The Justice Department’s criminal enforcement of antitrust laws is a model of success. DOJ’s criminal program took off in the 1990s with two major developments: (1) adoption of a corporate leniency program which increased self-reporting by cartel members; (2) enforcement against international cartels which had an impact on US consumers.
Criminal fines in 2009 exceeded $1 billion, dipped to $555 million in 2010, and then in 2011 rose to nearly $1 billion if civil penalties are added in for civil settlements in the municipal bond cartel investigation.
In the last decade, the US collection of fines against companies has been eclipsed by the EU’s cartel enforcement program, which is very aggressive, but limited to imposition of civil fines. In many international enforcement cases, the EU is the driving enforcement agency.
The US program, however, has one important distinction — criminal prosecution of individuals for antitrust violations. The Antitrust Division has had some good years in prosecuting individuals, usually convicting 90 percent of charged individuals. Three-quarters of the convicted individuals are given jail sentences, averaging between 2 and 3 years imprisonment.
Some argue that criminal fines rarely deter corporate actors because they are viewed as a “cost of doing business,” and that individual prosecutions are the only meaningful deterrent to anti-competitive cartels. The Antitrust Division aggressively pursues individuals and on average prosecutes three individuals for every corporation prosecuted for criminal violations. Ten years ago, only 38% of defendants received sentences of imprisonment, and the average length of those sentences was only 10 months.
The Antitrust Division and the Fraud Section of the Criminal Division work closely with each other – after all, white collar criminals involved in cartel activity are often involved in fraud, foreign bribery and other types of schemes. Cooperating defendants often have information about both cartel activity and foreign bribery.
It is clear that the Justice Department is building a stable of cooperating witnesses who are committed to assisting in the investigation and prosecution of other criminal actors. When debriefing a cooperating witness, prosecutors always ask about antitrust violations as well as foreign bribery.
The Justice Department is currently prosecuting one of the largest criminal conspiracies it has ever tackled – a global conspiracy involving auto parts suppliers. It has apparently issued target letters to over 30 separate individuals, and is focusing on nearly 15 to 20 companies. The cooperating witnesses in the auto supply industry are sure to have information about potential FCPA violations.
Recent years have also shown an increased emphasis on prosecuting foreign individuals, where their antitrust violations reach the United States. Since 1999, when the first foreign defendant was sentenced to serve time in a U.S. prison, approximately 40 foreign nationals have received similar jail sentences.
Amnesty and Leniency Program
In the 1990s, the United States introduced a formal amnesty and leniency program to increase detection of antitrust conspiracies. This program is the engine fueling the criminal enforcement program — over half of the Antitrust Division’s criminal investigations were initiated by a leniency applicant.
Under the leniency program, the cartel member to self-report a violation receives immunity for itself and all of its officers, directors, and employees. In addition, the company receives reduced exposure to civil verdicts. Normally, United States law allows for recovery of treble damages for suits alleging antitrust violations, but the first self-reporting applicant is only liable for the amount of damages actually caused. A successful amnesty applicant also escapes provisions providing for joint and several liability among members of an antitrust conspiracy.
In contrast, the potential liability of other members of an antitrust conspiracy remains severe. The maximum fine is now the greatest of $100 million, twice the gain from the conspiracy, or twice the victims’ loss as a result of the conspiracy. Furthermore, the officers, directors, and employees of the company face criminal prosecution, including sentences of up to 10 years’ imprisonment, and individual fines of up to $1 million. The sharp contrast between these harsh potential fines and sentences provides significant incentive for leniency applicants to quickly self-report.
The benefits of an amnesty application are not limited to the first reporting company. In certain circumstances, the Antitrust Division is also willing to award subsequent companies to report. Admittedly, the benefits of “second in” cooperation are less clear. Nonetheless, these companies may also be entitled to a substantial reduction in fines.
International Enforcement and Cooperation
The great success of the amnesty and leniency programs in the United States has led other jurisdictions to adopt similar programs. For instance, Canada and the European Commission modified their programs in early 2000, leading to a significant increase in applications and self-reporting. Numerous other countries have followed suit, and today over 50 jurisdictions have leniency programs in place. These programs are enjoying success comparable to that seen in the United States, with record-breaking fines imposed in Australia, Brazil, Canada, the European Union, Japan, Korea, Poland, and the United Kingdom.
Increasingly, prosecutors in the United States are relying on coordination and cooperation to identify and convict antitrust conspirators. Coordination among various prosecutors’ offices plays a key role, as existing investigations frequently will reveal hints of antitrust conspiracies in related industries. Although this often occurs simply as a result of the Antitrust Division’s own efforts, other times amnesty applicants will identify additional industries of interest in their own applications. International cooperation among antitrust enforcement authorities from a variety of jurisdictions has resulted in increased success in targeting international cartels.
Sentencing Guidelines and Compliance
The increase in antitrust enforcement has brought with it a rising interest in compliance programs. The Corporate Sentencing Guidelines include a sentencing reduction for an “effective compliance and ethics program.” Such a program can reduce a corporation’s “culpability score,” which in turn reduces their recommended fine range under the Guidelines.
A company’s participation in an antitrust conspiracy, however, raises questions about the effectiveness of any existing compliance program. Thus, there is a rebuttable presumption that a compliance program is not effective where high level personnel from a small organization, or persons with substantial authority in larger organizations, participated or condoned the inappropriate conduct. Consistent with this observation, the Sentencing Guidelines will not provide a culpability score reduction where there was unreasonable delay in notifying the government of an offense, or if high level personnel “participated in, condoned, or [were] willfully ignorant of the offense.”
Recent modifications to the Guidelines attempted to add more flexibility to the compliance program provisions in the Guidelines. In November 2010, the corporate sentencing guidelines were amended to allow for a culpability score reduction where (1) persons with operational responsibility report directly to a governing authority or an appropriate subgroup thereof; (2) the compliance program detected the offense before discovery outside the organization, or before such discovery was reasonably likely; (3) the offense was promptly reported; and (4) there was no participation in the offense by anyone with operational responsibility for the compliance program.