The legal and compliance community finally has an inkling of what to expect of antitrust enforcement under the new administration, following the nomination and expected confirmation of White House Deputy Counsel Makan Delrahim as the new head of the Department of Justice’s Antitrust Division.

President Trump picked Delrahim as assistant attorney general of the Antitrust Division in March, and the Senate Judiciary Committee on June 8 approved his nomination by a vote of 19-1. If confirmed, Delrahim would bring to the Antitrust Division experience in government, private practice, and politics.

Prior to his current role as deputy counsel to the President, Delrahim was a partner at law firm Brownstein Hyatt Farber Schreck, where he practiced antitrust and intellectual property law, and he was deputy assistant attorney general for the Antitrust Division prior to that.

Beginning in 2003, he served for four years on the Antitrust Modernization Commission, a group tasked with assessing and making recommended changes to antitrust law. Delrahim also served as staff director and chief counsel of the U.S. Senate Judiciary Committee, where he initially started as antitrust counsel and was the principal staff architect of landmark antitrust merger reform legislation.

In his response to questions for the record to the Senate Judiciary Committee, Delrahim said, “If confirmed, my focus for the Antitrust Division would be on cartel behavior that raises prices or otherwise adversely affects the welfare of consumers; mergers and other forms of consolidation that risk a substantial lessening of competition; and single firm or collusive conduct that suppresses the free market competition to which consumers are entitled.”

Delrahim further indicated that international cooperation will be another priority: “In recent years, international regimes have increasingly passed antitrust laws and started enforcement programs,” he said. “Accordingly, I believe that I should also focus on close consultation with competition enforcement officials from other jurisdictions in an effort to promote fair, transparent, and consistent application of competition principles for the benefit of American consumers, businesses, and workers.”

Assessing cartel risk. “Today, more than ever, companies must be forward-looking in how they deal with a potential cartel problem,” Lisa Tenorio-Kutzkey, a partner at law firm DLA Piper, said during a recent Webinar sponsored by The Knowledge Group on cartel enforcement trends. Companies at a minimum must be able to answer two important questions, she said: what is the risk for cartel activity, and what is the solution to minimize that risk?

There are two types of cartel risk: market risk (the likelihood of industry players engaging in cartel activity) and internal risk (characteristics unique to the company that make it prone to cartel activity).

“Any cartel problem will invariably include at least one of your competitors,” Tenorio-Kutzkey said. In assessing market risk for cartel behavior, she recommended that companies consider the following:

“Today, more than ever, companies must be forward-looking in how they deal with a potential cartel problem.”
Lisa Tenorio-Kutzkey, Partner, DLA Piper

Are you in a global or regional market? There is a lot more focus on global markets than on regional ones.

Are there a limited number of key competitors? Markets with a limited number of suppliers, or a limited number of dominant suppliers, tend to be more prone to cartel behavior.

What products are you selling? If the company sells interchangeable products, for example, market players tend to compete based on price. Examples can include credit terms, discounts, floor prices, price ceilings, volume discounts, and more. In theory, any monetary component is prone to price-fixing.

How often are trade association meetings attended? Trade association meetings, as well as joint dinners, lunches, or social events are a common venue for competitors to meet. Common practice includes acknowledgement of potential anti-competition behavior and practices.

Are costs on the rise, or has there been customer pressure on pricing? Markets that have experienced ongoing or recent pricing shocks are especially vulnerable to cartel behavior.

Another important market-risk consideration is whether there has been a history of collusive conduct in the country, industry, or among competitors. In fiscal year 2016, the Criminal Division obtained $399 million in fines and penalties, with 19 companies and 52 individuals charged. Currently, the Antitrust Division is actively investigating many areas, including price-fixing in the seafood packaging industry, ocean-container shipping, electronic components, and foreign-exchange trading.

Delrahim said the Antitrust Division would also continue its focus on anti-competitive pricing in the generic pharmaceuticals industry. “I agree that the Department of Justice has an important role to play in ensuring that drug companies do not engage in anti-competitive practices, criminal or civil or monopolistic behavior,” Delrahim said. “If confirmed, working with our colleagues at the Federal Trade Commission, I will ensure potential antitrust violations in this industry are investigated and, if any Department of Justice investigation uncovers a violation of antitrust laws, pursue that aggressively.” The Antitrust Division also would devote time and resources investigating anti-competitive behavior in the agricultural industry, he said.

Addressing potential cartel activity. If the company suspects cartel activity, take proactive steps to respond to the issue and address any potential violations. “Do not wait for a subpoena,” Tenorio-Kutzkey said.

Concerning the assessment of internal risk, consider the following questions:

How are you organized? Is it a command-and-control environment where all major decisions are run by headquarters?

Are pricing decisions centralized or is power more diffuse, where local subs have more discretion to charge what they think is appropriate?

Do you participate in trade associations, and who are attending these meetings—executives or people with pricing or sales authority?

Is there any hint of competitor cooperation, understandings, or agreements?

Do you have an active anti-competitive compliance program and training in place where employees know what they can and cannot say?

Has the company itself previously been investigated for cartel conduct?

