Criminal Cartel Enforcement
Stakeholder Views on Impact of 2004 Antitrust Reform Are Mixed, but Support Whistleblower Protection Gao ID: GAO-11-619 July 25, 2011In Process
After ACPERA's enactment, there was little change in the number of wrongdoers applying for leniency, an increase in successful applicants reporting previously unknown criminal conduct, and higher penalties in criminal cartel cases. Analysis of DOJ data indicate ACPERA may have resulted in little change in the number of leniency applications submitted--78 submitted in the 6 years before ACPERA versus 81 in the 6 years after--the most relevant indicator of ACPERA's impact, according to Antitrust Division officials. In addition, most defense attorneys representing leniency applicants in our sample indicated that ACPERA's offer of relief from some civil damages had a slight positive effect on leniency applicants' decisions to apply for leniency, though the threat of jail time and corporate fines were the most motivating factors both before and after ACPERA's enactment. However, after ACPERA's enactment nearly twice as many successful applicants reported criminal cartel activity about which the division had no prior knowledge. In addition, higher fines and jail times were imposed in criminal cartel cases after ACPERA's enactment, though Antitrust Division officials stated that neither trend is primarily attributable to ACPERA. Factors other than ACPERA--such as the increase of leniency programs in other countries--may also have affected the number and types of leniency applications submitted over this time period, making it difficult to isolate ACPERA's impact. Plaintiffs' attorneys from most of the 17 civil cases in our sample indicated that ACPERA's cooperation provision--which provides the leniency applicant with relief from some civil damages in exchange for cooperation with plaintiffs--has strengthened and streamlined their cases. However, differing views on the timing and amount of ACPERA cooperation have resulted in challenges, such as disputes about delayed cooperation. Some plaintiffs' and defense attorneys for leniency applicants have mitigated these challenges by developing detailed agreements which set forth the timing and extent of cooperation that leniency applicants will provide. In addition, a 2010 amendment to ACPERA provides some clarification that cooperation must be provided in a timely manner, but it is too soon to assess the impact of this amendment because private civil antitrust cases often take years to resolve. There was no consensus among key stakeholders GAO interviewed--antitrust plaintiffs' and defense attorneys, among others--regarding the addition of a whistleblower reward, but they widely supported adding antiretaliatory protection. Nine of 21 key stakeholders stated that adding a whistleblower reward in the form of a bounty could result in greater cartel detection and deterrence, but 11 of 21 noted that such rewards could hinder DOJ's enforcement program. Currently, whistleblowers who report criminal antitrust violations lack a civil remedy if they experience retaliation, such as being fired, so they may be hesitant to report criminal wrongdoing, and past reported cases suggest retaliation occurs in this type of situation. All 16 key stakeholders who had a position on the issue generally supported the addition of a civil whistleblower protection though senior DOJ Antitrust Division officials stated that they neither support nor oppose the idea. Adding a civil remedy for those who are retaliated against for reporting criminal antitrust violations could help mitigate such retaliation and increase reporting of antitrust violations. Congress may wish to consider an amendment to add a civil remedy for those who are retaliated against for reporting criminal antitrust violations. DOJ generally agreed with GAO's findings but did not comment on this matter.
RecommendationsOur recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.
Director: Eileen Larence Team: Government Accountability Office: Homeland Security and Justice Phone: (202) 512-6510GAO-11-619, Criminal Cartel Enforcement: Stakeholder Views on Impact of 2004 Antitrust Reform Are Mixed, but Support Whistleblower Protection
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United States Government Accountability Office:
GAO:
Report to Congressional Committees:
July 2011:
Criminal Cartel Enforcement:
Stakeholder Views on Impact of 2004 Antitrust Reform Are Mixed, but
Support Whistleblower Protection:
GAO-11-619:
GAO Highlights:
Highlights of GAO-11-619, a report to congressional committees.
Why GAO Did This Study:
Criminal cartel activity, such as competitors conspiring to set
prices, can harm consumers and the U.S. economy through lack of
competition and overcharges. The Department of Justice (DOJ) Antitrust
Division‘s leniency program offers the possibility that the first
individual or company that self-reports cartel activity will avoid
criminal conviction and penalties. In 2004, the Antitrust Criminal
Penalty Enhancement and Reform Act (ACPERA) was enacted to encourage
such reporting. The 2010 reauthorization mandated that GAO study
ACPERA‘s effect. This report addresses (1) the extent that ACPERA
affected DOJ‘s criminal cartel enforcement, (2) the ways ACPERA has
reportedly affected private civil actions, and (3) key stakeholder
perspectives on rewards and antiretaliatory protection for
whistleblowers reporting criminal antitrust violations. GAO analyzed
DOJ data on criminal cartel cases (1993-2010) and interviewed DOJ
officials. GAO also interviewed a nongeneralizable sample of plaintiffs‘
and defense attorneys from 17 civil cases and key stakeholders
including other antitrust attorneys selected using a snowball sampling
technique whereby GAO identified contacts through referrals.
What GAO Found:
After ACPERA‘s enactment, there was little change in the number of
wrongdoers applying for leniency, an increase in successful applicants
reporting previously unknown criminal conduct, and higher penalties in
criminal cartel cases. Analysis of DOJ data indicate ACPERA may have
resulted in little change in the number of leniency applications
submitted”-78 submitted in the 6 years before ACPERA versus 81 in the
6 years after-”the most relevant indicator of ACPERA‘s impact,
according to Antitrust Division officials. In addition, most defense
attorneys representing leniency applicants in our sample indicated
that ACPERA‘s offer of relief from some civil damages had a slight
positive effect on leniency applicants‘ decisions to apply for
leniency, though the threat of jail time and corporate fines were the
most motivating factors both before and after ACPERA‘s enactment.
However, after ACPERA‘s enactment nearly twice as many successful
applicants reported criminal cartel activity about which the division
had no prior knowledge. In addition, higher fines and jail times were
imposed in criminal cartel cases after ACPERA‘s enactment, though
Antitrust Division officials stated that neither trend is primarily
attributable to ACPERA. Factors other than ACPERA”-such as the
increase of leniency programs in other countries-”may also have
affected the number and types of leniency applications submitted over
this time period, making it difficult to isolate ACPERA‘s impact.
Plaintiffs‘ attorneys from most of the 17 civil cases in our sample
indicated that ACPERA‘s cooperation provision”which provides the
leniency applicant with relief from some civil damages in exchange for
cooperation with plaintiffs”has strengthened and streamlined their
cases. However, differing views on the timing and amount of ACPERA
cooperation have resulted in challenges, such as disputes about
delayed cooperation. Some plaintiffs‘ and defense attorneys for
leniency applicants have mitigated these challenges by developing
detailed agreements which set forth the timing and extent of
cooperation that leniency applicants will provide. In addition, a 2010
amendment to ACPERA provides some clarification that cooperation must
be provided in a timely manner, but it is too soon to assess the
impact of this amendment because private civil antitrust cases often
take years to resolve.
There was no consensus among key stakeholders GAO interviewed”
antitrust plaintiffs‘ and defense attorneys, among others”regarding
the addition of a whistleblower reward, but they widely supported
adding antiretaliatory protection. Nine of 21 key stakeholders stated
that adding a whistleblower reward in the form of a bounty could
result in greater cartel detection and deterrence, but 11 of 21 noted
that such rewards could hinder DOJ‘s enforcement program. Currently,
whistleblowers who report criminal antitrust violations lack a civil
remedy if they experience retaliation, such as being fired, so they
may be hesitant to report criminal wrongdoing, and past reported cases
suggest retaliation occurs in this type of situation. All 16 key
stakeholders who had a position on the issue generally supported the
addition of a civil whistleblower protection though senior DOJ
Antitrust Division officials stated that they neither support nor
oppose the idea. Adding a civil remedy for those who are retaliated
against for reporting criminal antitrust violations could help
mitigate such retaliation and increase reporting of antitrust
violations.
What GAO Recommends:
Congress may wish to consider an amendment to add a civil remedy for
those who are retaliated against for reporting criminal antitrust
violations. DOJ generally agreed with GAO‘s findings but did not
comment on this matter.
View [hyperlink, http://www.gao.gov/products/GAO-11-619] or key
components. For more information, contact Eileen Larence at (202) 512-
6510 or larencee@gao.gov.
[End of section]
Contents:
Letter:
Background:
After ACPERA, There Was Little Change in the Number of Wrongdoers
Applying for Leniency, a Shift in the Types of Successful
Applications, and Higher Penalties in Criminal Cartel Cases:
Plaintiffs' Attorneys Reported that ACPERA Has Helped Advance Civil
Cases, but Differing Views on Timing and Amount of Cooperation Have
Posed Challenges:
No Consensus Among Key Stakeholders on Adding Whistleblower Reward,
but Wide Support for Adding Antiretaliatory Protection:
Conclusions:
Matter for Congressional Consideration:
Agency Comments and Our Evaluation:
Appendix I: Objectives, Scope, and Methodology:
Appendix II: Additional Information on the Criteria for Different
Types of Leniency Applications:
Appendix III: Additional Information on the Antitrust Division's
Criminal Cartel Enforcement Efforts During FY 1994 - 2010:
Appendix IV: Published Federal Judicial Decisions Involving the
Antitrust Criminal Penalty Enhancement and Reform Act:
Appendix V: Comments from the Department of Justice:
Appendix VI: GAO Contact and Staff Acknowledgments:
Figures:
Figure 1: Leniency Application and Criminal Antitrust Case Process:
Figure 2: Typical Private Civil Antitrust Case Process:
Figure 3: The Number of Corporate and Individual Leniency Applications
Received by DOJ's Antitrust Division, by Fiscal Year of Application:
Figure 4: The Number and Percentage of Successful Type A, Type B, and
Amnesty Plus Leniency Applications in the 6 Fiscal Years Before and
After ACPERA's Enactment:
Figure 5: Total Fines Imposed in Criminal Cartel Cases, by Fiscal Year
of Sentencing:
Figure 6: Total Days of Jail Time Imposed in Criminal Cartel Cases, by
Fiscal Year of Sentencing:
Figure 7: Various Parties in a Private Civil Antitrust Case:
Figure 8: Number of Criminal Cartel Cases Filed Each Fiscal Year,
Broken Out by Those Assisted and Not Assisted by a Leniency Applicant:
Figure 9: Number of Criminal Cartel Cases Involving International
Companies Compared to Cases Involving Domestic Companies, by Fiscal
Year Filed:
Figure 10: Successful International Leniency Applicants as a
Proportion of All Successful Leniency Applicants, by Fiscal Year of
Application:
[End of section]
United States Government Accountability Office:
Washington, DC 20548:
July 25, 2011:
The Honorable Patrick J. Leahy:
Chairman:
The Honorable Chuck Grassley:
Ranking Member:
Committee on the Judiciary:
United States Senate:
The Honorable Lamar Smith:
Chairman:
The Honorable John Conyers, Jr.
Ranking Member:
Committee on the Judiciary:
United States House of Representatives:
Criminal cartel activity--price fixing, market allocation, and bid
rigging, for example[Footnote 1]--can cause tremendous harm to
businesses, consumers, and the U.S. economy in the form of lack of
competition and overcharges. Criminal cartels are secretive and,
therefore, hard to detect. As a result, since 1993 the Department of
Justice's (DOJ) Antitrust Division--the sole enforcer of the criminal
federal antitrust laws--has relied heavily upon a leniency program to
help the agency uncover and prosecute illegal cartel activity. DOJ's
leniency program provides for the possibility that the first
individual or company that reports its involvement in a criminal
antitrust conspiracy to the Antitrust Division will avoid criminal
conviction, fines, and prison sentences. Under the policy, an
individual or company (including its executives) will not be
criminally charged, avoiding fines and incarceration, provided they
are the first to confess, fully cooperate with DOJ's investigation of
the remaining cartel members, and meet other conditions for the
program. However, upon learning of a criminal cartel, those harmed
almost always file a civil case seeking damages so companies
considering reporting cartel conduct have faced an important
disincentive--potential civil liability for three times the total
damages caused by the entire conspiracy (treble damages and joint and
several liability). In 2004, the Antitrust Criminal Penalty
Enhancement and Reform Act (ACPERA) was enacted.[Footnote 2] The
statute included provisions increasing the incentives for individuals
and companies to self-report illegal conduct through DOJ's leniency
program. ACPERA:
* increased the maximum fine for antitrust violations from $10 million
to $100 million for corporations and from $350,000 to $1 million for
individuals;
* increased the maximum jail time from 3 years to 10 years; and:
* provided relief from treble damages and joint and several liability
for leniency applicants, in exchange for satisfactory cooperation with
the civil claimant.
Legislative history indicates that Members of Congress intended ACPERA
to increase the number of companies and individuals applying for
antitrust leniency with DOJ--and thus the detection of cartels--while
simultaneously benefiting consumers by offering an incentive for
leniency applicants to cooperate with plaintiffs in their civil cases.
In 2010, ACPERA was reauthorized for 10 years, and was amended to
include "timeliness" in the consideration of satisfactory cooperation.
[Footnote 3] The 2010 reauthorization included a requirement that GAO
report on ACPERA's effect and the appropriateness of adding informant
rewards--such as a bounty or qui tam[Footnote 4] provision--and
antiretaliatory protection for employees who report illegal
anticompetitive conduct.[Footnote 5] Accordingly, this report
addresses the following questions:
* To what extent has ACPERA affected criminal cartel investigation and
enforcement by DOJ's Antitrust Division?
* In what ways, if any, has ACPERA reportedly affected private civil
actions involving leniency applicants?
* What are the perspectives of key stakeholders regarding the
advantages and disadvantages of adding rewards or antiretaliatory
protection for those who report criminal antitrust violations?
In conducting our work on all three of these questions, we interviewed
DOJ Antitrust Division officials and reviewed speeches by division
officials on criminal cartel enforcement efforts; academic studies;
and articles. We also identified 21 key stakeholders--7 antitrust
attorneys who have worked on numerous antitrust cases, 7 additional
antitrust attorneys who are representatives of three nongovernmental
antitrust organizations (including the American Antitrust Institute,
the American Bar Association Section of Antitrust Law, and the
Committee to Support the Antitrust Laws), and 7 academics whose work
focuses on antitrust law and enforcement issues (including 4 law
professors and 3 economists)--using an iterative process often
referred to as "snowball sampling," to identify knowledgeable
stakeholders, and select for interviews those who would provide us
with a broad range of perspectives on ACPERA. At each interview, we
solicited names of additional stakeholders it would be useful to
interview until we had coverage of a broad range of perspectives on
ACPERA. We selected a nonprobability sample of stakeholders, and while
the information gathered is not generalizable beyond the individuals
we interviewed, the interviews provided insights into issues
pertaining to all three objectives.
To address the first objective, we analyzed Antitrust Division data
from August 1993 (the inception of the Antitrust Division's current
leniency program) to September 2010 on criminal cartel investigations
and enforcement actions.[Footnote 6] We used this analysis to discern
apparent differences in the Antitrust Division's criminal cartel
enforcement efforts before and after ACPERA went into effect.[Footnote
7] Due to numerous confounding variables, we were not able to causally
link identified differences between pre-and post-ACPERA criminal
cartel investigation and enforcement data to ACPERA. For example, the
increase in antitrust enforcement efforts outside the United States
and global economic forces beyond ACPERA may be influencing the number
of leniency applications submitted to the Antitrust Division before
and after ACPERA's enactment. Further, ACPERA could be having a
deterrent effect by preventing or destabilizing cartel formation but
it is difficult to know the extent, if any, of this effect. We
assessed the reliability of the Antitrust Division's criminal cartel
investigation and enforcement data by reviewing relevant DOJ
documentation and interviewing knowledgeable agency officials. To the
extent possible, we compared the data totals the Antitrust Division
provided across categories and analyses, and against published data,
for obvious errors in accuracy and completeness. We determined that
the data were sufficiently reliable for the purposes of our report. In
addition we identified a nonprobability sample of 25 publicly
disclosed applications to the Antitrust Division's Corporate Leniency
Program both before and after ACPERA's enactment and interviewed and
analyzed responses from 15 defense attorneys who represented leniency
applicants in 18 of the 25 leniency applications.[Footnote 8] While
our sample is limited to companies that publicly disclosed their
participation in DOJ's Corporate Leniency Program and therefore not
generalizable to all leniency applicants, the results of these
interviews helped inform our analysis.[Footnote 9]
To address the second objective, we reviewed court dockets and case
filings from relevant federal private civil class action cases that
reference ACPERA. In addition, we interviewed and analyzed responses
from attorneys in private civil antitrust cases that involved 17 of
the 25 publicly disclosed leniency applications discussed above, where
ACPERA may have affected the civil process.[Footnote 10] We
interviewed 10 plaintiffs' attorneys who served as class counsel in
the 17 private civil antitrust cases, and 11 defense attorneys who
represented the publicly disclosed leniency applicants in 14 of the 17
cases.[Footnote 11] We aggregated and analyzed the results of these
interviews to determine ACPERA's reported effects on private civil
litigation.
To address the third objective, we reviewed relevant literature,
conducted a legal review of existing whistleblower protection
provisions, and reviewed published legal decisions involving
employment retaliation related to an employer's antitrust violations.
Additionally, we interviewed the 21 key stakeholders described above
as well as others with knowledge of whistleblower reward and
protection provisions including the Legal Director of the Government
Accountability Project,[Footnote 12] officials with the Occupational
Safety & Health Administration's (OSHA) Office of the Whistleblower
Protection Program who administer 21 federal whistleblower protection
provisions, members of the Securities and Exchange Commission's (SEC)
rulemaking team, and officials responsible for rewards programs
administered by the Internal Revenue Service (IRS) and DOJ's Civil
Division. These stakeholders represent a variety of interests, and,
analyzing their responses to open-ended questions, allowed us to
describe key stakeholder perspectives on the advantages and
disadvantages of adding informant rewards and antiretaliatory
protection in the antitrust setting.
We conducted this performance audit from October 2010 through July
2011 in accordance with generally accepted government auditing
standards. Those standards require that we plan and perform the audit
to obtain sufficient, appropriate evidence to provide a reasonable
basis for our findings and conclusions based on our audit objectives.
We believe that the evidence obtained provides a reasonable basis for
our findings and conclusions based on our audit objectives. Additional
details on our scope and methodology are contained in appendix I.
Background:
Criminal Cartel Activity:
The Sherman Act, which was originally enacted in 1890, prohibits
agreements among competitors that unreasonably restrain trade.
[Footnote 13] Certain types of agreements--price fixing, bid rigging,
and market allocation--have been found by courts to be per se illegal
because they are likely to restrict competition and decrease output,
and have "manifestly anticompetitive" effects.[Footnote 14] According
to DOJ's Antitrust Division, these offenses are generally prosecuted
criminally because they have been found to be unambiguously harmful.
Criminal enforcement of the Sherman Act is the responsibility of DOJ's
Antitrust Division.[Footnote 15] Criminal violations of the Sherman
Act are subject to substantial penalties. Individuals are subject to a
term of imprisonment of up to 10 years and a fine up to $1 million.
[Footnote 16] Corporations are subject to fines of up to $100 million.
[Footnote 17] Under the alternative fine provision, corporations and
individual defendants may be fined up to twice the gross financial
loss or gain resulting from a violation.[Footnote 18] The alternate
fine provision has resulted in corporate fines well exceeding the
maximum amount in the Sherman Act.
DOJ's Leniency Program:
According to the Antitrust Division, criminal cartel investigations
normally develop from one of several sources: proactive efforts by the
Antitrust Division or another government agency, complainants, or
leniency applicants. The Antitrust Division first implemented a
leniency program in 1978 and substantially revised the program with
the issuance of a Corporate Leniency Policy in 1993 and a Leniency
Policy for Individuals in 1994.[Footnote 19] Through the Antitrust
Division's leniency program, companies and individuals can avoid
criminal conviction, prison terms, and fines, by being the first to
confess participation in a criminal antitrust violation, fully
cooperating with the Antitrust Division, and meeting other specified
conditions. Leniency is available for companies and individuals who
self-report to DOJ either before or after an Antitrust Division
investigation has begun. Only the first qualifying company to self-
report may be granted leniency for a particular antitrust conspiracy,
creating an incentive for companies to self-report as quickly as
possible. The Antitrust Division grants two types of Leniency--Type A
and Type B. Type A leniency is granted for applicants reporting
illegal antitrust activity before the Antitrust Division has received
information about the activity from any other source, and before an
Antitrust Division investigation has begun. Type B leniency is
available for applicants reporting illegal antitrust activity after
the Antitrust Division has received information about the activity,
whether this is before or after the division has opened an
investigation. In addition, Amnesty Plus leniency may be granted for
applicants already under investigation by the Antitrust Division that
report involvement in a separate antitrust conspiracy. A leniency
applicant who obtains Amnesty Plus may receive either Type A or Type B
leniency. For additional information on the criteria for each type of
leniency see appendix II.
