- DOJ Sentencing Memorandum Emphasizes Importance of Instituting Antitrust Compliance Programs in Face of Government Investigation
- October 26, 2015 | Authors: Kathryn M. (Kathy) Fenton; J. Bruce McDonald; Paula W. Render; Ryan C. Thomas; Rachel H. Zernik
- Law Firms: Jones Day - Washington Office ; Jones Day - Houston Office ; Jones Day - Chicago Office ; Jones Day - Washington Office ; Jones Day - Los Angeles Office
The U.S. Department of Justice has recommended a significantly reduced fine for an auto parts defendant accused of bid-rigging and price-fixing, based largely on the defendant's having quickly instituted a rigorous antitrust compliance program - even though only after the government initiated its investigation. The case is United States of America v. Kayaba Industry Co. An important example for other companies, DOJ's sentencing memorandum lays out what the government considers to constitute a rigorous antitrust compliance program. This is useful guidance for a company developing a compliance program in any situation. Of course, the best time to implement a compliance program is before there is any government investigation.
Since 2011, DOJ and other antitrust authorities worldwide have been engaged in a wide-ranging investigation and prosecution of price-fixing and bid-rigging in international automobile parts sectors. The defendant here, Kayaba Industry Co. ("KYB"), is a Japanese corporation that manufactures shock absorbers for U.S. vehicle manufacturers. DOJ has charged that, from the mid-1990s through 2012, KYB conspired with auto parts competitors to allocate markets, rig bids, and fix the prices of shock absorbers sold in the U.S.
KYB is scheduled for a sentencing hearing later this month. In its pre-hearing sentencing memorandum, DOJ recommended that the company be fined $62 million. This is a 40% "downward departure" from the range recommended under the U.S. Sentencing Guidelines, which prescribe a fine of $104 million to $207 million (based on the volume of commerce affected by KYB's role in the conspiracy and KYB's "culpability score").
In recommending this downward departure in the fine, DOJ emphasized to the court the steps KYB has taken to prevent recurrence of the offense (which is one of the statutory factors the court considers in sentencing). Specifically, DOJ noted that "from the moment KYB received notification of the government's investigation," KYB took steps to put in place a "comprehensive" and "effective" antitrust compliance policy. DOJ noted that KYB's new policy:
- was directed by senior management, making antitrust compliance "a true corporate priority"
- included both classroom training and one-on-one training for personnel at high risk for antitrust violations, such as sales personnel
- required prior approval of contact with competitors where possible
- required reports of contact with competitors, which were audited by in-house counsel
- required sales personnel to certify that all prices had been independently determined
- established an anonymous hotline for employees to report possible violations.
Beyond the $62 million fine, DOJ did not request restitution (noting the availability of private damages lawsuits) and did not request a term of probation. In declining to request probation, the DOJ again noted KYB's compliance program and the company's "timely and complete acceptance of responsibility."
Consistent with recent DOJ policy, this sentencing memorandum reflects the credit that DOJ appears to give to defendant companies that proactively implement rigorous antitrust compliance programs. And while not all jurisdictions may offer sentencing credit for implementing such programs, agencies around the world are focusing on the adequacy of corporate compliance efforts. The obvious lesson is that companies should quickly work to institute antitrust compliance programs in the face of government investigations. Even better, put rigorous programs in place early to prevent violations in the first place.
Although DOJ noted that its description of the relevant elements of KYB's compliance program was "not exhaustive," the sentencing memorandum indicates elements that companies should include in developing their own antitrust compliance programs, including involvement of top-level management, active monitoring of contact with competitors, and facilitation of whistle blowing. Similar elements are emphasized in the final report recently issued by the court-appointed antitrust monitor assigned to Apple following the court judgment against the company with respect to its actions in the ebooks market. That report notes that Apple's new compliance policy involves senior executives to highlight the corporate priority, provides additional training to employees in high-risk positions, and includes a hotline where potential antitrust issues can be anonymously reported.