On July 11 the head of the Antitrust Division will give a presentation at NYU on incentives for compliance programs. Many of us believe the Division will finally endorse the role of compliance programs and make it clear that diligent programs do matter when it comes to enforcement decisions. This positive approach has been the policy for the rest of the Department of Justice for years, with the Antitrust Division having been a stark holdout in its refusal to recognize programs no matter how diligent.
So negative had the Division’s approach been that it had carved out special exceptions in the Sentencing Guidelines, did the same thing with the U.S. Attorney’s Manual (now Justice Manual), and adopted a policy of simply ignoring compliance programs. All that mattered was its leniency program for voluntary disclosures. And companies admitted into leniency were not even required to have or upgrade compliance programs.
Meanwhile, in FCPA and other criminal areas, enforcers realized the importance of effective compliance programs in preventing violations. The Justice Manual instructed all other DOJ enforcement personnel to consider compliance programs (except for antitrust). In FCPA, for example, the DOJ has made it very clear that strong programs do count.
But what happens when an agency like the Antitrust Division ignores compliance programs? It completely loses its leverage. Why listen to advice from someone with no experience with compliance programs, and who does not care about them when it matters. The Division had a one-size fits all approach; no matter what the facts of a case or how diligent the program, they simply did not care. They appeared only to want to rack up fines.
Interestingly, a senior Antitrust Division official has recently observed the consequences of this negative policy. He noted that in looking at companies they would find first class anti-corruption programs, but much less in antitrust. SCCE, in a survey conducted among compliance professionals, similarly found that in antitrust programs companies did not even meet the minimum standard for conducting compliance audits. Well, if you encourage, value and reward something, it can grow. If you disparage and ignore it, it may not. No surprise here.
I personally started on this journey as far back as the Summer of 1991 (1 Corporate Conduct Quarterly, now ethikos), noting the negative impact of then Assistant Attorney General James Rill’s remarks that compliance programs did not matter, and observing how this hurt compliance efforts. Quite a few of us have been making this point for years. While other areas of the law have applied the lessons learned in promoting effective compliance programs, antitrust enforcers, academics and even economists have come up with wild theories to support their inflexible approaches. Some have even posited that compliance programs are really just tools for committing violations! (I am not exaggerating here, incredible as this seems).
Antitrust enforcement may have fallen into a trap of relying on gamesmanship with leniency policies. But it appears that violators may have fully adapted to this leniency environment and may be cancelling it out. It may also be that antitrust compliance programs have so atrophied in this environment that companies are now unearthing fewer violations.
While it is very encouraging that the Antitrust Division appears on the cusp of taking a smarter approach, there are still traps and mistakes to avoid. The approach to compliance programs set out in the Justice Manual is one of the best in the world. It is to be hoped that the Division buys into this standard. There are also other pitfalls to avoid, and we can hope that the Division continues to talk with the compliance and ethics professionals, so we can pursue a path that actually works.
Perhaps even the EU Commission (which perfectly mimicked the Antitrust Division’s disdain for compliance programs with an inflexibly negative approach) will be next to open its eyes, and realize how much their mission can be helped if instead of denigrating and undermining compliance professionals, they too join with us in developing effective ways to prevent all forms of corporate misconduct, including bribery and anticompetitive cartels.
We are looking forward to July 11.
Joe Murphy, pictured above, is a Certified Compliance and Ethics Professional and author of 501 Ideas for Your Compliance and Ethics Program: Lessons from 30 Years of Practice (SCCE; 2008) and A Compliance & Ethics Program on a Dollar a Day. He has worked in the compliance field for over 40 years. He can be contacted here.