Antitrust Law Daily Deputy Assistant AG Powers highlights cartel enforcement Lenience Program
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Thursday, February 20, 2020

Deputy Assistant AG Powers highlights cartel enforcement Lenience Program

By Peter Reap, J.D., LL.M.

In remarks before the 13th International Cartel Workshop, Powers discussed the programs core principles, and the changes it has undergone over time.

The Justice Department’s Deputy Assistant Attorney General Richard A. Powers, delivered prepared remarks entitled "A Matter of Trust: Enduring Leniency Lessons for the Future of Cartel Enforcement" before the 13th International Cartel Workshop in San Francisco yesterday. Powers stated that the workshop was the ideal opportunity o underscore the agency’s firm commitment to the Leniency Programs core principles, and, in the spirit of transparency, highlight some of the changes in the program as it has evolved over time.

Powers focused on the lessons that the Antitrust Division has learned from the nearly three decades of its modern Leniency Program: (1) the program must be built upon certain key "cornerstones;" (2) trust is a prerequisite for any leniency program to flourish; (3) the agency must stay vigilant to external factors that may affect leniency’s incentive structure; and (4) leniency’s role in the Antitrust Division’s broader cartel enforcement program must not be overlooked.

Before launching into an examination of each of these cornerstones, Powers thought it worth emphasizing that "only one company per conspiracy can qualify for leniency in the United States. A company that is second in the door even if by only a matter of days or hours, as has been the case in a number of our investigations, is not eligible for leniency—it could be the difference between a complete pass versus fines in the hundreds of millions, single damages versus treble damages, and immunity for executives and employees versus prison time."

The Leniency Program’s three cornerstones. The indispensable components or cornerstones of every leniency program are: "(a) the threat of severe and significant sanctions, (b) a heightened fear of detection, and (c) transparent and predictable enforcement policies," according to Powers." Powers noted that the Antitrust Division’s long-held view that individual liability and criminal sanctions are the most severe sanctions for cartel activity. He mentioned the division’s announcement last month of a favorable extradition ruling by the Italian courts, only the second extradition in history solely on an antitrust charge. He then spoke about the importance of corporate fines and penalties, the division’s philosophy over ways for companies to mitigate their penalties, especially with cooperation that assists in holding other corporations and individuals accountable.

Powers then addressed some concerns that had been raised about the division’s recent compliance policy change and the impact that the availability of deferred prosecution agreements (DPAs) could have on incentives of would-be leniency applicants. By opening the door to the possibility of a DPA, companies with effective compliance programs may qualify for an option that avoids a felony conviction. But the agency has heard concerns that with this option, some companies may no longer feel the need to seek leniency as quickly as possible, but may instead sit tight and later advocate for a DPA if leniency is no longer available. These concerns reflect a fundamental misunderstanding of what it takes to qualify for a DPA, Powers said. The adequacy and effectiveness of a company’s compliance program is one of the ten factors the Justice Manual directs prosecutors to consider when weighing charges against a corporation. The choice to take a wait-and-see approach when a company uncovers evidence of cartel conduct could prove to be a costly mistake, he warned. On the final cornerstone, predictability and transparency, Powers noted the agency’s myriad efforts in this regard: a written Leniency Policy, several speeches and papers explaining the policy, a Frequently Asked Questions (FAQs) document, and the publication of model conditional leniency letters.

Maintaining trust and confidence. Trust is a prerequisite for leniency to work, Powers said. With the sole exception of Stolt-Nielsen, the division has not encountered a situation that resulted in us revoking an applicant’s conditional leniency. Powers acknowledged that it generally takes longer now to receive a conditional letter than it did 20 years ago; but the division’s marker system allows a leniency applicant to hold its spot at the front of the line even as counsel conducts a thorough internal investigation and provides the necessary information to the division. The division encourages encourage companies to race in for a marker at the first hint of cartel activity.

Powers discussed the department’s expectations from leniency applicants to provide motivated and engaged cooperation throughout the investigation, to move expeditiously to provide early cooperation, and how the agency handles key employees of a leniency applicant.

Vigilance to external factors. The Leniency Program does not operate in a vacuum and external challenges exist in many forms to the program’s incentives structure. These challenges are very evident in the area of cross-border cartel enforcement. Here, the increased costs of cooperation and enforcement are dis-incentives to seeking leniency. However, Powers spoke to the division’s history of successful international cartel investigations and that it continues to strive to make improvements in international investigations.

Powers also noted that the Antitrust Criminal Penalties Enhancement and Reform Act’s (ACPERA’s) detrebling provisions are set to expire in June 2020 due to a sunset in the original legislation. The division supports reauthorization and the elimination of the sunset provision. Second, Assistant Attorney General Delrahim has made it clear that ACPERA’s cooperation requirement and detrebling incentive will apply to any Clayton Act Section 4A claims pursued by the division to recover damages for the Government. Finally, the time is now ripe for international convergence on the laws governing the intersection of leniency, private damages, and cooperation among enforcers. Greater convergence would increase the incentives to seek leniency and decrease burdens, Powers said.

The greater context. The Antitrust Division has a three-part mission: to deter, detect, and prosecute criminal violations of the antitrust laws and related federal statutes. "When it comes to detecting, destabilizing, and disrupting large-scale domestic and international cartels, leniency is and has been the most important tool. But we cannot rely on leniency alone." Corporate compliance programs and the Justice Department’s Procurement Collusion Strike Force (PCSF) also have roles to play and complement the role of the Leniency Program in the department’s efforts to deter, detect, and prosecute cartels, Powers said.

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