FTC Announces Expansion of Criminal Referral Program

President Biden has indicated that antitrust enforcement is a key priority for his administration and has encouraged government agencies including FTC and DOJ to cooperate on enforcement. Consistent with the Biden Administration’s directives, FTC recently announced an expansion of its criminal referral program. In announcing the November 18 policy statement, FTC Chair Lina Khan explained: “At a time when major corporate lawbreakers can treat civil fines as a cost of doing business, government authorities must ensure that criminal conduct is followed by criminal punishment. Today the FTC is redoubling its commitment and improving its processes to expeditiously refer criminal behavior to criminal authorities, promoting accountability and deterrence.”

As the Biden Administration continues to signal more aggressive antitrust enforcement, we offer three takeaways for companies to keep in mind about the risk of criminal prosecution resulting from FTC investigations:

#1: FTC Merger Investigations Can Lead to DOJ Criminal Investigations

As discussed in greater detail in this advisory, the wide-ranging nature of merger reviews means they can result in criminal investigations and prosecutions. For example, in 2015, packaged seafood companies Thai Union Group PLC (d/b/a Chicken of the Sea) and BumbleBee Foods LLC abandoned merger plans due to DOJ concerns that “the [packaged seafood] market [was] not functioning competitively…, and further consolidation would only make things worse.” Subsequently, BumbleBee, along with another company that was not involved in the merger, and multiple executives agreed to plead guilty to criminal antitrust charges for a conspiracy to fix prices. In 2018, DOJ indicted BumbleBee’s former CEO, who was found guilty after a multi-week trial and sentenced to 40 months imprisonment.

This risk is not limited to DOJ merger reviews. Although FTC has only civil enforcement authority, the agency has a long history of referring matters to DOJ if it finds evidence of potential criminal activity. For example, in the early 1990s, an FTC merger investigation in the commercial explosives industry resulted in a referral to DOJ. The resulting DOJ criminal investigation and prosecution of companies in the commercial explosives industry resulted in 17 guilty pleas and over $40 million in fines.

Companies should be aware that when conducting merger reviews, FTC and DOJ are also on the lookout for evidence of potential criminal violations, even if not directly related to the particular transaction under consideration. They may stumble across such evidence as part of the review or may conduct targeted searches of documents produced in response to merger reviews for issues that may evidence anticompetitive conduct, whether civil or criminal, such as no-poach agreements or covenants not to compete. Companies producing internal documents as part of a merger investigation should be aware that those documents may be shared with criminal prosecutors at any time, and should be prepared to address any conduct in those documents that might draw DOJ’s attention.

#2: FTC Conduct Investigations Can Also Lead to DOJ Criminal Investigations

As with merger investigations, DOJ may pursue criminal violations that they learn of during investigations of allegedly anticompetitive conduct, even if the violations are unrelated to the conduct under review. Further, DOJ may take action with respect to issues arising from FTC investigations, such as obstruction of justice or false statements. For example, in April 2017, FTC investigated health-staffing agencies for labor market collusion. Following a civil settlement with FTC, the owner of one of the staffing agencies was indicted not just for violating antitrust law (by agreeing with competitors to fix wages paid to home health therapists), but also for making false and misleading statements to FTC during its investigation.

The FTC policy statement describes several other examples where civil FTC investigations have resulted in criminal prosecutions for a variety of offenses. Companies should heed FTC’s recent warning that it will redouble its efforts to identify matters for potential criminal referrals, and should approach FTC investigations with a thorough understanding of criminal laws that may be in play.

#3: Compliance Is Key

In today’s enforcement climate, implementing and maintaining an effective compliance program is more important than ever. A good compliance program can not only help prevent antitrust violations, but can also be beneficial in the event of a criminal antitrust violation. DOJ’s longstanding leniency program allows companies to avoid prosecution if they are the first to self-report a violation and comply with the requirements of the leniency policy. And more recently, in 2019, DOJ announced that it would consider a company’s existing compliance program when making a charging decision, and may allow a company to avoid a criminal conviction. Accordingly, companies should ensure that their compliance programs are tailored to prevent and detect potential criminal violations of the antitrust laws.

For questions about criminal laws that may be implicated in FTC investigations, please reach out to the authors or any of their colleagues in Arnold & Porter’s Antitrust/Competition or White Collar Defense & Investigations practice groups.

© Arnold & Porter Kaye Scholer LLP 2021 All Rights Reserved. This blog post is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.