(Pix © 2004 Larry Catá Backer)
Why bother with law when in the modern administrative state, official exercises of discretion work all the better? There is a move toward the institutionalization of guidelines that increasingly serve as a set of shadow regulations without the bother of being formally regulatory that shifts effective authority from the letter of the law to the boundaries within administrative discretion may be exercised with impunity (in accordance with law). This reflex, of course, is central to the governance of private institutional actors--for example through the development of fiduciary duty law as a means of constraining the exercise of the discretionary decision making of members of a corporate board of directors. And it is certainly common among university administrators. But the delegation of regulatory authority within liberal democratic states might have been considered to require additional or distinctive approaches, ones traditionally bound up in mechanics like that of the Administrative procedure Act (see, e.g., here in the context of the 2019 "Census Case").
I have been examining the way that Leninist States have successfully built rule of law cultures on this mechanism. Most recently, the transformation of Cuba's Caribbean Marxism provided a quite sophisticated window on the institutionalization of rule based authority through which rules provided the framework for the exercise of administrative discretion, as well as policy and principles within which such discretion might be exercised (e.g., here, and here).
I have been examining the way that Leninist States have successfully built rule of law cultures on this mechanism. Most recently, the transformation of Cuba's Caribbean Marxism provided a quite sophisticated window on the institutionalization of rule based authority through which rules provided the framework for the exercise of administrative discretion, as well as policy and principles within which such discretion might be exercised (e.g., here, and here).
That sort of political culture is not unknown in liberal democracies either. At the highest levels, of course, both political parties have, when it suited them, embraced the strategic use of presidential executive orders, standing procedures, and the like, to further their governance aims around the increasingly clunky mechanics of democratic law making that seems better suited for the republic building of the 18th century than the political desires of the 21st century. And, indeed, this sort of transformation of the working style of liberal democracies now appear to have some value for compliance methods in Leninist systems (e.g., From a 'Two Thrust Approach' to a 'Two Sword One Thrust Strategy' to Combat Criminal Corruption: Government Enforcement of Compliance and Oversight by Sovereign Investors).
The move toward extra-legal regulation has found a particularly warm welcome--where else (?)--but with lawyers in the Department of Justice and their prosecutorial wings. Without a wink of irony and clothed with a strategic reading of their customs, traditions, and self conception, the Department of Justice has over the last generation slowly begun to build a sophisticated codex of regulation in the form of self guidance on the exercise of their prosecutorial discretion. The effect is not meant as much for internal self discipline and guidance. Rather these guidelines are meant to be projected out to the class of people and institutional organs against which they might assert the authority of the state.
The temptations to move toward this shift of authority from the rule of law to the law of the exercise of discretion is especially irresistible where the prosecutorial organs of state power seek to protect against corruption or to further the governmentalization of enterprises through the institution of internal law systems (in the American parlance--compliance and monitoring programs designed to prevent, mitigate and avoid unlawful behaviors). It is a trajectory that is as important in the "soft law" area of corporate social responsibility where one might substitute non-governmental organizations, or public international organizations for the organs of state prosecutorial power.
It is with this in mind that one ought to carefully consider the latest regulatory actions of the Antitrust Division of the US Department of Justice, again, disguised as guidance to its officials on the way in which they exercise discretion, but directed toward the objects of that discretionary exercise to change their behavior (and to induce internal regulatory reform, again in the jargon of compliance).
What follows are the Antitrust Division's announcement that would consider, and potentially reward, effective compliance programs at the charging stage in criminal antitrust investigations, along with an excellent analysis prepared by Ropes and Grey's Kaede Toh, David Zhang, Mark S. Popofsky, Kennan Khatib and Stefan P. Schropp on its effects. The 18 page guidance for prosecutors’ evaluation of corporate compliance programs at the charging and sentencing stage may be accessed HERE: U.S. Department of Justice Antitrust Division: Evaluation of Corporate Compliance Programs in Criminal Antitrust Investigations (July 2019).
Department of Justice
Office of Public Affairs
FOR IMMEDIATE RELEASE
Thursday, July 11, 2019
Antitrust Division Announces New Policy to Incentivize Corporate Compliance
During remarks today, Assistant Attorney General Makan Delrahim announced the Antitrust Division’s new policy for incentivizing antitrust compliance. For the first time, the Division will consider compliance at the charging stage in criminal antitrust investigations, a change which is reflected in the Justice Manual. The Division also announced revisions to its Manual and published a document to guide prosecutors’ evaluation of corporate compliance programs at the charging and sentencing stage.