The Antitrust Division frequently gives a leniency applicant a
"marker" for a finite period of time (30 days is common) to hold its
place at the front of the line for leniency while the company's legal
counsel gathers additional information through an internal
investigation to complete the client's leniency application.[Footnote
20] The conditional leniency letter is the initial leniency letter
given to a leniency applicant. The initial grant of leniency is
conditional because a final grant of leniency depends upon the
applicant performing certain obligations over the course of the
criminal investigation and any resulting prosecution of
coconspirators, such as establishment of its eligibility; its full,
truthful, and continuing cooperation; and its payment of restitution
to victims. Before receiving a conditional leniency letter, a leniency
applicant must admit to a criminal violation of the antitrust laws.
[Footnote 21] If any conditions are not met, the Antitrust Division
may revoke an applicant's conditional leniency.[Footnote 22] When the
applicant establishes its eligibility to receive leniency, and has
provided the required cooperation, the Antitrust Division will notify
the applicant in writing that he or she has been granted final,
unconditional leniency, which typically occurs after the completion of
the investigation and any resulting prosecutions of the applicant's
coconspirators. (No criminal case is filed against the leniency
applicant.) Figure 1 depicts the process for a typical criminal case.
Figure 1: Leniency Application and Criminal Antitrust Case Process:
[Refer to PDF for image: illustration]
1) Leniency applicant reports possible antitrust violation to
Antitrust Division.
2) Antitrust Division grants leniency applicant conditional leniency.
3) Leniency applicant provides Antitrust Division with leniency
application.
4) Upon finding evidence of antitrust violation, Antitrust Division
grants leniency applicant conditional leniency.
5) Antitrust Division files a criminal case(s) against other
coconspirators (leniency applicant is not charged in the case(s)).
6) Antitrust Division prosecutes case(s) with the assistance of the
leniency applicant.
7) If leniency applicant has satisfied all conditions of the Corporate
or Individual Leniency Program, the Antitrust Division grants final
leniency to the leniency applicant.
Source: GAO analysis of Antitrust Division documents. Upon finding
evidence of antitrust violation,
[End of figure]
Private Civil Antitrust Litigation:
Through civil litigation, private citizens or companies are able to
seek damages for harms they suffered as a result of criminal antitrust
violations. For example, a company involved in a price-fixing
conspiracy may face criminal charges brought by DOJ as well as a civil
case brought by consumers who were overcharged as a result of the
conspiracy. Potential plaintiffs may learn of antitrust violations in
a variety of ways, including through DOJ criminal investigations,
required disclosures of publicly traded companies, filed cases, or the
press.
Federal civil antitrust laws are generally enforced by private persons
who are victims of the illegal conduct. They may bring suit under
section 4 of the Clayton Act, which provides, "any person—injured in
his business or property by reason of anything forbidden in the
antitrust laws may sue—and shall recover threefold the damages—
sustained and — a reasonable attorney's fee."[Footnote 23] This
provision allows private parties, including state and local
governments, that have been injured by an illegal cartel to bring a
suit for damages.[Footnote 24] Under the Clayton Act, an injured
party--generally a competitor or consumer--can recover three times the
damages suffered as a result of the violation--known as treble
damages--and defendants are subject to joint and several liability for
the entire treble damage amount. This means that each party that is
found liable for the violation is responsible individually for the
entire amount and the plaintiff can decide which party to obtain it
from. In addition, defendants that are found liable are not entitled
to contribution against fellow conspirators--contribution would give
defendants the right to demand that other defendants that are jointly
responsible for a third party's injury pay their proportionate share.
[Footnote 25] Antitrust plaintiffs often proceed as a class,
aggregating the claims of all those that are harmed into one action.
[Footnote 26] However, plaintiffs are also permitted to opt out of the
class and proceed against the defendants separately. Private civil
class action lawsuits that are able to overcome motions to dismiss are
typically resolved through settlements, which specify the amount of
damages that the defendants will pay to the plaintiffs.
Federal civil litigation is governed by the Federal Rules of Civil
Procedure. In order to institute a civil case, the plaintiff must file
a complaint[Footnote 27] which states the wrongdoing showing that the
plaintiff is entitled to relief.[Footnote 28] When there has been a
successful criminal prosecution of an antitrust conspiracy by DOJ,
plaintiffs may use the final judgment to support their civil case and
show that collusion has occurred.[Footnote 29] Figure 2 depicts the
process for a typical civil antitrust case. The complaints that
plaintiffs file may allege a longer time period or larger set of
involved products than DOJ's investigation or case involving the
conspiracy. After a complaint is filed, but before plaintiffs have
officially begun to collect evidence (a process which is called
discovery or conducting discovery), defendants, including the leniency
applicant, may file a motion to dismiss the case. Defendants can try
to dismiss the action for a variety of reasons, including the
plaintiff's "failure to state a claim upon which relief can be
granted."[Footnote 30]
Figure 2: Typical Private Civil Antitrust Case Process:
[Refer to PDF for image: illustration]
1) Civil plaintiffs file an initial complaint (which could occur as
soon as they hear of criminal investigation or case).
2) Individual complaints are centralized in one judicial district.
3) The court appoints class counsel to represent plaintiffs.
4) Plaintiffs file consolidated amended complaint including all
claims.
5) Leniency applicant or other defendant in the case may file a motion
to dismiss the case. If defendant's motion to dismiss is granted, go
to #9.
6) Plaintiffs or defendants conduct discovery:
- The Antitrust Division may request a stay of civil discovery.
7) Plaintiffs file a motion for class certification[A]. If class is
certified or if class certification is denied, go to #9.
8) Plaintiffs or defendants file motions for summary judgment[B].
Trial is held.
9) Plaintiffs or defendants may file appeals seeking review of the
case by a higher court.
Leniency applicant may provide ACPERA cooperation at any point during
the civil case.
Plaintiffs may reach a settlement agreement with the leniency
applicant and/or other defendants at any point during the civil case.
Source: GAO analysis of court documents and testimonial evidence.
[A] Class certification refers to the decision by the court that the
issues warrant a class action suit and that the plaintiffs
appropriately represent the class.
[B] Summary judgment is a determination made by the court without a
full trial.
[End of figure]
A 2007 Supreme Court decision--Bell Atlantic Corp. v. Twombly[Footnote
31]--affected the amount of evidence that plaintiffs must allege in
their complaint at the time they initiate the case and thus increased
the chance of a case being dismissed on the ground of plaintiffs'
failure to state a claim upon which relief can be granted. In Twombly,
a large antitrust case, the Supreme Court held that to overcome a
motion to dismiss, a complaint must contain sufficient factual matter
to support a plausible claim that allows the court to reasonably infer
that the defendant is liable for the alleged misconduct.[Footnote 32]
Among other things, the court cited the likely expense of discovery as
justification for the ruling.[Footnote 33] The Twombly decision
effectively made it easier for defendants to win motions to dismiss.
Under ACPERA, leniency applicants who provide satisfactory and timely
cooperation to civil plaintiffs may receive relief from treble damages
and joint and several liability.
ACPERA:
ACPERA was originally enacted in 2004, with strong support from DOJ.
In addition to increases in maximum penalties for Sherman Act
violations, ACPERA also contained provisions addressing the leniency
applicants' involvement in private civil actions under the Clayton
Act.[Footnote 34] Specifically, ACPERA's provisions provide that in
civil actions alleging violations of the Sherman Act--such as price
fixing--DOJ leniency applicants are only liable for actual damages
caused by their conduct, as opposed to treble damages and joint and
several liability, if the leniency applicants provide "satisfactory
cooperation" to the plaintiffs. The court determines whether
cooperation is satisfactory. According to ACPERA's provisions,
"satisfactory cooperation" includes, among other things:
* providing a full account to the plaintiffs of all facts known to the
applicant that are potentially relevant to the civil action;
* furnishing all documents or other items potentially relevant to the
civil action; and:
* making cooperating individuals available for interviews,
depositions, or testimony.
In 2010, ACPERA was amended to require explicitly that in determining
whether the requirement of satisfactory cooperation had been met, the
court consider the "timeliness" of the applicant's cooperation with
the plaintiffs.[Footnote 35]
Members of Congress who supported ACPERA stated that it was intended
to increase the number of companies and individuals self-reporting
anticompetitive behavior as well as benefit consumers by encouraging
leniency applicants to cooperate with plaintiffs in their civil cases.
[Footnote 36] To date, there has been no comprehensive study of
ACPERA's effect.
Other Incentives to Report Criminal Cartel Activity:
While DOJ's Antitrust Division has implemented a leniency program to
encourage those participating in illegal cartels to report violations,
in other contexts the federal government offers different incentives
to report wrongdoing. For example, under the False Claims Act,
[Footnote 37] which is administered by DOJ's Civil Division, a person
with evidence of fraud against the federal government, also known as a
whistleblower or relator, is authorized to file a qui tam case in
federal court. A qui tam case allows the whistleblower to sue, on
behalf of the government, persons engaged in the fraud and to share in
money the government may recover. DOJ has the responsibility to decide
on behalf of the government whether to join the whistleblower in
prosecuting these False Claims Act cases. In contrast, other agencies
that administer whistleblower reward programs, such as the IRS and the
SEC, rely on statutes that do not provide whistleblowers with a
private right of action to sue on behalf of the government where there
is potential wrongdoing, but instead offer a reward--or bounty--when
whistleblowers provide information leading to a successful
prosecution.[Footnote 38] Existing reward provisions vary in terms of
the duties of the whistleblowers, the discretion of the agency, and
how much money whistleblowers may be awarded.
In addition, various laws protect whistleblowers who report wrongdoing
without providing them with a financial reward for reporting illegal
conduct. These laws generally protect whistleblowers by providing them
a remedy if they are fired from their job or otherwise retaliated
against by their employers for reporting wrongdoing.
After ACPERA, There Was Little Change in the Number of Wrongdoers
Applying for Leniency, a Shift in the Types of Successful
Applications, and Higher Penalties in Criminal Cartel Cases:
Analysis of DOJ's Antitrust Division data indicates that after
ACPERA's enactment there was little change in the number of leniency
applications submitted by individuals and companies--the most relevant
indicator of ACPERA's impact, according to Antitrust Division
officials. However, there was a shift in the type of successful
applications, with nearly twice as many applicants successfully
applying for Type A leniency after ACPERA's enactment. The division
values this type of leniency application the most because these
applicants are reporting criminal cartel activity about which the
division had no prior knowledge. Our interviews with defense attorneys
representing 18 leniency applicants who came forward to the Antitrust
Division both before and after ACPERA indicate ACPERA's offer of
relief from civil damages had a slight positive effect on leniency
applicants' decisions to apply for leniency, though the threat of jail
time and corporate fines were the most motivating factors both before
and after ACPERA's enactment.[Footnote 39] In addition, higher fines
and jail times were imposed in criminal cartel cases after ACPERA's
enactment, though division officials report that neither trend is
primarily attributable to ACPERA.
After ACPERA, There Was Little Change in the Number of Leniency
Applicants but an Increase in Successful Applicants Reporting
Previously Unknown Criminal Conduct:
Analysis of Antitrust Division data indicates there was little
difference in the total number of leniency applications[Footnote 40]
submitted in the 6 years before and after ACPERA's enactment in fiscal
year 2004--78 and 81, respectively, as shown in figure 3
below.[Footnote 41] There was also little change in the number of
leniency applications withdrawn or rejected[Footnote 42] before and
after ACPERA so the number of successful leniency applications--
applications not withdrawn or rejected--also remained nearly the same
with 54 in the 6 fiscal years prior to ACPERA and 56 in the 6 fiscal
years after ACPERA's enactment.[Footnote 43] Figure 3 also shows that
ACPERA was enacted during a peak in the number of applications, with
the highest numbers of applications (25 per year) submitted in fiscal
years 2003, 2004, and 2005. Senior Antitrust Division officials stated
that they did not know the reasons why the number of applications
increased to 25 in fiscal year 2003--the year prior to ACPERA's
enactment--from an average of about 11 applications submitted per year
in the prior 5-year period. The fact that this spike started before
ACPERA's enactment may indicate that ACPERA did not cause the high
level of applications in fiscal year 2005, the fiscal year immediately
following ACPERA's enactment.
Figure 3: The Number of Corporate and Individual Leniency Applications
Received by DOJ's Antitrust Division, by Fiscal Year of Application:
[Refer to PDF for image: stacked vertical bar graph]
Fiscal year application received: 1994;
Successful applications: 9;
Withdrawn/rejected applications: 1.
Fiscal year application received: 1995;
Successful applications: 2;
Withdrawn/rejected applications: 3.
Fiscal year application received: 1996;
Successful applications: 3;
Withdrawn/rejected applications: 0.
Fiscal year application received: 1997;
Successful applications: 4;
Withdrawn/rejected applications: 0.
Fiscal year application received: 1998;
Successful applications: 9;
Withdrawn/rejected applications: 6.
Fiscal year application received: 1999;
Successful applications: 8;
Withdrawn/rejected applications: 1.
Fiscal year application received: 2000;
Successful applications: 9;
Withdrawn/rejected applications: 1.
Fiscal year application received: 2001;
Successful applications: 8;
Withdrawn/rejected applications: 4.
Fiscal year application received: 2002;
Successful applications: 4;
Withdrawn/rejected applications: 3.
Fiscal year application received: 2003;
Successful applications: 16;
Withdrawn/rejected applications: 9.
Fiscal year application received: 2004 (Year ACPERA enacted);
Successful applications: 11 (Pre-ACPER fiscal year applications: 9);
Withdrawn/rejected applications: 14 (Pre-ACPER fiscal year
applications: 8).
Fiscal year application received: 2005;
Successful applications: 6;
Withdrawn/rejected applications: 19.
Fiscal year application received: 2006;
Successful applications: 9;
Withdrawn/rejected applications: 5.
Fiscal year application received: 2007;
Successful applications: 9;
Withdrawn/rejected applications: 1.
Fiscal year application received: 2008;
Successful applications: 13;
Withdrawn/rejected applications: 0.
Fiscal year application received: 2009;
Successful applications: 15;
Withdrawn/rejected applications: 0.
Fiscal year application received: 2010;
Successful applications: 4;
Withdrawn/rejected applications: 0.
Source: GAO analysis of Antitrust Division data.
Note: Of the applications withdrawn or rejected in this time period,
about 61 percent were withdrawn or rejected in the same fiscal year in
which they were received, about 25 percent were withdrawn or rejected
in the next fiscal year, and the remaining about 14 percent were
withdrawn or rejected in later periods.
[End of figure]
Additionally, the highest proportion of leniency applications (19 of
25) that were withdrawn or rejected were submitted in fiscal year
2005--the first full fiscal year following ACPERA's enactment.
Antitrust Division officials reported that for a short time after
ACPERA's enactment, applicants were rushing to report even borderline
conduct possibly in order to take advantage of ACPERA's potential
relief from civil damages. This led to a short-term increase in
leniency applications that the Antitrust Division ultimately found
lacked evidence of a criminal antitrust violation, meaning that there
may have been no evidence of an agreement to collude between
competitors. According to Antitrust Division officials, 17 of the
fiscal year 2005 applications were withdrawn or rejected due to a lack
of criminal antitrust violation.[Footnote 44] Two defense attorneys
among the 21 key stakeholders we identified told us that in some
instances ACPERA's potential civil relief motivated companies to seek
leniency from the Antitrust Division even though there was not a clear
criminal antitrust violation. According to senior Antitrust Division
officials, the decline in the number of applications withdrawn or
rejected in the years following ACPERA--with no application withdrawn
or rejected that was submitted in fiscal years 2008, 2009, or 2010--
may largely be the result of the increasing use of the marker system
[Footnote 45] as well as a natural learning curve for defense
attorneys regarding the circumstances under which they should apply
for leniency, among other factors.[Footnote 46]
Furthermore, though there was little change in the total number of
leniency applications, including successful applications, submitted in
the 6 years before and after ACPERA, there was a shift in the type of
successful leniency applications. As shown in figure 4 below, in the 6
fiscal years prior to ACPERA's enactment, Type B applications--those
related to criminal cartel activity the Antitrust Division was already
aware of at the time the application was submitted--comprised the
largest share (about 43 percent) of successful applications. However,
in the 6 years after ACPERA's enactment, there were nearly twice as
many successful Type A applications--33 compared to 17--as in the 6-
year period prior to ACPERA and these applications accounted for the
largest share (about 59 percent) of successful applications.[Footnote
47] The Antitrust Division's Deputy Assistant Attorney General for
Criminal Enforcement and other senior division officials regard Type A
applications as the most valuable because they are those in which the
division had no prior knowledge of the criminal cartel activity. These
officials stated that they are not certain what, if any, impact ACPERA
had on the increase in Type A applications. See appendix II for
additional information on the criteria for Type A and B leniency and
appendix III for additional analysis of Antitrust Division data on
leniency applications.
Figure 4: The Number and Percentage of Successful Type A, Type B, and
Amnesty Plus Leniency Applications in the 6 Fiscal Years Before and
After ACPERA's Enactment:
[Refer to PDF for image: stacked horizontal bar graph]
Successful applications:
6 fiscal years before ACPERA (1998-2003):
Amnesty Plus: 14 (26%);
Type B: 23 (43%);
Type A: 17 (31%);
Total: 54.
6 fiscal years after ACPERA (2005-2010):
Amnesty Plus: 10 (18%);
Type B: 13 (23%);
Type A: 33 (59%);
Total: 56.
Source: GAO analysis of Antitrust Division data.
[End of figure]
Our interviews with attorneys representing leniency applicants
indicate ACPERA's offer of relief from civil damages had a slight
positive effect on leniency applicants' decisions to apply for
leniency, though the threats of jail time and corporate fines were the
most motivating factors both before and after ACPERA's
enactment.[Footnote 48] We spoke with 15 defense attorneys who
represented clients in 18 successful applications for leniency both
before and after ACPERA about the factors that motivated their clients
to seek leniency.[Footnote 49] All of the defense attorneys for the 4
post-ACPERA leniency applicants told us that ACPERA's benefit of
relief from treble damages and joint and several liability motivated
the company to apply for leniency, but reported this benefit was less
important than the threat of jail time and/or corporate fine in the
company's decision to apply for leniency. Similarly, a majority of the
defense attorneys representing the pre-ACPERA leniency applicants (for
9 of 14 applicants) told us that the threat of civil treble damages
and joint and several liability was slightly or moderately important
in the company's decision to apply for leniency.[Footnote 50] However,
as with the defense attorneys for the post-ACPERA leniency applicants,
all 14 of these defense attorneys for pre-ACPERA leniency applicants
reported that the threat of jail time and corporate fines were the
most important factors in their clients' decision to seek leniency.
Factors other than ACPERA may also have affected the number and types
of leniency applications submitted to the Antitrust Division over this
time period, making it difficult to isolate ACPERA's impact. For
example, the increase of leniency programs in other countries has made
it more attractive for companies to simultaneously seek leniency in
multiple countries where they have criminal exposure. The Antitrust
Division's Deputy Assistant Attorney General for Criminal Enforcement
has noted that because effective international leniency programs
create a race among conspirators to disclose their conduct to
enforcers, in some instances even before an investigation has begun,
this possibly contributed to an increase in the number of leniency
applications, and specifically Type A applications. In addition,
cartels are more likely to form during recessions as businesses try to
limit the intense competition, so economic forces beyond ACPERA may
also be influencing the pool of potential leniency applicants. Despite
these and other limitations in isolating ACPERA's impact--such as the
fact that ACPERA could be having a deterrent effect by preventing or
destabilizing cartel formation but it is difficult to know the extent,
if any, of this effect--senior Antitrust Division officials stated
that the number of leniency applications received by the Antitrust
Division is the most relevant indicator of ACPERA's impact, and that
they will continue to monitor these data over time.
