Antitrust and Corruption

The FCPA prohibits making, promising, or authorizing another to make, a corrupt payment or providing anything of value to a foreign government official (Foreign Official) in order to influence that Foreign Official to do something or abstain from doing something that will provide an improper advantage to the party making the payment. “Foreign Officials” can include almost anyone who is paid with a government-issued paycheck, including most physicians overseas.

An FCPA violation carries significant penalties. Bribing a foreign official can result in up to five years in prison per violation, and a willful violation of the FCPA's internal controls or books and records provisions can result in up to 20 years' imprisonment per violation. Financial penalties can be significant as well. Reputational costs, legal fees, and the possibility of imposition of a monitor are also all likely.

Criminal conduct that violates the FCPA can also lead to civil suits. In Petrobras, investors who bought the company's U.S.-traded shares sued for disclosure violations and losses in the value of those shares caused by the fallout from the company's conduct. (The case is In re: Petrobras Securities Litig., No. 14-09662 in the Southern District of New York.) And, of course, for companies that are regulated by the U.S. Securities and Exchange Commission (SEC), civil suits and penalties are available under the FCPA's civil books and records and internal controls provisions, enforced by the SEC. 15 U.S.C. ' 78m.

Section 1 of the Sherman Act prohibits contracts, combinations, and conspiracies that unreasonably restrain trade or commerce among the several states or with foreign nations. Price-fixing, bid-rigging and market allocation (so-called “hard-core” cartels) are all per se violations of Section 1 (i.e., no proof of anticompetitive effects is needed). Section 2 of the Sherman Act prohibis single company monopolization of the market. Many other jurisdictions (at least 120 at last count) have competition laws along similar lines.

Like the FCPA, Sherman Act violations can result in significant penalties. Corporations may be subject to penalties of up to $100 million, and executives risk up to $1 million in penalties and 10 years of prison. Alternatively, these violations, like FCPA violations and other financial crimes, may result in fines of up to twice the gross financial loss or gain resulting from the violation. 18 U.S.C. ' 3571(d). In 2015, the Antitrust Division secured approximately $3.9 billion in criminal fines, with several fines of over $500 million imposed on participants in the alleged LIBOR cartel. The Antitrust Division has also long focused on jail time for individuals ' in 2015, for example, 66 individuals were charged, with average sentences of 25 months and one sentence of as long as 14 years.

The U.S. antitrust laws also provide for a private right of action and treble damages. 15 U.S.C. ' 15. Multiple class actions following on from Antitrust Division investigations are common, and in cases where companies have pleaded guilty, the final judgment serves as prima facie evidence of the antitrust violation, leaving only class certification and damages in dispute. 15 U.S.C. ' 15a.

While, unlike the FCPA, most U.S. laws do not apply to conduct taking place outside the U.S., the antitrust laws explicitly reach extraterritorial conduct. Under the Foreign Trade Antitrust Improvements Act, hard-core cartel conduct taking place outside the U.S. can be prosecuted in the U.S. if there is a direct, substantial, and reasonably foreseeable effect on U.S. domestic or import commerce.

Voluntary Disclosure

Effective April 5, 2016, the DOJ launched a one-year pilot program (“Pilot Program”) designed to incentivize companies to voluntarily self-report FCPA violations. https://1.usa.gov/1t1svjx. Under the program, companies that voluntarily self-report, meet the DOJ's requirements for cooperation and remediate may receive a reduction of up to 50% below the low end of the applicable U.S. Sentencing Guidelines' range of fines, and may possibly avoid the appointment of a monitor. The DOJ has stated that under certain circumstances it will also consider declining to prosecute such companies. Companies that cooperate and remediate, but do not self-report, can receive up to a 25% reduction below the low end of the applicable Guideline range. After a year, the DOJ may extend or modify the Pilot Program.

Under the Antitrust Division's leniency program, a company can obtain immunity and avoid both fines and criminal convictions for its employees by being the first to fully disclose its cartel conduct and cease participation. The leniency program also requires that the corporation cooperate with the DOJ's investigation, provide restitution where possible, and not be the conspiracy's “ringleader.” Subsequently-reporting companies may receive fine reductions for substantial assistance; being second or third to report, therefore, has some benefits. The Antitrust Division also grants fine reductions for the institution of new compliance measures, but the standards for obtaining a downward departure are very high.

An FCPA/Antitrust Compliance Program

Implementing an effective compliance program can significantly benefit companies at risk for FCPA and antitrust violations. A strong program may help deter or prevent criminal conduct, or the appearance of impropriety. It may also promote early detection of potential violations. This is critical in antitrust cases because only the first company to report qualifies for immunity. It is also critical in FCPA matters, since early detection allows a company to avail itself of the Pilot Program, should it choose to do so.

Historically, companies have provided separate FCPA and antitrust compliance training. A more effective approach may be to stop cabining the two and, instead, join them to create a broader compliance culture not dependent on the particular subject matter but dependent on the fact that employees are operating overseas where the risks are higher. Better to have employees be able to spot inappropriate conduct under any law than to develop a cabined “check-the-box” mentality.

An effective compliance program takes into account the industry, location, customer base, and organizational structure. Key aspects of an effective global antitrust and anticorruption compliance program are: 1) a risk assessment to identify areas of potential exposure; 2) policies and procedures for interactions with government officials, competitors, and all other third parties, including provision of clear examples of impermissible conduct; 3) providing regular, live training to employees and high risk third parties in the attendees' native language; 4) conducting regular audits; 5) implementing reporting procedures and systems; 6) fostering regular, timely, and frank communication between and among employees, management, Compliance, and Legal; 7) sampling e-mails and reviewing bids; 8) providing incentives for compliance, and 9) disciplining employees who violate policies.

Jacqueline C. Wolff is a Partner and Co-chair of Manatt, Phelps & Phillips LLP's Corporate Investigations and White Collar Defense Group; Lisl J. Dunlop is a Partner and Co-chair of the Antitrust practice; and Shoshana S. Speiser is an Associate in the Litigation Department.