“The Antitrust Division is committed to rewarding corporate efforts to invest in and instill a culture of compliance,” said Assistant Attorney General Delrahim. “The Division’s Leniency Policy has long provided the ultimate credit for effective antitrust compliance programs. Beyond leniency, recently we have credited prospective compliance efforts at sentencing. Crediting compliance at charging is the next step in our continued efforts to deter antitrust violations and reward good corporate citizenship. We also remain dedicated to predictability and transparency. As such, in concert with today’s policy changes, the Division issued a public guidance document that outlines what prosecutors look for when evaluating antitrust compliance programs.”
The Justice Manual previously explained the Antitrust Division’s policy “that credit should not be given at the charging stage for a compliance program.” That text has been deleted.
The Division also updated its Manual. The revisions address evaluating compliance programs at the charging and sentencing stage, and Division processes for recommending indictments, plea agreements, and selecting monitors.
For the first time, the Division also published a guidance document that focuses on evaluating compliance programs in the context of criminal violations of the Sherman Act. It is intended to assist Division prosecutors in their evaluation of compliance programs at both the charging and sentencing stage of investigations, and to provide compliance officers and the public greater transparency of the Division’s compliance analysis. To that end, it contains two sections: the first relates to evaluating antitrust compliance programs at the charging stage, and the second addresses compliance considerations at sentencing.
Topic(s):
Antitrust
Component(s):
Antitrust Division
Press Release Number:
19-756
__________
DOJ’s Antitrust Division Announces New Policy to Incentivize Corporate Compliance at Charging
USA
July 26 2019
On July 11, 2019, the Antitrust Division of the U.S. Department of Justice (the “Division”) announced for
the first time that it would consider, and potentially reward,
effective compliance programs at the charging stage in criminal
antitrust investigations. Previously, and for more than 25 years, the
Division had only considered compliance programs and efforts at the
sentencing stage. Announcing the significant policy change, Assistant
Attorney General Makan Delrahim noted the Division’s continued
commitment to “rewarding corporate efforts to invest in and instill a
culture of compliance.” Revisions to the policy are reflected in the
Division’s updated Justice Manual,
which now addresses the evaluation of compliance programs at both the
charging and sentencing stages as well as Division processes for
recommending indictments, plea agreements, and selecting monitors. Among
the many changes ushered in with this new guidance, the Division will
now consider entering Deferred Prosecution Agreements (“DPAs”) as a
resolution option for companies with effective antitrust compliance
programs. There are significant legal and business implications as a
result of the new policy, which further underscore the importance of
establishing and maintaining an effective and robust compliance program
to minimize risks and exposure.
I. Preexisting Corporate Leniency Policy
While the Division’s Corporate Leniency Policy also allowed companies to receive credit, and ultimately leniency, in criminal antitrust investigations, it had two conditions which lessened the incentive to develop and maintain rigorous antitrust compliance programs. First, the Division’s “first-in-the-door” requirement only considered the first company to come forward with material information about suspected violations for potential leniency even if a later-reporting corporation maintained a stronger corporate antitrust compliance program. Given the existence of similar rules in other jurisdictions globally, the first-to-report requirement also disincentivized reporting in any location unless a company was the first to report in every location. Second, notwithstanding a company’s “first reporter” status, the Division did not explicitly consider the scope of the company’s preexisting compliance program when making a leniency determination. These factors reduced the incentive for companies to implement and maintain robust compliance programs. At the same time, and for the same reasons, developing a robust enforcement program did not generate incentives for firms to self-report.
Further, under the existing policy, the Division was not permitted to award credit for effective compliance programs at the charging stage of an investigation. Although the Division has credited prospective compliance efforts at sentencing by reducing fines where pleading companies substantially improved their compliance programs after the wrongful conduct was detected, the Division did not award credit for preexisting compliance efforts. In fact, the Department’s Justice Manual explicitly stated that “credit should not be given at the charging stage for a compliance program.” The new policy strikes that language.
