President Biden’s administration is following through on its promise of a progressive enforcement program, particularly in antitrust matters. While much attention has been paid to merger policy changes and the threat of antitrust cases targeting Big Techs, the latest Justice Department announcement on white collar enforcement policy is equally as if not more ambitious.
On October 28, the U.S. Attorney General’s Office announced what amounts to a major change – or expansion – in the department’s vision of its reach. The policy change comes into play when it comes to deciding whether to prosecute or decide on a sentencing recommendation for a criminal charge.
Deputy Attorney General Lisa O. Monaco Explain that in the future, prosecutors from the Department of Justice of the various divisions should “examine the complete criminal, civil and regulatory record of any business when deciding on the appropriate resolution for a business subject or target of ‘a criminal investigation’.
At first glance, this may seem like an innocuous policy statement. The scope of the DOJ’s ambition here, however, is extraordinary.
Monaco explains all the ambition behind this statement, asking prosecutors to ask the following questions when assessing prosecutions for alleged corporate offenses:
Did this company violate the Tax Division, Environment and Natural Resources Division, Money Laundering Sections, US Attorney’s Offices, etc. He or she should also assess what has happened outside of the department, whether that business has been sued by another country or state, or whether that business has a history of trouble with regulators. Some prior misconduct may ultimately turn out to be of less significance, but prosecutors should start by assuming that any prior misconduct is potentially relevant.
In a nutshell, Biden’s DOJ has federalized not only local compliance, but global compliance.
When “any previous misconduct is potentially relevant,” it opens a Pandora’s box of application. The approach can be counterproductive, as it deters voluntary disclosures that the DOJ should invite.
Unwrap that Pandora’s Box
For lawyers who are considering advising their clients on how to cooperate and resolve a DOJ investigation, there is a lot to do here.
Federal authorities are required to review “any prior misconduct … whether or not such misconduct is similar to the conduct at issue in a particular investigation.” What does this mean for the white-collar defendants, given their difficulty in resolving an investigation into alleged pricing or bribery within the Biden administration?
Monaco gives several examples, and it includes past violations of taxation, the environment and money laundering – and presumably violations of any other legal obligations a business may have.
If a company has already been convicted in an area unrelated to an ongoing investigation, the DOJ presumes the company is lacking a “global commitment to compliance.” Thus, a more severe sanction for subsequent violations is considered justified, as it can lead to guilt, lawlessness and potentially future recidivism.
The new policy recalls the adoption of three strike laws, providing for tougher sentences for those convicted of a third crime. Yet this is a much broader concept than a three-step approach to corporate malfeasance.
More problematic is the instruction to include any alleged violation that has already been the subject of “prosecution”. Monaco could have said it was condemned, but chose to focus on pre-trial proceedings. This raises important questions of dual criminality.
The United States Supreme Court has previously considered sentences of three strikes and narrowly considered them constitutional. The laws on the three strikes, however, take into account previous convictions, not previous prosecutions. When is it appropriate for a prosecutor to sue, lose, and then gain the benefit of that unsuccessful prosecution when considering sentencing for a subsequent alleged crime?
The directive would also require prosecutors to examine in more detail “the history of a company in breach of regulators.” What that means is guessable.
Another important question is how far a DOJ prosecutor can go to consider a violation “relevant”. Can they reconsider violations that have exceeded the statute of limitations? When is past conduct simply no longer relevant?
The recent announcement not only leaves this to the discretion of the prosecutor, it assumes that “any previous misconduct is potentially relevant”.
Take the role of “world cop” to the extreme
The US government has long been criticized for its long arm in pursuing extraterritorial convictions. This new policy goes even further.
As announced, state and foreign lawsuits are also to be considered. DOJ effectively says that a company’s violation of another country’s legal standards can be used against it in the United States.
But what does it mean to clash with regulators and a different jurisdiction than ours, and how does that lead to guilt? If a company has allegedly violated Canadian or Mexican regulators, does that mean it is more guilty of non-compliance under US law?
Even if a foreign government prosecution could be considered to meet our substantive law and due process requirements, it is difficult to imagine a scenario where the federal government can or should consider a foreign prosecution or regulatory enforcement action.
Antitrust lawsuits by the DOJ have plummeted over the past five years. The majority of these prosecutions come from requests for leniency. As the global exposure to an antitrust violation has increased, the requests have declined.
The Department of Justice’s new department-wide policy only adds uncertainty and even greater risk of exposure for companies that are subject to antitrust review. This is a policy in serious need of line art. When a prosecutor is ordered to “assume[e] any previous fault is potentially relevant ”, how do you decide when to draw the line and what is“ less important ”?
The DOJ may find this new policy announcement pushes deterrence too far. Rather than deterring violations, there is a real risk that the policy change will deter the kind of compliance efforts that should be encouraged, such as hotlines, self-audits, internal investigations and, where appropriate, self-declaration.
This column does not necessarily reflect the opinion of the Bureau of National Affairs, Inc. or its owners.
Noah brumfield is an antitrust practice partner at Allen & Overy, where he divides his time between Washington, DC, and Silicon Valley. He works with clients to develop and execute global antitrust strategies while representing them in U.S. courts, the DOJ, the Federal Trade Commission, and various state attorney general offices.