Think Your Compliance Program Doesn’t Need to Address Antitrust Concerns? Think Again.

Increasing criminal antitrust enforcement focus and activity argues strongly for companies to expand the antitrust-specific elements of their corporate compliance programs. Such expansion would be consistent with the governing board’s compliance oversight obligations under the Caremark doctrine.

This new activity arises in large part from a 2021 executive order and the Biden Administration’s call on the primary U.S. antitrust enforcement agencies to vigorously enforce antitrust laws, with particular focus on the labor, consumer products, agricultural and healthcare markets and the tech sector, among others. 

Moreover, U.S. antitrust agencies are seeking to advance new, aggressive and controversial theories of liability through rhetoric in speeches and investigations and filed cases. This aggressive approach is backed by historic monetary and people power resources. With more resources and more eyes focused on antitrust related issues, there has been an increase in antitrust-related investigations and charged cases.

Two recent examples of DOJ efforts to apply novel and aggressive interpretations of antitrust laws are (1) criminal enforcement of Section 1 of the Sherman Act to so-called no-poach and non-solicit agreements, and (2) investigating and prosecuting alleged violations of Section 2 of the Sherman Act, which primarily focuses on conduct by one firm or company with significant market power. This enforcement activity, coupled with DOJ’s renewed emphasis on corporate fraud enforcement, is prompting corporate boards and their audit committees to re-evaluate internal compliance controls on conduct that could expose the company and potentially culpable employees to criminal antitrust liability.

First, DOJ’s investigations and prosecutions for alleged labor market violations have been a top priority for several years. Despite the lack of precedent supporting criminal labor market violation prosecutions, the DOJ has asserted that the mere existence of any naked wage fixing or no-poach agreement would constitute a crime. While judges and juries have not agreed with the DOJ so far, the agency continues to prioritize labor market investigations and prosecutions criminalizing this type of conduct. Importantly, the DOJ has taken a broad and aggressive stance on what it means to be a horizontal competitor in this area — that companies may compete for labor, even if they don’t compete for products and services.

Second, the most recent and eye-opening example of continued expansion of criminal antitrust enforcement efforts would be the guilty plea of a Montana construction company president, to violating Section 2 of the Sherman Act. The guilty plea reflected the resolution of a DOJ Antitrust Division prosecution for attempting to monopolize the market for highway crack-sealing services in Montana and Wyoming.

Two factors make this prosecution, and its ultimate resolution, significant in the context of compliance plan oversight. First, it represents the Antitrust Division’s first criminal prosecution of a Section 2 case in about 50 years. Second, it suggests that seemingly unilateral conduct or taking anticompetitive steps can be interpreted as an “attempt to collude” or an attempt to obtain monopoly power and are now subject to criminal prosecution — even if the actions didn’t result in an any agreement to collude or were otherwise unsuccessful (as was the case in this fact pattern).

The focus on unilateral conduct is a significant change in the historical approach by which the DOJ has pursued monopolization claims, as criminal antitrust enforcement has traditionally concentrated on per se anticompetitive agreements between two or more horizontal competitors. This new interpretation of Section 2 primarily focuses on conduct by one firm or company with significant market power. Companies with significant market positions or few competitors in products or services may now face criminal investigation for conduct and/or implementing policies the DOJ views as exclusionary or otherwise anticompetitive.

Importantly, seemingly unilateral conduct that attempts to collude is now subject to criminal prosecution under Section 2, even if such an attempt did not result in any agreement. In contrast, there is no attempt component of a Sherman Act Section 1 charge, where the DOJ has traditionally investigated and prosecuted per se criminal price fixing, bid rigging and market allocation conduct requiring an agreement or “meeting of the minds” between horizontal competitors. In short, the agency has created a new investigative and prosecution tool for its toolbox.

This resolution should also be considered in the context of the DOJ’s renewed emphasis on corporate crime enforcement and individual accountability, as described in comments of Deputy Attorney General Lisa Monaco on Sept. 15, 2022.

