April 20, 2021

Volume XI, Number 110

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April 20, 2021

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April 19, 2021

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Congress Misses Opportunity to Bolster Flagging Cartel Enforcement through Whistleblowers

Congress recently took two steps towards incentivizing private participation in federal cartel enforcement:  the permanent adoption of ACPERA, and enactment of the Criminal Antitrust Anti-Retaliation Act.  While now companies may have permanent incentives to self-report cartel activity, and whistleblowing employees may be better protected from employer retaliation, no surge in individual cartel reporting should be expected absent direct whistleblower financial incentives, such as found in other federal enforcement regimes.

ACPERA Is Now Permanent

Signed into law in October 2020, the Antitrust Criminal Penalty Enhancement and Reform Permanent Extension Act made permanent the provisions in ACPERA originally enacted in 2004 providing greater incentives for corporations to self-report and cooperate pursuant to the Department of Justice Antitrust Division’s Corporate Leniency Policy.  ACPERA buttresses the Division’s policy of giving amnesty from criminal prosecution to the first firm or individual to confess participation in a criminal antitrust conspiracy by limiting subsequent civil liability for the same conduct.  The rationale is that even if a co-conspirator qualifies for amnesty from criminal prosecution, the specter of broad civil liability might dissuade an otherwise cooperative cartel member from confessing, thereby blunting the amnesty program’s incentives.

Under ACPERA, a defendant that fulfills the reporting and cooperation requirements under the DOJ’s amnesty program can also limit its liability in subsequent civil lawsuits to the “actual damages” caused by the defendant’s illegal conduct.  However, defendants are only entitled to ACPERA protection if they provide “timely” and “satisfactory cooperation” to civil plaintiffs.  As this blog previously observed, these terms are ambiguous, and only at the end of litigation will the judge determine whether a civil defendant has satisfactorily performed its role and earned the sought protection under ACPERA.  This lack of clarity calls into question just how effective ACPERA’s protections are in getting co-conspirators to come forward.

When it made ACPERA permanent, Congress could have eliminated this uncertainty by guaranteeing civil protection once a co-conspirator fulfills its amnesty duties to the DOJ, but it opted not to do so.  By reauthorizing ACPERA in its present form, Congress preserved civil protection for defendants who meet its requirements, but it also preserved the ambiguities that cartel members must confront when considering whether to confess.

Antitrust Whistleblowers Get Protection from Employer Retaliation

Next came the Criminal Antitrust Anti-Retaliation Act, signed into law in late December 2020.  Unlike ACPERA, which protects firms and individuals that violate criminal antitrust laws, this Act protects workers who report such violations.  Specifically, it prohibits employers from retaliating against “covered” individuals who report criminal antitrust violations, either to the federal government or to an internal “person with supervisory authority.”

The Act sweeps broadly, both in terms of who it covers and the conduct required to trigger its protections.  To count as “covered,” a worker need not be a full-fledged employee.  Any “employee, contractor, subcontractor, or agent” can be covered as long as the individual has not personally “planned or initiated a violation or attempted violation” of the antitrust laws, a criminal violation “in conjunction with” the violation of such laws, or engaged in obstruction of a related DOJ investigation.  The individual need only “reasonably believe[]” that some conduct in the firm amount to an antitrust violation, a criminal act in conjunction with an antitrust violation, or obstruction of a DOJ investigation into such violations.

Once there, the individual has two relatively straightforward paths to whistleblower protection.  The first path requires the individual to “provide or cause to be provided” information “relating to” the illegal conduct to either the federal government or an internal authority.  The second entails “caus[ing] to be filed, testify[ing] in, participat[ing] in, or otherwise assist[ing]” a federal investigation into the illegal conduct.  In either case, once the whistle has been blown, the Act prohibits the employer from firing, demoting, suspending, threatening, harassing, or otherwise retaliating against the individual.

Should the employer illegally retaliate, the covered individual has 180 days to file a complaint with Secretary of Labor.  Earlier this month, the Department of Labor’s Occupational Safety and Health Administration announced that it would oversee and investigate complaints filed under the Act.  If the Secretary fails to issue a decision within the following 180 days, the individual can then file suit in federal district court.  If the individual prevails in either forum, the employer must then reinstate the individual with the same seniority.  Moreover, the employer remains liable for back pay with interest, as well as special damages, including attorney’s fees and other litigation costs.

Takeaways

Notably absent among the remedies for the reporting individual under the Anti-Retaliation Act (or ACPERA) is a percentage of the recovery obtained through government prosecution of the illegal underlying conduct.  This is curious.  The Anti-Retaliation Act serves to encourage reporting amongst workers and offset fears that a whistleblower might face retaliation.  If the goal is to encourage reporting and cooperation, it would seem fitting to give the whistleblower a stake in the outcome.

That Congress neglected to do so may represent a concern about giving antitrust whistleblowers an “economic incentive to bring forth false claims.”  But this concern did not stop Congress from enacting similar programs in other contexts.  Section 922 of the Dodd Frank Act, for example, allots whistleblowers ten to thirty percent of the recovery when the Securities and Exchange Commission wins a recovery of over $1 million.  Similarly, section 3730 of the False Claims Act gives whistleblowers fifteen to thirty percent of the recovery in successful qui tam actions.  Both programs are significant drivers of enforcement actions, and omission of a reward here marks a departure that could reduce the Act’s effectiveness in bringing forward more whistleblowers.

The Division only filed twenty criminal cases in 2020, and criminal enforcement has trended downward over the past decade.  These legislative efforts, which encourage firms and employees to report criminal antitrust violations, indicate a desire to ramp up enforcement.  Extending whistleblower protection to reporting employees is a significant step towards that end.  Nevertheless, it remains surprising that Congress did not also opt to give whistleblowers an economic incentive to report, given the prevalence of whistleblower reward programs in other enforcement contexts.

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Copyright © 2021, Sheppard Mullin Richter & Hampton LLP.National Law Review, Volume XI, Number 55
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About this Author

MIchael Scarborough, Sheppard Mullin Law Firm, San Francisco, Litigation Law Attorney
Partner

Mike Scarborough is a partner in the firm's San Francisco office and the U.S. Chair of the firm’s Antitrust and Competition Group.

Areas of Practice

Mr. Scarborough specializes in complex litigation, with particular expertise in antitrust, unfair competition and consumer protection matters. He has significant experience defending U.S. and multinational businesses in all phases of class action and direct plaintiff litigation, and regularly defends businesses and individuals in civil and criminal matters...

415-774-2963
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