Tuesday, December 23, 2008

Antitrust Compliance Policies Can Help Prevent or Limit Liability

Consequences of Antitrust Violations - Each year, a number of companies in the consumer goods and retail industry are indicted or sued for alleged involvement in price fixing, bid rigging, and other antitrust violations. Examples of alleged price-fixing mentioned on this blog include, for example, chocolate manufacturers, packaged ice manufacturers, egg producers, tomato processors, and multiple retailers. On December 16, for example, a sales broker for a major tomato processor pleaded guilty to antitrust and related charges in connection with a price-fixing scheme in which he bribed purchasing agents at Safeway, Kraft, ConAgra, Frito-Lay and other companies to pay artificially inflated prices.

Antitrust violations, if discovered, can be devastating to a corporation, potentially leading to substantial liability, including criminal fines, treble damages, attorneys' fees, and other related costs. Ice manufacturers Reddy Ice and Arctic Glacier, for example, have seen their stock prices drop by over 90% after they publicly disclosed in March 2008 that they were targets of a criminal antitrust investigation.

Compliance Policies - To help avoid antitrust liability, companies should develop and implement proactive antitrust compliance policies and programs that will help prevent and detect violations. The existence of antitrust compliance policies may also be a mitigating factor at sentencing in the event that a company is found guilty of criminal antitrust violations. In order to qualify for a sentencing reduction under the Federal Sentencing Guidelines, a company must have implemented an antitrust compliance policy that meets certain minimum criteria.

To be effective, the antitrust compliance policy should be specifically tailored to the company's business and culture. In addition, the policy should explain the company's commitment to antitrust compliance, provide clear compliance standards, assign responsibility for overseeing compliance to high-level executives, and provide mechanisms to enforce compliance, including consistent disciplinary actions.

Compliance Programs – Simply having a written policy is not enough. Employees – especially sales staff, purchasing staff, and executives – need to be educated on the company's antitrust policy, e.g., through interactive in-person training sessions, and written, internet, or video instruction. Employees should be trained periodically to avoid discussing certain topics with competitors, such as pricing, market share, customer allocation, or boycotts. They should also be educated about situations where antitrust issues are most likely to arise, such as trade association meetings and other industry gatherings, including social gatherings with competitors. And they should be warned of the potential for individual liability under antitrust laws, even if they were ordered by a superior to participate in the antitrust scheme.

Periodic corporate audits can help ensure compliance with antitrust guidelines. Auditors can examine e-mail correspondence and other records of key employees, such as those involved in sales, pricing, or marketing decisions, along with employee interviews. Exit interviews of outgoing employees that include antitrust-related questions can also prove valuable.

In the current economic environment, companies may be tempted to skimp on discretionary spending like the implementation of an antitrust compliance policy. But such short-term savings may lead to future expenses far in excess of the short-term costs. Experienced antitrust counsel can help in developing and implementing appropriate antitrust compliance policies and programs.

In a subsequent post, I will address issues that should be addressed if a company discovers that its employees have committed antitrust violations.


The Law Firm of Kotchen & Low LLP - Civil Litigation, Counseling, and Representation Before Government Agencies

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