The U.S. Justice Department has invigorated it’s approach to antitrust enforcement, prosecuting more cases, across a wider range of misconduct — and with more rewards for companies that embrace antitrust compliance. That new approach began under the Trump Administration, and will only accelerate today.
In this master class, hosted by Radical Compliance’s Matt Kelly, we discussed:
The types of antitrust misconduct the Justice Department is pursuing and its new appetite for enforcement. Regulators’ new support for antitrust compliance programs and the benefits those programs can bring: the practical challenges around policy development, training, and reporting for effective antitrust compliance.
Transcript for Antitrust Compliance New Pressures and New Solutions
Giovanni “Gio” Gallo: I’m Gio Gallo. I’m calling in from Charlotte, North Carolina. Erik, welcome. Where are you calling from?
Erik Koons: I am in Kitty Hawk, North Carolina for the week.
Gio: Excellent. Charles, how about you?
Charles Webb: I’m in my home office in Bentonville, Arkansas.
Gio: Wonderful. Thanks for joining everyone. And Matt, where you calling from?
Matt Kelly: I am calling from the Radical Compliance global headquarters, here in Cambridge, Massachusetts, in my spare bedroom.
Gio: Global headquarters. I want a global headquarter.
Matt: Well, it’s pretty small. Not much going on here, but…
Charles: Do you have the clocks with the different time zones?
Matt: Alas, I do not. I am just counting out days until the weather warms up in Boston, and we can move the global headquarters to the back deck. That’s still a couple of weeks away.
Gio: Oh. Like that. The alfresco office. All right. So, let’s get going. Thank you everyone for joining us today. I’m Giovanni Gallo, co-CEO of ComplianceLine, and we’re super excited that you’re joining us for our webinar today on antitrust. I imagine that most if not everyone here knows that there is a lot afoot around antitrust regulations, enforcement, and the practical application of antitrust with…companies, and we have an excellent panel today, that we’re excited to present our findings, our viewpoints, and maybe some predictions about where all of this is going. So, we’ll get started by introducing the panel, and then I’ll get a little bit of housekeeping for you all. But to start out, Erik Koons, welcome to the panel.
Erik: Thanks for having me. So, yeah, my name’s Erik Koons. I’m a partner at Baker Botts. I am in the Washington D.C. office, when we were in the office, but live in Northern Virginia. So, I’ve been doing antitrust basically all my life, since I got out of…20-some years ago, and mostly focus on compliance and litigation issues.
Gio: Great. Thank you, Erik. Chuck Webb, welcome to the panel.
Charles: Thanks, Gio, and great to see you. Actually, I have some professional news. As of this morning, I was accepted to the astronaut training program, so I’ll be leaving the antitrust profession. But moving beyond my lame attempt at a April Fools Day joke, I’m a senior antitrust counsel at FedEx, responsible for global antitrust compliance. I’m also an adjunct professor of antitrust law at the University of Memphis Law School. So, very, very happy to be here today.
Gio: Great. We got a lot of expertise on here for everyone, and to lead us through it, our inestimable host, Matt Kelly, welcome. Thanks for joining us.
Matt: Yeah. Sure, Gio. It’s…happy to be here, and Erik and Chuck, it’s great to talk with you guys too. Like Gio said, we got a lot we can talk about about enforcement theory, enforcement actions, how this is all going to work on a practical level, so we got a lot of ground we can cover here today.
Gio: Yeah. So, thank you Matt and Erik and Chuck for joining us today. I’ll get a little bit of housekeeping, and then we’ll jump right in. We’ll have you tee up the first question in a second, Matt.
