating to causation and damages, which plaintiffs may assert runs counter to an acceptance of responsibility. Leniency applicants defending against civil litigation could therefore face significant risk of losing the Program’s benefits by challenging elements of a Sherman Act claim beyond the violative conduct itself. In this respect, this change will likely provide civil plaintiffs with more leverage in settlement negotiations with leniency applicants.
Beyond the updates to the Leniency Program, AAG Kanter also noted some other Division priorities moving forward. First, he made clear that the Division is prepared to litigate matters when necessary. He noted that the Division has brought on two Acting Deputy Assistant Attorneys General to oversee litigation efforts and that these individuals will focus on bringing more cases to trial rather than settling on less onerous terms for fear of losing at trial. Second, as he has highlighted in other recent public statements, he explained that the Division will now seek to enforce violations of Section 2 of the Sherman Act – i.e., monopolistic conduct – as criminal felonies when appropriate. He explained that while the Division already has this power, they will now seek to use this remedy when the situation warrants. AAG Kanter, however, did not provide examples of the kind of monopolistic conduct would warrant criminal prosecution.
In total, AAG Kanter’s statements earlier this week make clear that the Division will seek to be more active by both trying to make the Leniency Program more enticing to companies and by seeking to litigate where necessary – both in areas where it has traditionally brought cases to trial and through seeking potential new avenues of prosecution when appropriate.