After ACPERA, Higher Penalties Were Imposed in Criminal Cartel Cases:
After ACPERA's increase in maximum fines under the Sherman Act--from
$10 million to $100 million for corporations, and from $350,000 to $1
million for individuals--higher fines were imposed in criminal cartel
cases, though senior Antitrust Division officials primarily attribute
this trend to the division's efforts to pursue larger multistate and
international cases.[Footnote 51] Total fines imposed in criminal
cartel cases increased about 51 percent in the 6 fiscal years after
ACPERA's enactment, compared with the 6 fiscal years prior to ACPERA.
[Footnote 52] This trend is illustrated in figure 5 below. In
addition, the Antitrust Division's criminal cartel cases generally
resulted in higher fines per case in the 6 years after ACPERA's
enactment--median fines increased about 81 percent between the same
periods.[Footnote 53] Antitrust Division officials attributed the
increase in fines imposed largely to the Antitrust Division's policy
shift beginning in the mid 1990s toward prosecuting larger multistate
and international cartels--which generally involve a larger volume of
commerce in the United States and, therefore, result in larger
criminal fines.[Footnote 54]
In addition, Antitrust Division officials reported that, while they
have not had a post-ACPERA trial in which they sought a fine above the
previous Sherman Act maximum, ACPERA's increase in maximum fines would
make it somewhat easier to obtain higher fines in the 10 percent of
cases that go to trial. Antitrust Division officials explained that
the pre-ACPERA maximum fines did not inhibit the agency from
negotiating fines in excess of the Sherman Act maximums in the 90
percent of cases that result in plea agreements, because the division
has relied on a provision of federal law allowing a fine up to either
twice the gain from the illegal activity or twice the loss to the
victims.[Footnote 55] However, Antitrust Division officials reported
that ACPERA's increase in maximum fines would make it somewhat easier
to seek higher fines in cases that go to trial because the Antitrust
Division could obtain higher fines without having to prove the gain or
loss attributable to the illegal activity in court, a very resource-
intensive process.[Footnote 56]
Figure 5: Total Fines Imposed in Criminal Cartel Cases, by Fiscal Year
of Sentencing:
[Refer to PDF for image: line graph]
Fiscal year of sentencing: 1994;
Total fines, adjusted for inflation: $55.84 million.
Fiscal year of sentencing: 1995;
Total fines, adjusted for inflation: $55.6 million.
Fiscal year of sentencing: 1996;
Total fines, adjusted for inflation: $35.03 million.
Fiscal year of sentencing: 1997;
Total fines, adjusted for inflation: $270.73 million.
Fiscal year of sentencing: 1998;
Total fines, adjusted for inflation: $318.89 million.
Fiscal year of sentencing: 1999;
Total fines, adjusted for inflation: $1.252 billion.
Fiscal year of sentencing: 2000;
Total fines, adjusted for inflation: $388.99 million.
Fiscal year of sentencing: 2001;
Total fines, adjusted for inflation: $336.54 million.
Fiscal year of sentencing: 2002;
Total fines, adjusted for inflation: $124.06 million.
Fiscal year of sentencing: 2003;
Total fines, adjusted for inflation: $74.33 million.
Fiscal year of sentencing: 2004;
Total fines, adjusted for inflation: $152.35 million.
Fiscal year of sentencing: 2005;
Total fines, adjusted for inflation: $674.36 million.
Fiscal year of sentencing: 2006;
Total fines, adjusted for inflation: $521.88 million.
Fiscal year of sentencing: 2007;
Total fines, adjusted for inflation: $530.9 million.
Fiscal year of sentencing: 2008;
Total fines, adjusted for inflation: $698.04 million.
Fiscal year of sentencing: 2009;
Total fines, adjusted for inflation: $989.81 million.
Fiscal year of sentencing: 2010;
Total fines, adjusted for inflation: $343.98 million.
Source: GAO analysis of Antitrust Division data.
Note: Trends in yearly total fines are sensitive to fluctuations from
fiscal year to fiscal year in part because of the number of cases
sentenced each year. For example, Antitrust Division officials
reported that the peak in fiscal year 1999 is due in part to fines of
$725 million imposed against members of the international vitamins
cartels. These officials stated that the decrease in fiscal year 2010
could be an anomaly and that they would continue to monitor these
trends.
[End of figure]
ACPERA's increase in maximum jail time for antitrust violations--from
3 to 10 years--may have contributed to higher jail time imposed in
criminal cartel cases sentenced after ACPERA's enactment.[Footnote 57]
In the 6 years after ACPERA's enactment, total jail time imposed in
criminal cartel cases increased about 56 percent compared with the 6
fiscal years prior to ACPERA. This trend is illustrated in figure 6
below. In addition, Antitrust Division data show that the median jail
sentence for individual cases increased about 86 percent in the 6
fiscal years after ACPERA's enactment, compared with the prior 6
fiscal years.[Footnote 58] Additionally, since ACPERA's enactment, a
higher proportion of defendants in criminal cartel cases have been
sentenced to jail. Specifically, in the 6 fiscal years before ACPERA
about 44 percent of defendants in criminal cartel cases were sentenced
to jail, and in the 6 fiscal years after ACPERA about 74 percent of
defendants were sentenced to jail.
Figure 6: Total Days of Jail Time Imposed in Criminal Cartel Cases, by
Fiscal Year of Sentencing:
[Refer to PDF for image: line graph]
Fiscal year of sentencing: 1994;
Total jail days: 1,225.
Fiscal year of sentencing: 1995;
Total jail days: 2,900.
Fiscal year of sentencing: 1996;
Total jail days: 1,821.
Fiscal year of sentencing: 1997;
Total jail days: 789.
Fiscal year of sentencing: 1998;
Total jail days: 1,301.
Fiscal year of sentencing: 1999;
Total jail days: 4,116.
Fiscal year of sentencing: 2000;
Total jail days: 5,552.
Fiscal year of sentencing: 2001;
Total jail days: 3,740.
Fiscal year of sentencing: 2002;
Total jail days: 4,946.
Fiscal year of sentencing: 2003;
Total jail days: 2,296.
Fiscal year of sentencing: 2004;
Total jail days: 2,696.
Fiscal year of sentencing: 2005;
Total jail days: 5,517.
Fiscal year of sentencing: 2006;
Total jail days: 4,665.
Fiscal year of sentencing: 2007;
Total jail days: 4,930.
Fiscal year of sentencing: 2008;
Total jail days: 8,340.
Fiscal year of sentencing: 2009;
Total jail days: 7,880.
Fiscal year of sentencing: 2010;
Total jail days: 2,839.
Source: GAO analysis of Antitrust Division data.
Note: Trends in yearly total jail time are sensitive to fluctuations
from fiscal year to fiscal year in part because of the number of
defendants sentenced each year. Antitrust Division officials noted the
decrease in fiscal year 2010 could be an anomaly and that they would
continue to monitor these trends.
[End of figure]
Antitrust Division officials reported that ACPERA's increase in
maximum jail time was one of several reasons for the increase in total
and median jail times imposed in criminal cartel cases.[Footnote 59]
Antitrust Division officials also identified other factors that have
contributed to the increase, including:
* the Antitrust Division's stronger cooperative relationships with
foreign governments improved its ability to obtain jail time for
foreign nationals;[Footnote 60]
* a policy shift toward prosecution of additional culpable individuals
from each corporate defendant rather than only the single most
culpable employee from foreign companies in international cartel cases;
* elimination of "no-jail" deals for any defendant, meaning the
Antitrust Division no longer agreed to recommend a no-jail sentence
for any defendant; and:
* judges imposing tougher sentences since 2005.
Plaintiffs' Attorneys Reported that ACPERA Has Helped Advance Civil
Cases, but Differing Views on Timing and Amount of Cooperation Have
Posed Challenges:
Plaintiffs' attorneys from most of the cases in our sample reported
that ACPERA's cooperation provision has generally helped advance their
civil cases by improving the cases' strength and efficiency. In
addition, most plaintiffs' and defense attorneys for leniency
applicants noted differing views on certain aspects of ACPERA
cooperation--namely the timing and amount of cooperation--which have
resulted in challenges. A 2010 amendment to ACPERA provides some
clarification that cooperation must be provided in a timely manner,
but it is too soon to assess the impact of this amendment.
Additionally, some plaintiffs' and defense attorneys for leniency
applicants have developed detailed agreements which set forth the
timing and extent of cooperation that leniency applicants will provide.
Plaintiffs' Attorneys We Interviewed Reported that Information Gained
through ACPERA Cooperation Strengthened and Streamlined Their Cases:
In order to obtain the civil benefits of ACPERA--relief from treble
damages and joint and several liability--leniency applicants must
cooperate with civil plaintiffs in private civil antitrust litigation.
Specifically, under ACPERA, leniency applicants are required to
provide to plaintiffs a full account of all facts that are potentially
relevant to the civil action and provide all relevant documents or
other items that are in the possession of the applicant. Plaintiffs'
attorneys in our sample reported that information gained through
ACPERA cooperation both strengthened and streamlined their cases.
Specifically, plaintiffs' attorneys for 12 of the 17 cases in our
sample[Footnote 61] reported that information shared by the leniency
applicant through ACPERA cooperation was greatly valuable. Moreover,
10 of these 12 plaintiffs' attorneys explained that the information
was valuable because it helped to strengthen their cases.[Footnote 62]
The types of information that leniency applicants shared with
plaintiffs have included attorney proffers (which provide a
chronological overview of the conspiracy), witness interviews, e-mails
and other documentary evidence of the companies and individuals who
participated in the conspiracy, the product market and geographic area
covered by the conspiracy, and the pricing structure for the relevant
products. Plaintiffs' attorneys we interviewed stated that such
information strengthened their cases in the following ways:
* ACPERA cooperation helps plaintiffs overcome motions to dismiss the
case: Because evidence of criminal cartel activity is secretive and
difficult to discover, plaintiffs whose cases are assisted by a cartel
insider--the leniency applicant--are able to build stronger cases.
Strong evidence at the complaint phase became more important to
plaintiffs' ability to overcome motions to dismiss, particularly in
light of a 2007 Supreme Court case--Bell Atlantic Corp. v. Twombly.
[Footnote 63] The Twombly decision requires plaintiffs to allege
enough facts to support a plausible claim for relief--before they have
the opportunity to conduct civil discovery--or risk having the case
dismissed.[Footnote 64] Plaintiffs' attorneys for all four cases in
our sample which occurred after the Twombly decision reported that
ACPERA cooperation was greatly or moderately valuable to their cases.
Of the three plaintiffs' attorneys who said ACPERA cooperation was
greatly valuable, two stated that ACPERA cooperation provided
plaintiffs with the early evidence they needed to support their case,
thereby helping plaintiffs survive defendants' motions to dismiss the
case.
* ACPERA cooperation helps plaintiffs reach higher settlements with
nonleniency defendants: Plaintiffs' attorneys for 6 of the 14 cases in
our sample that reached settlements with nonleniency defendants
reported that ACPERA cooperation provided by a leniency applicant
increased the amount of the settlement with these other defendants.
[Footnote 65] Specifically, plaintiffs' attorneys from 5 of these 6
cases stated that their cases against nonleniency applicants were
stronger because plaintiffs had the cooperation of a cartel insider--
the leniency applicant. For example, 2 plaintiffs' attorneys stated
that when nonleniency defendants know that a leniency applicant is
supplying plaintiffs with insider evidence of cartel activity,
nonleniency defendants acknowledge that the plaintiffs' case is
probably strong. Plaintiffs' attorneys from 4 (of 14) cases in our
sample that reached settlements said that ACPERA had no effect on
their settlements with other defendants[Footnote 66] because, for
example, plaintiffs were already in negotiations with other defendants
when the leniency applicant first provided cooperation and key
witnesses were unavailable for interview. Figure 7 depicts the three
parties to private civil antitrust lawsuits involving leniency
applicants--the plaintiffs, leniency applicant, and other
(nonleniency) defendants.
Figure 7: Various Parties in a Private Civil Antitrust Case:
[Refer to PDF for image: illustration]
Plaintiffs:
Lawsuit against all defendants:
Cooperation: Leniency applicant defendant.
Nonleniency defendant 1;
Nonleniency defendant 2;
Nonleniency defendant 3.
Source: GAO analysis of testimonial evidence from plaintiffs' and
defense attorneys for leniency applicants.
[End of figure]
In addition to strengthening cases, plaintiffs' attorneys for 10 of 17
cases in our sample reported that information gained through ACPERA
cooperation helped them to streamline their cases by reducing the
burden of long and costly civil discovery because leniency applicants
provided a roadmap to the conspiracy.[Footnote 67] For example, the
plaintiffs' attorney in 1 case said that the information shared by the
leniency applicant as a result of ACPERA was less expensive, more
focused, and more helpful in comparison to regular civil discovery.
Plaintiffs' attorneys in 3 cases stated that ACPERA cooperation also
reduced gamesmanship, which can extend the length of civil discovery.
[Footnote 68]
Differing Views on the Timing and Amount of ACPERA Cooperation Have
Posed Challenges:
Both plaintiffs' attorneys and leniency applicants' defense attorneys
we spoke with had differing views (between and within the groups) of
precisely how much ACPERA cooperation leniency applicants must
provide, and when, to ensure that they would qualify for ACPERA's
civil relief. While attorneys' perceptions differed with regard to
ACPERA, it should be noted that plaintiffs' and defendants' interests
are often in opposition and differing views of legal requirements are
typical. However, information sharing by a defendant (the leniency
applicant) with the plaintiffs, as ACPERA requires, creates a unique
situation in this typically adversarial relationship. While plaintiffs
and defendants may have similar interests and may work toward a
mutually acceptable resolution of claims, a defendant under normal
circumstances is not obligated to help a plaintiff prove its case
against the defendants.
Specifically, plaintiffs' and defense attorneys for leniency
applicants differed in their views of when ACPERA cooperation should
begin and end, and the amount of information the leniency applicant
should provide to plaintiffs. The statute does not provide a
definition of "satisfactory cooperation," nor does it provide specific
guidance on the amount of cooperation required and exactly when ACPERA
cooperation must begin and end.[Footnote 69] ACPERA provides that in
order to receive relief from treble damages and joint and several
liability, the leniency applicant must provide "satisfactory"
cooperation to plaintiffs in prosecuting their case. The statute
states that a judge may rule on whether the leniency applicant has
provided satisfactory cooperation. However, plaintiffs' and defense
attorneys for leniency applicants reported that private civil
antitrust cases typically reach a settlement and thus a judge seldom
has the opportunity to rule on ACPERA cooperation. Attorneys also
cited advantages of differing views as well as a strategy for
addressing challenges as discussed below.
The timing of ACPERA cooperation:
Plaintiffs' and defense attorneys for leniency applicants reported
differing views about when ACPERA cooperation should start and end in
private civil cases. Seven of 10 plaintiffs' attorneys we interviewed
explained why ACPERA cooperation should begin early in the case and
last through trial if necessary; however, 8 of 11 defense attorneys
for leniency applicants we interviewed explained why they may delay
providing cooperation or their concerns about how long leniency
applicants must provide cooperation. These differing perspectives may
give rise to frustrations from both plaintiffs' and defense attorneys
regarding ACPERA cooperation in civil proceedings.
The start of cooperation: Leniency applicants are not required to
provide ACPERA cooperation in civil cases and, therefore, some
leniency applicants determine that it is in their best interest to
wait to provide cooperation--and accept the possibility of paying
treble damages--before divulging incriminating information to
plaintiffs. Leniency applicants may decide to hold off on cooperation
until they see whether the civil case will be dismissed or if their
risk of civil damages is relatively minor. For example, one defense
attorney stated that if his client sells most of his products
overseas, making the threat of civil damages in the United States
relatively minor, he may counsel the leniency applicant to wait to
provide ACPERA cooperation until after the court decides on whether to
dismiss the case. Plaintiffs' attorneys told us that when leniency
applicants wait to provide cooperation plaintiffs are often left with
insufficient evidence to establish a claim (i.e., prove that illegal
conduct occurred) or survive defendants' motions to dismiss the case.
Additionally, if cooperation occurs late in the case, plaintiffs may
already be in settlement negotiations with other defendants and thus
unable to use the leniency applicants' information as leverage in
those discussions.
Stays of civil discovery requested by the Antitrust Division may also
keep some leniency applicants from providing early ACPERA cooperation
and plaintiffs' attorneys report that this hurts their cases. Criminal
investigations and cases take precedence over civil proceedings and,
therefore, the Antitrust Division may ask the court to issue a stay of
civil discovery which, if granted, essentially halts certain or all
aspects of civil discovery such as, for example, witness interviews or
document sharing. Stays of civil discovery constrain how much
information a leniency applicant provides to plaintiffs because
information plaintiffs are seeking from the leniency applicant may be
the type of information that could adversely impact the Antitrust
Division's criminal investigation or case. For example, when the
Antitrust Division's criminal case is still ongoing, prosecutors may
object to plaintiffs interviewing any witnesses who have not yet
testified for the criminal case. Antitrust Division officials told us
that if a witness testifies more than once it increases the odds of
inconsistency in their statements so permitting a criminal case
witness to be deposed in a civil case puts their criminal cases at
some risk. Since ACPERA's enactment in June 2004, Antitrust Division
officials report that they have obtained stays in 15 criminal cartel
actions. These officials stated that the Antitrust Division considers
several factors[Footnote 70] when deciding whether to request a stay,
such as whether information provided in the civil case will jeopardize
the criminal case or prematurely reveal information from the Antitrust
Division's investigation, and the length of time that the Antitrust
Division's criminal investigation has been ongoing.[Footnote 71]
Plaintiffs' attorneys told us that stays can hurt their cases by
precluding early ACPERA cooperation from the leniency applicant,
prolonging victims' wait for compensation, and compromising their
attorneys' ability to gather relevant information to the case.
All defense attorneys for leniency applicants in our sample of 14
cases stated that the applicants they represented elected to provide
ACPERA cooperation, to varying extents, at different stages throughout
the case, beginning as early as before the consolidated complaint was
filed or as late as discovery.[Footnote 72] For example, in 1 case in
our sample, the leniency applicant provided an initial chronology of
the conspiracy after the complaint was filed and then provided the
bulk of cooperation, including interviews with witnesses, during civil
discovery. In another case, the leniency applicant began to provide
cooperation during civil discovery.
Two published court decisions discuss the issue of timing with regard
to ACPERA cooperation, but in general there is little case law to
provide guidance on how to resolve differing interpretations of
ACPERA's provisions. In one case we reviewed, the court ruled that
ACPERA does not compel a leniency applicant to identify itself and
cooperate with plaintiffs.[Footnote 73] In another case we reviewed,
the court ruled plaintiffs must provide reasonable notice to the
leniency applicant when requesting depositions of key witnesses.
[Footnote 74] See appendix IV for a description of judicial decisions
which involve ACPERA's cooperation requirement.
ACPERA'S 2010 amendment provides some clarification that cooperation
must be provided in a timely manner and, in the case of a stay of
civil discovery, as soon as the stay is lifted.[Footnote 75] At the
time of our interviews with plaintiffs' attorneys, little time (about
9 months) had passed since the amendment's enactment. Seven of the 10
plaintiffs' attorneys we interviewed reported having evidence of the
amendment's effect on ACPERA cooperation. Three of these 7 attorneys
reported that in their experience after the amendment, leniency
applicants are providing ACPERA cooperation earlier, and another
attorney stated that the amendment had reduced tensions between the
leniency applicant and the plaintiffs' attorney. [Footnote 76] Because
private civil antitrust cases often take years to resolve, it is too
soon to assess the impact of this amendment.
The end of cooperation: Seven of 11 defense attorneys for leniency
applicants expressed concerns about how long leniency applicants must
provide ACPERA cooperation. Four of these 7 defense attorneys stated
that it was unclear how long the leniency applicant would need to
cooperate with plaintiffs in order to receive ACPERA's benefits of
civil relief. However, a plaintiffs' attorney told us that he
interpreted ACPERA's cooperation requirements to mean that leniency
applicants must continue to cooperate through trial and appeal (or
settlement) of the plaintiffs' cases with all defendants involved in
the case, if the case proceeds that far. The plaintiffs' attorney
described a dispute with the defense attorney for the leniency
applicant over how long ACPERA cooperation would continue in a case.
