The U.S. Department of Justice (DOJ) and U.S. Federal Trade Commission (FTC) have turned the spotlight on antitrust and trade regulation compliance programs as they have come into focus in several contexts. As a result, general counsel may want to review their company’s compliance policies and programs to ensure that their antitrust and trade related portions cover the spectrum of conduct and activities that could expose the company to risk.
Many corporate compliance programs include general policy statements about the company’s commitment to complying with, and prohibitions against violating, the antitrust and trade regulation laws. However, general policy statements may not be enough in today’s legal and regulatory environment.
Interactions with suppliers and competitors: The DOJ’s recent case involving coordination of prices for electronic books is a prime example. The case involved Apple’s agreements with five publishing companies regarding their e-book pricing models and ‘most favored nation’ pricing terms that the DOJ alleged resulted in higher prices for e-books. The publishing companies settled with the DOJ before trial, but after a full trial, Apple was found in violation of the Sherman Act for facilitating a price-fixing conspiracy among the publishers. In the court’s final judgment, Apple was required to significantly improve its antitrust compliance program. The order imposes both an external compliance monitor to evaluate and oversee Apple’s antitrust compliance program and its compliance with the order, and an internal antitrust compliance officer who will report directly to a committee of independent directors on Apple’s board of directors rather than the legal department. According to the DOJ, these strong compliance-related remedies were imposed because there were failures in the company’s compliance program and the court concluded that “Apple’s senior executives and in-house counsel helped orchestrate the price fixing scheme.”
The DOJ’s criminal case against AU Optronics Corporation (AUO), a Taiwan-based company, is another high-profile example. The case involved a conspiracy to fix the prices of liquid crystal display (LCD) panels. AUO and several executives were found guilty and the federal district court imposed a $500 million fine. In addition, the court placed AUO on three years of probation, during which AUO and its U.S. subsidiary are required to develop and implement an antitrust compliance program, and retain an independent monitor to oversee the compliance program. DOJ officials have stated that the agency will continue to seek independent monitors where it appears that penalties alone are not sufficient to deter future collusive conduct.
Mergers: Also this year, the FTC charged Bosley Inc. with violating the FTC Act by exchanging competitively sensitive information with competitors in the medical/surgical hair transplant industry. The activity was discovered during the course of the FTC’s review of Bosley’s acquisition of a competitor, the Hair Club. According to the FTC, the improper exchanges of nonpublic pricing and strategy information, which occurred over a period of four years, could facilitate coordinated interaction and harm competition. Although the FTC allowed Bosley’s acquisition of the Hair Club to proceed, the agency reached a settlement that requires Bosley to cease and desist from such information exchanges and implement a corporate antitrust compliance program. The FTC’s action highlights not only that companies need an effective antitrust compliance program, but also that trade association activities as well as mergers and acquisitions are activities that can expose a company to risk. Trade associations often engage in legitimate information collection and statistical reporting among other procompetitive activities; however, exchanges of competitively sensitive information about members’ prices, costs, output or capacity may expose an association or its members to antitrust risk. In mergers and acquisitions, during transaction due diligence and preparation for possible government review, counsel should be on the lookout for evidence of possible anticompetitive conduct.
Operations outside of the U.S.: Enforcement of the Foreign Corrupt Practices Act (FCPA) is another area where the DOJ has focused on compliance programs. Notably when the DOJ accepted a plea arrangement with a former Morgan Stanley executive for violation of the FCPA, the agency did not charge the corporation. As the DOJ explained, although the executive had violated the law and evaded the company’s internal controls, Morgan Stanley had implemented and maintained a compliance program designed to provide reasonable assurances that its employees were not bribing government officials. Guidance regarding the FCPA published jointly by the DOJ and Securities Exchange Commission (SEC) further highlights the importance of corporate compliance programs and the role that such programs can play in influencing prosecutorial discretion with respect to charging and sentencing corporations.
Effective compliance policies and programs not only state appropriate standards of conduct but also provide mechanisms for training, monitoring, detection, investigation, and self-disclosure, when applicable. Given that recent enforcement activity by the DOJ and FTC have focused on whether antitrust and trade regulation compliance programs are in place and effectively implemented, corporations are well advised to ensure that their compliance programs address these topics and position the company in the best light.