ANTI-TRUST COMPLIANCE PROGRAMS -- A VIEW FROM THE TRENCHES
| Jurisdiction | United States |
(May 2008)
ANTI-TRUST COMPLIANCE PROGRAMS -- A VIEW FROM THE TRENCHES
BP America Inc.
Warrenville, Illinois
In today's post-Enron, post-WorldCom, post-Sarbanes-Oxley world, there is no shortage of guidance on corporate ethics and compliance programs. But most of this guidance is written by learned commentators, external counsel and law school professors. Both the US Sentencing Commission2 and the Antitrust Division of the U.S. Department of Justice provide general guidance on compliance programs. But they both acknowledge that the practical details of these programs are beyond their expertise. As a result, there is a dearth of common sense advice for the in-house lawyer who actually has to implement these programs.3 This paper addresses some of the common questions.
What is the purpose of an antitrust compliance plan?
Put plainly and simply, the purpose of an antitrust compliance plan is to prevent violations and to detect them if they occur. It is very easy to lose sight of this simple purpose. You need to take care that the plan itself does not become the end goal. In other words, a plan that works is effective whether or not it complies with the recommendations of the experts in the field. In the real world, it is important to do what works in your company. It is always helpful to seek advice from external compliance and ethics experts. But ultimately, the real test of any program is how it works in preventing and detecting violations in your company.
What about the United States Sentencing Guidelines?
Where your company has been convicted of a crime, the United States Sentencing Guidelines ("USSG")4 provide for consideration at sentencing for companies with an "effective compliance and ethics plan." The USSG's standards for these plans have been widely adopted by commentators and corporate ethics experts in many contexts where the USSG may or may not apply. Therefore, anyone planning a corporate compliance plan needs to be familiar with the basic elements required under the USSG.5
The USSG elements are the beginning of the plan, not the end. They must be adapted to meet the needs of your company. As the Sentencing Commission itself recognizes:
[The USSG] embody broad principles that, taken together, describe a corporate "good citizenship" model, but do not offer precise details for implementation. This approach was deliberately selected in order to encourage flexibility and independence by organizations in designing programs that are best suited to their particular circumstances.6
In spite of this language, it is possible to lose sight of the ultimate goal--prevention and detection--and focus instead on complying with the USSG model for an effective compliance program. The USSG provide useful guidance in formulating a compliance plan, but you should not let the USSG become the end in itself. Therefore, if you have to choose between allocating resources in a way that works for your company and complying with the letter of the USSG guidelines, always choose what works best for your company.
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If my company is found to have violated the antitrust laws, will an "effective" compliance program make any real difference in our sentence?
In theory, an effective compliance and ethics plan can result in mitigation of up to 95% of the applicable fine.7 In practice, no company has ever received a deduction for an effective compliance plan in an antitrust prosecution.8 This is because there are two significant exceptions that trump the general rule. A deduction is not available if senior managers participated in the crime or if the company did not report the crime to the Government when it was first discovered.9 Therefore, no matter how hard you try to comply with the USSG's Guidelines, if an antitrust violation occurs, you will most likely not be able to qualify for a deduction.
What are the elements of an effective compliance and ethics program?
The USSG identifies seven elements10 for an effective compliance program.
• The organization shall set standards and procedures to prevent and detect criminal conduct.
• The program shall be administered by senior managers under the supervision of the Board of Directors.
• Individuals known to have engaged in illegal conduct should not be put in positions of responsibility.
• The organization shall conduct training programs and distribute compliance materials.
• The organization shall monitor compliance and shall have a whistleblower program.
• If criminal conduct is detected, the corporation shall respond appropriately.
In addition to these elements, the USSG also require that the organization conduct periodic risk assessments to reduce the risk of criminal conduct.11
Where do I start? The Code of Conduct
The first element of any compliance plan is to set standards for the corporation. Today, any corporation that does not have a Code of Conduct is courting trouble. The Code of Conduct should contain a short and simple statement on antitrust and competition law. The shorter and simpler the better.12 In a global corporation, you will need to make a decision as to whether you want to prohibit certain kinds of antitrust offenses as a matter of corporate policy, regardless of local law. With the proliferation of antitrust and competition laws all over the world, this is becoming an easier question every day. Depending on where you operate, it is usually wise to prohibit hard core horizontal offenses--price fixing, bid ridding and market allocation--regardless of whether that conduct is illegal in every jurisdiction in which you do business. This is because there is a growing consensus that such conduct is unethical and immoral, even if it is legal. In addition, having one common standard globally makes training easier and improves compliance with the standard.
What is an Antitrust Manual and what do I need to include in it?
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Under the USSG, an "effective" compliance program requires that the organization take "reasonable steps to communicate periodically and in a practical manner its standards and procedures . . . by conducting effective training programs and otherwise disseminating information appropriate to such individual's respective roles and responsibilities."13 In addition to training (discussed later), the Antitrust Division has opined that an effective compliance program should include "a clear statement of the company's commitment to comply with the antitrust laws, accompanied by a set of practical do's and don'ts written in plain English so that every employee can understand them."14
Again, sample antitrust manuals are available in the compliance literature and on line.15 A review of sample antitrust manuals over the last decade or so shows a couple of significant trends. First, ten years ago it was considered sacrosanct that you could not have a "global" manual. Rather, you needed different manuals in different jurisdictions and particularly different manuals for the US and the EU. Today, you see more and more corporations adopting global manuals.
Usually such manuals divide conduct into three categories--1) prohibited conduct (usually hard core conduct such as price fixing, bid rigging, and market allocation); 2) permitted conduct; and 3) conduct which requires review by counsel. The vast majority of conduct will fall within this third category. The purpose of the manual is not to train the employee to answer every question about antitrust and competition law. Rather, the purpose is to alert the employee that some conduct may create antitrust concern and they need to consult with local counsel. The antitrust manual creates the framework, which can be supplemented with training materials designed specifically for particular jurisdictions.
The second trend follows logically from the first. Over time, antitrust manuals have become shorter and simpler. Again, the idea is to communicate acceptable and unacceptable behaviors in ordinary language without a lot of unnecessary detail and legalese.
The Antitrust Manual may include or be supplemented with handouts on commonly raised topics such as benchmarking, meeting with competitors, and trade association meetings.
What about training programs?
The Antitrust Training Program is at the heart of any antitrust compliance program. Again, the goal is not to train the employee to be able to be an antitrust lawyer. Rather the goal is to train the employee to recognize the fact that he or she requires legal advice. A healthy balance must be struck between giving employees enough information to recognize the issues and so much information that they conclude they are an expert and no longer need to consult their in-house lawyers.
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Who should be trained?
This is one of those practical questions for which it can be very difficult to find any real guidance. The USSG says you need to train "members of the governing authority, high-level personnel, substantial authority personnel, the organization's employees and, as appropriate, the organization's agents."16 Many of these terms are defined by the Guidelines, but the definitions aren't particularly helpful. As a general rule you will want to train the following:
...— All senior managers (often this can be defined as employees above a certain grade level);
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