The Society of Corporate Compliance and Ethics recently released the results of an important survey of company antitrust compliance practices. Called “Antitrust: A Dangerous but Underappreciated Compliance Issue,” the survey reports on some of the compliance steps used by companies, and the impact of governmental approaches to compliance programs.
The report notes that in antitrust the Antitrust Division of the Department of Justice gives no credit for compliance programs, in marked contrast to the approach taken to other enforcement areas by the other units of the Department of Justice.
Similarly, in Europe, DG Comp also takes a very negative approach; it tells companies they should have programs, but only considers them where it hurts companies and never where it helps. Recently it has, at least, taken a big step beyond the Antitrust Division and has started to show an interest in the field by issuing a guide (“Compliance Matters”). But it offers no recognition of programs.
The survey report notes a tendency by companies to put antirust compliance in a separate silo, i.e., in the legal department, which may result in a less coordinated approach to compliance and thus suboptimal results. It notes that most companies report using both live and online training in this risk area. This does reflect a wise approach, since the two different techniques have both strengths and weaknesses, and the two combined can improve the reach of the message.
One finding is particularly striking and reveals fundamental weakness in the approach to antirust compliance. While companies may do the relatively easy step of training (although the survey does not attempt to measure the quality of the training), the more important and difficult steps are alarmingly absent. In the words of the report:
“The approach to auditing suggests a strong need to reexamine antitrust compliance. An astounding 64% do not report performing the types of antitrust compliance audits that would meet the minimum standards under the Sentencing Guidelines. To be sure, one could argue that the lack of an audit is not surprising given the lack of incentives from the Department of Justice for having an effective program. Nonetheless, given the dangers of an antitrust compliance failure, not conducting more comprehensive audits appears highly risky.”
The Antitrust Division has been engaged in a relentless public crusade against cartel behavior for decades. Each big case it proudly announces that it is “sending a message.” But these results suggest this “big stick” only approach is not enough. By now we should certainly have expected to see not only audits, but state-of-the-art techniques like computerized screening to detect cartel conduct. But the Department’s message is not necessarily being heard.
There is another fact about this survey that makes the numbers much worse than they appear. This survey primarily reached companies that already had a serious interest in compliance because it was conducted by SCCE; SCCE would mostly not reach companies that had no interest in compliance. There is also a natural tendency to participate in surveys when the participants feel they have something to contribute. If these results represent the cream of the crop, what do you suppose we would find if we looked at companies not generally committed to compliance or the many small and medium-sized companies?
Most telling about the study was the companies’ views on the government’s negative approach to compliance programs:
“Detailed advice on steps to include in compliance programs, taking compliance programs into account when deciding whether to take enforcement actions, and offering penalty reductions to companies that have compliance programs were all given high ratings for value by survey respondents—77% for advice and 88% for some form of incentives.”
In other words, the result of the Antitrust Division’s and DG Comp’s lack of interest in compliance programs is entirely predictable: “if the government doesn’t care, why should we?” If the government did consider programs as a positive factor and did provide advice on what elements were important, the survey makes it clear that this would get results.
The government’s failure to step up to this issue also has another predictable result. Too much of anti-cartel compliance has become a matter of simply issuing rules and telling people to follow them. So there is coverage in codes of conduct, maybe antitrust manuals, and training. Given this history, even if these governmental bodies doubled their enforcement, the likely result would be more of the same policies and antitrust lectures. In other words, doing more of the same by the government will likely produce only more of the same by companies – not necessarily steps that are effective in preventing cartels.
What causes companies to do the truly effective steps like auditing and screening? The record here and elsewhere is that it takes meaningful effort by government. When the government sends the message that effective programs count, and that effective programs call for things like empowered and independent chief ethics and compliance officers, substantive audits, compliance screening, discipline of higher-ups for failure to take reasonable steps to prevent violations, and real incentives to promote the compliance program, then and likely only then will programs improve.
When it comes to another enforcement area, anti-corruption, we are now seeing that in practice by the Department of Justice’s Criminal Division. The recent Morgan Stanley FCPA case, in which a company completely escaped prosecution because of its detailed and rigorous compliance program, serves as an excellent example. But in antitrust, both the Antitrust Division and DG Comp have forfeited all their leverage; how can they tell companies to upgrade their programs when they have made it perfectly clear that they simply do not care at all about these programs.
Those of us who believe strongly in antitrust compliance need more from our governments. The current approach by these antirust enforcers is irresponsible and needs to change as quickly as possible.
Joe Murphy, of counsel to Compliance Systems Legal Group, and co-founder of Integrity Interactive Corporation (now part of SAI Global), has worked in the organizational compliance and ethics area for over thirty years. Before working with Compliance Systems Legal Group, Joe was Senior Attorney, Corporate Compliance, at Bell Atlantic Corporation, where he was architect and lawyer for Bell Atlantic’s worldwide corporate compliance program.