When discussing the role of individuals in an antitrust context, companies and their advisors often focus heavily on the most serious end of the spectrum – the consequences, potentially in terms of personal criminal liability, for an individual that becomes involved in a price-fixing cartel or similar hardcore competition infringement.
These are, of course, the most sensitive cases in terms of the legal position of the individuals concerned. In particular, where an individual is implicated in the infringement and their interests and those of the company may diverge, the legal team must be alive to the potential need for separate representation for individuals.
In any event, working with individuals can raise challenges. While employees have a duty to co-operate with reasonable instructions from their employer, antitrust investigations are typically vast, time-consuming, and procedurally complex. Being drawn into their scope can be daunting for non-lawyers unaccustomed to dealing with regulatory processes, and in practice many business people who may have useful information relevant to an antitrust investigation fall into this category – often they are relatively junior staff involved in the sales side of the business.
There is a balance to be struck in supporting these individuals through the process: on the one hand, the individuals involved need to understand the serious nature of an antitrust investigation and its implications, both in terms of the company and potentially their own personal position (particularly if their conduct may be such as to warrant disciplinary action). On the other hand, it is important that they are not unnecessarily alarmed, especially if this might lead to them withdrawing their co-operation from the investigation team. It is also important to be aware that an inexperienced individual's first instinct is often to speak to friends who may also be involved, whether internally or at other companies. This could simultaneously breach confidentiality obligations owed to the regulator where an investigation has commenced and constitute interference with evidence.
For all of these reasons, it is important that management of individuals is planned from the earliest stages of an antitrust issue coming to a company's attention. We set out below two aspects of an investigation where the relationships with the individuals involved will require particularly careful planning by the company's in-house and external legal teams. Whilst this article is prepared by representatives of Norton Rose Fulbright from the UK and Australia, its themes are relevant in most jurisdictions and indeed, in other legal contexts beyond antitrust.
Internal investigations before a leniency application
At the very earliest stage of identifying and assessing a possible antitrust issue, gathering relevant evidence and forming an accurate picture of what has taken place is crucial. This assessment will then inform the company's decision about whether it might be appropriate to seek leniency from the competition authorities.
In the UK, the Competition and Markets Authority (CMA) gives detailed guidance to companies on how to approach an internal investigation before making a leniency application.1 The CMA's primary concern is for the company to avoid any action that could have the effect of "tipping off" a party to the infringement, especially if this might lead to the destruction of evidence. As a result, the CMA asks potential leniency applicants to keep their internal investigations to the minimum necessary to establish the grounds for a leniency marker to be awarded by the CMA (noting that this is a low evidential threshold).
In terms of dealing with individuals, the CMA recommends that former employees are not approached at the pre-leniency stage, other than in exceptional circumstances. For current employees, the CMA recommends a careful approach, including using covert investigation methods (such as reviewing emails) where possible to establish the necessary evidence if possible – although data protection considerations may need to be taken into account in designing any such covert review. If an individual needs to be interviewed, the CMA suggests that companies consider keeping the approach "low key" with a view to establishing the facts, rather than briefing the individual on the full leniency context. Care will need to be taken in respect of how this is presented, particularly if the individual might be subject to disciplinary action at a later stage (and thus the employer may need to ensure they have run a fair disciplinary process). In addition, the legal team will need to avoid "contaminating" the witness's evidence by, for example, showing them documents that they would not have had access to or allowing witnesses to discuss the investigation between themselves.
This guidance is helpful but still leaves companies with a tricky balance to achieve. While the evidential standard for a leniency marker is generally low in many jurisdictions, in practice companies will want as much clarity as possible on the existence, nature and potential extent of any infringement before seeking leniency. Given the considerable legal costs, management time and potential business disruption involved in making a leniency application, no company wants to start on this path only to find out that there was an innocent explanation for the relevant conduct or material. It is also important that the company understands the full extent of the potential infringement, as this could affect, for example, which competition authorities the company decides to approach.
Overall, therefore, the investigation needs to be sufficiently thorough to give the company confidence that a leniency application is worthwhile and a good understanding of its overall position, without going so far as to open the company to later criticism from the authorities for unnecessary disclosure of the existence of a possible infringement. Speaking to relevant current employees is often a necessary part of this initial investigation, and the basis on which this approach is made will need to be planned carefully. We offer some practical tips below.
While co-operating with an authority
Part of the ongoing obligation of co-operation undertaken by a company that is seeking immunity or leniency (or, in the UK, has entered into a settlement agreement) is making available officers and employees within the business to augment the regulator's understanding of the factual context. These interviews, while relatively routine from the regulator's point of view, can be particularly daunting for the individuals involved: they are typically attended by a number of representatives of the regulator; the proceedings are often recorded; and there are lengthy legal warnings given at the start – including to the effect that misleading the regulator is a criminal offence.
