View from the U.S.: Policy changes in U.S. antitrust enforcement
Counsel would be well advised to consider the implications of antitrust policy shifts on existing compliance policies and processes, as well as in connection with formulating strategies for navigating global antitrust enforcement actions. In the waning hours of President Barack Obama’s administration, the Antitrust Division of the U.S. Department of Justice (Division) hurriedly implemented new guidelines and quietly made several revisions to one of its key antitrust policies. Broadly stated, each of the new changes reflects the outgoing administration’s views on the reach of the U.S. antitrust laws, the increasing role of international cooperation in antitrust enforcement, and the importance of individual accountability in accomplishing deterrence. It remains to be seen whether the new administration will ascribe to these same views.
HR beware – hiring and compensation practices targeted
New guidance in October 2016 targets hiring and compensation practices,1 making clear that future collusive activity between employers in the hiring, compensation, terms of employment, or recruitment of their employees will be subject to criminal penalties, including prison sentences. The guidelines warn employers that the Division now intends to criminally investigate wage-fixing and so called “no-poach” agreements among competing employers that have no pro-competitive justification or are unrelated to a larger legitimate collaboration between employers. The Division and FTC previously initiated civil enforcement actions on this type of conduct.
Whereas the HR function at many companies would normally not have been an obvious candidate for antitrust attention, the Division’s move to criminalize collaboration in the employment sector highlights a need to both train and partner with HR professionals on antitrust compliance. Indeed, compliance professionals should look to develop closer relationships with their HR colleagues in implementing the Division’s new guidance, as it will be the HR professionals who are best positioned to issue spot on a day-to-day basis for the types of situations and scenarios that may put a company and its employees at risk.
In working with HR professionals, companies should also take note that the Division’s new guidance is just the latest move by the Department of Justice to focus on HR-related conduct as a new frontier. In November 2016, in relation to the Foreign Corrupt Practices Act, the Department of Justice’s Fraud Section imposed a significant fine against an institution for hiring “princelings” – children of China’s elite – in order to win business.
Attitude to international cooperation
Another last minute policy change from the Division came on January 13, 2017, when it issued revised guidance on the role of international cooperation in antitrust enforcement: Antitrust Guidelines for International Enforcement and Cooperation. The revised guidelines lay out the guiding principles the Division will employ in deciding whether to exercise jurisdiction and are aimed at fostering cooperation with foreign authorities where there is parallel foreign enforcement action. The goals of the proposed guidelines are to: (i) “increas[e] global understanding of different jurisdictions’ respective antitrust laws, policies, and procedures”; (ii) “contribut[e] to procedural and substantive convergence toward best practices”; and (iii) “facilitat[e] enforcement cooperation internationally”.
These new guidelines will be an important reference point for multinationals navigating cross-border investigations involving the Division, as they reflect evolving views by the Division on jurisdiction, comity and adequate deterrence. However, it remains to be seen how religiously the Division will ultimately adhere to them in practice, particularly in light of the political headwinds within the new administration against globalization and international cooperation.
The final changes by the Division came in the form of quiet amendments to the Division’s marquee Corporate Leniency Program. Specifically, on January 17, 2017, the Division reissued the Frequently Asked Questions About the Antitrust Division’s Leniency Program and Model Leniency Letters (FAQs). The FAQs provide a practical framework for understanding the Division’s Leniency Program. Of the several revisions, there are three counsel should take particular note of:
the FAQs now specifically state that a company’s former employees are “presumptively excluded” from a leniency agreement, but may be included if the former employee furthers the company’s cooperation or offers new and valuable information;
the FAQs emphasize that leniency agreements cover only violations of the Sherman Act, and do not reach other criminal offenses regardless of relatedness to the antitrust violation; and
the FAQs now address a query on the penalty plus program, dictating that unrelated criminal conduct must be disclosed in the context of seeking leniency or the company may face a fine that may exceed that recommended by the U.S. Sentencing Guidelines.
It is too early to tell what the impact of these new changes will be on antitrust enforcement by the Division. What is clear, however, is that companies need to be sure to take these policy changes on board in their compliance processes and strategic thinking in the immediate term, while also keeping a close eye on whether the winds shift again as the new administration takes the reins over antitrust enforcement.
1. Antitrust Guidance for Human Resource Professionals and Antitrust Red Flags for Employment Practices Tip Sheet.
This case summary is part of the Allen & Overy Legal & Regulatory Risk Note, a quarterly publication. For more information please contact Karen Birch – email@example.com, or tel +44 20 3088 3710.