In this case, it was determined through negotiations between attorneys
that cooperation would continue until all claims against all
defendants were resolved. A plaintiffs' attorney from another case in
our sample stated that plaintiffs' attorneys are generally reluctant
to tell the leniency applicant that they have provided sufficient
cooperation because plaintiffs' attorneys want to leave the door open
should they need to ask the leniency applicant for more information.
The amount of information provided to plaintiffs by the leniency
applicant:
Attorneys have differing views on the required scope of ACPERA
cooperation. The statute requires "satisfactory cooperation to the
[plaintiffs] with respect to the civil action," but attorneys'
interpretations of this requirement vary. One way different
perspectives on the required amount of ACPERA cooperation is
manifested is in civil cases that allege a longer period of time for
the conspiracy or may include more products than what the leniency
applicant admitted to and sought leniency for from the Antitrust
Division during the criminal proceedings. For example, a leniency
applicant may provide information to the Antitrust Division during the
criminal investigation about a certain time period of misconduct
involving a defined set of products, but civil plaintiffs may allege a
longer period of misconduct and a greater number of products involved.
This causes a challenge because plaintiffs may press leniency
applicants for cooperation pertaining to a wider scope of conspiracy
than for which they sought criminal leniency.
Advantages of differing views and strategies for addressing challenges:
Some attorneys have noted potential advantages to these differing
views on ACPERA's cooperation requirements[Footnote 77]. For example,
two key stakeholders (the Chair of the American Bar Association
Section of Antitrust Law and a defense attorney) and three attorneys
from our sample of cases involving leniency applicants (two
plaintiffs' attorneys and one defense attorney) stated that the
statute's room for interpretation encourages defendants to be more
cooperative because they do not want to risk being denied relief from
treble damages and joint and several liability. According to the
defense attorney from our sample, the possibility that a leniency
applicant could provide cooperation but, due to the insufficiency or
lateness of the cooperation, be denied civil relief, makes early
settlements more attractive to both the leniency applicant and the
claimants. Early settlements are generally regarded by attorneys as
good for both parties because plaintiffs get the ACPERA cooperation
they need to build a strong case, leniency applicants are able to
resolve the claim as swiftly as possible, and both parties are able to
save legal fees associated with prosecuting and defending the case.
One way attorneys have navigated the challenges presented by differing
views on exactly when ACPERA cooperation should end and the amount of
ACPERA cooperation a leniency applicant should provide is by
developing detailed cooperation agreements. According to plaintiffs'
attorneys in 5 of 17 cases in our sample, they entered into
cooperation agreements that dictated the form, scope, and timing of
ACPERA cooperation. For example, in 1 case, the settlement agreement
set forth the types of cooperation and information that was expected--
from the availability of documents and witnesses to the requirement
that the leniency applicant be present for trial.[Footnote 78] The
agreement also included a paragraph specifically stating that the
cooperation provided for in the agreement would satisfy the leniency
applicant's ACPERA cooperation requirements. The plaintiffs' attorney
in this case noted that because the details of cooperation were agreed
upon in writing, ACPERA cooperation occurred without the delays that
he found to be typical without such an agreement.
No Consensus Among Key Stakeholders on Adding Whistleblower Reward,
but Wide Support for Adding Antiretaliatory Protection:
Nine of 21 key stakeholders[Footnote 79] we interviewed and DOJ
officials stated that incentives such as a whistleblower reward might
motivate more whistleblowers to report criminal cartel activity to DOJ
which, in turn, could result in greater cartel detection by the
agency.[Footnote 80] However, 11 of 21 key stakeholders and DOJ
officials noted disadvantages that could hinder DOJ's enforcement
program by jeopardizing witness credibility, undermining companies'
internal compliance programs, generating more claims that do not
result in prosecutions, or requiring additional DOJ resources to
administer.[Footnote 81] Program officials responsible for existing
whistleblower reward programs at the IRS and DOJ's Civil Division, as
well as members of the SEC's rulemaking team provided their
perspectives on some of these potential disadvantages. In contrast,
all key stakeholders who had a position on the issue (16 of 21)
[Footnote 82] generally supported the addition of a civil
whistleblower protection provision for those who report criminal
antitrust violations, though senior DOJ Antitrust Division officials
stated that they neither support nor oppose the idea. Currently,
whistleblowers who report criminal antitrust violations lack a civil
remedy if they experience retaliation, such as being fired, and past
reported cases suggest retaliation occurs in this type of situation.
Stakeholders stated that a new whistleblower reward could result in
greater cartel detection and deterrence but noted that a reward could
hinder DOJ's enforcement program:
DOJ's leniency program offers incentives for wrongdoers to report
criminal cartel activity to the agency, but there is currently no
incentive or protection to encourage innocent third-party informants,
or whistleblowers, to report suspected wrongdoing to DOJ. A bounty
provision typically allows the government to provide a portion of a
recovery (fine or penalty)[Footnote 83] to individuals who provide
information leading to the enforcement action.[Footnote 84] While DOJ
already provides incentives for cartelists to self-report criminal
activity by providing protection from criminal conviction through its
leniency program, a bounty provision in the criminal antitrust setting
could mean that innocent whistleblowers who are not part of the
criminal conspiracy would be eligible for reward--they could receive
some percentage of the fine imposed by DOJ or a court if they provide
information that results in a successful enforcement action. Nine of
21 key stakeholders we interviewed--3 law professors, 3 economics
professors, and 3 plaintiffs' attorneys--as well as Antitrust Division
officials stated that incentives such as a whistleblower reward might
motivate more whistleblowers to report criminal cartel activity to DOJ
which, in turn, could result in greater cartel detection by the
agency.[Footnote 85] Further, 2 of these law professors and 1 of these
economics professors maintain that merely offering a whistleblower
reward could destabilize cartels by increasing uncertainty and fear of
detection among cartel members. This could result in the weakening of
some existing cartels and the deterrence of cartel formation.
It is important to note the distinction between a whistleblower reward
in the form of a qui tam provision and a bounty provision. A qui tam
provision in the criminal antitrust setting would allow for a
whistleblower to pursue a criminal lawsuit against cartel members on
behalf of the government and be rewarded with a portion of any
resulting penalties. However, DOJ has the sole authority to prosecute
federal criminal cases, so a private right of action in the criminal
context would conflict with this authority.[Footnote 86] The Antitrust
Division's Deputy Assistant Attorney General for Criminal Enforcement
maintains that this type of reward provision works in the civil
setting where nongovernment entities can bring civil lawsuits but is
unworkable in the criminal setting because DOJ has the sole authority
to prosecute federal criminal cases. Almost all key stakeholders who
had a position on the addition of a qui tam provision (11 of 12) and
Antitrust Division officials stated that a whistleblower reward in the
form of a qui tam provision would not be appropriate in the criminal
antitrust setting.[Footnote 87] In contrast, a bounty provision would
allow the government to maintain control over the action, while
providing a reward to the whistleblower for assistance.
DOJ Antitrust Division officials and 11 other key
stakeholders[Footnote 88] we interviewed stated that a whistleblower
reward could hinder DOJ's enforcement program in the following ways,
though views were mixed about the impact of these potential
disadvantages.
* A whistleblower reward could jeopardize DOJ criminal cases: DOJ
Antitrust Division officials and 5 of 21 other key stakeholders
[Footnote 89] we interviewed explained that a whistleblower reward
could jeopardize DOJ's existing criminal cases, many of which are
already assisted by a leniency applicant. These stakeholders stated
that cases could be jeopardized because a paid whistleblower might not
be regarded as a credible witness if the case went before a jury. The
Antitrust Division's Deputy Assistant Attorney General for Criminal
Enforcement explained that this was his primary concern about a
potential whistleblower reward provision. He stressed that jurors may
not believe a witness who stands to benefit financially from
successful enforcement action against those he implicated. He also
noted that DOJ has received some tips from third party informants whom
the department has not rewarded and he expressed concern that if a
bounty provision were added, such unpaid informants would require
payment which could jeopardize their credibility.
Even in the civil context, where the government's burden of proof at
trial is lower than in the criminal context,[Footnote 90] DOJ's Civil
Division and IRS officials have concerns about witness credibility and
generally do not use whistleblowers to substantiate their cases
because of these concerns. DOJ's Antitrust Division officials say
these concerns are heightened in the criminal context where the
government must prove its case beyond a reasonable doubt, and even
more so in the criminal antitrust context where reliance on cartel
insiders is almost always necessary to prove the case. In addition,
the Antitrust Division's Deputy Assistant Attorney General for
Criminal Enforcement explained that even if criminal cartel cases
involving a whistleblower did not go before a jury, the fact that DOJ
may be less able to prove its case because of whistleblower
credibility issues would affect leverage in obtaining plea agreements
and deter companies from settling with DOJ.
Four of 21 key stakeholders countered these concerns about
whistleblower credibility jeopardizing DOJ's criminal cartel cases,
and DOJ officials provided their views on these differing
perspectives. For example, 1 law professor noted that rewarded
whistleblowers would be no less credible than witnesses who have
received the "reward" of criminal leniency (avoided jail/fines) as a
result of their cooperation in DOJ's criminal cartel case against
their coconspirators. In addition, 3 law professors noted the
perception that criminal cartel cases are generally resolved by plea
agreement and, even when cases proceed to trial, witnesses do not
generally take the stand so there is little risk that witness
credibility would negatively impact DOJ's criminal cases. DOJ
Antitrust Division officials dismissed both of these arguments.
[Footnote 91] To the first point, DOJ officials noted that the issue
of witness credibility is more of a problem for witnesses who receive
a monetary reward than witnesses who receive criminal leniency because
at least witnesses who receive leniency have to publicly admit
criminal wrongdoing and subject their company to civil liability. To
the second point, DOJ officials stated that while about 90 percent of
cases are settled by plea agreements, about 10 percent of their cases
go to trial and in those cases they almost always have the leniency
applicant testify.
Both DOJ Civil Division and IRS officials explained that they can, in
the context of their programs, mitigate to some extent the challenges
to whistleblower credibility by corroborating the whistleblower-
provided evidence. For example, an IRS official stated that they do
not use whistleblower-provided information as the basis for an
assessment of wrongdoing, but rather try to obtain corroborating
information from another source because the whistleblower has a
personal interest in the success of the case and his or her
credibility may be questioned in litigation.[Footnote 92] In addition,
DOJ Civil Division officials responsible for administering the False
Claims Act explained that they also try to corroborate their relators'
testimony due to concerns about witness credibility. However,
according to DOJ officials, in the criminal cartel cases it may be
very difficult to find a second witness because knowledge of the
wrongdoing tends to be limited to those actually implicated in the
crime.
* A whistleblower reward could result in claims that do not lead to
criminal prosecution: Eight of 21 key stakeholders,[Footnote 93] the
Legal Director of the Government Accountability Project, and DOJ
officials noted that the prospect of a reward could increase the
number of claims from whistleblowers who either lack sufficient
information to be useful to a criminal case or are making fraudulent
claims.[Footnote 94] DOJ officials reported that because cartel
activity is so secretive, typically only insiders--those who are
criminally involved in the conspiracy--have sufficient knowledge to be
of assistance in a criminal investigation and the agency's existing
leniency program already provides incentives for wrongdoers to self-
report to DOJ. Thus, DOJ officials maintain that whistleblower tips
pertaining to criminal cartel activity would require substantial
investigation and, potentially, a leniency applicant to substantiate
the claims. In addition, one attorney we interviewed cited a case
where, in his view, a whistleblower was motivated by the prospect of a
qui tam reward and provided a falsified document to implicate a
company. This whistleblower has since been charged by DOJ in
connection with making false statements to the Antitrust Division.
[Footnote 95]
Staff of the SEC, IRS, and DOJ Civil Division's whistleblower reward
programs reported that they mitigate the risk of fraudulent claims in
several ways. For example, the SEC whistleblower statute makes
ineligible for reward any whistleblower who knowingly and willfully
makes any false, fictitious, or fraudulent statement or representation
and the agency's rules implementing the program contain certain
procedural requirements designed to deter false submissions.[Footnote
96] Similarly, the Director of the IRS Whistleblower Office explained
that the IRS requires whistleblower information to be submitted with a
penalty of perjury statement, and that their process for evaluating
and acting on whistleblowers' information is designed to test its
accuracy and obtain independent corroboration.[Footnote 97] In
addition, DOJ Civil Division officials explained that two features of
their program have the effect of deterring frivolous claims, to some
extent--their whistleblowers must have legal representation to file a
claim[Footnote 98] and a provision of the False Claims Act permits
defendants to sue whistleblowers for their attorneys' fees if the
whistleblower is found to have filed a clearly frivolous claim.
[Footnote 99]
* A whistleblower reward could undermine internal compliance programs:
One defense attorney we interviewed as a key stakeholder noted that
there is a risk that a whistleblower reward program could undermine
internal compliance programs by offering an incentive for employees to
report suspected wrongdoing directly to the federal government rather
than pursue it internally. In addition, the impact of a whistleblower
program on companies' internal compliance processes was a significant
issue addressed in the SEC's proposed rules for implementing that
agency's bounty program. In the proposed rules, the SEC requested
comment on whether to include a requirement that whistleblowers report
the violation internally and its final rules included several elements
designed to encourage potential whistleblowers to utilize internal
compliance.[Footnote 100] The Legal Director of the Government
Accountability Project also acknowledged this concern and added that
it is much more efficient and effective for companies to address
problems internally; companies are more likely to take broader
corrective action more quickly when they do it of their own accord
rather than as a result of a lawsuit. The Sarbanes-Oxley Act of 2002
generally requires the internal audit committee of each public company
to establish procedures for employees to confidentially and
anonymously submit concerns regarding questionable accounting or
auditing matters.[Footnote 101] In issuing rules to implement changes
mandated by Sarbanes Oxley, the SEC stated that establishing
procedures for receiving and handling complaints should serve to
facilitate disclosures, encourage proper individual conduct, and alert
the audit committee to potential problems before they have serious
consequences.[Footnote 102] The SEC's final rules have included
provisions intended to encourage whistleblowers who work for companies
that have robust compliance programs to also report the violation to
appropriate company personnel, while at the same time preserving the
whistleblower's status as an original source of the information and
eligibility for a reward. The rules also provide an additional
financial incentive for whistleblowers to report violations
internally. These rules have not yet become effective so it is too
soon to tell whether and how such language would motivate
whistleblowers to pursue their claims.[Footnote 103]
* A whistleblower reward could require additional resources to
administer: Officials responsible for administering the IRS and DOJ
Civil Division's bounty and qui tam provisions as well as three other
key stakeholders[Footnote 104] noted that administration of a rewards
program would require additional resources. For example, it would take
additional time and effort to process tips, communicate with
whistleblowers, and administer rewards. Officials responsible for
administering DOJ Civil Division's qui tam provision highlighted the
administrative burden and expense of handling whistleblower claims
that do not result in cases. They stated that they investigate 100
percent of the claims but actually pursue only 20 to 25 percent of
them. Therefore, they report that they are devoting a fair amount of
investigative resources to claims that are not pursued.
A reward program could net enough gain (successful new cartel cases
and fines imposed) to justify the additional resource requirements but
senior DOJ officials maintain that innocent third parties are of
limited value in cartel cases and the agency already has a leniency
program that motivates cartel insiders to self-report wrongdoing. More
specifically, two of DOJ's criminal cartel investigations that were
initiated by False Claims Act qui tam relators have, together,
resulted in approximately $153.6 million in criminal fines and $10.9
million in restitution.[Footnote 105] In addition, DOJ Civil Division
officials report that the False Claims Act's qui tam provision has
resulted in $9.6 billion in federal recoveries from fiscal year 2005
through 2010 and IRS officials responsible for administering that
agency's whistleblower program report that it has resulted in just
over $1 billion in collections from fiscal year 2003 through 2009 that
it would not have recouped without the program. However, Senior
Antitrust Division officials noted a key difference between bounty
provisions in the civil setting and a potential new bounty provision
in the criminal antitrust setting. They explained that tips from
innocent third parties are more valuable to investigations of civil
violations, such as fraud against the government or tax fraud, than
criminal antitrust violations which typically involve a high degree of
secrecy and coordination among a small number of insiders. DOJ
Antitrust Division officials stressed the importance of a cooperating
cartel insider to the success of their cases and noted that their
leniency program already provides incentives for cartel insiders to
self-report wrongdoing and cooperate with DOJ. Therefore, a
whistleblower reward in the criminal antitrust setting may not result
in as big a net gain (successful new cases and fines) as the Civil
Division and IRS whistleblower rewards have.
DOJ Antitrust Division officials acknowledge that a whistleblower
reward could increase the number of whistleblowers reporting criminal
cartel activity to DOJ and, therefore, the number of cartels detected.
However, these officials maintain that the potential benefits would be
outweighed by all of the above noted disadvantages, most importantly
the threat to witness credibility. In addition, other stakeholders--
including program officials responsible for reward provisions at the
IRS and DOJ Civil Division and members of the SEC's rulemaking team--
acknowledge these disadvantages, though they have mixed perspectives
on the extent to which they can be mitigated in a criminal antitrust
setting. Therefore, it is difficult to determine whether the benefits
of a whistleblower reward provision in the antitrust setting would
outweigh the disadvantages.
Whistleblowers Lack a Civil Remedy for Retaliation; Stakeholders
Support the Addition of a Whistleblower Protection Provision:
It is widely regarded as good public policy to protect those who take
risks to expose illegalities. Over the last 35 years, Congress has
passed numerous laws providing protections for whistleblowers. For
example, in passing the Whistleblower Protection Act of 1989 (which
protects federal employees) Congress found that protecting employees
who disclose government illegality, waste, and corruption is a major
step toward a more effective civil service.[Footnote 106] There is no
comprehensive federal whistleblower protection; rather, Congress has
typically passed whistleblower protection provisions specific to
industries and types of illegality reported.[Footnote 107] Officials
with OSHA's Office of the Whistleblower Protection Program agree that
it is good public policy to protect those who take risks to expose
illegalities, noting that employees who fear that they will be
discharged or otherwise retaliated against for reporting unsafe
working conditions or other illegalities are unlikely to do so. In
addition, the Legal Director of the Government Accountability Project
stated that the first principle for any effective law enforcement
program is protecting witnesses.
All key stakeholders who had a position on the issue (16 of 21)
[Footnote 108] generally supported the addition of a civil
whistleblower protection provision for those who report criminal
antitrust violations, though senior DOJ Antitrust Division officials
stated that they neither support nor oppose the idea. The 5 key
stakeholders who did not have a position on the issue were the
President of the American Antitrust Institute and 4 representatives of
the Committee to Support Antitrust Laws, all of whom stated that their
organizations have no position on the addition of a whistleblower
protection provision though representatives of both organizations told
us that they personally favored the idea. In addition, officials with
OSHA, the SEC, and the IRS as well as the Legal Director of the
Government Accountability Project stated that they generally supported
the idea of whistleblower protection for those who report criminal
violations. The 16 key stakeholders who had a position on the issue
generally explained that assurance of protection against retaliation
could motivate additional individuals to come forward to DOJ with
evidence of criminal cartel activity, resulting in the prosecution of
more criminals and the disruption of more cartels. In addition, an IRS
official and the Legal Director of the Government Accountability
Project also noted the benefit that existing whistleblowers (those who
are willing to report suspected wrongdoing even without an
antiretaliation provision) would obtain some assurance of protection
for their efforts. Officials from OSHA's Office of the Whistleblower
Protection Program noted that in the antitrust setting which involves
secret deals or arrangements and a great deal of pressure not to speak
up about wrongdoing, a whistleblower protection provision would likely
make more people willing to report wrongdoing. The Antitrust
Division's Deputy Assistant Attorney General for Criminal Enforcement
said he does not oppose a new antiretaliation provision but questioned
whether there was a need for such a provision and whether it makes
sense to create an antitrust-specific civil remedy. In addition,
Senior DOJ officials stated that it is not their role to propose
legislation to Congress.
