Effective compliance programs are necessary to enable a company and its employees to obtain immunity from antitrust prosecution through use of the U.S. Justice Department’s leniency program or to obtain reductions in fines if the company should be swept into a criminal antitrust prosecution.
For several reasons, antitrust compliance programs are needed now more than ever:
- Ongoing high levels of fines and record jail sentences in the U.S.
- Substantial increases in statutory maximums for fines and jail sentences
- Imposition of fines by foreign governments
- Increased international coordination of cartel investigations
- Domestic and international expansion of amnesty programs
First, the levels of fines and jail sentences in Justice Department Antitrust Division cartel cases continue to be very high. Corporate fines of $10 million or more have become increasingly common and have now been imposed on 40 or more corporate defendants. FY 2004 ranked as the second highest year for corporate fines with a total of $350 million assessed against 17 corporations. The Division has obtained fines of $100 million or more in seven cases, with the $500 million fine paid by F. Hoffmann-La Roche in May 1999 remaining the highest. The $160 million fine agreed to last year by Infineon Technologies AG for participating in a price fixing conspiracy in the DRAM market, now is the third highest of record.
Increasingly long and record-long jail sentences have been imposed in recent years. In the four years ending in 2003, more than 30 defendants had received jail sentences of one year or more. Three antitrust defendants received very long sentences in FY 2002 although they were also charged with crimes such as bribery and fraud. These sentences included one for ten years, another for more than five years and one for three years. Since FY 2001, roughly one-third of the individual defendants were foreign nationals from Canada, Germany, Switzerland, Sweden and France.
Second, passage of the Antitrust Criminal Penalty Enhancement and Reform Act (“ACPERA”) in 2004 resulted in another substantial increase in the maximum penalties in criminal antitrust cases. The maximum corporate fine was raised from $10 million to $100 million, the maximum individual fine went from $350,000 to $1 million and the maximum jail sentence was raised from three to ten years.
The level of fines imposed by foreign governments has increased substantially. The European Commission has fined eight companies more than 850 million euros in the vitamin case, ten companies more than 310 million euros in the European carbonless paper price-fixing case and three companies more than 216 million euros in the monochloroacetic acid cartel. It has also imposed significant fines in the specialty graphites, nucleotides and concrete reinforcing bar cases. Australia fined members of the vitamin cartel and Israel has imposed jail sentences on antitrust offenders.
International coordination of cartel investigations has increased. The result has been simultaneous “dawn raids,” service of subpoenas and interviews in multiple jurisdictions. In 2004, a simultaneous dawn raid occurred in the U.S., Europe, Canada and Japan. In 2003 in connection with the U.S. investigation of bid rigging on USAID-funded wastewater treatment plant construction projects in Egypt, more than 100 German police officers assisted in the simultaneous service of search warrants in Germany.
Liberalization of the U.S. Corporate Leniency Program and adoption of similar amnesty programs by many foreign countries have produced much greater use of such programs and an increased flow of criminal investigations and prosecutions. The U.S. program was expanded dramatically in 2004 by a statute providing that the confessing company in any ensuing private treble-damage litigation, if it cooperates with the private plaintiffs, is liable only for single damages based on its own sales of the product or service. Amnesty programs have also been introduced in several other jurisdictions, including the EU, Canada, Brazil, England, Germany, France, Ireland, the Czech Republic and Korea. As a result, the amnesty application rate in the U.S. has grown from approximately one per year before 1993, to one per month thereafter and three per month during the first six months of FY 2003.
An effective compliance program can enable a company to take advantage of such leniency programs and can reduce fines by millions of dollars. The Federal Sentencing Guidelines require an “effective” program to satisfy seven requirements:
- The company must adopt compliance standards and procedures
- Specific high-level personnel must be assigned to oversee compliance
- The company must not delegate discretionary authority to individuals having a propensity to engage in illegal activity
- The company must provide training programs and disseminate useful materials
- Reporting and auditing systems must be established
- The company’s standards must be “consistently enforced through appropriate disciplinary mechanisms"
- If a violation is detected, the company must “respond appropriately” to prevent further violations.
About Parker Poe's Antitrust & Business Torts Practice
Parker Poe provides a wide range of services relating to antitrust, trade regulation and business tort matters. The Antitrust & Business Torts Practice Group has designed effective compliance programs for corporate clients and recommends that all clients have them in place. The group resolves disputes at the state, national and international levels through negotiation, alternative dispute resolution, litigation and the appeals process. Our attorneys have worked at federal and state antitrust enforcement agencies, held United States Supreme Court judicial clerkships and include former federal prosecutors.
If you have any questions or need further information, please contact any of the following attorneys in our Antitrust and Business Tort Practice Group for answers to specific legal questions:
Catharine Biggs Arrowood
Melanie Black Dubis
Deborah L. Edney
William L. Rikard, Jr.
Robert W. Spearman
Eric D. Welsh
Cynthia L. Wittmer