Compliance officers can work proactively with other business units to minimize the risk of cartel activity by taking the following steps:

Eliminate or limit participation in competitor-facing events;

Make appropriate changes to business operations, duties and responsibilities, and company policies;

Use anonymous surveys, questionnaires, or employee interviews to understand where examples or allegations of cartel behavior may exist; and

Improve training and strengthen compliance so employees understand what they can and cannot do.

Individual prosecutions. Prosecution of individuals for antitrust violations also will continue to be a top priority, including going after overseas executives. Issuance of the Yates Memo has further emboldened the Antitrust Division to take a more aggressive approach in identifying culpable individuals and demanding full cooperation from companies in this respect.


Below is an excerpt from Makan Delrahim's responses to Questions for the Record from Senator Chuck Grassley.
QUESTION: A March 2017 International Competition Policy Expert Group report, commissioned by the U.S. Chamber of Commerce, raises concerns about whether foreign competition authorities are using their antitrust laws to benefit national champions. The report asserts that “certain of our major trading partners appear to have used their laws to actually harm competition by U.S. companies, protecting their own markets from foreign competition, promoting national champions, forcing technology transfers and, in some cases, denying U.S. companies fundamental due process.” Are you concerned about the use of foreign competition laws to assist national champions and to advance an industrial or trade policy? Do you agree with the findings and the recommendations of the report? If you are confirmed, what steps will the Antitrust Division take under your direction to address these challenges and better harmonize/cooperate with other international antitrust authorities?
RESPONSE: I firmly believe that antitrust laws should not be misused by foreign authorities to defend their national businesses or to try to exclude American business from foreign markets. The underlying basis for all antitrust actions, in the United States and elsewhere, should be appropriate legal and economic analysis. I understand that the Antitrust Division communicates this message to the international community in a number of ways. When I was a Deputy Assistant Attorney General at the Antitrust Division, one of my primary responsibilities was representing the Division’s international affairs. In that capacity, I advocated strongly for foreign enforcers to apply sound, competition-based principles in their own enforcement efforts. If I am confirmed as Assistant Attorney General, I will support the continuation and strengthening of those contacts as well as exploring additional avenues to ensure American businesses and consumers are not harmed by discriminatory antitrust enforcement by foreign antitrust authorities.
Source: Delrahim responses to Questions for the Record.

Under the Antitrust Division’s Leniency Program, the first corporate or individual to confess participation in an antitrust crime, fully cooperate with the Division, and meet all other conditions that the Corporate Leniency Policy or the Leniency Policy for Individuals specifies receives leniency for the reported antitrust crime.

Each company must consider how many jurisdictions leniency will be pursued, which can drive up costs, Mejia said. When an investigation involves multiple competition authorities, it’s important to have a well-coordinated approach for providing relevant facts and determining what strategy the company is going to take across multiple jurisdictions.

“Cooperation is going to be a significant factor,” said Beatriz Mejia, a partner at law firm Cooley, who also spoke on The Knowledge Group Webinar. When faced with an investigation, a company will be expected to produce key documents and witness interview memoranda, for example.

The decision of whether to apply for leniency grew more complex in January 2017, when the Antitrust Division updated its FAQ on its Leniency Program, which it last updated in 2008. One of the most significant updates to the FAQ concerns the treatment of employees in a leniency situation.

The leniency program provides for two types of leniency: Type A (where the government has no knowledge of the conduct when a company applies for leniency) and Type B (where the government already has information about the conduct).

Under the revised FAQ, the Antitrust Division now has broader discretion on whether to include or not include certain employees under Type B leniency: “[T]he Division may exercise its discretion to exclude from the protections that the conditional leniency letter offers those current directors, officers, and employees who are determined to be highly culpable,” it states.

The language, “highly culpable,” was not in the previous version and introduces several compliance questions and concerns, Tenorio-Kutzkey said. Among them, she said, when is the decision made as to whether an employee is ‘highly culpable’ or not—when the facts are still developing or after a long, drawn-out inquiry? What standard will the Antitrust Division use to determine who is ‘highly culpable’?

Although the Division has said that the updated FAQ only memorializes the practices that have already been in effect over the past decade, not all antitrust experts agree. “Something fundamentally changes when the Division puts a practice into writing,” Tenorio-Kutzkey said. “It makes that practices less flexible, less fact-specific, and more likely a law or an edict.”

The updated FAQ signals that companies could pay a higher price for leniency, and they further portend greater uncertainty about the availability of leniency. “Uncertainty is expensive, and uncertainty is risky,” Tenorio-Kutzkey added. It clouds the question of whether a company should seek amnesty in the first place, she said.

Absent a leniency agreement, the Department of Justice may still initiate a cartel investigation based on internally generated leads. These leads can come from a variety of sources, including state, federal, or foreign enforcement agencies and bodies; whistleblowers; or publicly available data (i.e., bid data, media reports, earnings calls).

“At this stage, it’s all about preserving records, letting people know their rights, and avoiding any conduct that could be viewed as obstruction,” said Mary Strimel, a partner at law firm McDermott, Will & Emery. Make sure to suspend any copying over of any back-up tapes; request counsel be present for interviews and searches; and notify employees of their right to counsel if approached by the Department of Justice, she said.