So, you know, as we get into this, we’re gonna be talking about antitrust misconduct, how regulators are impacting and enforcing this, and obviously, these practical challenges that we deal with as ethics experts in policy development, training, reporting, and all of that. As we get into it, in case you haven’t been on a ComplianceLine webinar before, we like this to be as conversational as it can be in this format. So, most likely, if you hover your mouse over your screen, you’ll see a chat bubble at the bottom. If you click on that, you can give us some feedback as we’re going. If you want us to go deeper in on something, if you have a related or unrelated question, we want this webinar to be something that serves you well, that helps make you a better professional, a more informed leader within your organization. So please give us that feedback, those questions and things like that. We’ll be monitoring those throughout the webinar, so we may dig into those while we’re on topic, and also we’ll have some time at the end to go over some of those, so please give us your questions. We’d love to make this as focused as possible on the things that are important to you.
In addition to that chat function, we want to let you know that we will be offering SHRM credits for this. And for everyone who’s joined us and registered today, we’re gonna offer you a chance to get a free, no-obligation access to an antitrust training that you can consider rolling out to your workforce if these issues are something that are relevant to you. So keep an eye out for that on follow-up. We will be sending around a recording for this, in case you miss something, in case your Wi-Fi goes out, or in case you just really love all the stuff we’re talking about and want to view it again.
So, we did all of our introductions, but we have two other panelists today. I’m working from home today, taking care of my two new twin boys. This is Vincenzo on the left, and Matteo on the right, so they will be antitrust apprentices by the time we finish up today. So, without further ado, we have an awesome panel today. I won’t take any more time with the setup. Matt, why don’t you lead us off, and we’ll get started.
Matt: Yeah, sure. So, thank you very much, Gio. And I suppose the first question I wanted to ask of Erik and Chuck was probably just, what do you see, what are you looking for, for the shift from the Trump administration’s approach to antitrust to the Biden administration? Everybody always says the Biden administration is going to step up enforcement, period, for many different things, antitrust among them, but I am wondering if does that mean we’re just going to see more zealous enforcement? Are we going to see novel theories of antitrust, and what might those look like? And then, on a very practical level, what would that actually mean for compliance programs? Because we had those before Biden showed up, and we’re going to have them after they’re gone. So I don’t know what this would really mean for a living, breathing compliance officer, but Erik, if you want to start, like, what do you see at a sort of an enforcement level, before we get to the compliance program stuff? What’s gonna happen, do you think?
Erik: Yeah. So, I think you’re gonna see some things happen, and the reason I phrase it that way is because, for those people who have been practicing for a while, every new administration, you always see all these law firms roll out these webinars. It’s “what to expect,” and frankly, most of them are, it’s a Democratic regime, it’s gonna be more enforcement, it’s a Republican, it’s gonna be less. And, you know, there’s not much more meat around the bones than that when people are kind of speculating.
But we’ve got some history, you know, already, that’s happened with this administration, that I think is showing that it’s more than theoretical, that we’re not only gonna see more enforcement, but you’re gonna see some new theories, or, frankly, existing theories, that were not embraced as much in the past by the enforcers, that are being picked up. And specifically, what I mean by that, you can look, even just to, you know, this week, on Tuesday of this week, the FTC voted four-nothing to block the deal, the Illumina potential acquisition of GRAIL. And that’s the second deal that the FTC vertical, the proposed vertical deal with the FTC, has attempted to block in 40 years.
Now, yeah, it’s a 2-2 vote. I mean, there are two Republican, two Democrats, and all of them voted for it, so some have argued that that really isn’t showing a shift in the Biden administration’s philosophy. But I think it is. If you look at what the acting chair, Slaughter, has said, she said what she’s going to do, and she’ll have another Democrat on the commission very quickly, in the form of Lina Khan. She said she’s gonna start focusing on vertical theories, and that’s something that just has not been a focus of the FTC in the past, and we expect, I expect to see, you know, similar enforcement priorities from the DOJ.
What you’ll also see, I think, is the FTC, and perhaps the DOJ, looking more and more, and they were doing this towards the middle and end of the Trump administration too, but looking more and more at deals that involve nascent competitors. And that’s something that has not really gotten a lot of attention in the past. It’s kind of a new and sexy issue. Economists love it. The enforcers love it. And we saw that, coincidentally, with the Illumina attempted acquisition, now, probably eight or nine months ago.