Whistleblowers who report criminal antitrust violations currently lack
a civil remedy for retaliation, though there is some criminal
protection for retaliatory conduct in the workplace.[Footnote 109] An
existing criminal statute provides for penalties (fines and up to 10
years imprisonment) for retaliation--including interference with
employment--for providing information to law enforcement related to
the commission of any federal offense.[Footnote 110] However, this
antiretaliation provision does not provide for any remedy for the
negative effects experienced because of the retaliatory conduct, i.e.,
a means to pursue reinstatement at their job or monetary damages or a
means for individual whistleblowers to independently pursue their
cases. Instead, it is incumbent upon DOJ to pursue whistleblowers'
criminal retaliation cases and DOJ officials report that, to date,
they have not investigated or prosecuted any cases involving
employment retaliation against a cartel whistleblower under this
statute.[Footnote 111]
While all key stakeholders who had a position on the issue agreed that
antiretaliation protection for whistleblowers would be beneficial, it
is difficult to determine the extent to which retaliation against
cartel whistleblowers has occurred. DOJ Antitrust Division officials
said they were not aware of any evidence that antitrust whistleblowers
have been particularly vulnerable and they could only recall one
instance of alleged retaliation. In searches of published decisions,
we found one recent legal action relating to employment retaliation
based on an employee's reporting of or refusal to participate in
criminal cartel conduct. The attorney who represented this
whistleblower filed a complaint alleging that the whistleblower was
terminated from his job because of his refusal to cooperate with his
employer's antitrust conspiracy.[Footnote 112] This attorney also
stated that his small firm had seen other cases of this type of
retaliation, but that without an available cause of action, there
would be few published decisions involving these issues. In addition,
past cases reveal that retaliation has occurred in this setting. We
identified several published decisions from the 1980s and 1990s
involving such employee whistleblower retaliation suits. For example,
we found one case involving the gas industry where an executive
alleged he was fired and blacklisted for refusing to participate in a
conspiracy to fix prices, impose conditions of sales on customers, and
allocate customers.[Footnote 113] In another case we found, two
employees of a paper company alleged they were discharged because they
exposed, objected to, and made efforts to eliminate unlawful price
discounts and promotional allowances granted by their employer to
certain customers and not others.[Footnote 114] However, while some
plaintiffs were successful, the means by which plaintiffs attempted to
bring these cases in the past has generally not provided a basis for
relief.[Footnote 115] Without an available protection provision, it is
difficult to know how many cases of retaliation are occurring.
Officials with OSHA's Office of the Whistleblower Protection Program
who administer 21 federal whistleblower protection provisions noted
that a new whistleblower protection provision would require resources
to administer and enforce. They explained that whistleblower claims
are difficult matters to investigate because they require a particular
kind of expertise, trained personnel, administrative support, a travel
budget to support thorough investigation, program audits, equipment,
supplies, and costs associated with managing a data processing system.
These officials noted that none of the 20 whistleblower statutes
delegated to OSHA since 1982 has been enacted with appropriated
funding.[Footnote 116] In addition, any cases filed in court would
also necessitate judicial resources. While a new whistleblower
protection provision would likely require additional federal resources
to administer it--whether it be administered by DOJ, OSHA, or designed
such that claimants may proceed directly to court without first filing
their claim with an administrative body--these additional resources
could be recouped if the added protection results in more
whistleblowers reporting criminal cartel activity to DOJ, more
prosecutions, and more fines. In addition, ultimately, if cartel
activity is reduced, the benefits to the U.S. economy could outweigh
the costs of administering the program.
Conclusions:
Criminal cartel activity can harm businesses, consumers, and the U.S.
economy in the form of lack of competition and overcharges. For the
last 17 years, DOJ has relied heavily on its corporate and individual
leniency programs to encourage wrongdoers to self-report such
activity. However, innocent third parties may also report illegalities
and in so doing may expose themselves to risk of retaliation. Without
a civil remedy for those who are retaliated against as a result of
reporting criminal antitrust violations, whistleblowers are currently
unprotected and may therefore be hesitant to report wrongdoing to DOJ.
It is widely accepted as good public policy to protect those who take
risks to report crime and Congress has passed numerous laws providing
protection for whistleblowers reporting various types of illegalities
in various industries. By considering a civil remedy for
whistleblowers who are retaliated against for reporting criminal
antitrust violations, Congress could provide existing whistleblowers
an assurance of protection for their efforts and, further, could
motivate additional individuals to come forward with evidence of
criminal cartel activity.
Matter for Congressional Consideration:
To protect those who take risks to report criminal antitrust
violations and help motivate others to do the same, Congress may wish
to consider an amendment to add a civil remedy for those who are
retaliated against for reporting criminal antitrust violations.
Agency Comments and Our Evaluation:
We provided copies of a draft of this report to DOJ, the Department of
Labor, SEC, and the IRS for their review and comment. The SEC provided
technical edits, which we incorporated, and the IRS and Department of
Labor, representing OSHA, provided no comments. DOJ provided technical
edits, which we incorporated, as appropriate, as well as written
comments which are reproduced in full in appendix V.
In their written comments, DOJ noted that the rate of increase in post-
ACPERA applications depends upon the time period considered. As we
note in our report, the numbers of leniency applications received each
year are small so these data are indeed sensitive to fluctuations over
time. Therefore, as we and DOJ both note, we obtain different percent
changes if we compare the 3, 4, 5, or 6 years before and after
ACPERA's enactment--for example, we report that the change in
successful applications ranged from a 14 percent decrease, to no
change, to a 16 percent increase. However, we chose to compare the
number of leniency applications received in the 6-year periods pre-and
post-ACPERA to capture the broadest and most recent data available.
This 6-year comparison shows a 4 percent increase in successful
applications post-ACPERA. We also looked at 6-year trends in the total
number of leniency applications received and this too yields a 4
percent increase.
DOJ also noted that the Antitrust Division's views on whistleblower
rewards are based on years of substantial practical experience in
prosecuting and trying criminal antitrust cases and questioned whether
all of the key stakeholders we interviewed had prior criminal
antitrust trial experience. We agree that the Antitrust Division's
perspective on this issue is very important and we thus included
Antitrust Division officials' perspectives on key issues related to
whistleblower rewards. However, we also purposely sought the diverse
perspectives of numerous other key stakeholders who we selected based
on their significant antitrust experience, such as economists who have
extensively researched and published on criminal cartel enforcement
efforts.
We are sending copies of this report to the Department of Justice and
other interested parties. The report will also be available at no
charge on the GAO Web site at [hyperlink, http://www.gao.gov].
If you or your staff have any questions about this report, please
contact me at (202) 512-8777, or at larencee@gao.gov. Contact points
for Office of Congressional Relations and Public Affairs may be found
on the last page of this report. GAO staff who made major
contributions to this report are listed in appendix VI.
Signed by:
Eileen Regan Larence:
Director:
Homeland Security and Justice Issues:
[End of section]
Appendix I: Objectives, Scope, and Methodology:
The 2010 Reauthorization of the Antitrust Criminal Penalty Enhancement
and Reform Act (ACPERA)[Footnote 117] directs GAO to report to the
House and Senate Judiciary Committees, no later than 1 year after the
date of enactment, on the effectiveness of ACPERA, both in criminal
investigation and enforcement and in private civil actions as well as
the appropriateness of the addition of qui tam and antiretaliatory
protection provisions for employees who report illegal anticompetitive
conduct.[Footnote 118] To address this mandate, this report answers
the following questions:
* To what extent has ACPERA affected criminal cartel enforcement by
the Department of Justice's (DOJ) Antitrust Division?
* In what ways, if any, has ACPERA reportedly affected private civil
actions involving leniency applicants?
* What are the perspectives of key stakeholders regarding the
advantages and disadvantages of adding rewards or antiretaliatory
protection for those who report criminal antitrust violations?
To inform our analysis of all three objectives, we interviewed DOJ
Antitrust Division officials and reviewed speeches by division
officials, which described the division's enforcement efforts from
fiscal year 1993--the fiscal year in which the division implemented
its revised leniency program--through fiscal year 2010--the last
fiscal year included in our review; academic studies; and articles
prepared by economists and attorneys on the Antitrust Division's
criminal cartel enforcement efforts. We also identified 21 key
stakeholders--7 antitrust plaintiffs' and defense attorneys who have
worked on numerous antitrust cases, 7 additional antitrust attorneys
who are representatives of three nongovernmental antitrust
organizations (including the American Antitrust Institute, the
American Bar Association Section of Antitrust Law, and the Committee
to Support the Antitrust Laws), and 7 academics whose work focuses on
antitrust law and enforcement issues (including 4 law professors and 3
economists)--using an iterative process, often referred to as
"snowball sampling," to identify knowledgeable stakeholders, and
select for interviews those who would provide us with a broad range of
perspectives on ACPERA. At each interview, we solicited names of
additional stakeholders it would be useful to interview until we had
coverage of a broad range of perspectives on ACPERA. We selected a
nonprobability sample of stakeholders to interview and, therefore, the
information gathered from key stakeholders is not generalizable beyond
the individuals we interviewed; however the interviews provided
insights into issues pertaining to all three objectives.
To address the extent to which ACPERA has affected criminal cartel
enforcement by DOJ we analyzed DOJ's Antitrust Division data on their
criminal cartel investigation and enforcement actions for the period
August 1993 (the inception of the Antitrust Division's current
leniency program) to September 2010.[Footnote 119] We analyzed data
on, for example, the number of leniency applications that the
Antitrust Division received and granted, the number of leniency
applications withdrawn or rejected, the number of criminal cartel
cases assisted by leniency applicants compared to those that were not,
and the fines and jail time imposed on convicted cartelists, among
other things.[Footnote 120] We used this analysis to discern apparent
differences in the Antitrust Division's criminal cartel enforcement
efforts before and after ACPERA went into effect. Due to numerous
confounding variables, we were not able to causally link identified
differences between pre-and post-ACPERA criminal cartel investigation
and enforcement data to ACPERA. For example, the increase in antitrust
enforcement efforts outside the United States and global economic
forces beyond ACPERA may be influencing the number of leniency
applications submitted to the Antitrust Division before and after
ACPERA's enactment. Further, ACPERA could be having a deterrent effect
by preventing or destabilizing cartel formation but it is difficult to
know the extent, if any, of this effect. To assess the reliability of
the Antitrust Division's criminal cartel investigation and enforcement
data, we reviewed relevant Antitrust Division documentation and
interviewed knowledgeable agency officials about the source of these
data and the controls the Antitrust Division had in place to maintain
the integrity of these data. To the extent possible, we compared the
data totals the Antitrust Division provided across categories and
analyses, and against published data, for obvious errors in accuracy
and completeness. We determined that the data were sufficiently
reliable for the purposes of our report.
To assess ACPERA's impact on wrongdoers' decision to seek leniency, we
identified a nonprobability sample of 25 publicly disclosed
applications to the Antitrust Division's Corporate Leniency Program
both before and after ACPERA's enactment and interviewed and analyzed
responses from 15 defense attorneys who represented leniency
applicants in 18 of the 25 leniency applications. Due to the
confidentiality of leniency applicant identities, we were unable to
compile a complete list of all criminal cartel cases involving
leniency applicants and instead identified our sample of publicly
disclosed leniency applicants involved in 25 applications using
Securities and Exchange Commission (SEC) filings, annual reports, or
court documents.[Footnote 121] Because our sample was limited to
publicly disclosed leniency applicants, we excluded the perspectives
of defense attorneys for leniency applicants whose identities were not
publicly disclosed as well as the perspectives of defense attorneys
for clients who considered but decided not to seek leniency, or were
unsuccessful in seeking leniency. We mitigated this limitation by
interviewing 3 defense attorneys (recommended to us using the snowball
method) who had represented numerous leniency applications, both
publicly disclosed and not. While our sample of defense attorneys is
not generalizable beyond the individuals we interviewed, the results
of these interviews helped inform our analysis of the extent to which
ACPERA has affected the Antitrust Division's efforts to combat
criminal cartel activity.
To determine in what ways, if any, ACPERA has reportedly affected
private civil actions involving leniency applicants, we reviewed court
dockets and case filings from relevant federal private civil class
action cases to describe court decisions related to and which
reference ACPERA. We also reviewed available literature from economic
and legal experts on the impact of leniency programs in general and
ACPERA specifically on private civil actions. In addition, we
interviewed and analyzed responses from attorneys in private civil
antitrust cases that involved 17 of the 25 publicly disclosed leniency
applications discussed above, where ACPERA may have affected the civil
process. We found that ACPERA could have played a role in 17 of the 25
cases because 17 cases were either ongoing or had reached a settlement
agreement between plaintiffs and the leniency applicant after ACPERA's
enactment in June 2004. We interviewed and analyzed responses from 10
plaintiffs' attorneys who served as class counsel in the 17 private
civil antitrust cases, and 11 defense attorneys who represented the
publicly disclosed leniency applicants in 14 of the 17 cases about
how, if at all, ACPERA affected these private civil actions involving
leniency applicants.[Footnote 122] Due to the confidentiality of
leniency applicant identities, and the fact that there is no national
repository of private civil cases with these data, we were unable to
compile a complete list of all federal private civil cases involving
leniency applicants from 2004 to early 2010 and thus were only able to
interview attorneys involved in the 25 cases with publicly disclosed
leniency applicants. Because our sample is necessarily small and
limited to cases involving publicly disclosed leniency applicants, we
are not able to generalize our findings. Instead, our sample provides
examples of ACPERA's reported effect on private civil litigation.
To determine stakeholder perspectives on the potential advantages and
disadvantages of adding rewards and antiretaliatory provisions for
those who report criminal antitrust violations, we reviewed relevant
literature and interviewed the 21 key stakeholders described above as
well as others with knowledge of whistleblower programs and existing
bounty provisions including the Legal Director of the Government
Accountability Project (a whistleblower advocacy group), officials
with the Occupational Safety & Health Administration's (OSHA's) Office
of the Whistleblower Protection Program who administer 21 federal
whistleblower protection provisions, program officials responsible for
existing bounty provisions administered by the Internal Revenue
Service (IRS) and DOJ Civil Division, and members of the SEC's
rulemaking team. We asked these officials open-ended questions about
their perspective on the advantages and disadvantages of adding
informant rewards and antiretaliatory protection in the antitrust
setting and analyzed their responses to determine the extent of
support for such provisions. The perspectives of these stakeholders
are not generalizable beyond this sample of key stakeholders and
officials but do represent a variety of opposing interests, including
both plaintiffs' and defense attorneys. We also conducted a legal
review of existing whistleblower protection provisions and interviewed
OSHA officials and others to determine whether whistleblowers in the
antitrust setting are currently protected by any existing
antiretaliation provisions. In addition, we reviewed evidence of legal
actions relating to employment retaliation based on an employee's
reporting of or refusal to participate in criminal cartel conduct to
help us determine the extent of retaliation in this setting. We also
reviewed relevant statutes, case law, and literature to identify four
informant rewards provisions that could be informative in the
antitrust setting, because they involve corporate wrongdoing. We then
interviewed the IRS and DOJ Civil Division officials responsible for
administering these provisions as well as members of the SEC's
rulemaking team who were establishing the agency's new whistleblower
program and reviewed data on each program (i.e., number of
whistleblower claims and statistics on claim outcomes).[Footnote 123]
We conducted this performance audit from October 2010 through July
2011 in accordance with generally accepted government auditing
standards. Those standards require that we plan and perform the audit
to obtain sufficient, appropriate evidence to provide a reasonable
basis for our findings and conclusions based on our audit objectives.
We believe that the evidence obtained provides a reasonable basis for
our findings and conclusions based on our audit objectives.
[End of section]
Appendix II: Additional Information on the Criteria for Different
Types of Leniency Applications:
The Antitrust Division grants individual leniency and two types of
corporate leniency, Type A and Type B.[Footnote 124] The criteria for
each type of leniency are as follows:
Individual Leniency:
The Antitrust Division grants leniency to individuals reporting
illegal antitrust activity before an investigation has begun, if the
following three conditions are met:
1. At the time the individual comes forward to report the illegal
activity, the Antitrust Division has not received information about
the illegal activity being reported from any other source;
2. The individual reports the wrongdoing with candor and completeness
and provides full, continuing and complete cooperation to the Division
throughout the investigation; and:
3. The individual did not coerce another party to participate in the
illegal activity and clearly was not the leader in, or originator of,
the activity.
Type A Leniency (Leniency Before an Investigation Has Begun):
The Antitrust Division grants leniency to companies reporting illegal
antitrust activity before an investigation has begun if the following
six conditions are met:
1. At the time the company comes forward, the Antitrust Division has
not received information about the activity from any other source.
2. Upon the company's discovery of the activity, the company took
prompt and effective action to terminate its participation in the
activity.
3. The company reports the wrongdoing with candor and completeness and
provides full, continuing, and complete cooperation to the Antitrust
Division throughout the investigation.
4. The confession of wrongdoing is truly a corporate act, as opposed
to isolated confessions of individual executives or officials.
5. Where possible, the company makes restitution to injured parties.
6. The company did not coerce another party to participate in the
activity and clearly was not the leader in, or the originator of, the
activity.
Cooperating employees of a leniency applicant may also receive
protection under the division's Corporate Leniency Policy. If the
company does not meet all six of the Type A Leniency conditions, it
may still qualify for leniency if it meets the conditions of Type B
Leniency.
Type B Leniency (Alternative Requirements for Leniency):
The Antitrust Division may grant leniency to companies even after the
Antitrust Division has received information about the illegal
antitrust activity, whether this is before or after an investigation
is formally opened, if the following conditions are met:
1. The company is the first to come forward and qualify for leniency
with respect to the activity.
2. At the time the company comes in, the Antitrust Division does not
have evidence against the company that is likely to result in a
sustainable conviction.
3. Upon the company's discovery of the activity, the company took
prompt and effective action to terminate its part in the activity.
4. The company reports the wrongdoing with candor and completeness and
provides full, continuing, and complete cooperation that advances the
Antitrust Division in its investigation.
5. The confession of wrongdoing is truly a corporate act, as opposed
to isolated confessions of individual executives or officials.
6. Where possible, the company makes restitution to injured parties.
7. The Antitrust Division determines that granting leniency would not
be unfair to others, considering the nature of the activity, the
confessing company's role in the activity, and when the company comes
forward.
Cooperating employees of a leniency applicant may also receive
protection under the division's Corporate Leniency Policy.
Amnesty Plus:
The Antitrust Division may grant leniency to companies or individuals
for reporting involvement in a separate antitrust conspiracy. If a
company is under investigation for one antitrust conspiracy but is too
late to obtain leniency for that conspiracy, it can receive benefits
in its plea agreement for that conspiracy by reporting its involvement
in a second antitrust conspiracy and also receive leniency for the
second conspiracy if it meets the criteria for Type A or Type B
leniency.
[End of section]
Appendix III: Additional Information on the Antitrust Division's
Criminal Cartel Enforcement Efforts During FY 1994 - 2010:
After the Antitrust Criminal Penalty Enhancement and Reform Act's
(ACPERA) enactment in June 2004, cases assisted by leniency applicants
increased significantly, even though the Department of Justice's (DOJ)
Antitrust Division's overall criminal cartel caseload decreased
significantly, as shown in figure 8.[Footnote 125] In the 6 fiscal
years after ACPERA's enactment, there was a 42 percent increase in
criminal cartel cases filed in which the Antitrust Division was
assisted by a leniency applicant, compared with the 6 fiscal years
prior to ACPERA.[Footnote 126] The overall number of criminal cartel
cases filed by the Antitrust Division--including both those assisted
and not assisted by a leniency applicant--decreased about 30 percent
between the same time periods.[Footnote 127] Therefore, cases assisted
by a leniency applicant made up a larger share of the Antitrust
Division's total criminal cartel caseload after ACPERA's enactment.
[Footnote 128] Antitrust Division officials explained that one key
reason for the decrease in the number of criminal cartel cases after
ACPERA's enactment is a policy shift from investigating and
prosecuting a large number of cartels to focusing on a smaller number
of larger cartels, including international cartels.[Footnote 129]
Figure 8: Number of Criminal Cartel Cases Filed Each Fiscal Year,
Broken Out by Those Assisted and Not Assisted by a Leniency Applicant:
[Refer to PDF for image: stacked vertical bar graph]
Fiscal year case filed: 1994;
Cases assisted by leniency applicant: 4;
Cases not assisted by leniency applicant: 48.
