Mergers & Antitrust Law News

Companies That Disclose Antitrust Crimes Set to Lose Perks (1)

June 19, 2020, 9:30 AMUpdated: June 19, 2020, 6:23 PM

Corporations that disclose price-fixing and other federal antitrust violations are set to lose a significant benefit that’s helped shield them from excessive damages in private civil suits.

A nearly 16-year-old law, known as the Antitrust Criminal Penalty Enhancement & Reform Act (ACPERA), affords some protection from follow-on civil antitrust lawsuits for companies that are the first to self-report collusive conduct to the Justice Department and gain leniency in federal prosecutions.

However, the statute, which has benefited companies such as Samsung and ‘Chicken of the Sea’ tuna producer Thai Union Group, will expire June 22 unless Congress reauthorizes it. So far, there’s no sign lawmakers will act before the deadline passes, as House and Senate bills (H.R. 7036, S. 3377) haven’t advanced out of committee.

“A world without ACPERA puts leniency applicants at risk of death by a thousand cuts,” said John Terzaken, a former director of the DOJ’s antitrust criminal enforcement section.

The law allows companies to avoid high penalties in private civil cases by eliminating the threat of treble damages. Companies are also shielded from being held responsible for the illicit conduct other corporations helped foster, as the statute removes the risk of joint and several liability.

The statute is expected to play a significant role in the DOJ’s ongoing federal price-fixing investigations involving the food industry, which has already ensnared top corporate executives.

The law’s benefits haven’t always played out as companies imagined they would in court, said Terzaken, currently global co-chair of Simpson Thacher & Bartlett LLP’s antitrust and trade regulation practice. But it has “strategic benefits” that help companies decide whether to self-disclose violations, he said.

Bills Stalled

Although reauthorization of the law has bipartisan support in Congress, it’s progress has fallen victim to other disputes.

Sen. Sheldon Whitehouse (D-R.I.) told the Justice Department in a June 9 letter that he will withhold his consent to expedite the Senate’s reauthorization bill because antitrust chief Makan Delrahim hasn’t sufficiently responded to lawmaker queries about an abandoned federal probe into automakers who engaged in an emissions deal with the state of California.

The senator’s office declined to comment beyond the June letter.

The Senate bill is sponsored by Senate Judiciary Chairman Lindsey Graham (R-S.C.), and Sens. Amy Klobuchar (D-Minn.) ), Mike Lee (R-Utah), and Dianne Feinstein (D-Calif.)

The House bill is sponsored by Rep. Joe Neguse (D-Col). and Rep. Jim Jordan (R-Ohio), as well as three other Democrats and one other Republican.

Both bills have been referred to their respective Judiciary subcommittees, but votes have yet to be scheduled.

“ACPERA is an important law that strengthens antitrust enforcement and it is critical that we do not let it expire this year,” Neguse, vice chair of the House Judiciary antitrust subcommittee, said in a May 28 statement.

Risk Protection

The law’s benefits are only available to the very first company that self-reports criminal antitrust conduct. A company and its executive can gain leniency from the government on fines, criminal convictions, and even prison time.

Federal antitrust suits are typically followed by civil complaints, which are usually brought by a group of consumers or other businesses harmed by the allegedly illicit conduct.

Thai Union’s Group’s ‘Chicken of the Sea’, for example, was afforded leniency by the government, and reduced civil liability, since it was the first to report its role in a price-fixing scheme with Bumble Bee Foods LLC and StarKist Co. to the DOJ.

Bumble Bee Foods, which eventually plead guilty to price-fixing, was forced to declare bankruptcy in November as a $25 million criminal fine and numerous pile-on civil suits by consumers pushed it into insolvency.

Samsung was afforded the law’s rights when it pleaded guilty in 2011 to a price-fixing conspiracy involving color display tubes, which are used in computer monitors.

When Bank of America pleaded guilty in 2010 to rigging bids in the municipal bond market, it gained the law’s benefits unlike other companies involved in the conspiracy, including J.P. Morgan Chase Bank N.A and UBS Group AG.

Without commenting on any specific companies or cases, Ben Bradshaw, co-chair of O’Melveny & Myers LLP’s antitrust practice, said, “From a corporate board perspective, if you are making a decision to go in for amnesty to obtain leniency, the benefit of ACPERA is significant.”

The statute also has proved helpful for plaintiffs in bringing corporations to the settlement table, Jennifer Oliver, an antitrust attorney with MoginRubin LLP, said.

“We do believe that it benefits consumers greatly, mostly because it encourages leniency applicants to cooperate with private plaintiffs in our civil cases,” Oliver added.

Not Perfect

ACPERA hasn’t always worked exactly how companies envisioned.

Companies afforded the statute’s benefits are required to hand over all relevant documents related to civil suits, help show all the facts related to a case’s claims, and also help ensure witnesses are made available. But due to ambiguities, it’s not always clear to courts when companies have satisfied the statute’s requirements.

Consumers and other corporations have used that vagueness to their benefit by asserting in court that a corporate defendant hasn’t met the statutory requirements, Lisa Phelan, an antitrust partner at Morrison & Foerster LLP, said.

“Plaintiffs sometimes can be seen holding out and kind of stringing you along for years and years before you get a resolution,” Phelan, who previously headed the DOJ’s criminal section, said.

Corporations have found that they are on the hook to satisfy ACPERA’s requirements “up until the very last minute of the last day of trial,” said Ian Simmons, co-chair of O’Melveny & Myers LLP’s antitrust practice. Simmons didn’t comment on any specific companies or cases.

Despite those hurdles, the law still provides corporations benefits that are critical to navigating criminal proceedings, Bradshaw of O’Melveny said.

” A world with ACPERA is generally a world that is better than a world without,” Bradshaw added.

(Updates to note O'Melveny & Myers LLP attorneys didn't comment on any specific companies or cases.)

To contact the reporter on this story: Victoria Graham in Washington at vgraham@bloomberglaw.com

To contact the editors responsible for this story: Michael Ferullo at mferullo@bloomberglaw.com; Seth Stern at sstern@bloomberglaw.com

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