And then, also, one of…the last thing I’ll say that I think you’re likely to see more activism from the FTC is in the form of rulemaking. And again, acting Chair Slaughter has said that they’re planning on exploring new rulemaking, and potentially using antitrust to address things like social justice reform. So, I think the chances of seeing real and tangible changes, and more activism in the enforcement regime in the United States, is virtually guaranteed.
Matt: You know, I’ll wanna circle back to some of those ideas about other issues, such as social justice, and how they square with antitrust. But before that, Chuck, I know you cut out for a minute. I think you’re back now.
Charles: Yeah. I’m here. I’m here.
Matt: SO, what are you preparing for, or what do you think will be most notable, now that we have the Biden administration in? Especially for the compliance program stuff that you have to run, do you expect… Or, what do you expect will change, that might affect how your compliance program is or isn’t gonna respond?
Charles: Well, I think I just reflect what Erik just said. I mean, I would not expect the foot to be taken off the gas with respect to antitrust enforcement under the Biden administration. To the contrary, I think, and Erik had mentioned, you know the appointment, the pending appointment of Lina Khan, and acting Chairman Slaughter. I mean, the appointments at the FTC indicate a continuation, and frankly an expansion, of a more aggressive enforcement approach. And something, you know, we haven’t heard, at least publicly, who’s being considered at the DOJ, but, you know, I think we’ve heard some rumors, and I think that’s that kind of pro-enforcement approach will be consistent at the Antitrust Division as well.
And both the FTC and the DOJ are under intense pressure to act, or be seen as acting, in the antitrust space. And that pressure is coming from, frankly, the public. I mean, the fact the antitrust has becomes so high-profile, and even an issue talked about in presidential debates, that public focus is, corresponds to the focus on Capitol Hill that we’re seeing on antitrust, both in the hearings late last year…the House report, and then the Klobuchar amendments, I think we’ll probably touch on today. And frankly, I think that pressure also comes from what’s happening in Europe. I mean, the fact that the European, both the European Commission and member states continue to be very, taking very aggressive actions in competition, particularly with respect to big tech. And I think, you know, that action in Europe has a knock-on effect in the States, of increasing the pressure on the FTC and DOJ to be seen as doing something in antitrust.
And also, Europe, I think, probably brings in the broader implications on social justice, etc., that Erik mentioned. And I guess the last layer I’ll put onto that, and to make it even more complex, is we’re seeing a lot of enforcement at the state AG level in the U.S., with state AGs getting into the antitrust game, both, in both complementing what the federal agencies are doing, but also expanding it. I think we’ve seen that with the recent filings on Google, where the states, certain states, bought a separate action. And also, we’re seeing it in a way, another kind of hot topic, which I’m sure we’ll unpack today, is at the DOJ, we’ve seen now this, just earlier this week, the third indictment for no-poach and wage-fixing agreements. The third indictment in the past, I think, since December. So, that’s, you see vigorous DOJ enforcement in that space. But yeah, it’s also a space where you see bigger state AG enforcement, taking it in directions that even go beyond what Justice is doing, and you’re starting to see that emerge internationally as well.
So, yeah, I’d say no foot taken off the gas over the next four years in antitrust enforcement. And we can unpack later, Matt, how that kind of knocks on to compliance, but certainly calls for a focus on, a continued focus on corporate compliance over the next four years and beyond.
Matt: Well, you know, I’m glad that you brought up the non-poach, because that was my next question, was, as much as we, many people might like to, they hear antitrust, and they focus on the sexy stuff. They think about it’s Facebook and its Google, and we’re gonna break them up, and the court cases will be nine years long, and… But there’s this whole other realm of what are companies getting indicted for, and fined for? It’s price fixing. It’s some sort of collusion and bid-rigging. It is a non-poach agreement, and there’s this more, I guess I’ll call it pedestrian sort of antitrust misconduct, that is still very much…you know, that never went away in the Trump administration. And I am wondering how much… So, are we gonna see more cases like that? Are we gonna see those cases, but with bigger fines or more corrective action plans that Justice is going to put on the corporate defendants?
