The purpose of antitrust enforcement is to discourage cartels, and the U.S. Department of Justice's leniency program has been one of its most important tools for decades. But in the last several years, criminal leniency applications anecdotally appear to be declining, which is prompting concern among antitrust defense lawyers.

Allen & Overy partner John Roberti, who is in charge of the firm's Washington, D.C., antitrust practice and a member of its investigations and litigation practice, recently published a paper about the "death of antitrust leniency" and how governments should rethink their immunity programs in light of global developments. 

In an interview with Corporate Counsel, Roberti said some antitrust lawyers are hoping the U.S. Congress will address the issues next year, when the Antitrust Criminal Penalty Enhancement & Reform Act, ACPERA, enacted in 2004 is set to expire in June. The act limited civil damages exposure of a company granted leniency under the policy if it provides civil plaintiffs with "satisfactory cooperation" in a timely manner, but some critics say the terms are vague and the program isn't working as intended. The antitrust division has been seeking input from stakeholders regarding ACPERA and its impact on the division's criminal enforcement efforts.

Roberti and other corporate antitrust attorneys contend that, as more and more governments around the world create their own antitrust regimes, there is no guarantee that leniency in one jurisdiction will result in leniency in another, which is exposing companies and individuals to the risk of additional penalties including significant fines.

"China, India and the Philippines—the developing economies, Kenya in Africa, etc., even places like Hungary in Eastern Europe that are trying to adopt these," he said.

As a result, companies may decide not to self-report violations because the cost of private litigation could exceed any benefit from avoiding criminal penalties, because leniency applicants could then be more likely to face civil damages.

Criminal antitrust cases filed by the antitrust division declined to 18 in 2018 from 60 in 2015, according to DOJ statistics of 2009 through 2018, down from a high of 90 in 2011. Restraint of trade cases under the Sherman Act declined to 16 from 54 in the same period, with a high of 63 in 2011. The American Bar Association's antitrust section urged investigation of whether the drop reflects a failure in ACPERA to incentivize self-reporting of violations.

In an April 11 speech, the assistant attorney general for the DOJ's antitrust division, Makan Delrahim, pushed back on the notion that leniency applications are declining. He said "despite some recent eulogies over the purported death of leniency, the division's leniency program is still alive and well." Delrahim said the number of leniency applications received in 2018 was on par with historical averages. In July, Delrahim announced a new incentive for antitrust compliance, which is that the antitrust division would consider an organization's corporate compliance effort at the charging stage in antitrust investigations.

But Roberti said the air cargo price-fixing investigation some years ago is an example of the potential complexity and expense for companies under the leniency program: In that instance, Lufthansa airlines sought antitrust leniency on a global basis in 2005 and 2006. The applications required Lufthansa to file in a large number of jurisdictions. The company was offered immunity in all of them but still faced more than 20 class action lawsuits in the U.S. and Europe. While the company was able to settle U.S. litigation early, it continued to face claims in Europe more than 13 years after it filed its leniency application in the states.

Today, the challenges are even greater, Roberti contends, because there are many more active antitrust regimes around the world than there were then, including a private damages regime in Europe and other countries that are more advanced. Financial services, agricultural and commodity and the automotive industries are among those most affected, he said.

The American Antitrust Institute, a nonprofit group that advocates for more stringent antitrust enforcement, said in comments prepared for the DOJ Antitrust Roundtable last spring that it supports reauthorizing ACPERA without significant amendments except to add a provision strengthening whistleblower protections. Randy Stutz, vice president of legal advocacy, said in an emailed comment on Monday that "you would be hard-pressed to find any hard evidence that ACPERA has been anything but a legislative success story, and everyone seems to agree that it should be reauthorized. The occasion of its reauthorization has prompted some anecdotes and war stories in support self-serving amendments, but if you look closely, there is usually more to these kinds of stories." 

Allen & Overy's Roberti provided the following three takeaways for companies and their counsel considering whether to file a criminal antitrust leniency application, in light of recent global developments: 

  1. Corporate leniency program at the U.S. Department of Justice is an important option for companies that have identified potential violations of law.

Though Congress enacted criminal penalties for cartel activity as early as the 1890 Sherman Act, the Antitrust Procedures and Penalties Act of the 1970s changed cartel activity from misdemeanors to felonies and increased fines and incarceration periods. The U.S. Department of Justice also introduced the leniency program in 1978 to increase the level of cartel detection. In 1993, the act was overhauled. In 2004, Congress enacted ACPERA in hopes of increasing the number of companies applying for antitrust leniency both to enhance cartel detection and provide an incentive for applicants to cooperate with plaintiffs in civil cases.

  1. But as the leniency program has matured, different risks and costs have emerged, making the decision to file a leniency application more difficult.

"Companies are facing new risks when they consider making a leniency application," Roberti said. "The cost of the leniency application is increasing because to have an effective one, you have to file a lot of different places and each different regime has a different application. For a multinational, the upfront expense of doing it becomes pretty high. Second, there are now regimes around the world that have introduced the concept of private damages, and that is drastically increasing the risk with a leniency application. In Europe, if you filed and reversed, your cost was zero. Now, with private damages that are unconsolidated, you could be facing thousands of lawsuits across different jurisdictions, and the costs could be much higher," he said.

Despite cooperating with the government, accused companies can continue to face the threat of treble damages and joint and several liability. Moreover, applicants may receive leniency in one jurisdiction but not in another because of not being the first to report or for some other reason, heightening the risks.

  1. Shifting global antitrust realities mean companies' decision-making about whether to file a leniency application also must shift.

"The clients I work with want to do the right thing," Roberti said. "If you have a clear-cut case of noncompliance, companies that want to do the right thing will file for leniency. But where you have a less clear-cut case or a valid defense, the incentive to seek leniency is less clear because of all of these uncertainties." 

The Justice Department needs to consider how the new elements have affected incentives for companies to self-report, so that they can make sure the program remains effective, he said,  a position supported by other defense lawyers in the antitrust bar, although that position is viewed skeptically by AAI and the Committee to Support the Antitrust Laws, which includes many plaintiff attorneys. 

Antitrust defense attorneys are urging Congress and policymakers to think about what changes to ACERPA could bring self-reporting back into alignment when the decision to renew or reform the legislation comes before Congress next year.

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