Article by William M. Conley, James T. McKeown, Gregory E. Neppl, Alan D. Rutenberg and David W. Simon.
On June 22, 2004, President Bush signed into law legislation that strengthens federal antitrust enforcement in a number of potentially significant ways. By increasing the statutory maximum penalties for criminal antitrust violations, and increasing the value to potential antitrust whistleblowers for participation in the Department of Justice's (DOJ) Corporate Leniency Program, this legislation increases the risks to corporations and individuals from engaging in criminal antitrust conduct such as bid-rigging, price-fixing, and territorial and customer allocations. As a result, this is an opportune time for businesses to review the status and efficacy of their antitrust compliance programs, and to update and invigorate those compliance programs if necessary.
The new legislation has four primary components:
1. Increases Prison Time and Monetary Penalties.
The legislation increases the penalties for criminal antitrust violations significantly: the maximum prison time for individuals increases from three to ten years, the maximum individual fine increases from $350,000 to $1 million, and the maximum corporate fine increases from $10 million to $100 million. While a number of corporate defendants in recent years paid fines of $100 million or more (e.g., Archer- Daniels-Midland, F. Hoffmann-La Roche, and BASF), these companies were fined pursuant to the alternative sentencing provisions of 18 U.S.C. § 3571, which permit fines of twice the economic "gain" to the defendant or twice the economic "loss" to the victims, notwithstanding the $10 million Sherman Act statutory maximum fine then in place. However, this increase in the Sherman Act statutory maximum fine to $100 million should make it somewhat easier for DOJ to obtain very large criminal fines more often.The existence of an effective antitrust compliance program remains a basis for a downward departure under the Federal Sentencing Guidelines, which are applied in the sentencing of both corporate and individual antitrust defendants. For this reason alone, an effective antitrust compliance program is a business necessity.
2. Adds Value to DOJ’s Corporate Leniency Policy.
The legislation limits the civil liability of companies participating in DOJ’s Corporate Leniency Program to single (as opposed to trebled) civil damages. This change could (and is intended to) encourage more businesses to participate in this successful program. Under DOJ’s Corporate Leniency Program, a company that reports its illegal antitrust activity at an early stage is not charged criminally for this activity, provided that the company meets various requirements of the program, including cooperation in DOJ's prosecution of other involved parties. Importantly, corporate executives from the cooperating company are also covered by the leniency grant and avoid prosecution.While participation in DOJ's Corporate Leniency Program has the potential to save a company tens of millions of dollars in fines and avoid the prosecution and incarceration of its executives, a participating company was still subject to treble damages in civil actions -- a potentially huge exposure. The legislation preserves the basic leniency program, but limits this civil exposure to single damages, thus reducing an economic disincentive to participate in the program. As a result, participation in the program could increase. To receive the single damages benefit, participating companies will be required to pay restitution to private plaintiffs and to assist private plaintiffs in antitrust claims.
3. Protects Standards Development Organizations.
The legislation reduces the potential antitrust exposure of standards development organizations (SDOs), by amending the National Cooperative Research and Production Act of 1993 (NCRPA) to ensure that the activities of these organizations are analyzed under the rule of reason standard. Moreover, SDOs may notify DOJ and the Federal Trade Commission (FTC) of their activities in order to qualify for additional protection under NCRPA. If DOJ and/or FTC do not object to the standard setting proposal at that time, the SDO may be liable for actual (as opposed to trebled) damages, if later sued by a private antitrust plaintiff. This amendment of NCRPA may not mean a great deal in practice, because companies engaged in collaboration through an SDO do not directly benefit from the legislation; only the SDO itself receives these advantages.4. Reforms Tunney Act Process.
The Tunney Act provides standards for the judicial approval of proposed consent judgments agreed to by DOJ and antitrust defendants. The legislation amends the Tunney Act to require courts to consider various factors, such as the competitive impact of the proposed judgment and the impact on competition in the relevant markets at issue. Courts are also required to make findings to support DOJ's assertion that the consent judgment is in the public interest. These revisions to the Tunney Act are not likely to have a significant impact on settlement negotiations between DOJ and antitrust defendants.In light of these statutory changes, please let us know if you would like us to review the status and efficacy of your company’s antitrust compliance program, or provide any other antitrust counseling or support for your organization. Foley & Lardner's Antitrust Practice Group has experience in all aspects of antitrust law practice, including significant experience in criminal defense, SDO counseling, and the development and implementation of compliance programs.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