I don’t know. Erik, maybe if you wanna give me some thoughts about these sort of, I’ll call them block-and-tackle antitrust, as opposed to the new stuff, and the sexy stuff. But, what do you think’s gonna happen there?
Erik: Yeah, I think what you’re suggesting there is exactly right, and that’s what I’m seeing, both from a compliance perspective and compliance program perspective, and what companies are doing to brace for those types of continued but intense blocking-and-tackling type issues, and the zeal of enforcers. And I’m glad that Chuck had mentioned the AGs, because we are seeing, have seen, you know, during the Trump administration, and the continuation during the beginning of the Biden administration, of both federal and then more intense state enforcement actions in the litigation world. And so, take, for example… It’s not a complete anomaly, but it’s one of a few recent giant cases, where the AGs have started to step in and take a leading role. And what I’m referring to is it’s the IN RE: Generics antitrust litigation, which is in the Eastern District of Pennsylvania’s MDL there.
I’m involved in that, in full disclosure, on the defense side. But what you’re seeing there is, I’d lost exact count of what it is, but if you take all of the AGs plus, you know, places like American Samoa, and other places like that, that have enforcement regimes, you’ve got over 50 different, you know, AGs or AG-type entities that are involved as plaintiffs in that litigation. And you just, you didn’t see that 10 years ago. Take for example, you know, 15 years ago, in 2007, another case that’s kind of near and dear to my heart, and that’s the cathode ray tube and the LCD litigations. Those are litigations where you’d see three or four, maybe five state AGs get involved, and they were not super active. In the Generics case, and in other cases like that, the AGs are driving, you know, the ship. Steering the ship. I guess, driving the car, whatever. But you get my point.
So, super active, super involved, because A, they’re interested from a policy perspective, and B, they’re seeing it as a revenue, you know, stream for states. And so, I think everything that you’re suggesting, and that Chuck Webb had highlighted, that’s happening with the states, is a new reality in antitrust, that potential defendants… Or I guess a better way of saying it is just everybody should be focused on. And that’s important from a compliance perspective, too. Take, for example, the sleepy issue of Robinson-Patman, that everybody says, you know, or has said, has been dead, or is near dead, and nobody’s enforcing it. You’re starting to see, you know, the states focus on Robinson-Patman issues, and there’s real threat there.
And as a consequence, you’re starting to see a few plaintiff-side civil Robinson-Patman claims come up, and, you know, in situations where you’ve got, you know, COVID, and suppliers, sellers that are really trying to make price adjustments based on input cost increases, or do any number of things, they’re putting customers on allocation, all the types of things that could be interpreted as some type of a discrimination, whether it be direct price or price-related, these are issues that people really need to focus on, because AGs and others are looking at all issues price, not just price gouging, although that’s a big issue, now, too. So, in any event, that is a long way of saying that I think that you’re onto something, Matt, and that people need to face the new reality of zealous advocacy on behalf of the states by the states.
Matt: So, Gio, do you have any thoughts or observations here, or what you might be hearing from customers and clients about the, sort of, just generally heightened and intensified enforcement risk here? Because that is gonna have follow-on consequences for what you do with compliance and training and everything else. You have your ear to the ground on this? What are you hearing?
Gio: Yeah, I don’t think that I’m going to add much of anything to the experts on the panel on, you know, especially, kind of, high-level views on, you know, regulatory changes, monopoly enforcement, and things like that, but I think what we’re seeing across our client base is much more that other end of the spectrum on that employee misconduct, and the, you know, the things that can happen at the employee level, right. At ComplianceLine, we’re all about culture, we’re all about being effective Compliance 3.0 leaders, who actually change behavior and help move the mission forward. And I think that everyone’s wondering, there’s this general sense that, you know, Biden is going to continue in that same direction, maybe move faster, maybe, you know, pull some other things to do some enforcement, and I think it’s this general uncertainty, kind of to what Erik was saying around, well, there are some things that just haven’t been enforced.