Fiscal year case filed: 1995;
Cases assisted by leniency applicant: 9;
Cases not assisted by leniency applicant: 40.
Fiscal year case filed: 1996;
Cases assisted by leniency applicant: 3;
Cases not assisted by leniency applicant: 36.
Fiscal year case filed: 1997;
Cases assisted by leniency applicant: 10;
Cases not assisted by leniency applicant: 22.
Fiscal year case filed: 1998;
Cases assisted by leniency applicant: 4;
Cases not assisted by leniency applicant: 51.
Fiscal year case filed: 1999;
Cases assisted by leniency applicant: 26;
Cases not assisted by leniency applicant: 27.
Fiscal year case filed: 2000;
Cases assisted by leniency applicant: 21;
Cases not assisted by leniency applicant: 33.
Fiscal year case filed: 2001;
Cases assisted by leniency applicant: 16;
Cases not assisted by leniency applicant: 21.
Fiscal year case filed: 2002;
Cases assisted by leniency applicant: 10;
Cases not assisted by leniency applicant: 14.
Fiscal year case filed: 2003;
Cases assisted by leniency applicant: 14;
Cases not assisted by leniency applicant: 11.
Fiscal year case filed: 2004 (year ACPERA enacted);
Cases assisted by leniency applicant: 22;
Cases not assisted by leniency applicant: 6.
Fiscal year case filed: 2005;
Cases assisted by leniency applicant: 18;
Cases not assisted by leniency applicant: 5.
Fiscal year case filed: 2006;
Cases assisted by leniency applicant: 15;
Cases not assisted by leniency applicant: 7.
Fiscal year case filed: 2007;
Cases assisted by leniency applicant: 16;
Cases not assisted by leniency applicant: 7.
Fiscal year case filed: 2008;
Cases assisted by leniency applicant: 17;
Cases not assisted by leniency applicant: 10.
Fiscal year case filed: 2009;
Cases assisted by leniency applicant: 31;
Cases not assisted by leniency applicant: 6.
Fiscal year case filed: 2010;
Cases assisted by leniency applicant: 32;
Cases not assisted by leniency applicant: 9.
Source: GAO analysis of Antitrust Division data.
[End of figure]
Antitrust Division officials reported that since the mid-1990s, the
division made the prosecution of international cartels that impact
commerce in the United States one of its highest priorities. As shown
in figure 9, the number of criminal cartel cases involving
international companies[Footnote 130] in the 6 fiscal years after
ACPERA decreased slightly compared with the prior 6 fiscal years,
which may be due, in part, to the overall decrease in the criminal
cartel caseload discussed above.[Footnote 131] However, a larger share
of the division's criminal cartel cases involved international
companies in the 6-year period after ACPERA. Specifically, the
proportion of total cases that involved international companies
increased from about 18 percent in the 6 fiscal years prior to ACPERA
to about 24 percent in the 6 fiscal years after ACPERA. While the
number of cases involving international companies in any given year
has consistently been fewer than those involving domestic companies,
Antitrust Division officials reported that international cases tend to
be larger (affecting a higher volume of commerce), more complex, and
more resource intensive to investigate and prosecute.
Figure 9: Number of Criminal Cartel Cases Involving International
Companies Compared to Cases Involving Domestic Companies, by Fiscal
Year Filed:
[Refer to PDF for image: stacked vertical bar graph]
Fiscal year case filed: 1994;
All cases involving international companies: 3;
All cases involving only domestic companies: 49.
Fiscal year case filed: 1995;
All cases involving international companies: 4;
All cases involving only domestic companies: 45.
Fiscal year case filed: 1996;
All cases involving international companies: 6;
All cases involving only domestic companies: 33.
Fiscal year case filed: 1997;
All cases involving international companies: 4;
All cases involving only domestic companies: 28.
Fiscal year case filed: 1998;
All cases involving international companies: 6;
All cases involving only domestic companies: 49.
Fiscal year case filed: 1999;
All cases involving international companies: 11;
All cases involving only domestic companies: 42.
Fiscal year case filed: 2000;
All cases involving international companies: 8;
All cases involving only domestic companies: 46.
Fiscal year case filed: 2001;
All cases involving international companies: 10;
All cases involving only domestic companies: 27.
Fiscal year case filed: 2002;
All cases involving international companies: 4;
All cases involving only domestic companies: 20.
Fiscal year case filed: 2003;
All cases involving international companies: 5;
All cases involving only domestic companies: 20.
Fiscal year case filed: 2004 (year ACPERA enacted);
All cases involving international companies: 6;
All cases involving only domestic companies: 22.
Fiscal year case filed: 2005;
All cases involving international companies: 3;
All cases involving only domestic companies: 20.
Fiscal year case filed: 2006;
All cases involving international companies: 5;
All cases involving only domestic companies: 17.
Fiscal year case filed: 2007;
All cases involving international companies: 2;
All cases involving only domestic companies: 21.
Fiscal year case filed: 2008;
All cases involving international companies: 7;
All cases involving only domestic companies: 20.
Fiscal year case filed: 2009;
All cases involving international companies: 12;
All cases involving only domestic companies: 25.
Fiscal year case filed: 2010;
All cases involving international companies: 12;
All cases involving only domestic companies: 29.
Source: GAO analysis of Antitrust Division data.
[End of figure]
While criminal cartel cases involving international companies
comprised a relatively low share of the Antitrust Division's total
criminal cartel caseload for the period fiscal years 1994 through
2010--about 17 percent--successful international leniency applicants
[Footnote 132] comprised a relatively large share of total successful
leniency applications granted over the same period--about 58 percent.
[Footnote 133] Successful international leniency applications have
outnumbered successful domestic applications in 9 of the last 17
fiscal years, as shown in figure 10. Antitrust Division officials
explained that international cartel cases are more likely to involve a
leniency applicant than domestic cases because members of
international cartels have more tenuous personal connections than
members of domestic cartels. Antitrust Division officials reported
that the leniency program may also be more attractive to international
leniency applicants because of the increasing number of leniency
programs in foreign countries.
Figure 10: Successful International Leniency Applicants as a
Proportion of All Successful Leniency Applicants, by Fiscal Year of
Application:
[Refer to PDF for image: stacked vertical bar graph]
Fiscal year applications received: 1994;
International: 1;
Domestic: 8.
Fiscal year applications received: 1995;
International: 0;
Domestic: 2.
Fiscal year applications received: 1996;
International: 0;
Domestic: 3.
Fiscal year applications received: 1997;
International: 1;
Domestic: 3.
Fiscal year applications received: 1998;
International: 5;
Domestic: 4.
Fiscal year applications received: 1999;
International: 7;
Domestic: 1.
Fiscal year applications received: 2000;
International: 8;
Domestic: 1.
Fiscal year applications received: 2001;
International: 4;
Domestic: 4.
Fiscal year applications received: 2002;
International: 2;
Domestic: 2.
Fiscal year applications received: 2003;
International: 9;
Domestic: 7.
Fiscal year applications received: 2004 (year ACPERA enacted);
International: 4;
Domestic: 7.
Fiscal year applications received: 2005;
International: 3;
Domestic: 3.
Fiscal year applications received: 2006;
International: 9;
Domestic: 0.
Fiscal year applications received: 2007;
International: 7;
Domestic: 2.
Fiscal year applications received: 2008;
International: 7;
Domestic: 6.
Fiscal year applications received: 2009;
International: 10;
Domestic: 5.
Fiscal year applications received: 2010;
International: 3;
Domestic: 1.
Source: GAO analysis of Antitrust Division data.
[End of figure]
[End of section]
Appendix IV: Published Federal Judicial Decisions Involving the
Antitrust Criminal Penalty Enhancement and Reform Act:
This appendix describes the four published judicial decisions we
identified in which the Antitrust Criminal Penalty Enhancement and
Reform Act (ACPERA) cooperation requirement is mentioned or discussed.
In one case, the court explicitly dealt with the defendant's duty to
cooperate. In the other three cases, aspects of ACPERA's cooperation
requirement were referenced in other contexts.
In re TFT-LCD Antitrust Litig., 618 F. Supp. 2d 1194 (N.D. Cal. 2009).
This is the only reported case dealing explicitly with the leniency
applicant's duty to cooperate. In this case the plaintiffs, who were
direct purchasers, brought a motion to compel the leniency applicant
to comply with ACPERA by disclosing its identity and providing
cooperation to the plaintiffs. The plaintiffs argued that if the
leniency applicant did not comply, it should be required to forfeit
any right it may have for reduced civil liability. The lead attorney
from the Department of Justice's (DOJ) Antitrust Division confirmed
that DOJ had entered into a conditional leniency agreement with a
company that had manufactured and sold TFT-LCD panels.[Footnote 134]
The plaintiffs argued that the leniency applicant should be required
to disclose itself and cooperate with the plaintiffs because
cooperation is only satisfactory if provided early in the litigation
and the fact that the applicant has not done so had adversely impacted
the plaintiffs.
Both DOJ and the defendant argued that ACPERA does not authorize the
court to compel an applicant to identify itself and cooperate with the
plaintiffs, but it is up to the applicant when to come forward. They
further argued that the court should only evaluate the adequacy of an
applicant's cooperation when the applicant seeks a limitation on civil
liability.
The court agreed with the defendant and DOJ. The court noted that
while the value of cooperation diminishes over time, "the language of
ACPERA suggests that the Court's assessment of an applicant's
cooperation occurs at the time of imposing judgment or otherwise
determining liability and damages."
In re Air Cargo Shipping Servs. Antitrust Litig., 2009 U.S. Dist.
LEXIS 88404, 2009 Westlaw 3077396 (E.D.N.Y. Sept. 25, 2009).
This decision involved the court's approval of a settlement agreement
between the plaintiffs and certain related defendants, which were the
Antitrust Division's leniency applicants--collectively, Lufthansa. The
agreement called for Lufthansa to pay $85 million, in return for
release from all claims. In addition, Lufthansa agreed to provide
extensive cooperation to the plaintiffs relating to the conduct at
issue in the litigation.
In reviewing the settlement agreement, the court examined nine factors
that relate to the substantive fairness of the settlement. In the
context of one factor, the court noted that the bargained for
cooperation with Lufthansa may facilitate a more expeditious outcome
of the remaining claims and advance the final resolution of the
litigation. The court also made several statements with respect to
ACPERA. In examining the factor related to the risk of establishing
liability and damages, and of maintaining the class action through the
trial, the court noted that the plaintiffs were continuing to litigate
against the nonsettling defendants and questioned whether Lufthansa,
as a leniency applicant, could even effectively contest its liability
at trial. With respect to examining the reasonableness of the
settlement fund in light of the best possible recovery in litigation
and the risks of litigation, the court took ACPERA into account.
Specifically, the court stated that Lufthansa's exposure would be
limited by ACPERA to a measure of its own sales, without regard to the
rest of the air cargo industry. The court also noted that the
agreement to cooperate with plaintiffs added significant value to the
settlement, which had not been factored into the overall value of the
agreement. After discussing several other issues, the court went on to
approve the settlement.
In re Mun. Derivatives Antitrust Litig., 252 F.R.D. 184, 2008 U.S.
Dist. LEXIS 61005 (S.D.N.Y. Aug. 1, 2008).
This decision involved the court's approval of interim class counsel
to represent the plaintiffs. Various plaintiffs were requesting that
their respective attorneys be appointed as interim class counsel. In
background, the court noted that Bank of America had entered into
DOJ's corporate leniency program under ACPERA. Subsequently, the first
set of attorneys that had been making efforts on behalf of potential
class members entered into an agreement with Bank of America under
which they had agreed not to seek treble damages from Bank of America
in exchange for Bank of America providing information and evidence
pertaining to the alleged conspiracy for the purpose of settlement
negotiations.
The second set of attorneys made several arguments as to why they were
appropriate to represent the class. One of the arguments they made was
that the first set of attorneys had improperly exchanged the
plaintiffs' right to recover treble damages against Bank of America,
which would lessen the recovery available from Bank of America. The
court disagreed because it found that the reduction from Bank of
America was already contemplated by ACPERA as an incentive to
encourage cooperation with the government. In addition, the court
found that the agreement allowed plaintiffs to recover treble damages
from the other defendants, which remained jointly and severally
liable. Accordingly, the court appointed the first set of attorneys as
interim class counsel.
In re Sulfuric Acid Antitrust Litig., 231 F.R.D. 320, 2005 U.S. Dist.
LEXIS 18265 (N.D. Ill., Aug. 26, 2005).
This decision involved the plaintiffs' motion to compel certain
discovery. In this case, the plaintiffs had not obtained all of the
answers to their discovery requests from the defendants before the
discovery deadline, and wanted the court to require the defendants to
provide more information. In the context of going through the
plaintiffs' numerous requests, the court referenced both the
cooperation agreement signed between the plaintiffs and the leniency
applicant defendant as well as the court's decision as to whether the
leniency applicant had provided satisfactory cooperation.
One of the items that the plaintiffs had requested was that
representatives from the leniency applicant corporation be made
available for depositions. The plaintiffs also brought up that they
had a cooperation agreement with this corporation that required "full
cooperation" and by not providing the depositions, the defendants were
in violation of that agreement. The court disagreed, finding that the
plaintiffs had waited until the very last minute to make their request
and it was too late to complain about it. The court also looked at the
agreement and found that it said the defendant would provide
depositions with "reasonable notice" and here the plaintiffs were too
late, which was not reasonable. The court said that this agreement
tracked ACPERA, which also required that the cooperation must be
"reasonably require[d]." Lastly, the court said only the day before
the plaintiffs came into court complaining that the defendants had not
been made available for depositions, the plaintiffs had filed a motion
agreeing that the leniency applicant had provided satisfactory
cooperation for purposes of ACPERA; now the plaintiffs were saying the
opposite. The court had already made a determination that the leniency
defendants had satisfactorily cooperated, which the plaintiffs had not
sought to overturn. Thus, the plaintiffs could not now argue that the
cooperation, including the availability of employees for depositions,
had not been satisfactory.
[End of section]
Appendix V: Comments from the Department of Justice:
U.S. Department of Justice:
Antitrust Division:
Office of the Deputy Assistant Attorney General:
Washington, D.C. 20530:
July 8, 2011:
Ms. Eileen Regan Larence:
Director:
Homeland Security and Justice Issues:
U.S. Government Accountability Office:
441 G Street:
Washington, D.C. 20548:
Dear Ms. Larence:
the Antitrust Division ("Division") appreciates the opportunity to
respond to the Government Accountability Office's ("GAO") draft report
on the impact of the Antitrust Criminal Penalty Enhancement and Reform
Act of 2004 ("ACPERA"). We ask that this letter be appended to GAO's
final report.
Number of Leniency Applications Pre- and Post-ACPERA:
The draft report concludes that there has been little change in the
number of leniency applications after the enactment of ACPERA when the
two six-year periods before and after ACPERA are compared. It is true
that a comparison of the number of applications made during the six-
year period from fiscal year 1908 through fiscal year 2003 to the
number of applications made from fiscal year 2005 through fiscal year
2010 reveals only a 3.8 percent increase in leniency applications.
However, statistics obviously depend on the period of time considered
and can fluctuate over time. As the GAO report points out, the rate of
increase in post-ACPERA applications has fluctuated during different
post-ACPERA periods. In the first three fiscal years after ACPERA, the
leniency application rate rose II percent, and the rate increased
almost 15 percent in the first four fiscal years after ACPERA. In the
first five fiscal years post-ACPERA, the rate increased 22 percent.
In addition, as the GAO report notes, the change in our leniency
practice to use markers has likely resulted in fewer applications
being made post-ACPERA than would have been made without the marker
system. Because time is of the essence in making a leniency
application, the Division uses a marker system to hold a potential
applicant's place in line for leniency while it gathers additional
information to support its leniency applicaton.[Footnote 1] The
increasing use of the marker system post-ACPERA has likely resulted
in fewer applications being made post-ACPERA than would have been made
without a marker system. If reported conduct does not actually rise to
the level of a criminal antitrust violation, the lack of a violation
is frequently discovered during the marker phase with the result that
no application is subsequently made.[Footnote 2] The GAO report notes
the decline in the number of applications withdrawn or rejected in the
years following ACPERA, which is likely largely attributable to the
increasing use of markers.[Footnote 3]
Although there have been periods post-ACPERA with appreciable
increases in leniency applications, it is difficult to isolate the
cause of the increased applications. The increased applications
provide some circumstantial evidence of the value of both
ACPERA's increase in penalties and its detrebling relief in
incentivizing leniency applications, Multiple additional factors also
continue to provide strong motivations to seek leniency in the United
States, including the routine imposition of prison sentences, the
transparency and predictability in the operation of the leniency
program, strong investigative powers that create a high risk of
detection, the Division's close coordination in evidence gathering
with non-U.S. enforcers, and the increasing number of non-U.S.
leniency programs.
Stays of Civil Discovery:
The GAO report discusses the timing of ACPERA cooperation and the
impact on civil discovery of stays requested by the Antitrust
Division. As noted in the report, criminal antitrust convictions
establish prima facie evidence of a violation in a private civil case.
[Footnote 4] Civil cases, however, are typically filed at very early
points in the Division's grand jury investigations, often as soon as
any news article or securities statement is released relating to the
Division investigation. The leniency program was established because
antitrust conspiracies are complex and difficult to prove, and the
early filing of civil cases creates substantial risks of interference
with leniency applicants' cooperation with the Division and the
Division's grand jury investigations. Thus, the Division has an
obligation to seek stays of civil discovery when necessary to prevent
interference with the progress of its grand jury investigations and
resulting criminal cases, The Division typically considers factors
such as the following in assessing this potential interference and in
deciding whether to seek it stay of civil discovery: whether civil
discovery will least to the disclosure of secret grand jury material
or covert aspects of an investigation including spinoff
investigations; whether civil discovery will expose the identities of
government cooperators and lead to witness intimidation; whether civil
discovery will give non-cooperating companies and individuals a madman
to the grand jury investigation; whether civil discovery will allow
grand jury targets or defendants to use civil tools improperly to
subvert the limited discovery rules of the Federal Rules of
Criminal Procedure to obtain material in defense of a criminal
investigation or ease; and whether potential government witnesses will
be deposed before the witness has been interviewed by the Division or
testified before the grand jury or at trial. Thus, while stays
constrain a leniency applicant's cooperation with civil plaintiffs,
stays are often necessary to preserve the integrity of grand jury
investigations and criminal cases.
Whistleblower Rewards:
The Division's views on the impact of whistleblower rewards on the
litigation of antitrust cases are based on years of substantial
practical experience in prosecuting and trying criminal antitrust
cases. Conversely, it is not clear whether the plaintiff attorneys or
academic stakeholders who commented on the whistleblower reward
provision have any prior criminal antitrust trial experience, or if
so, the extent of that experience. It is noteworthy that four of the
academics interviewed countered our concerns about the credibility of
a rewarded whistleblower, including three who expressed the mistaken
view that "When cases proceed to trial, witnesses do not generally
take the stand." This perception is at odds with the Antitrust
Division's criminal prosecutorial experience where leniency applicants
and other wistleblowers routinely testify at trial. In evaluating
views on the impact of whistleblower rewards on the litigation of
criminal antitrust eases, we believe that the practical experience of
various stakeholders in litigating criminal antitrust cases is highly
significant.
Thank you for the opportunity to respond to GAO's draft report. As
always, we look forward to working with you in the future to ensure
effectiveness in enforcement actions against cartels. Please contact
me or Belinda Barnett if you need further assistance.
Sincerely,
Signed by:
Scott D. Hammond:
Deputy Assistant Attorney General:
Antitrust Division:
Appendix V Footnotes:
[1] Scott D. Hammond & Belinda A. Barnett. Frequently Asked Questions
Regarding the Antitrust Division's Leniency Program and Model Leniency
Letters 2-4 (Nov. 19, 2008), [hyperlink,
http://www.justice.gov/atr/public/criminal/239583.pdf].