The specific concern here is that not only may the experience be onerous for the employee, but also that under the pressure of the situation they may provide inaccurate information, or refuse to provide any information at all – in other words they may panic or clam up. This could have serious consequences for the company in terms of its entitlement to leniency if the regulator feels that the company has not provided adequate co-operation. It could also have significant ramifications for the individual by exposing them to liability for misleading the regulator or contempt (or equivalent), and undermining the employee's willingness to assist the company further if they feel unsupported.
To avoid this, as well as to minimise the stress of the interview process more generally, it is worth ensuring the employee is thoroughly prepared and supported, especially if they have little experience of similar procedures. A face-to-face meeting where they can be fully briefed on what to expect is the best starting point. It may also be helpful to refresh their memory by giving them a chance to review relevant documentation that is likely to be discussed – although, as noted above, this should be limited to documentation that they would have had access to at the relevant time to avoid contaminating their evidence. Ideally, the lawyer giving the briefing would also become the single point of contact through the whole process for the employee.2 They can then help the individual prepare, offer reassurance, deal with any questions they may have, and accompany them on the day of the interview. Providing moral support and reassurance can in some ways be just as important to the employee's overall experience as technical legal advice.
Internal disciplinary procedures also need to be considered. The best outcome, in terms of the antitrust investigation, is for the employee to feel free to give a full and frank account of the relevant matters, since this is the best way to protect – and even maximise – the benefit of leniency/settlement for the company. While it is helpful to be able to reassure the individual that they will not face any negative consequences for any information they disclose in this context, the legal team will need to ensure that they do not give any reassurance that goes beyond their control or certain knowledge, whether in terms of the employee's position within the company or as to how the regulator may act in future.
In light of the above, we have developed some high level considerations and tips when dealing with individuals.
At the outset of an internal or external investigation, individuals who are to take part should be briefed as follows:
- Explain the general subject matter of the investigation - approach it "low key" with a view to establishing the facts, rather than briefing the individual on the full leniency context.
- Reassuring the individual about their position can be helpful if this is appropriate, but bear in mind potential future disciplinary action as well as action by the regulator when explaining the individual's personal situation and potential liability.
- Explain to the individual that they must cooperate with internal or external requests for information and documents.
- Explain to the individual that they must not destroy documents or evidence and that they should de-activate any automatic destruction functions in their inboxes etc.
- Explain to the individual that they should keep the fact of the investigation confidential and not discuss it with others inside or outside of the organisation.
- Give the individual a clear point of contact for questions and concerns.
When an individual is interviewed internally:
- It is preferable that this occur in the presence of external legal counsel to maximise the chances that discussions are under the veil of legal professional privilege.
- In any case, the individual must be informed that counsel represents only the company and not the individual. This known as an "Upjohn warning". It originates from a case in the United States and helps to manage what could, in the future, otherwise result in conflict of interest issues.
- It is also advisable to consult with and/or engage the company's human resources department to ensure that any internal or employment-specific protocols are adhered to.
Where an individual is to be interviewed by the regulator, make sure they are fully briefed and that they have had an opportunity to review the materials that the regulator is likely to ask them about.
Consider separate representation for the individual where they might be incriminating themselves in a contravention and/or there is a formal regulatory investigation process that necessitates separate representation because it raises a conflict for the company's own legal counsel.
Generally a company will pay for an individual's separate representation, at least in the initial stages and subject to reasonable limitations in terms of cost and level of co-operation expected. This is particularly advisable if the company needs to make all reasonable efforts to secure the cooperation of employees to obtain leniency. However, there are laws against indemnification of officers and employees in certain jurisdictions. In Australia, for example, the company commits an offence if it indemnifies another person for any penalty ultimately payable and legal costs incurred by the person. Accordingly, if a person is ultimately found individually liable for an antitrust violation, the company would need a mechanism to claw back from the individual any separate representation fees paid. This can generally be achieved by the company setting specifying at the outset the terms upon which it agrees to pay for the individual's separate legal representation.
1 See OFT 1495: Applications for leniency and no-action in cartel cases, especially Annex C.
2 Note that in this situation external counsel will technically be representing the company rather than the employee. This is unlikely to cause any issues since the interests of the company and the employee will usually be aligned in this context. However, the lawyer will need to be aware that in event that the company and employee's interests diverge, they may need to consider separate representation for the employee. In-house counsel in the UK should have regard to the SRA Handbook/Practice Framework Rules 2011 for guidance on their role.