We don’t have to wait for new regulations, we don’t have to wait for this case to take nine years to kind of set a new precedent. We can see, you know, I think people are concerned, and looking out for, a much more nimble, faster-moving antitrust enforcement, that, you know, I don’t know if the other panelists have a view on this, but they’re, on one end, there’s just kind of enforcing what’s there. On the other end is taking a softer view that, you know, may move slower, but of giving guidance, and saying “Okay, we’re gonna start enforcing this soon.” I know that there are some open issues where there’s some guidance, and we’re kind of waiting for it to settle, but I think that that’s what we hear our clients talking about, of, you know, what, it, you know, a lot of our clients, they wanna be ahead of the curve. They don’t wanna get, you know, kind of caught on their heels, and they’re looking for, you know, how can we train our employees, you know, fix the implementation of our processes, build a, you know, whether internal whistleblower or just a speak-up culture, so that we can find these before we get caught by the regulators. Because that’s always a push and a pull, right? We want to stay ahead of it, not just kind of get, see someone else get caught, and hope that we’re not in the same stance.
Matt: Chuck, let me ask you to maybe flesh that out a little bit. Like, what do you think of the current state of guidance for antitrust compliance programs, and especially because the antitrust division did give that new guidance, I want to say it was either last…I can’t remember if it was last year or 2019, but that they would be more leniency available for companies, for more companies with good antitrust compliance programs. Like, how much do you know what you want to do here to build a good antitrust compliance program these days?
Charles: Yeah, I think it was…my memory serves correctly, it was April 2019, the guidelines were issued. You know, what’s interesting. If you have, and I’ll be a two-handed lawyer here for a second. You have, on the one hand calls, I think quite public calls, for more aggressive antitrust enforcement leading to more aggressive remedies in, you know, it’s in structural remedies. You know, the criminal stuff is all out there as well. But on the other hand, you have the new DOJ policy on compliance programs, and maybe with an effective compliance program, you know, that can lead to a deferred prosecution agreement. Potentially, you can argue that you don’t need corporate probation, or you don’t need a corporate monitor, which, you know, those are huge… So, you know, but I think we’re still waiting to see how that plays out in practice. I think it’s still very, very early days about how that effectively plays out in practice for companies facing criminal antitrust prosecution under the sentencing guidelines.
I will say, I mean, one thing about the…what the DOJ did was essentially took what was an ICC, International Chamber of Commerce, toolkit, that was produced several years ago now, and actually, a good friend of Erik and I, one of Erik’s partner, Paul Lugard, was the driving force behind that…toolkit…What is a bit concerning is they took the toolkit, and they made it into a DOJ guideline. And if you read the DOJ guideline, the toolkit’s actually the most frequently-cited source document in the guideline. But, why that’s concerning? So, I don’t think that, you know, the Justice guideline didn’t change much, in terms of how I look at compliance programs, but what’s potentially concerning is you take a toolkit, which, it was a private document. It gave kind of a menu of options, and then you turn that into a guideline of, like, “Here’s a menu of options, and then here’s a guideline of everything you should do,” and it’s just a vast thing.
And, you know, that’s, I mean, obviously, it kind of is what it is, but I think what we’re seeing now in antitrust, and I see this kind of on the front lines of…compliance program, I think you’re increasingly seeing the sliding of antitrust compliance becoming its own mini-industry, if you will, kind of like as we have already seen with anti-corruption compliance, and as we are increasingly seeing with privacy compliance, with GDPR and the California law coming…I think I’ve been just seeing the same trend with antitrust.
Matt: Well, I was gonna say, you know, FCPA compliance is not a mini-industry anymore. It’s a pretty big one, and I kind of wonder if we are gonna go this way. Erik, what do you think about this? And, you know, what we might… What is happening with the antitrust guidance that’s being provided, and how big is this antitrust compliance industry that’s cropping up?
