compliance, criminal AT, leniency, South Africa

Winds of Change? DOJ approach to compliance & lessons for South Africa

By Jemma Muller, Junior Contributor

In July 2019, the U.S. Department of Justice Antitrust Division announced new steps towards incentivizing antitrust compliance programs. According to the new model, compliance programs will be evaluated by the Division’s Prosecutors at the charging and sentencing stage in order to make a determination whether or not to recommend a sentencing reduction founded on a company’s efficacious antitrust compliance program.

This transition away from the pure all-or-nothing corporate leniency approach, towards a more inclusive view of all circumstances relevant to the antitrust violation, had been over five years in the making, says Andreas Stargard, a competition practitioner: “For years, this change was debated by experts at conferences and round-table discussions.  Moreover, senior DOJ leadership had been hinting strongly at embracing this more holistic approach, such as Bill Baer in his 2014 Georgetown Law speech and various other enforcers over time.  The current administration has merely sealed the deal,” he notes, pointing to Assistant Attorney General Makan Delrahim’s July speech entitled “Wind of Change: A New Model for Incentivizing Antitrust Compliance Programs.”  Mr. Delrahim noted that ‘the Antitrust Division is committed to rewarding corporate efforts to invest in and instill a culture of compliance’, and in doing so takes cognizance of company’s efforts to invest substantially in vigorous compliance programs (Justice News, ‘Assistant Attorney General Makan Delrahim Delivers Remarks at the New York University School of Law Program on Corporate Compliance and Enforcement’, 11 July 2019).  Mr. Stargard notes that the Antitrust Division is not truly breaking new ground here, as other countries such as Great Britain and France have long advocated for, and recognized the value of, voluntary programs.  In addition, similar changes in government attitudes vis-à-vis internal corporate compliance regimes have already occurred in other divisions of the Department of Justice, such as the Fraud and Criminal divisions.  “Indeed, even Mr. Delrahim acknowledged the long U.S. history of recognizing that ‘prevention is better than a cure’ by invoking Benjamin Franklin’s famous catchphrase in his speech,” he says.

Incentivizing a compliance program is beneficial for consumers as well as companies, as a company with an effective compliance program is likely to detect violations more promptly, thus not only curtailing the resultant harm from the violations, but also allowing those companies the most probable chance of being the first to partake in and secure corporate leniency.  The stance in this approach therefore seeks to ensure prevention, and as a result less ensuing harm, which translates into less efforts and resources spent on enforcement.

To guide prosecutors in evaluating compliance programs, three essential questions should be asked, namely;

(1) Is the corporation’s compliance program well designed?

 (2) Is the program being applied earnestly and in good faith?

 (3) Does the corporation’s compliance program work?”

It is also useful that guidance is given on what elements an effective antitrust compliance program consists of in order for a company to structure its program accordingly.  These elements consist of:

  • The design and completeness of the program;
  • The corporation’s principles of compliance;
  • The resources allocated to antitrust compliance and those responsible for compliance;
  • Risk assessment procedures;
  • Training and communication to employees on compliance;
  • Techniques for monitoring and auditing;
  • Reporting procedures;
  • Incentives for compliance as well as a discipline framework; and
  • Procedures for remediation.

It is important to note that a comprehensive compliance program does not in itself guarantee a sentencing reduction, as Antitrust Division prosecutors are generally tasked with having a holistic outlook, i.e., taking into account all of the specific facts of each case.  Said Delrahim: “The Antitrust Division’s new approach to compliance programs should not be misconstrued as an automatic pass for corporate misconduct.”

With regards to administrative penalties specifically, the new model provides for a possible statutory fine reduction for a company’s recurrence prevention efforts. In considering a reduction, prosecutors will take cognizance of measures taken by a company in discipling those responsible for a particular violation, as well as measures taken to ensure such a violation does not reoccur. Here, prosecutors will consider: the steps senior management has taken to revise the compliance program, as well as the involvement in training and incentivizing compliance; improvements to the pre-existing compliance program; if no compliance program is in place then the design of a compliance program; and lastly the enforcement and/or creation of disciplinary procedures.

Do these winds of change blow all the way east, across the Atlantic, and reach African shores?  Unlike the U.S., South Africa does not — thus far — have a similar approach to incentivizing compliance programs. This means that the cited benefits of incentivizing compliance programs are not necessarily gained. If South African authorities were to implement a similar approach, it would encourage a culture of compliance; it would be beneficial for companies and consumers; and it would assist companies in designing and implementing effective compliance programs which would assist in early detection of violations and thereby assist those companies wishing to apply for corporate leniency in being the first in line potentially to receive immunity.

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