Ideas and suggestions are always welcome. Please let us know how we can improve your newsletter! We welcome your feedback.
LexisNexis® for Corporate Counsel
LexisNexis® Webinar Center
LexisNexis® Legal Newsroom
Live CLE Webinars | OnDemand Webinars
Given the choice between attending antitrust compliance training and being pushed down a flight of stairs, is the question not how many employees will head for the stairwell, but who will get there first?
If you answered yes, we may have a solution. When inviting them to training, make sure you use the phrase “criminal liability.” As in their criminal liability.
That was the suggestion at an April 9 LexisNexis® Webinar featuring panelists who regularly confront antitrust investigations and litigation. The panel comprised Lori Beardell, corporate counsel with DuPont Legal in Wilmington, Del.; Timothy (Ty) Carson, counsel in Crowell Moring’s Washington, D.C. office; and Chong S. Park, partner in Steptoe’s Washington, D.C., office. The speakers offered strategies for managing risk by improving antitrust compliance at all levels. Using training to help avoid common and emerging pitfalls and abiding by the Ten Commandments for Document Creation and Retention are among the strategies the speakers advocated.
Park outlined some typical antitrust danger zones. Some are well-known, such as agreements on:
Additionally, Park noted that not all potential restraints on trade are as obvious violations as price fixing and bid rigging. Tying, exclusive dealing, resale price maintenance and price discrimination also make the list, as do the newest danger zones for increased scrutiny—intellectual property and patent enforcement and most-favored-nations clauses in contracts.
With so many potential problems, several compliance training approaches are necessary, from basic to specialized. Park said training should include a mix of substantive law and the process of how to identify and resolve potential antitrust conflicts. Ideally, training should be tailored to the audience, with different presentations that address the various jobs and their risk profiles.
Sales and marketing teams often use more colorful—and problematic—language such as “dominate” within three words of “market.” To ensure compliance from this group, education should include messages of consistency regarding:
Data sharers such as scientists and engineers prefer accurate and precise data, and they like to share it. Training, which can be coordinated with intellectual property counsel, should include information on:
Senior executives have the ability to wreak the most havoc because they are unpredictable and have decision-making authority. They are not easily trained or advised. A succinct “elevator speech” might include discussion of:
The consensus among the panelists is that in order to have effective compliance training, counsel really must have buy-in from top management—for company-wide training and their own individual training. “Mandatory training is not really high on folks’ list as an everyday opportunity or activity,” Park said. “But with respect to managing risk and potential liability to a company, it’s critical.”
Park advocated two approaches:
How do you find time for training in an already full work day? Capitalize on even the smallest opportunity, the speakers agree. Some companies use flash cards that include the dos and don’ts of communications with other companies, suppliers and customers. Others have hotline numbers that are separate phone numbers to in-house counsel that simplify the process of elevating compliance questions.
Beardell suggested that, in addition to building training time into the schedule, counsel take a moment to discuss a real-life scenario at the end of a meeting, when a potential conflict may have come up.
One useful tool is compliance auditing. Beardell said an outside company looks at emails, trade association memberships and other documents for red-flag words. They gather examples that then can be sent to employees a few times a year as reminders of improper language. She also suggested presenting at training sessions, clients who have been deposed as part of a compliance investigation or litigation. They are the most effective because they are real-life examples of what can go wrong.
When a company undertakes a new activity that has potential antitrust implications, Park said it helps counsel to clarify the conflicts by asking “minesweeper” questions:
a. the companyb. competitorsc. industryd. consumers
The answers often set off alarm bells. Park said some troublesome responses he has encountered include:a. "to block competition"b. "to stabilize prices"c. "to flex our muscle and use our market power"
“If the answers tend to raise a hair on the back of your neck, that’s an indication that some more investigation is merited,” Park said.
Emerging Antitrust Areas
More and more, companies encounter litigation and investigations relating to whether or not standards for a patent are being enforced appropriately. Park predicted more legal battles about intellectual property that will result in more focus on the intersection between IP and antitrust.
In healthcare, hospital contracts are increasingly being scrutinized and pharmaceutical manufacturers are being hit for paying to delay the release of generics, he said.
Another hot topic is most-favored-nation language in contracts that enforcers view as anti-competition, he said.
Bad Documents and How to Avoid Them
As the government litigates more antitrust cases, bad documents increasingly play a role, Carson said. Bad documents simplify government arguments.
“You can hire economists to explain how consumers or competitors aren’t affected by an action, but a jury hears that and then sees a document that says you’re going to crush your competitor. That’s all they hear,” Carson said.
Where do these documents come from? Antitrust enforcers are very thorough. Carson said they sift through millions of documents and look for the most damaging ones to use at trial. Comments that business lawyers never thought would be read, including email chatter that simply discussed the state of the market, suddenly form the lynchpin in the government’s case.
Documents come in many forms:
Strategies for avoiding bad documents abound. Beardell suggested using the The New York Times® Test. “Would the person you are talking to want to see their quote or email in The New York Times on the front page above the fold? Are you embarrassed to see what you have written? Would you embarrass the company with what you have written?”
A one-off document might not be enough to show intent, Beardell said, but taken with other documents, a case can be built. “Why make it easy for someone to connect dots? Follow the law and be careful about how you are trying to communicate as a business.”
It is the job of antitrust attorneys and in-house counsel to show executives and employees how their natural language can come back to bite them.
What Thou Shalt Do . . . and Not
The panelists offered corporate listeners the Ten Commandments of Document Creation and Retention.
It is imperative to include pro-competitive language in communications and documents so that investigators find those documents, too, the speakers agreed. Focus on how the activity at issue will improve quality, allow the company to innovate and benefit customers.
“I don’t think that can be emphasized enough, the contemporaneous documentation of the pro-competitive benefits,” Carson said. “It’s just very hard to tell your story if you’re waiting until a challenge to make it.”
The abundance of information available online and the number of forums for sharing it poses considerable risks for companies in terms of over sharing and in conducting inappropriate research about competitors.
Carson advocated gathering competitive intelligence from:
He cautioned not to gather competitive intelligence from:
Trade association meetings tend to be fertile ground for missteps, Carson said. While they provide ample pro-competitive information, the potential for problems abounds when competitors meet in the same place. He suggested discussing with clients ahead of time what they can and cannot say at a trade association meeting. He often advises sending counsel along to a meeting to flag potentially harmful information.
Social media presents its own dangers. In a survey by Forrester Research of 150 companies that monitor social media, more than 82 percent said they gather competitive intelligence from social media — it was the #1 reason for monitoring. Risks arise due to interaction with competitors and interaction with customers and suppliers.
Beardell said in addition to a strict compliance policy, a company should designate one person to approve all social media posts on behalf of the company.
“It’s easy to blur the line between your personal comment and the comment of the company. Ultimately, people are going to insinuate that you are commenting on behalf of the company,” Carson said.
He said a company must set ground rules for employee participation in online forums, addressing use in both official and personal capacities.
Ensuring Antitrust Compliance at All Levels
Antitrust compliance is an ever-growing, ever-changing beast. Counsel must stay on top of it to protect client interests at every turn. Monitoring and auditing the company’s online presence and internal systems go a long way toward ensuring compliance. Document creation and retention policies, especially in the virtual age, are critical. Even if an investigation goes nowhere, the expense of mounting a defense that involves wading through thousands of 10-year-old documents should be motivation enough to stick to a document retention policy.
In the end, Beardell said, remember that a company is not just managing risk but is adhering to its own code of ethics.