Erik: Yeah, it’s big and getting bigger, and I think everything that Chuck said, I definitely agree with that, that there’s only a little bit of track record here to know exactly where DOJ, for example, is gonna be going with these guidelines. One thing that I’m…that Chuck and I have both worried about this in the past, and I think for good reason, is that the DOJ guidelines would be viewed as the baseline from which companies need to operate, and if they don’t tick off all of the different examples that are in the guidance, that they’re somehow falling down. And one of the things that a company is supposed to look at, and that the government will look at, if they’re examining a company who’s suspected of engage in some wrongdoing, is, you know, whether the compliance system, you know, “works.” And whether it works or not is, you know, that’s in the eye of the beholder. But if a compliance system is judged as working or not working based on whether or not it does, you know, virtually all, or most of the different things that are listed on the DOJ guidance list, that’s gonna be really hard for most companies, you know, to adhere to.
I remember when they first came out, I got calls from a number of clients, saying, “Does this mean I have to do all of these things?” Because it would take just a monumental amount of human power to implement these things, and then to go on and, you know, monitor them, to make sure they’re working. And, you know, it’s a tough situation to be in as a company, and as outside counsel giving advice, and saying, “Well, no, you don’t have to do all of them.” Okay, then the follow-up question would be, “Well, which ones do I need to do?” And of course, that depends on what kind of company you are, what kind of…how much interface, if at all, you actually have with competitors. So it’s a very complicated analysis, that I think, in the end, getting back to what Chuck said, is not all that different than what robust compliance systems should have been designed to be prior to the guidance. So…
Matt: I’ve always thought that compliance programs are in a bit of a difficult spot, because inevitably, when the issue arises, the prosecutors will only ask about those questions that apply to the specific fact. But until that day, you don’t know what specific facts are going to haunt you, so your compliance program…I mean, it has to be able to answer whichever ones might come up to the top, in incident X, which you don’t even know when it’s going to arrive. So, I, like, you’re not in an enviable position if you’re trying to develop a compliance program. And I suppose that might be true for FCPA, or antitrust, or privacy, or anything else, is that you need to be very versatile. And I don’t know what the easy answer to that is, or if there is one, but, I mean, Chuck, what do you think about how you try to decode these kind of capabilities that you’re gonna need?
Charles: Well, I think… My video may have popped out, but I’m still online here. I mean, I think it… Part of building the essential compliance program for antitrust, or really, any subject matter, you need to take a risk-based approach, and that really starts with…it starts with really knowing the business very, very well, and that’s where I think in-house counsel has the unique ability to build those partnerships and to build those trust, and to really understand the business, understand the KPIs the business is driving towards, how do they define success, and then that kind of flows naturally into a risk assessment process, and it’s something I’ve been heavily involved with at FedEx, and really kind of peeling that onion, and doing the risk assessment.
Because, you know, at the end of the day…what Erik says, you know, we would like to do everything on the menu, but we only have very limited resources to do, so you need to deploy those resources, taking a risk-based approach, which frankly, for a company like FedEx, where we operate in 220 countries and territories worldwide, can be a challenge. But, you know, I think you start to address that through this, knowing the business well, partnering the business, don’t be an island, don’t be a black box.
And then, having a, what’s the word, a transparent and cooperative risk assessment process. And what I mean by that is the risk assessment process, if it’s just Erik and I sitting in our offices, thinking “Gee, where do we think the risks lie?” that’s not gonna be effective. You gotta get the business engaged in that process, and get them part of both identifying the risks, and to get their view, the business partners’ view, on how to adequately address those risks, and do the control you have in place already, the compliance, training, etc. Is it worth the virtual paper it’s written on, or can it be made better?