II. Compliance Considerations at the Charging Stage
The updated guidance has the potential to address several of the perceived problems with the preexisting Corporate Leniency Policy and sets forth nine factors that Division prosecutors should consider when evaluating the effectiveness of an antitrust compliance program at the charging stage of a criminal antitrust investigation:
The Division’s guidance is careful to note that these factors are not a checklist or formula. Nonetheless, the updated guidance contains a helpful catalogue of individual factors that the Division should consider under each of the nine, broad categories outlined above. Although the relevance and importance of each of these factors will inevitably vary from case to case, they are designed to help prosecutors determine whether a compliance program is well-designed, effective, and enforced in earnest and in good faith.
III. Implications of the New Policy
Crediting effective compliance programs is undoubtedly a major shift in policy for the Division. Companies with strong compliance programs stand to benefit from the new policy whereas companies with limited or ineffective compliance programs may now face criticisms and consequences for their deficiencies. The new policy presents additional opportunities for companies to mitigate the impact of isolated violations or rogue employee conduct by shifting away from the “all-or-nothing” leniency reward system. Most significantly, a company has a chance to seek a more desirable resolution in the form of a DPA. The first DPA under the new policy will set the watermark for cases to come.
Of course, there have not been any resolutions under this new policy, and the practical impact on the Division’s approach to criminal antitrust enforcement is currently unclear. However, companies can look toward other divisions within the Department of Justice (“DOJ”) with more developed corporate evaluation and enforcement policies. For instance, DOJ’s Criminal Division has recently revised their FCPA Corporate Enforcement Policy, which aims to encourage companies to make timely and voluntary disclosures of wrongdoing under the FCPA, while providing concrete incentives that reward corporations for cooperation and remediation. Similarly, in April 2019, the Criminal Division also published updated guidance on evaluating corporate compliance programs designed to bring those standards in line with other DOJ guidance and to provide additional context to the multifactor analysis. While an imperfect guidepost relative to real-world enforcement by the Division, the factors considered by these other divisions are similar to the nine outlined above and their application could provide valuable insight into the new policy’s potential impact.
In the interim, companies should strongly consider assessing their corporate compliance program’s alignment with the Division’s revised guidance and should proactively strengthen any identified areas for improvement. Potential steps for companies to consider include (1) assessing compliance responsibilities and resources on antitrust compliance; (2) reviewing existing antitrust policies and procedures; (3) implementing appropriate antitrust training programs and messaging from leadership to establish “tone from the top” and a culture of compliance; (4) establishing appropriate reporting channels for related misconduct; (5) implementing effective antitrust monitoring and control mechanisms; (6) conducting proactive antitrust risk assessments and audit review; and (7) deploying investigation resources when issues arise.
IV. Conclusion
The Division’s new policy underscores the importance of establishing and maintaining an effective compliance program. Under the new regime, companies have an opportunity to potentially prevent or mitigate any exposure from antitrust violations. Ropes & Gray will monitor the Division’s application of these factors to pending and future criminal antitrust investigations.
I. Preexisting Corporate Leniency Policy
While the Division’s Corporate Leniency Policy also allowed companies to receive credit, and ultimately leniency, in criminal antitrust investigations, it had two conditions which lessened the incentive to develop and maintain rigorous antitrust compliance programs. First, the Division’s “first-in-the-door” requirement only considered the first company to come forward with material information about suspected violations for potential leniency even if a later-reporting corporation maintained a stronger corporate antitrust compliance program. Given the existence of similar rules in other jurisdictions globally, the first-to-report requirement also disincentivized reporting in any location unless a company was the first to report in every location. Second, notwithstanding a company’s “first reporter” status, the Division did not explicitly consider the scope of the company’s preexisting compliance program when making a leniency determination. These factors reduced the incentive for companies to implement and maintain robust compliance programs. At the same time, and for the same reasons, developing a robust enforcement program did not generate incentives for firms to self-report.
Further, under the existing policy, the Division was not permitted to award credit for effective compliance programs at the charging stage of an investigation. Although the Division has credited prospective compliance efforts at sentencing by reducing fines where pleading companies substantially improved their compliance programs after the wrongful conduct was detected, the Division did not award credit for preexisting compliance efforts. In fact, the Department’s Justice Manual explicitly stated that “credit should not be given at the charging stage for a compliance program.” The new policy strikes that language.