From a board compliance oversight perspective, the Antitrust Division’s new criminal enforcement posture presents at least five specific and significant challenges for compliance programs: 

• The breadth, boundary-shifting and aggressive nature of DOJ’s theories
• The debilitating impact on corporations and individuals of criminal investigation and prosecution
• The general unfamiliarity of many executives with the parameters of criminal antitrust conduct;
• The likelihood that a company’s compliance program does not contain specific criminal antitrust provisions
• The extent of the board’s Caremark obligations

Individually and collectively, these are significant challenges and should be addressed by the board’s audit and compliance committee; i.e. whether a company’s compliance plan is sufficiently effective to mitigate the new criminal antitrust law enforcement focus and environment. In that context, there is value from incorporating into the company’s existing plan relevant elements of the Antitrust Division’s 2019 Evaluation of Corporate Compliance Programs in Criminal Antitrust Investigations and the DOJ’s corporate criminal enforcement policies.

A critical provision reflected in this antitrust compliance policy is that unlike in the past, the DOJ will consider the effectiveness of a compliance policy both when making charging decisions as well as at the sentencing stage. This, as well as the DOJ revised corporate criminal enforcement policies, increases the incentive for companies to maintain a vigorous antitrust compliance program at all times.  

The questions and factors the DOJ considers when evaluating the presence and effectiveness of a company’s antitrust compliance program are explored in the details of the antitrust compliance policy. The scope of the antitrust compliance policy is also similar to the questions and factors considered by the Criminal Division’s 2020 Evaluation of Corporate Compliance Programs. Both position prosecutors to consider three “fundamental” questions in their evaluation:

1. Is the corporation’s compliance program well-designed?
2. Is the program being applied earnestly and in good faith?
3. Does the corporation’s compliance program work?

While these questions — and the factors that a company should consider in answering these fundamental questions — are core principles in both the 2019 and 2020 DOJ documents, it would be a mistake to assume that a generalized corporate compliance plan would be sufficient in the DOJ’s view. Instead, the expanded and aggressive DOJ antitrust enforcement agenda highlights the necessity of antitrust specific — rather than one-size-fits-all — compliance programs that are tailored to the company, the industry and employees. 

A company only compounds mistakes by further assuming that a corporate compliance plan based solely on the Criminal Division’s 2020 document would be sufficient to address antitrust compliance matters and risks. Instead, a program’s written policies and procedures should explicitly address antitrust-related matters, including price fixing, bid rigging, market allocation, labor markets, monopolization and other similar issues, particularly given the DOJ’s focus on antitrust-related crimes and its expanding views on criminal liability. 

This also highlights the importance of compliance education, so that executives and other employees are familiar with conduct that the DOJ might view as violating antitrust laws. And this further underscores the importance of continuing ongoing compliance reviews and audits, including developing controls around and identifying communications with competitors and responding to another company’s solicitation to collaborate or enter into a potentially collusive agreement. 

Such a robust antitrust compliance program not only prevents potential antitrust violations but also allows a company to timely identify and report violations, maximizing a company’s best chance at avoiding or mitigating investigations and prosecution. These significant new government initiatives merit review of current compliance program treatment of antitrust-related legal and compliance risks. The chief compliance officer, teaming with the chief legal officer and outside antitrust counsel, may wish to recommend to the audit and compliance committee a series of antitrust-related revisions to the compliance program.

Michael W. Peregrine and Justin P. Murphy are partners at the law firm McDermott Will & Emery. Peregrine advises corporations, officers and directors on matters relating to corporate governance, fiduciary duties and officer and director liability issues. Murphy, a member of the firm’s regulatory practice group and a former federal prosecutor, counsels and represents corporate and individual clients involved in government enforcement of complex antitrust, fraud and all phases of white-collar criminal and related civil matters.