The Benefits of Conducting Antitrust Audits

Antitrust Audits

Why Are Antitrust Audits Important?
The risks of violating antitrust laws have never been higher, with enhanced cross-border coordination of investigations, ever increasing financial penalties, litigation, criminal sanctions and damage to shareholder value and customer goodwill.  There is also exposure to significant civil liability from follow-on class action lawsuits, which include automatic treble damages in the United States.  Furthermore, an increasing number of countries worldwide are adopting, proposing or strengthening antitrust enforcement.  Over 120 countries now have some form of antitrust law, including Denmark.

This toughened enforcement environment has prompted companies to undertake antitrust audits to assess and manage antitrust risks and ensure antitrust compliance.  When properly designed and targeted to a company’s specific operations, antitrust audits can reveal possible areas of exposure, determine the nature and extent of potential antitrust law violations, identify business practices that present heightened risks, and assess the effectiveness of a company’s antitrust compliance.

Most significantly, where an antitrust audit uncovers a potential criminal violation, the company has the likely advantage of being the first conspirator to discover the conduct and the opportunity to enter the DOJ Antitrust Division’s leniency program and face no fine, no prison time for anyone in the company, and a possible single damages limitation in follow-on civil litigation in the United States.  Effective compliance programs that include routine audits can also help companies manage legal risks that may arise in association with investigations by other federal agencies for non-antitrust violations, such as the SEC and the DOJ Criminal Division.

What Is An Antitrust Audit?
An antitrust audit is a review of business activities and practices aimed to detect actual or potential violations of antitrust laws before a company faces an investigation or challenge by a third party or government antitrust authority.  Antitrust audits can also help to identify business practices that present risks and assess the effectiveness of a company’s antitrust compliance and training.

What Are The Key Risk Areas?
Cartels or agreements between competitors to fix prices or other terms and conditions, to share markets, or to rig bids have traditionally been regarded as the most serious antitrust violations.

However, the antitrust laws cover more than just cartel activity and include areas such as: distribution; pricing; strategic transaction; and information exchanges.

Companies with market power also need to be vigilant that their conduct does not conflict with prohibitions on abuse of market power or “dominance,” which is an area where the antitrust laws differ most internationally.

When Might An Antitrust Audit Be Appropriate?
Answers to the following questions will assist a company to determine whether an antitrust audit is appropriate:

  • Whether the industry sector is “high risk” for antitrust issues.  Factors include: highly concentrated markets; standardized/commodity products; minimal competition on price; pricing changes by industry participants that are close in time; stable or declining markets; purchasing and/or supply agreements with competitors; joint ventures; or other interactions with competitors such as in trade associations.
  • Whether the industry sector is subject to or has a history of investigation by a government antitrust authority.
  • Whether there is a proposed or pending investigation or litigation raising antitrust issues.
  • Whether the company has conducted an antitrust audit in the recent past (e.g., within five years).
  • Whether the company is confident that all employees are familiar with their antitrust compliance responsibilities and company procedures.
  • Whether the company has undergone recent major reorganization (e.g., acquisition of a new business, business expansion into new territories and products/services, new procedures, new hires, or staff redeployment).

Who Should Conduct An Antitrust Audit?
If a company decides that an antitrust audit is appropriate, it should engage counsel that has a degree of independence and deep familiarity with the principles of antitrust law to recognize some of the subtleties of antitrust issues.

It is also important to have counsel oversee and conduct the audit to ensure that the company can resist disclosure of communications produced during and for the purposes of the audit in court, regulatory, or investigatory proceedings.  Note that the precise scope of legal privilege tends to differ depending on the jurisdiction.

What To Do If The Audit Uncovers Evidence Of A Possible Antitrust Violation?
If the audit uncovers an actual or potential antitrust violation, legal counsel should be involved in the assessment of the extent and gravity of the risk and the steps to be taken.  The following are among the risk mitigation strategies that may be considered following an audit:

  • Considering how the company might improve its internal procedures and training.
  • Conducting a risk assessment for making a disclosure to a relevant antitrust authority to apply for amnesty from the imposition of potential penalties where the company is the first to come forward with material evidence on an antitrust violation.

For more information, please contact:

JeffreyS.Spigel, Partner

Phone:  (202) 626-2626

Email:  jspigel@kslaw.com

BrianR.Meiners, Counsel

Phone:  (202) 626-2910

Email:  bmeiners@kslaw.com

King & Spalding

1700 Pennsylvania Ave., NW

Washington, DC  20006