United States: The Antitrust Division Changes The Calculus For Cooperating Cartelists

Last Updated: June 26 2019
Article by Kathryn (Katie) Hellings, Daniel E. Shulak and Susan Musser

Change is here. A few weeks ago, Makan Delrahim – Assistant Attorney General for the Antitrust Division of the U.S. Department of Justice (the Division or DOJ) – signaled a major change in how the Division will assess a company's cooperation. Delrahim explained that "[g]oing forward . . . leniency will no longer be the only benefit" for early detection and reporting of cartel conduct. The Division followed that proclamation with an announcement on 31 May 2019 that it had entered into a deferred prosecution agreement (DPA) with Heritage Pharmaceuticals (Heritage), in part due to the "company's substantial and ongoing cooperation with the investigation to date."

The new deal: Deferred prosecution agreements

The Division's DPA with Heritage demonstrates that the Division is employing new tools to resolve cases against companies accused of cartel conduct. The Division has been reluctant to use DPAs in the past, instead relying on amnesty to reward cooperation and citing concerns that DPAs might dilute the Division's successful amnesty program. Under a DPA, DOJ files charges and the agreement itself in court. The court must accept the terms of the agreement. If the court approves the DPA, at the end of an agreed-upon period of cooperation, DOJ will seek dismissal of the charges, assuming, of course, that the defendant has satisfied the terms of the agreement. If DOJ, at its discretion, determines that the defendant has not met the terms of the DPA, DOJ will proceed with its prosecution. At trial, DOJ may rely upon the defendant's factual admissions contained in the DPA.

Despite the Division's reluctance to use DPAs, the Division entered into DPAs with several financial institutions as part of its London Interbank Offered Rate (LIBOR) investigation, including Deutsche Bank AG (2017) and The Royal Bank of Scotland PLC (2013). In these cases, the banks agreed, in part: (1) to pay a fine; (2) to cooperate with the DOJ's investigation; and (3) to strengthen their compliance programs. In return, the Division deferred prosecution. The Division has always treated the LIBOR DPAs as anomalies and has not otherwise entertained DPAs as a viable option to resolve cartel allegations. Under the Division's shift in policy, however, DPAs now appear to be an attainable resolution for companies accused of cartel conduct.

Indeed, on 31 May 2019 the Division announced a DPA with Heritage, in which Heritage admitted that it "conspired to fix prices, rig bids, and allocate customers for glyburide." According to the Division's press release, Heritage agreed to "pay a $225,000 criminal penalty and cooperate fully with the ongoing criminal investigation." In return, the Division agreed to "defer prosecuting Heritage for a period of three years to allow the company to comply with the agreement's terms." The Division entered into the DPA with Heritage for reasons that include: (1) its "substantial and ongoing cooperation with the investigation to date, including its disclosure of information regarding criminal antitrust violations involving drugs other than those identified in the criminal charge and the agreement;" (2) Heritage's agreement to resolve all False Claims Act allegations related to the price-fixing conspiracy; and (3) in recognition that a conviction would likely result in Heritage's exclusion from all federal health programs to the detriment of American consumers.

Notably, the relevant terms of the Heritage DPA also apply to current and certain former employees, officers, and directors, effectively providing these individuals with protection from prosecution and requiring their cooperation. DPAs do not typically provide such terms for employees (for example, the LIBOR DPAs did not include such language). It is unclear whether the Division will include such terms as a matter of course in DPAs moving forward. It is important to note, however, that according to the Division's press release, Heritage "disclos[ed]...information regarding criminal antitrust violations involving drugs other than those identified in the criminal charge and the agreement." It is, therefore, likely that the Division expanded Heritage's protections under the DPA to ensure cooperation in the ongoing, unrelated investigations.

Heritage's deal with the Division signals to companies that the Division is expanding the tools used to resolve cases.

DPAs may weaken leniency and incentivize holdouts

The Division's use of DPAs may significantly impact how companies engage with the Division. First, DPAs may reduce both companies and individuals' willingness to plead guilty. Cartel cases are notoriously difficult to prove and resource-intensive to litigate. The Division, however, has rarely tried these cases and instead has historically resolved the majority of cases through plea agreement. Corporate defendants – recognizing the challenges the Division faces in pursuing cases through trial – may now press for DPAs instead of plea agreements. Faced with companies willing to hold out for DPAs, the Division likely will have to choose between trying more cases or expanding the use of DPAs.

DPAs may also reduce overall cooperation in Division cases. The Division needs the testimony of individuals to build cases against noncooperating companies and individuals. A witness typically will not testify without protection or incentive from the Division. The Division typically agrees to reduce or eliminate the witness's criminal liability in return for cooperation. The Division's corporate plea agreement provides this protection by exempting all company employees from prosecution for the charges laid out in the plea agreement, except for a short list of "carved-out" employees. In contrast, DPAs typically, Heritage DPA notwithstanding, do not provide protection to any company employees. For example, the Division's two prior DPAs explicitly did not extend protections to any "present or former officer, director, employer, shareholder or agent" of either Deutsche Bank or the Royal Bank of Scotland. Under a DPA, the Division will have to engage in the time-intensive process of entering into separate agreements with every company employee to get the witnesses necessary to build a case. Individuals may also be less willing to enter into separate cooperation agreements. Individuals are most incentivized to cooperate with the Division before the corporate plea agreement is signed, not after. A lack of cooperation and witness testimony will delay the Division's efforts to bring cases to trial and reduce the number of cases the Division can ultimately bring. For example, in the Deutsche Bank and Royal Bank of Scotland cases, the Division did not bring any individual prosecutions against employees of either company. Obviously the Division could mitigate this effect, by expanding the scope of DPAs' protections to include individuals, as it did in the Heritage DPA.

Second, the use of DPAs may water down the Division's leniency program. The Division's leniency program provides a cooperating company complete immunity from prosecution, provided the company meets the requirements of the leniency program. Under the leniency program, the company must provide extensive – and costly – cooperation with the Division, as well as follow-on civil plaintiffs. In addition, by entering into a leniency agreement, the company must admit wrongdoing and may expose itself to liability from other enforcement agencies. A DPA may in some cases be a better, less costly option to a cooperating company. Instead of alerting the Division to cartel conduct, a company instead may in some cases wait for the Division to uncover the conduct. The company – if it decides not to self-report – can still advocate for a DPA and avoid a criminal conviction. Leniency is no longer the only way to avoid criminal prosecution, making the gamble not to self-report potentially less risky. The availability of a DPA may weaken leniency's appeal and incentivize a "wait-and-see" approach.

New options could mean a change in tactics for companies facing cartel investigations

Historically, the Division has been reticent to change well-established policies and practices. Its willingness to now enter into DPAs is a major policy shift that expands options for companies under antitrust scrutiny. This new tool, however, may impact other historically critical sources of cooperation. If you uncover potentially criminal antitrust conduct, please contact experienced outside counsel to fully assess the conduct and all potential options.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions