Legislation Could Pose Tough Choices For
Employees
Government Asks For Increased
PenaltiesFor
Antitrust Violators
by Steven John Fellman
NATO Washington Counsel
Legislation that would increase the
maximum penalty for criminal violations of the antitrust
laws from a 3-year
jail sentence to a 10-year jail sentence has been introduced
by senators Mike DeWine (R-Ohio) and Herb Kohl (D-Wis.),
respectively chair and ranking minority member of the Senate
Subcommittee on Antitrust.
In addition to the increased jail
sentences, this proposed legislation (S. 1797) would
substantially increase the
fines that the government could levy against defendants
guilty of an antitrust violation. The maximum fine for
an individual would move up from $350,000 to $1 million.
The maximum fine for corporations would be raised from
the current $10 million to $100 million. These amounts
are in addition to civil penalties and provisions that
entitled private plaintiffs to recover treble damages plus
attorney fees.
Under S. 1797, the easiest way to mitigate damages
is for the corporate parent to become the
“whistle blower” on its division that has
engaged in the illegal antitrust activity. By turning
in the
individuals who actually engaged in the illegal conduct,
the parent corporation will eliminate the possibility
of treble damages, isolate the “bad guys” and
save a potential fortune in damages and attorney’s
fees. |
The proposed legislation also has
an interesting “whistle
blower” provision. The bill provides that where
a corporation discovers that one of its divisions has
been
engaging in an antitrust violation, the corporation can
limit its potential liability by joining the Department
of Justice Corporate Leniency Program and cooperating
with the government by providing the Department of Justice
with
information about the antitrust violation and other companies
that may be participating in the violation. If the corporation
decided to participate in the leniency program, its potential
civil damages would be reduced from treble damages to
single damages. However, the whistle blower corporation
is also
obligated to cooperate with private plaintiffs in litigation
against other members of the conspiracy.
If this legislation is enacted, it
will have widespread ramifications for the entertainment
industry. Today, the
entertainment industry is topped by a few mega-corporations
with operating divisions which may include motion picture
production and distribution, motion picture theatre exhibition,
television production, television and radio stations, cable
networks, book and record publishing, video production
and distribution, theme parks, retail stores, etc. In many
of the business sectors described above, antitrust litigation
has been prevalent. Government enforcement actions and
private treble damage suits are filed on a regular basis
in the entertainment industry. As an example, just recently
a group of independent producers sued MPAA alleging that
the MPAA policy on “screeners” violated the
antitrust laws. The United States District Court in New
York issued a preliminary injunction enjoining MPAA from
continuing the practice.
Antitrust violations generally exist
within the confines of defined markets. An antitrust
conspiracy involving the
record industry would not be relevant to cable TV. Similarly,
an antitrust case involving allegations of block booking
would have no relevance to the operation of theme parks.
Within this context, the whistle blower provisions of S.
1797 become significant.
If a major media giant learns that
one of its divisions has engaged in an antitrust conspiracy,
its initial question
will be, “What type of financial ramifications does
this have on the company as a whole?” If the potential
for treble damage litigation exists, the parent corporation
will have a great incentive to isolate the area of exposure
and mitigate damages in any way possible. Under S. 1797,
the easiest way to mitigate damages is for the corporate
parent to become the “whistle blower” on its
division that has engaged in the illegal antitrust activity.
By turning in the individuals who actually engaged in the
illegal conduct, the parent corporation will eliminate
the possibility of treble damages, isolate the “bad
guys” and save a potential fortune in damages and
attorney’s fees.
If the antitrust violation is a clear
violation of both the federal statutes and the corporation’s
antitrust compliance program, we have a case of willful
misconduct
and the corporation clearly is within its rights in acting
as a whistle blower. Yet in blowing the whistle, the corporation
is exposing high-ranking executives to a jail sentence
of up to 10 years.
Antitrust is a complicated area. There
may be many “gray” issues
involving new technology and application of the antitrust
laws to business environments that did not exist when these
laws were initially enacted. The antitrust violation may
not be willful or intentional.
Assume that I am the president of
a division of a major corporation and I attend industry
meetings at which certain
agreements are made that I believe do not involve antitrust
violations. However, over a period of time, I begin to
have concerns that the discussions at these meetings and
the agreements reached may have crossed the line. I would
like to consult antitrust counsel. The parent company has
outside antitrust counsel that serves the parent company
and each of the operating divisions.
When I go to see our outside corporate
antitrust counsel, will I be told that, if the facts
I want to discuss indicate
that I have engaged in activity which may be illegal, the
company will turn me over to the government? Will outside
counsel tell me that my own interest may conflict with
that of the company and therefore I should consult with
private counsel? Will my raising the question with corporate
outside counsel force the company into doing its own investigation
of the practices of my division?
In the wake of recent federal legislation
requiring upgraded corporate responsibility, and the
proposed increases in
antitrust penalties, we believe that more and more companies
will take the position that if your division engages in
a willful antitrust violation, you will be turned over
to the Department of Justice.
What is the answer? The answer is
that each company should have a strong antitrust compliance
program and that you
as a corporate officer should fully understand areas of
potential antitrust exposure. Antitrust is a serious business
and, whether S. 1797 is enacted or not, every corporation
executive with any antitrust exposure should fully understand
how the antitrust laws apply to his or her business. 
