UPDATE: U.S. Attorneys’ Offices Adopt Policy Incentivizing Self-Disclosure of Corporate Misconduct (Feb. 27, 2023)
On April 4, 2022, the U.S. Department of Justice’s Antitrust Division announced significant changes to its flagship leniency program. Largely unchanged since 1993, the leniency program allows any member of a cartel, whether an individual or a company, to avoid criminal prosecution by being the first to self-report involvement in an unlawful antitrust conspiracy, among other requirements. The Antitrust Division often touts the success of this program, heralding it as the “most important investigative tool” available “for detecting cartel activity.”
In an April 4 press release, the Division announced a critical new requirement for corporate leniency applicants: promptness. Effective immediately, companies seeking leniency must now promptly self-report after discovering wrongdoing. The Division also updated the language of the restitution obligation, another requirement for leniency, and clarified that leniency extends to other illegal acts committed “in furtherance of” the qualifying offense, such as wire fraud and conspiracies to monopolize markets. But these changes are overshadowed by the new promptness requirement.
In newly revised answers to frequently asked questions, the Antitrust Division gave some, though only limited, guidance on what prompt self-reporting means. “The Division makes this assessment,” the FAQs state, “based on the facts and circumstances of the illegal activity and the size and complexity of operations of the corporate applicant.” An all-things-considered standard such as this underscores the importance of haste once a corporation discovers cartel activity within its ranks. Simply put, it may be difficult to predict what the Division will consider prompt once an application is made. And, compounding the risk, it is “the applicant’s burden to prove that its self-reporting was prompt.”
So, what should an organization do when it suspects, though has not confirmed, unlawful activity? The Division concedes that “an organization may still be eligible for leniency if it conducts a preliminary internal investigation in a timely fashion” to be certain that a crime occurred, but expressly warns that “an organization that confirms its involvement in illegal activity and then chooses not to self-report until later learning that the Division has opened an investigation will not be eligible for leniency.” In short, investigate quickly and report the results thoroughly. If an answer is not readily apparent, the Division counsels an abundance of caution: “Potential applicants that are uncertain whether particular conduct is criminal should seek a marker as soon as possible.”
While adding a promptness requirement may limit eligibility for leniency, it is intended to further the program’s goals. By creating a race for leniency, the program encourages cartel members to come forward as quickly as possible, with the hope of destabilizing cartels and creating a powerful mechanism for detecting antitrust conspiracies. The promptness requirement ups the stakes significantly, even for first movers, making leniency not only a race against one’s co-conspirators, but also a race against time. As Assistant Attorney General for Antitrust Jonathan Kanter explained, the updated policy sends a message to “[c]orporate boards and executives, and the counsel advising them,… that sitting on their hands after detecting an antitrust crime will have real ramifications — losing out on leniency means severe consequences.”
Importantly, the new promptness requirement does not apply retroactively. As the FAQs make clear, “[t]he Division will review leniency applications under the version of the policy … in effect at the time the applicant received a marker.” A “marker” is a placeholder, confirming an applicant’s first-in-the-door status while it gathers the information necessary to perfect its application. Because the policy change lacks retroactivity, corporations that received a marker before April 4, 2022, need not show prompt action to avoid criminal prosecution.
The promptness requirement underscores the Division’s commitment — echoed throughout the executive branch during this administration — to vigorous enforcement of the antitrust laws. Now, more than ever, a strong antitrust training and compliance program is critical for corporations of all sizes in all sectors. Robust antitrust policies and procedures not only help a corporation prevent and detect criminal activity, they also help it spring to action if any misconduct surfaces. After the changes announced April 4, that could mean the difference between avoiding prosecution and facing indictment.
If you would like to discuss ways to enhance your company’s antitrust training and compliance program, please reach out to your McGuireWoods contact or to any of the authors listed below.