Matt: Let me back up a minute. How difficult might it be to get that risk assessment process done if you, the compliance person, have not necessarily been part of these conversations before, or antitrust hasn’t been a thing before? You could maybe have a lot of operating unit executives saying, “Well, wait. Who are you? Why are you here in my office again?” Or, “Why are we talking about this now? It’s never come up before, that I’ve had to worry about,” I don’t know, “non-poach agreements,” and something. Is there going to be a challenge to kind of pierce the mindset? And, I don’t know, Chuck if you can answer it, because, look, at FedEx, you’re a huge company. It makes sense that this is a risk for you. But Erik, do you think other companies might be in a more challenging position to try and get everyone else to pay attention that this is gonna be a thing now? We’re gonna have to think about this.
Erik: Yeah, it’s a huge challenge. So, again, you know, most companies don’t have dedicated antitrust in-house lawyers. And a lot of companies don’t have…you know, they may have a culture of compliance, but they may not have an appreciation of the antitrust laws, and therefore a culture of compliance with the antitrust laws. And sometimes, you know, a lot times, you know, the antitrust law seems, like, foreign, not just foreign, but, you know, kind of counter-intuitive to a lot of business people. You know, the number of times when you’re counseling business people, and they say, “Well, that’s just not the way we do it. This is the way we do it. This is the way the industry does it, has done it for 20 years.” First of all, be very afraid when people say that, because that usually is a justification for loose talk, or can be, with competitors.
But, you know, I feel for folks like that, who are trying to do their job. Take COVID, for example. You know, this is not a pure antitrust issue. It’s, again, more of a pricing issue, and I talked about price gouging before. But if you’ve got a company who is, let’s say they’re selling in all 50 states, and they wanna raise their prices by 12% because their input costs went up by 9%. And they wanna do a price move once a year rather than frequently, because that is a shock to the system with people they sell to. Well, they’ve gotta look at whether a, you know, 12%…I’m intentionally picking a number above 10%, because a lot of the state, you know, price gouging laws cap the price increases that are allowed at 10%. Some of them are specific about whether or not the price increase is justifiable if all or a portion of it is based on input cost increases. Some of them are not. So, you know, in some states, arguably, if your input costs go up by 20%, and you raise your prices by 11%, you could arguably still get in trouble, which, again, counter-intuitive.
And so, there’s a lot of sympathy, I think, that needs to be, you know, handed out to the, a lot of the companies that I counsel, want people, I think, that are probably dialed in, who are grappling with, you know, front-page, “Wall Street Journal,” Klobuchar, all this change, you have a lot of people with no good appreciation for the nuances of the law before, but now the law is gonna be more of a progressive interpretation of let’s just go after things that are “unfair.” How do you manage a business based on that kind of guidance, or lack thereof, where the guardrails are really hard to see? And I’ve got some answers as to how you do that, but I’m responding specifically to your question of is this a challenging environment for businesses, and the answer is an absolute yes.
Matt: Well, I’m kind of curious, how much, some of the challenge for compliance officers, specifically, is going to be getting involved in some of the more strategic business discussions about price hikes, about merger targets, especially if we’re going to take a more sharper view of something like a vertical merger, or a vertical integration. And how many compliance officers really are allowed to participate in conversations about what the price is gonna be in this region, in this country, or what mergers we will or we won’t do, as opposed to, “Here’s our strategic plan. Go figure out the documentation for us. Come back next quarter.” Chuck, do you think that this is gonna be a growing pain for compliance officers?
Charles: I think that’s a very good question, Matt, and I think a lot of the question comes back…and I know it’s near and dear to Gio’s heart, is culture. I mean, I happen to work in a company, and, you know, before I worked at FedEx, I’ve been in FedEx two and a half years now. Before I was there, I was at Walmart for almost five years. And both of those companies, I mean, the ethic as a compliance culture is amazing. And to quote my favorite musical, I mean, compliance in general, and antitrust compliance specifically, needs to be in the room where it happens, where decisions are made. And frankly, with the corporate culture that I enjoy, you know, we are. Now, that culture still needs to be cultivated. It needs to be, and it’s a certain level of trust that needs to be built there, that you truly are a corporate partner.