II. Compliance Considerations at the Charging Stage
The updated guidance has the potential to address several of the perceived problems with the preexisting Corporate Leniency Policy and sets forth nine factors that Division prosecutors should consider when evaluating the effectiveness of an antitrust compliance program at the charging stage of a criminal antitrust investigation:
| Factor | Description |
| Design and Comprehensiveness | The compliance program should be comprehensive and adequately designed, focusing specifically on integrating the program into the company’s business and ensuring that compliance resources are accessible to employees. |
| Culture of Compliance | The compliance program should be part of a broader culture of compliance at the company and should be built on visible and vocal support from top management. |
| Responsibility for the Compliance Program | The individuals responsible for the compliance program should have sufficient autonomy, authority, and seniority, and adequate resources should be dedicated to the program. |
| Risk Assessment | The compliance program should be appropriately tailored to account for antitrust risk of the individual company considering the nature of the business and industry best practices. |
| Training and Communication | The company should provide employees with adequate compliance training and communication so they are clear on what is and is not permissible and can effectively resist both internal and external pressures. |
| Periodic Review, Monitoring, and Auditing | The company should conduct periodic review, monitoring, and auditing of the compliance program to ensure that it continues to address the company’s antitrust risks. |
| Reporting | Employees should be able to report potential antitrust violations anonymously or confidentially and without fear of retaliation. |
| Incentives and Discipline | The company should have incentive and discipline systems in place to ensure that the compliance program is integrated throughout the company. |
| Remediation and Role of the Compliance Program in the Discovery of the Violation | The company should take remedial action upon discovery of potential antitrust violations and should review its compliance program as part of those efforts. |
The Division’s guidance is careful to note that these factors are not a checklist or formula. Nonetheless, the updated guidance contains a helpful catalogue of individual factors that the Division should consider under each of the nine, broad categories outlined above. Although the relevance and importance of each of these factors will inevitably vary from case to case, they are designed to help prosecutors determine whether a compliance program is well-designed, effective, and enforced in earnest and in good faith.
III. Implications of the New Policy
Crediting effective compliance programs is undoubtedly a major shift in policy for the Division. Companies with strong compliance programs stand to benefit from the new policy whereas companies with limited or ineffective compliance programs may now face criticisms and consequences for their deficiencies. The new policy presents additional opportunities for companies to mitigate the impact of isolated violations or rogue employee conduct by shifting away from the “all-or-nothing” leniency reward system. Most significantly, a company has a chance to seek a more desirable resolution in the form of a DPA. The first DPA under the new policy will set the watermark for cases to come.
Of course, there have not been any resolutions under this new policy, and the practical impact on the Division’s approach to criminal antitrust enforcement is currently unclear. However, companies can look toward other divisions within the Department of Justice (“DOJ”) with more developed corporate evaluation and enforcement policies. For instance, DOJ’s Criminal Division has recently revised their FCPA Corporate Enforcement Policy, which aims to encourage companies to make timely and voluntary disclosures of wrongdoing under the FCPA, while providing concrete incentives that reward corporations for cooperation and remediation. Similarly, in April 2019, the Criminal Division also published updated guidance on evaluating corporate compliance programs designed to bring those standards in line with other DOJ guidance and to provide additional context to the multifactor analysis. While an imperfect guidepost relative to real-world enforcement by the Division, the factors considered by these other divisions are similar to the nine outlined above and their application could provide valuable insight into the new policy’s potential impact.
In the interim, companies should strongly consider assessing their corporate compliance program’s alignment with the Division’s revised guidance and should proactively strengthen any identified areas for improvement. Potential steps for companies to consider include (1) assessing compliance responsibilities and resources on antitrust compliance; (2) reviewing existing antitrust policies and procedures; (3) implementing appropriate antitrust training programs and messaging from leadership to establish “tone from the top” and a culture of compliance; (4) establishing appropriate reporting channels for related misconduct; (5) implementing effective antitrust monitoring and control mechanisms; (6) conducting proactive antitrust risk assessments and audit review; and (7) deploying investigation resources when issues arise.
IV. Conclusion
The Division’s new policy underscores the importance of establishing and maintaining an effective compliance program. Under the new regime, companies have an opportunity to potentially prevent or mitigate any exposure from antitrust violations. Ropes & Gray will monitor the Division’s application of these factors to pending and future criminal antitrust investigations.
No comments:
Post a Comment