[2] The GAO report states that before November 2008, companies only
had to admit to possible involvement in a criminal cartel conspiracy
to receive conditional leniency and now must admit to a criminal
cartel violation. The model leniency letter issued by the Division in
November 2008 accurately reflected the evolution in our practice to
use markers by including an explicit admission of a criminal antitrust
violation in the conditional leniency letter rather than a reference
to a possible violation. Before the Division began using markers,
companies received a conditional letter far earlier in the leniency
process, sometimes before the company had the opportunity to conduct
an internal investigation and before it was able to confirm
definitively that it had committed a criminal antitrust violation.
Through the use of the marker system, which allows a company to
investigate its conduct more thoroughly before receiving a conditional
leniency letter, a company should be in a position to admit its
participation in a criminal antitrust violation before receiving a
conditional leniency letter.
[3] No or only one application that was submitted in fiscal years 2007
through 2010 was subsequently withdrawn or rejected. We view the high
number of withdrawals of applications in fiscal year 2005 as an
aberration that distorts the percentage of successful post-ACPERA
applications. The high number of withdrawals in 2005 was likely due to
applicants attempting, as an initial reaction to ACPERA, to obtain
detrebling relief for conduct that did not rise to the level of a
criminal antitrust violation. While the success rate or leniency
applications was roughly the same for the six years pre- and post-
ACPERA (69 versus 68 percent), if fiscal year 2005 is subtracted, the
percentage of successful post-ACPERA applications rises to 87.5
percent. Again, this large percentage is likely due to the use of the
marker system and it is difficult to attribute this percentage
specifically to ACPERA.
[4] IS U.S.C. 16(s).
[End of section]
Appendix VI: GAO Contact and Staff Acknowledgments:
GAO Contact:
Eileen R. Larence, 202-512-6510 or LarenceE@gao.gov:
Staff Acknowledgments:
In addition to the contact named above, Maria Strudwick, Assistant
Director, and Claudia Becker, Analyst-in-Charge, managed this
assignment. Robyn English, Michele Fejfar, Sarah Kaczmarek, John
Karikari, Jessica Orr, Meghan Squires, and Janet Temko made
significant contributions to this report.
[End of section]
Footnotes:
[1] Price fixing is an agreement among competitors to raise, fix, or
otherwise maintain the price at which their goods or services are
sold. Market allocation schemes are agreements in which competitors
divide markets among themselves. Bid rigging is the way that
conspiring competitors effectively raise prices where purchasers--
often federal, state, or local governments--acquire goods or services
by soliciting competing bids. Essentially, competitors agree in
advance who will submit the winning bid on a contract being let
through the competitive bidding process.
[2] Pub. L. No. 108-237, tit. II, 118 Stat. 661, 665.
[3] Pub. L. No. 111-190, 124 Stat. 1275. ACPERA was previously
extended for 1 year in 2009. Pub. L. No. 111-30, 123 Stat. 1775 (2009).
[4] Qui tam is the shortened version of the Latin phrase: qui tam pro
domino rege quam pro se ipso in hac parte sequitur, which means "who
as well for the king as for himself sues in this matter." A qui tam
provision is a specific type of informant reward that would allow an
individual who sues on behalf of the government or assists in a
prosecution to receive a reward or part of a penalty imposed. A key
distinction between bounty and qui tam actions is that in qui tam
actions, the government is not solely responsible for instituting any
enforcement action.
[5] Pub. L. No. 111-190, § 5, 124 Stat. 1275, 1276.
[6] The data we reviewed were current as of December 8, 2010.
[7] We reviewed and analyzed data on Title 15 offenses, specifically
15 U.S.C. §§ 1,3. We did not include cases that only alleged non-Title
15 offenses, such as Title 18 cases--cases that include conduct beyond
criminal cartel activity, such as obstruction of justice and fraud--in
our analysis. We adjusted all fine data for inflation using fiscal
year 2011 dollars based on the Gross Domestic Product deflator. We
performed our analysis of the fine data by fiscal year of sentencing
(i.e., the fiscal year a court imposed a fine) and not by the fiscal
year a fine was obtained.
[8] We were unable to schedule interviews with defense attorneys for
companies in three leniency applications, and defense attorneys for
companies in four leniency applications declined to speak with us.
[9] The Antitrust Division holds the identity of leniency applicants
and the information they provide in strict confidence, much like the
treatment afforded to confidential informants. Therefore, the
Antitrust Division does not publicly disclose the identity of a
leniency applicant or information provided by the applicant, unless
required to do so by court order in connection with litigation.
[10] We found that ACPERA could have played a role in 17 of the 25
cases because 17 cases were either ongoing or had reached a settlement
agreement between plaintiffs and the leniency applicant after ACPERA's
enactment in June 2004.
[11] Three plaintiffs' attorneys served as class counsel in more than
1 case in our sample of 17. Regarding defense attorneys for leniency
applicants, we were unable to schedule a meeting with the defense
attorneys who represented publicly disclosed leniency applicants in 1
of the 17 cases, and in 2 of the other cases the defense attorney
declined to speak with us.
[12] The Government Accountability Project is a nonpartisan
whistleblower protection and advocacy organization.
[13] Section 1 of the Sherman Act, as amended, states, "Every
contract, combination ... or conspiracy, in restraint of trade or
commerce among the several States, or with foreign nations, is
declared to be illegal ..." 15 U.S.C. § 1; see also Standard Oil Co.
v. United States, 221 U.S. 1 (1911).
[14] Leegin Creative Leather Prods, Inc. v. PSKS, Inc., 551 U.S. 877,
886 (2007).
[15] The DOJ and the Federal Trade Commission are largely responsible
for the public enforcement of the antitrust laws. Because the
jurisdiction of the two agencies overlaps, they have developed
clearance procedures for notifying each other before conducting
investigations or filing actions. If the matter involves likely
criminal activity, it will be referred to the Antitrust Division.
[16] Prior to June 2004, the maximum term of imprisonment for
individuals was 3 years and the maximum fine was $350,000 under the
Sherman Act. See Antitrust Amendments Act of 1990, Pub. L. No. 101-
588, § 4, 104 Stat. 2879, 2880.
[17] Prior to June 2004, corporations were subject to a maximum fine
of $10 million under the Sherman Act. See id.
[18] 18 U.S.C. § 3571(d).
[19] For more on DOJ's Individual and Corporate Leniency Policies, see
the Antitrust Division's November 19, 2008, "Frequently Asked
Questions Regarding the Antitrust Division's Leniency Program and
Model Leniency Letters," at [hyperlink,
http://www.justice.gov/atr/public/criminal/leniency.html].
[20] DOJ introduced the marker system in 2004.
[21] Prior to November 2008, companies only had to admit to possible
involvement in a conspiracy but now must admit to a violation in order
to receive conditional leniency.
[22] DOJ has revoked the leniency of one applicant due to evidence
that it had not terminated its anticompetitive conduct and had not
provided full cooperation. However, after DOJ indicted the applicant
and two of its executives, the District Court dismissed the indictment
and found that the applicant had complied with its leniency agreement.
United States v. Stolt-Nielsen S.A., 524 F. Supp. 2d 609 (E.D. Pa.
2007).
[23] 15 U.S.C. § 15.
[24] In those instances when the federal government or its agencies
have been the victims of antitrust violations, the Department of
Justice may also bring an action for treble damages under the Clayton
Act. 15 U.S.C. § 15a.
[25] Texas Indus., Inc. v. Radcliff Materials, Inc., 451 U.S. 630
(1981).
[26] Federal Rule of Civil Procedure 23 allows for plaintiffs to
proceed as a class where they can provide the required elements of
numerosity, commonality, typicality, adequacy, predominance, and
superiority.
[27] Fed. R. Civ. P. 3.
[28] Fed. R. Civ. P. 8(a)(2). There are certain exceptions where
plaintiffs are required to plead more specific facts to support the
claim.
[29] 15 U.S.C. § 16.
[30] Fed. R. Civ. P.12(b)(6).
[31] 550 U.S. 544.
[32] Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009) (citing Twombly,
550 U.S at 556, 570).
[33] See Twombly, 550 U.S. at 559.
[34] Pub. L. No. 108-237, §§ 201-215.
[35] Pub. L. No. 111-190, § 3.
[36] E.g., 150 Cong. Rec. S3610, S3614 (Apr. 2, 2004) (statement of
Senator Hatch); 150 Cong. Rec. H3654, H3657 (June 2, 2004) (statement
of Rep. Sensenbrenner).
[37] 31 U.S.C. §§ 3729-3733.
[38] The IRS administers a bounty program under 26 U.S.C. § 7623,
which provides for two types of awards. If the taxes, penalties,
interest, and other amounts in dispute exceed $2 million, and a few
other qualifications are met, the IRS will pay 15 percent to 30
percent of the amount collected. § 7623(b) (enacted in 2006). Under
the second type of award, whistleblowers who do not meet these
thresholds may still be eligible for a lesser award of 15 percent up
to $10 million; these awards are discretionary. § 7623(a). The SEC
previously administered a bounty program under section 21A(e) of the
Securities and Exchange Act of 1934 (codified at 15 U.S.C. 78u-1(e)),
which allowed the SEC to make awards to persons who provided
information leading to the imposition of a penalty for insider trading
offenses. The statute allowed awards of up to 10 percent of the
penalty imposed. This provision was repealed in 2010. Pub. L. No. 111-
203, § 923(b)(2), 124 Stat. 1376, 1850. The Dodd-Frank Wall Street
Reform and Consumer Protection Act, Pub. L. No. 111-203, § 922
(codified at 15 U.S.C. § 78u-6) requires the SEC to pay awards to
whistleblowers who provide information to the SEC that leads to
successful enforcement actions resulting in monetary sanctions
exceeding $1million. The award is to be between 10 percent and 30
percent of the total monetary sanctions collected in the actions. The
statute also contains antiretaliation provisions, protecting those who
provide certain information to the SEC, among other things.
[39] Due to the confidentiality of leniency applicant identities, we
were unable to compile a complete list of all criminal cases involving
leniency applicants and instead identified a nonprobability sample of
25 leniency applicant companies that had publicly disclosed their
participation in the Antitrust Division's Corporate Leniency Program,
and we were able to interview defense attorneys for 18 of the 25
leniency applicants. See appendix I for additional details of our
scope and methodology.
[40] These data include both corporate and individual leniency
applications though the vast majority of applications submitted both
before and after ACPERA were corporate leniency applications.
[41] The numbers of leniency applications received each year are small
so these data are sensitive to fluctuations over time. Therefore, we
obtain different percent changes if we compare the 3, 4, 5, or 6 years
before and after ACPERA's enactment. A comparison of the 3 year
periods before and after ACPERA's enactment yields an 11 percent
increase in total leniency applications received, a 4 year comparison
yields a 15 percent increase, and a 5 year comparison yields a 22
percent increase. We chose to compare the 6 year periods before and
after ACPERA's enactment to capture the broadest and most recent data
available; this yielded a smaller increase in applications (4 percent)
due, in part, to the relatively high number submitted in fiscal year
1998 (15) and the low number submitted in fiscal year 2010 (4).
[42] The data we reviewed were current as of December 8, 2010, but
Antitrust Division officials informed us on June 28, 2011, that one
additional leniency application submitted after ACPERA's enactment (in
fiscal year 2009) has since been withdrawn. Antitrust Division
officials reported that an applicant can withdraw its application, or
the division can reject an application. Typically, there is a mutual
understanding between Antitrust Division officials and the applicant
when an application is withdrawn or rejected. For example, an
application can be withdrawn or rejected due to a lack of criminal
antitrust violation after the Antitrust Division and/or the leniency
applicant conducts an investigation or internal review and determines
there is a lack of evidence to prove an antitrust violation. Antitrust
Division officials said this typically occurs when an actual
anticompetitive agreement was never reached or when the conduct did
not impact U.S. markets. In one instance, the division revoked a
leniency application.
[43] We compared the number of successful leniency applications
submitted in 6 years before and after ACPERA's enactment; this yielded
a 4 percent increase in successful applications. However, a comparison
of successful applications submitted in the 3 year periods before and
after ACPERA's enactment yields a 14 percent decrease in successful
leniency applications received, a 4 year comparison yields no change,
and a 5 year comparison yields a 16 percent increase.
[44] One of the remaining withdrawn or rejected applications from
fiscal year 2005 was due to a lack of a prosecutable case against
others, and the other was rejected because the applicant also
requested coverage for Title 18 conduct, but the Antitrust Division
issued a joint nonprosecution letter with the U.S. Attorney to cover
both Title 15 and Title 18 conduct.
[45] DOJ officials also told us they believe the change in their
leniency practice to use markers has likely resulted in fewer
applications being made post-ACPERA than would have been made without
the marker system. They stated that if reported conduct does not
actually rise to the level of a criminal antitrust violation, the lack
of a violation is frequently discovered during the marker phase with
the result that no application is subsequently made.
[46] Antitrust Division officials also stated that in November 2008,
they published a "Frequently Asked Questions Regarding the Antitrust
Division's Leniency Program and Model Leniency Letters (November 19,
2008)," and in March 2009, the Antitrust Division's Deputy Assistant
Attorney General for Criminal Enforcement delivered a speech before
the American Bar Association's Criminal Justice Section on recent
developments in the division's Corporate Leniency Program. Both the
Frequently Asked Questions and the speech clarified that a criminal
antitrust violation was required in order for an applicant to receive
conditional leniency.
[47] Amnesty Plus leniency applications are also categorized as either
Type A or Type B but are not included in the analysis in this section
because Amnesty Plus leniency applicants are already under
investigation by the Antitrust Division for their involvement in a
separate antitrust conspiracy. Antitrust Division officials report
that Type A applications and Type A Amnesty Plus applications,
together, account for 73 percent of all successful applications in the
6 years after ACPERA's enactment, compared to 50 percent in the 6-year
period pre-ACPERA.
[48] This finding is based on our analysis of responses to three
questions we posed to defense attorneys who represented clients in 18
successful applications for leniency. We asked defense attorneys who
represented 14 applicants prior to ACPERA's enactment whether the
threat of civil damages and joint and several liability was a factor
in their client's decision to seek leniency, and, if so, whether they
would characterize it as a slightly, moderately, or greatly important
factor in their client's decision. In addition, we asked them to rank
the threat of corporate fine, individual fine, and jail time in order
of importance. We asked defense attorneys who represented 4 applicants
after ACPERA's enactment to rank the benefit of relief from joint and
several liability and treble damages in exchange for satisfactory
cooperation with plaintiffs in order of importance against the threat
of corporate fine, individual fine, and jail time.
[49] Of these 18 corporate leniency applications, 14 were submitted to
the division prior to ACPERA's enactment. The pre-ACPERA applicants
included 4 Type A applicants, 4 Type B applicants, 5 Amnesty Plus
applicants, and 1 applicant where the attorney did not recall the type
of leniency received. Four of the 18 corporate leniency applications
were submitted after ACPERA's enactment. The post-ACPERA applicants
included 2 Type A applicants, 1 Type B applicant, and 1 Amnesty Plus
applicant.
[50] Specifically, defense attorneys for seven leniency applicants
told us the threat of civil treble damages and joint and several
liability was a slightly important factor in their clients' decisions
to seek leniency, defense attorneys for two applicants told us this
was a moderately important factor, defense attorneys for three
leniency applicants told us this was a greatly important factor, and
defense attorneys for the remaining two applicants said this factor
had no impact on their clients' decisions.
[51] As previously discussed, we analyzed data on fines and jail time
associated with criminal cartel cases for Title 15 offenses, including
cases that have both Title 15 and non-Title 15 offenses. We did not
include cases that only alleged non-Title 15 offenses, such as Title
18 cases--cases that include conduct beyond criminal cartel activity,
such as obstruction of justice and fraud--in our analysis. In
addition, we adjusted all fine data for inflation using fiscal year
2011 dollars based on the Gross Domestic Product deflator. We
performed our analysis of the fine data by fiscal year of sentencing
(i.e., the fiscal year a court imposed a fine) and not by the fiscal
year a fine was obtained. For these reasons, our reported data may
differ from data previously reported by the Antitrust Division on
their criminal cases and penalties associated with these cases.
[52] From fiscal year 1998 through 2003, total fines imposed were
about $2.5 billion. From fiscal year 2005 through 2010, total fines
imposed were about $3.8 billion, an increase of about 51 percent.
Between the same periods, the proportion of fines in cases assisted by
a leniency applicant to overall fines imposed was close to 100 percent
(94 and 99 percent respectively).
[53] Average fines increased about 60 percent between the same periods.
[54] Based on our analysis of Antitrust Division data, it appears that
the total volume of commerce impacted by criminal cartel cases
sentenced in the 6 fiscal years after ACPERA was higher than in the
prior 6 fiscal years. However, inconsistencies in the information
available on volume of commerce prevent a more definitive analysis.
See appendix III for additional analysis of the Antitrust Division's
criminal cartel enforcement data.
[55] In 1990, the maximum corporate fine for a Sherman Act violation
was increased from $1 million to $10 million. Antitrust Amendments Act
of 1990, Pub. L. No. 101-588, § 4. The maximum corporate fine was
increased again under ACPERA to $100 million. Pub. L. No. 108-237, §
215. The division has sought higher fines under 18 U.S.C. § 3571(d),
which allows for fines that exceed the Sherman Act maximum.
[56] See Scott Hammond, Deputy Assistant Attorney General for Criminal
Enforcement, Antitrust Division, Department of Justice, "Antitrust
Sentencing In The Post-Booker Era: Risks Remain High For Non-
Cooperating Defendants," (speech at the American Bar Association
Section of Antitrust Law Spring Meeting, Washington, D.C.: Mar. 30,
2005). In order to obtain a fine under the alternative fine provision,
the division may have to prove the amount of gain or loss attributable
to the entire cartel; whereas for a fine under the Sherman Act
maximum, once the elements of the crime are proved, the fine may be
imposed.
[57] As previously discussed, we analyzed data on jail time associated
with criminal cartel cases for Title 15 offenses, including cases that
have both Title 15 and non-Title 15 offenses. We did not include cases
that only alleged non-Title 15 offenses, such as Title 18 cases--cases
that include conduct beyond criminal cartel activity, such as
obstruction of justice and fraud--in our analysis.
[58] From fiscal year 1998 through 2003 total jail time was about
21,951 days. From fiscal year 2005 through 2010, total jail time was
about 34,171 days, about a 56 percent increase. Average jail time
increased about 135 percent, minimum jail time increased about 146
percent, and maximum jail time increased about 92 percent in the 6
fiscal years after ACPERA's enactment, compared with the prior 6
fiscal years.
[59] In response to ACPERA's increase in maximum jail time, the U.S.
Sentencing Guidelines were similarly updated in 2005.
[60] See Belinda Barnett, Senior Counsel to the Deputy Assistant
Attorney General for Criminal Enforcement, Antitrust Division,
Department of Justice, "Criminalization of Cartel Conduct - The
Changing Landscape," (speech at the Joint Federal Court of Australia/
Law Council of Australia (Business Law Section) Workshop, Adelaide,
Australia: Apr. 3, 2009).
[61] We talked with 10 class counsel (plaintiffs' attorneys) who
served as class counsel in 17 private civil antitrust cases involving
publicly disclosed leniency applicants. Three plaintiffs' attorneys
served as class counsel in more than 1 case in our sample of 17 cases.
[62] Plaintiffs' attorneys for 2 of the 12 cases who stated that
ACPERA cooperation was greatly valuable did not provide a reason why
they gave this response. Plaintiffs' attorneys for 4 cases said ACPERA
cooperation was moderately valuable, and a plaintiffs' attorney in 1
case said it was not valuable at all.
[63] 550 U.S. 544 (2007).
[64] This standard requires a more rigorous analysis of the complaint
than was previously undertaken by courts. See Conley v. Gibson, 355
U.S. 41, 45-46 (1957).
[65] Defense attorneys representing leniency applicants also generally
reported favorable effects on settlements as a result of ACPERA
cooperation. Defense attorneys for 10 of the 13 cases in our sample
where the leniency applicant reached a settlement with plaintiffs
reported that they believed ACPERA's cooperation provision decreased
the amount of the settlement with the plaintiffs in the case, meaning
that their clients had to pay less to settle the case. In 3 of the 13
cases, defense attorneys stated that ACPERA had no effect on the
settlement amount with plaintiffs. In 1 additional case, the leniency
applicant had not yet reached a settlement with plaintiffs at the time
of our interview.
