Corporate legal departments might want to move antitrust enforcement a few steps higher on the priority scale for 2010.
So said numerous speakers at the Association of Corporate Counsel’s annual meeting last week, during a forum to review the Obama Administration’s appetite for antitrust compliance. With new heads of antitrust policy at both the Federal Trade Commission and the Justice Department’s Antitrust Division, most compliance experts say that appetite is only going to get bigger.
“I don’t see them relaxing,” said Peter Wexler, general counsel of Schneider Electric. “I see them being more vigilant.”
Majoras
Deborah Majoras, general counsel at Procter & Gamble, noted that several new hires at the Antitrust Division have been litigators—a telling sign of what Christine Varney, the division’s new director, has in mind. The Justice Department “very much wants to make an impact, very much wants to shape up the law in a way they think is most constructive,” Majoras said. And FTC Chairman Jon Leibowitz is “going to want to try cases,” she added. “I don’t think there’s any question about that.”
Experts say both agencies will be paying particular attention to mergers and acquisitions. Any company with a dominant position in its market can expect lots of scrutiny and would be wise to develop a plan—“what if” scenarios—prior to meeting with the FTC.
Wexler
“What happens if you come in and say, ‘I’m going to pick up another 10 to 15 percent market share?’” Wexler said. “Don’t wait until they ask a question. Go in there and be ready to go.”
“If you don’t have the support from your big gun, that’s always going to be problematic.”
—Francois Ramsay,
General Counsel,
Yellos Pages Group
Majoras, however, warned legal departments to expect more skepticism from regulators, especially if the company is arguing for a merger under the “flailing firm” theory. That line of reasoning argues that when a company is in financial distress, its competitive influence is diluted and its acquisition by another company should be allowed.
“That’s not going to work,” Majoras said.
If a company truly is failing and no other option exists, the failing firm defense might make sense, she said. “But I don’t see any stomach for softening these rules.”
That new attitude means companies should take a hard look at what businesses they want to acquire, and have “a very heightened sense of awareness as to how that might affect … the FTC’s view of your business practices,” Wexler said. He gave the hypothetical example of Schneider Electric wanting to acquire certain distributors because it would allow Schneider to manage its business better. Others, however, might view the situation as, “Why are you acquiring them and not us?”
COMPLIANCE CHECKLIST
The following excerpt from the ACC’s “The Reinvigoration of North American Antitrust Enforcement” details the five key requirements for compliance programs:
(1) Senior Management Involvement and Support
(2) Antitrust Compliance Policies and Procedures
(3) Training and Education
(4) Monitoring, Auditing and Reporting Mechanisms
(5) Consistent Disciplinary Procedures and
Incentives
Source
ACC Presentation on Latest Antitrust Compliance Concerns (Oct. 19, 2009).
One other complicating factor: Regulatory agencies, just like businesses, like to compete with each other. “These agencies not only compete with each other, they learn from each other,” Wexler said. “They all take cues off of each other, and they enforce things in a different way,” which will make it more difficult for companies to develop a strategic, sustainable plan for antitrust compliance.
Pricing Pressure and More
Aside from mergers and acquisitions, Majoras said she also expects pricing issues to catch regulators’ attention as well. “I think we’re going to see a number of investigations in resale price maintenance,” she said.
Wexler agreed. “The more countries that operate, the more complex it gets,” he said. Schneider Electric, for example, has 72 different business models and each operates differently around the world. What may be acceptable pricing practice in one country might not be in another, he said.
Ramsay
But Francois Ramsay, general counsel and corporate secretary of the Yellow Pages Group, chided companies not to be excessively cautious. Legal officers have dwelled on the threat of enforcement so much, he said, that a stigma has developed in the marketplace and companies avoid doing legitimate deals for fear of potential consequences. He urged companies to get a better understanding of what the law requires, both so employees won’t be afraid of antitrust concerns and so they will understand that competition is healthy.
Majoras offered an example of a presentation she gave to Proctor & Gamble’s leadership team. Rather than start with “here’s what is going to happen to you, and you can go to jail,” she said, she presented studies showing why competition is healthy and how it benefits the business.
REGULATOR COMES KNOCKING
The following excerpt from the ACC’s “The Reinvigoration of North American Antitrust Enforcement” explains: ”What to do When the Regulator Calls:“
If antitrust authorities attend at your offices with search warrants:
advise them that you intend to co-operate with the search, but
would like to contact outside legal counsel, who will want to attend
to review the search warrant, etc.
if regulators are not willing to wait, do not obstruct their search in
any way; call counsel immediately
no documents that could possibly be relevant to the regulator’s
search should be removed from the premises or destroyed during
the search
keep an accurate record of all documents seized
direct all questions to your outside legal counsel
claim privilege over any documents that are privileged and ask that
these be sealed
Source
ACC Presentation on Latest Antitrust Compliance Concerns (Oct. 19, 2009).
Ramsay noted that U.S. companies are not the only ones experiencing stepped-up enforcement. Canada is also launching a major overhaul this year after the appointment of Melanie Aitken as the new commissioner of its Competition Bureau. Like the United States, Canada is also focusing attention and regulatory enforcement on price-fixing, resale price maintenance, and mergers and acquisitions.
“[Y]ou have to be prepared to be challenged by the [Competition] Bureau and not expect that, like in the old days, they’re going to be more conservative about bringing these in the courts,” Ramsay said. The Canadian government has also introduced more fines and penalties, he added.
“All of these changes have brought some big changes to how in-house law departments have to deal with this,” Ramsay said. “They will need to assess the impact on the business of the company. We need to update compliance programs, as well as educate senior leadership as well as the board of directors.”
And as always, Ramsay said, tone at the top is vital. “If you don’t have the support from your big gun, that’s always going to be problematic,” he said.
Securing support from management is “something that needs to be engraved in training,” Wexler said, although compliance officers can also use examples from their own companies or others. Unfortunately, he added, “I think the best experience comes from a bad experience.”
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