[66] Plaintiffs' attorneys who stated that ACPERA cooperation had no
effect on settlements with other defendants provided other reasons as
well. For example, they said that a standard combination of factors
(including products involved, market size, and geographic area) was
used to determine an appropriate settlement and that no ACPERA
cooperation was provided. Additionally, the plaintiffs' attorneys from
1 of 14 cases that reached settlement said ACPERA cooperation
decreased the settlement with other defendants. Plaintiffs' attorneys
in 3 of the 14 cases did not provide a response to this question.
Three of our 17 total cases did not--or had not at the time of our
interviews--reached a settlement with other defendants.
[67] Of the remaining 7 (of 17) attorneys, 4 found ACPERA to be more
valuable than civil discovery but did not provide a reason for this
response and 3 found ACPERA cooperation to be equally valuable
compared to regular civil discovery.
[68] Plaintiffs' attorneys also noted that discovery with a foreign
company can also provide complications in the discovery process; for
example, plaintiffs may have to request documents under Hague
Convention on the Taking of Evidence Abroad in Civil or Commercial
Matters, Mar. 18, 1970, 23 U.S.T. 2555, 847 U.N.T.S. 231.
[69] In general, the law requires that cooperation includes the
leniency applicant (1) providing a full account to the plaintiffs of
all facts known or that are potentially relevant to the civil action;
(2) furnishing all documents or other items potentially relevant to
the civil action; and (3) using best efforts to make individuals
available for interviews, depositions, or testimony as the plaintiffs
reasonably require. Pub. L. No. 108-237, § 213(b), as amended.
[70] Two plaintiffs' attorneys told us they were not clear on the
factors the Antitrust Division considers when requesting a stay of
civil discovery. When we raised this issue with the Antitrust
Division, officials said that in their stay motions they have
articulated the factors relevant to those cases, but will also add
these factors to the Antitrust Division manual to enhance the
transparency of the Antitrust Division's process for requesting stays.
[71] Antitrust Division officials told us that the division monitors
each stay until it is lifted and continually assesses whether civil
discovery would have an adverse impact on the Antitrust Division's
investigation and whether the stay is impacting the civil case. ACPERA
cooperation requirements are one of the variables in this assessment.
[72] In the course of our review, due to the confidentiality of
leniency applicant identities, we were only able to identify 17
publicly disclosed leniency applicants out of a total of 58 successful
leniency applicants since ACPERA was enacted in 2004 through fiscal
year 2010. We were unable to obtain the perspective of attorneys for
leniency applicants who have not been publicly disclosed and these
applicants may have elected not to provide ACPERA cooperation.
[73] In re TFT-LCD Antitrust Litig., 618 F. Supp. 2d 1194 (N.D. Cal.
2009).
[74] In re Sulfuric Acid Antitrust Litig., 2005 U.S. Dist. LEXIS 18265
(N.D. Ill. Aug. 26, 2005).
[75] Pub. L. No. 111-190, § 3, 124 Stat. 1275, 1276. The amendment
explicitly directs the court to consider, in making the determination
concerning satisfactory cooperation, the timeliness of the leniency
applicant's cooperation. The amendment also provides that if the
Antitrust Division obtains a stay, once the stay, or a portion of it,
expires or is terminated, the leniency applicant must provide
cooperation without unreasonable delay.
[76] Of the other 3 plaintiffs' attorneys who had evidence of the
effect of the timeliness amendment, 1 attorney stated that stays
requested by the Antitrust Division still constrain leniency applicant
efforts to be timely, 1 attorney said that the impact was mixed, and 1
attorney said the amendment had no effect. Of the 3 defense attorneys
for leniency applicants who had evidence of the effect of the
timeliness amendment, 2 attorneys stated that the amendment had no
effect, and 1 attorney stated that the amendment made it difficult to
cooperate early without endangering leniency status with foreign
authorities. Three of the 10 plaintiffs' attorneys and 8 of the 11
defense attorneys for leniency applicants we spoke with stated that
they did not have any evidence on how the timeliness amendment was
affecting ACPERA cooperation.
[77] E. Mahr and P.A. Lange. "ACPERA - Glass Half Full" Law 360 (Oct.
25, 2010).
[78] Settlement Agmt. Between Air Cargo Pls. and Defs. Deutsche
Lufthansa AG, Lufthansa Cargo AG & Swiss Int'l Air Lines Ltd., In re
Air Cargo Shipping Servs. Antitrust Litig., No. 06-1775, docket. no.
493, ex.2 (E.D.N.Y. July 13, 2007) (approved Sept. 25, 2009).
[79] To determine key stakeholder perspectives on the potential
advantages and disadvantages of adding rewards and antiretaliatory
provisions for those who report criminal antitrust violations, we
asked open-ended questions of the 21 key stakeholders described in
appendix I as well as others with knowledge of whistleblower programs
and existing bounty provisions, including the Legal Director of the
Government Accountability Project (a whistleblower advocacy group),
officials with OSHA's Office of the Whistleblower Protection Program
who administer 21 federal whistleblower protection provisions, members
of the SEC's rulemaking team, and program officials who administer
existing bounty provisions administered by the IRS and DOJ's Civil
Division.
[80] These nine key stakeholders included three plaintiffs' attorneys,
three law professors, and three economics professors.
[81] These 11 key stakeholders include 3 defense attorneys, 2
plaintiffs' attorneys, 2 representatives of the ABA Section of
Antitrust Law, 2 economics professors, and 2 law professors, though
each of these key stakeholders did not necessarily note more than one
of the listed disadvantages.
[82] This includes the perspective of the Chair and Chair's Assistant
of the ABA Section of Antitrust Law but they stated that their views
do not represent the position of the ABA. The five key stakeholders
who did not have a position on the issue were the President of the
American Antitrust Institute and four representatives of the Committee
to Support Antitrust Laws, all of whom stated that their organizations
have no formal position on the addition of a whistleblower protection
provision though representatives of both organizations told us that
they favored the idea.
[83] Currently, fines are deposited into the Crime Victims Fund, 42
U.S.C. § 10601, which provides grants for federal, state, and tribal
victim assistance programs, among other things.
[84] Some bounty programs require the government to provide a bounty,
whereas others provide discretion to the government to decide whether
to pay the whistleblower.
[85] Later in the report we discuss potential disadvantages of a
bounty provision noted by DOJ officials and others.
[86] See 28 U.S.C. §§ 516, 533; In re Persico, 522 F.2d 41, 54 (2nd
Cir. 1975).
[87] These 11 key stakeholders include 4 plaintiffs' attorneys, 3
defense attorneys, 2 law professors, and 2 representatives of the ABA
Section of Antitrust Law. Nine key stakeholders had no position or
elected not to comment. One law professor supported the idea of a qui
tam provision noting that the monetary incentive could motivate
informants to come forward as soon as possible, which may end cartel
activity sooner.
[88] These 11 key stakeholders included 3 defense attorneys, 2
plaintiffs' attorneys, 2 representatives of the ABA Section of
Antitrust Law, 2 economics professors, and 2 law professors.
[89] The five key stakeholders include the Chair and Chair's Assistant
of the ABA Section of Antitrust Law, two defense attorneys, and one
plaintiffs' attorney.
[90] One procedural difference between civil and criminal trials is
the difference in the burden of proof. Criminal cases require proof
beyond a reasonable doubt whereas civil cases require a preponderance
of evidence, a lower threshold.
[91] In addition, one plaintiffs' attorney stated that a witness of
questionable credibility is better than no witness at all.
[92] This IRS official also explained that I.R.C. § 6103 generally
prohibits the disclosure of taxpayer information, which also prevents
them from sharing information with the whistleblower.
[93] These eight key stakeholders include two defense attorneys, two
representatives of the ABA Section of Antitrust Law, one plaintiffs'
attorney, two economics professors, and one law professor.
[94] The Legal Director of the Government Accountability Project, a
nonpartisan whistleblower protection and advocacy organization, stated
that a whistleblower reward could result in some increase in unfounded
claims but he did not regard this as a legitimate disadvantage of such
a program because he did not believe that it should be difficult to
separate meritless from legitimate claims.
[95] United States v. Burch, No. 11-0334 (E.D. Pa. Jun. 21, 2011).
[96] 15 U.S.C. § 78u-6(i). The SEC's final rules impose certain
procedural requirements designed to deter false submissions, including
a requirement that the information be submitted under penalty of
perjury, and requiring an anonymous whistleblower to be represented by
counsel who must certify to the Commission that he or she has verified
the whistleblower's identity. 17 C.F.R. § 240.21F-9.
[97] He further explained that the penalty of perjury statement is a
deterrent to false statements, as is the knowledge that the IRS will
seek corroboration before any assessment and collection of tax. He
stated that discovery of material false statements during the IRS's
evaluation of the submission may be a factor in determining whether
commitment of audit or investigative resources is warranted, and may
affect an award determination if the submission results in collected
proceeds.
[98] Lawyers are subject to Federal Rule of Civil Procedure 11, which
subjects them to sanctions for submitting a claim for an improper
purpose, such as to harass, among other things.
[99] If the defendant prevails in the action and the court finds that
the claim of the relator was clearly frivolous, clearly vexatious, or
brought primarily for purposes of harassment, the court may award
attorneys' fees and expenses to the defendant. 31 U.S.C. § 3730(d)(4).
[100] SEC staff explained that many commenters recommended that the
commission require whistleblowers to report violations of the
securities laws through their employers' internal compliance and
reporting systems because of a belief that the proposed rules would,
among other things: encourage whistleblowers to bypass internal
compliance programs; undermine entities' ability to detect,
investigate, and remediate securities violations, particularly as to
those complaints over which the commission has no jurisdiction or
which are too small for the commission to investigate; and create
adverse incentives for whistleblowers to see their companies
sanctioned or to delay reporting potential violations; however, the
staff expressed the view that these concerns were speculative and not
supported by any data.
[101] Pub. L. No. 107-204, § 301, 116 Stat. 745, 775-76 (codified at
15 U.S.C. § 78j-1).
[102] Standards Relating to Listed Company Audit Committees, 68 Fed.
Reg. 18788, 18798 (2003).
[103] The SEC's final rules will be effective August 12, 2011.
[104] These three key stakeholders include two economics professors
and one plaintiffs' attorney.
[105] We identified these two cases by searching for published cases
involving a qui tam action under the False Claims Act that alleged
violations of the Sherman Act, and then additionally confirming
through published judicial opinions that the cases were initiated by a
relator and subsequently led to criminal antitrust prosecutions.
However, DOJ Civil Division officials reported that other cases may
exist. These officials were not able to provide a list of cases where
a False Claims Act qui tam complaint resulted in a criminal antitrust
indictment because of limitations in the way they keep and search
their case data.
[106] Pub. L. No. 101-12, § 2, 103 Stat. 16.
[107] Various forms of comprehensive whistleblower protection have
been proposed in prior Congresses, for example the Paul Revere Freedom
to Warn Act, H.R. 4925, 109th Cong. (2006), and the Private Sector
Whistleblower Protection Streamlining Act of 2007, H.R. 4047, 110th
Cong., but have not been passed.
[108] As previously noted, this includes the perspective of the Chair
and Chair's Assistant of the ABA Section of Antitrust Law; however,
they stated that their views do not represent the position of the ABA.
[109] There is no comprehensive federal whistleblower protection but,
rather, existing statutes cover some whistleblowers in some
situations. For example, 41 U.S.C. § 4705 (formerly 41 U.S.C. § 265)
contains protections for employees of federal contractors who are
retaliated against for reporting information relating to substantial
violation of law related to a contract to a Member of Congress or an
authorized official of an executive agency. Accordingly, a
whistleblower in this context who reports a criminal antitrust
violation--for example, bid-rigging--could have some protections from
retaliation.
[110] 18 U.S.C. § 1513(e). Section 1513 of title 18 provides for
criminal penalties for various types of witness intimidation,
including killing a witness and threatening bodily harm to a witness,
among other things. As part of the Sarbanes-Oxley Act of 2002, this
section was amended to prohibit retaliation generally. In particular,
it makes punishable by 10 years imprisonment the taking of any action
harmful to any person--including interference with lawful employment--
for providing to a law enforcement officer any truthful information
relating to the commission or possible commission of any federal
offense. Pub. L. No. 107-204, § 1107, 116 Stat. 745, 810 (codified at
18 U.S.C. § 1513(e)).
[111] Officials from DOJ's Criminal Division found no cases that
relate to this provision and officials with the Executive Office of
the United States Attorneys were unable to identify any cases
prosecuted based on retaliation in the employment context because they
are not able to disaggregate U.S.C. § 1513 cases by subsection. They
said that U.S. Attorney's Offices are not required to enter the
subsections when they open a file and enter case data and, as such,
even where subsections are used, they are not reliable and not
verified. In addition, DOJ Antitrust Division officials reported that
they had never investigated or prosecuted cases involving employment
retaliation against a cartel whistleblower under this statute.
[112] According to the attorney, after his client was fired, the
client indicated that he planned to speak to the authorities, leading
his former employer to offer him large sums of money if he returned to
work and did not follow through with his plan to cooperate with
authorities. Because of his cooperation with authorities, the client
alleges that he was blackballed by the industry. According to this
attorney, his client was socially isolated, unemployed for several
months, and was eventually forced to take a lower-paying job in
another industry. The client eventually lost his house to foreclosure,
and has suffered through difficult times for himself and his family.
[113] In re Indus. Gas Antitrust Litig., 681 F.2d 514 (7th Cir. 1982).
[114] Callahan v. Scott Paper Co., 541 F.Supp. 550 (E.D. Pa. 1982).
[115] In the 1980s and 1990s some courts interpreted Section 4 of the
Clayton Act to provide protection for whistleblowers in this context.
See, e.g., Ostrofe v. H.S. Crocker Co., 740 F.2d 739 (9th Cir. 1984).
Section 4 of the Clayton Act provides that "any person—injured in his
business or property by reason of anything forbidden in the antitrust
laws may sue—and shall recover threefold the damages—sustained and — a
reasonable attorney's fee." 15 U.S.C. § 15. Whistleblowers who were
terminated because they refused to participate in or reported illegal
cartel conduct argued that they were injured by reason of the
antitrust violation. In some cases, these whistleblowers were
successful. However, judicial decisions have clarified that employees
who are fired because of their employers' antitrust violations
generally cannot bring suit under the Clayton Act because they either
do not have antitrust injury or antitrust standing, or both. See,
e.g., In re Indus. Gas Antitrust Litig., 681 F.2d 514; Haigh v.
Matsushita Elec. Corp., 676 F. Supp. 1332 (E.D. Va. 1987). A
whistleblower protection provision would provide a civil remedy
distinct from existing antitrust laws, particularly the Clayton Act,
which provides remedies for victims of conspiracies, generally
consumers and competitors.
[116] For related GAO work on OSHA, see GAO, Whistleblower Protection
Program: Better Data and Improved Oversight Would Help Ensure Program
Quality and Consistency, [hyperlink,
http://www.gao.gov/products/GAO-09-106] (Washington, D.C.: Jan. 27,
2009) and Whistleblower Protection: Sustained Management Attention
Needed to Address Long-standing Program Weaknesses, [hyperlink,
http://www.gao.gov/products/GAO-10-722] (Washington, D.C.: Aug. 17,
2010).
[117] Pub. L. No. 111-190, § 5, 124 Stat. 1275, 1276.
[118] Qui tam is the shortened version of the Latin phrase: qui tam
pro domino rege quam pro se ipso in hac parte sequitur "who as well
for the king as for himself sues in this matter." A qui tam provision
would allow an individual who sues on behalf of the government or
assists in a prosecution to receive a reward or part of a penalty
imposed.
[119] We reviewed and analyzed data on Title 15 offenses, specifically
15 U.S.C. §§ 1,3 criminal cases. We did not include cases that only
alleged non-Title 15 offenses, such as Title 18 cases--cases that
include conduct beyond criminal cartel activity, such as obstruction
of justice and fraud--in our analysis. The data we reviewed were
current as of December 8, 2010.
[120] We adjusted all fine data for inflation using fiscal year 2011
dollars based on the Gross Domestic Product deflator. We performed our
analysis of the fine data by fiscal year of sentencing (i.e., the
fiscal year a court imposed a fine) and not by the fiscal year a fine
was obtained.
[121] In order to identify the defense attorneys who represented these
leniency applicant companies during their applications for leniency,
we identified the civil class action cases filed against these
companies and contacted the leniency applicants' defense attorneys in
those cases. We then confirmed whether the defense attorney in the
civil case also represented the company when it applied for leniency,
or were referred to the correct defense attorney. We were unable to
schedule interviews with defense attorneys representing companies in
two leniency applications, and defense attorneys declined to speak
with us regarding five leniency applications.
[122] Three plaintiffs' attorneys served as class counsel in more than
1 case in our sample of 17. Regarding defense attorneys for leniency
applicants, we were unable to schedule a meeting with the defense
attorneys who represented publicly disclosed leniency applicants in 1
of the 17 cases, and in 2 of the other cases the defense attorney
declined to speak with us.
[123] These four provisions include the False Claims Act, 31 U.S.C. §§
3729-3733; Internal Revenue Code § 7623; section 21A(e) of the
Securities and Exchange Act of 1934, previously codified at 15 U.S.C.
§ 78u-1(e); and section 922 of the Dodd-Frank Wall Street Reform and
Consumer Protection Act, Pub. L. No. 111-203,124 Stat. 1841-49
(codified at 15 U.S.C. § 78u-6).
[124] The Antitrust Division first set forth these criteria in its
1993 corporate leniency policy and 1994 individual leniency policy.
Most recently, the Antitrust Division discussed these criteria in the
"Frequently Asked Questions Regarding the Antitrust Division's
Leniency Program and Model Leniency Letters (Nov. 19, 2008)," see
[hyperlink, http://www.justice.gov/atr/public/criminal/239583.htm].
[125] We reviewed and analyzed data on Title 15 offenses, specifically
15 U.S.C. §§ 1,3 criminal cases. We did not include cases that only
alleged non-Title 15 offenses, such as Title 18 cases--cases that
include conduct beyond criminal cartel activity, such as obstruction
of justice and fraud--in our analysis.
[126] In the 6 fiscal years prior to ACPERA's enactment, the Antitrust
Division filed 91 criminal cartel cases that were assisted by a
leniency applicant. In the 6 fiscal years after ACPERA, the Antitrust
Division filed 129 criminal cartel cases assisted by a leniency
applicant.
[127] In the 6 fiscal years prior to ACPERA's enactment the Antitrust
Division filed a total of 248 criminal cartel cases. In the 6 fiscal
years after ACPERA, the Antitrust Division filed 173 cases.
[128] The proportion of the Antitrust Division's total criminal cartel
cases that were assisted by a leniency applicant increased from about
37 percent in the 6 fiscal years before ACPERA to about 75 percent in
the 6 fiscal years after ACPERA.
[129] Antitrust Division officials explained that they brought a high
number of small bid-rigging cases on school milk and foreclosure
auctions in the late 1980s and late 1990s, for example. Those cartels
had a large number of participants and resulted in a large number of
cases that were small in scope. According to Antitrust Division
officials, in recent years, the division has been more focused on
larger cartels impacting a higher volume of commerce.
[130] The Antitrust Division identifies a company as international if
the company's address, incorporated address, or principal address is
located in a foreign country.
[131] In the 6 fiscal years prior to ACPERA's enactment, 44 of the
Antitrust Division's 248 total criminal cartel cases involved
international companies compared with 41 of 173 total cases in the 6-
year period after ACPERA.
[132] The Antitrust Division considers a leniency applicant to be
international when the applicant reports involvement in international
cartel offenses. Successful applications are applications which were
not subsequently withdrawn or rejected.
[133] During the 17-year period from fiscal years 1994 through 2010,
108 of the Antitrust Division's 621 total criminal cartel cases
involved international companies. Over the same period, 80 of the
Antitrust Division's 139 total successful leniency applications were
international.
[134] DOJ officials also confirmed that the leniency applicant had to
date satisfied its obligations under the leniency agreement to
cooperate with DOJ, which had helped DOJ successfully prosecute
several others for their role in the conspiracy.
[135] Samsung responded to the motion without admitting whether it was
the leniency applicant.
[End of section]
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