I will say, and, you know, the examples you raise, you know, let’s say mergers, or pricing decisions, you know, of different business strategies, you know, I like that…I generally like to learn things and have a chance to comment on them before they happen, and not pick up the pieces afterwards. I mean, I’ve seen it in my career, both. But, and I think it’s generally more efficient, and lower-cost in the long run, if compliance is in the room where it happens, and they get to advise on things before they happen, as opposed to picking up the pieces afterwards. Because it’s gonna go one way or the other. I mean, the law is what the law is, and the law is changing, as Erik mentioned. So, it’s just much better, both legally, and it’s much more efficient, to build that proactive approach. But again, I, you know, I’m speaking from someone who’s worked for major companies, where the culture is where it needs to be, and legal and compliance is a recognized business partner.
Matt: Gio, what do you think about the culture question? And especially because, I swear, I had these conversations about 10 years ago, talking about anti-corruption issues, where, wait, compliance has to be involved in my expansion decision into China? And, you know, there’s some of these key phrases I’m hearing right now. They sound an awful lot familiar, like what we went through with FCPA. But, I mean, do you…how do you think the corporate cultures are coming along, to try and ingest compliance earlier, and get these issues thought about early?
Gio: Yeah, I think it’s really important, because we’ve been talking about a few things, right? New regulations, new, you know, new enforcement regime with the new president. You know, the AGs kind of stepping up, you know, new guidance. All of this stuff, this is all just in antitrust, but all of this signals that this is a front that we need to be prepared to, you know, meet challenges on throughout the coming years, and I think this is something that we’re seeing happen all across ethics and compliance, of, you know, it’s coming from both sides, right? Like, employees are demanding it, regulators are pushing it, and someone at the company needs to meet in the middle, and fulfill these challenges. You know, I think that this is getting more complex, and if we, as compliance and ethics leaders, don’t get ahead of these challenges, then we’re gonna be caught behind them, because, you know, more guidance is great, but then, to what we were talking about earlier, well, do I have to do all of that, or just do what’s reasonable, or just some of it?
We’re not in the ’90s anymore, where it’s just, “Hey, here’s a law. Just don’t do this to one thing, and you won’t get in trouble.” This is expanding from, you know, OSHA, getting involved, and the DOJ pushing it, and it happening all across financing. And I think that this is what I think a lot of us, as ethics leaders, have wanted all along, to be in that strategic discussion, to be able to opine on business issues, but, you know, as with most things in life, that comes at a cost, right. To be at that table, you have to be prepared to interact with people, and to advise them properly. And I would just advise everyone to realize that, you know, ask yourself the question, who owns the culture? Is it every, you know, is it the group of employees in the front line, or is it the CEO and the board? Well, you know, spoiler alert, the answer is yes, it’s everybody, which means everyone can influence it, right? And we, as compliance leaders, can step in and start having that conversation.
But, to Chuck’s point, if you’re just kind of catching people on foot faults, or you’re finding out after something happened, and you gotta come and be the cleanup person, then that’s a tough spot to be in. But I think also, to get on the other side of that conversation, to get in early, we probably have to have a softer hand, and say, “Hey, can I find out what you’re doing? I’m probably not gonna stop what you’re doing immediately unless it’s a massive red flag, which it probably isn’t, because you probably know what you’re doing, but I wanna start being part of this conversation, to help you move faster, and to keep you from having to redo something.”
You know, Chuck and I were having a conversation about this before. I think we need to find ways to maybe insert ourselves, or maybe get invited into those conversations, have a soft hand, build some relationships, and then figure out, okay, you know, now that I have more access to this, now that I have a better perspective on what’s actually happening here, let me try to kind of influence this, and it’s gonna take this compliance 3.0 perspective of, it’s not just a hammer, it’s not just a telling people what they can’t do, and being the department of “no,” but it’s being softer. It’s building relationships, it’s being a leader that influences these decisions, and I think we need to build those skills and those relationships in order to have the influence that we see that we need. And that’s part of this leadership, right? Having a vision, and saying, “Hey, you know what? It’s probably not gonna happen next month, but two or three years from now, we’re probably gonna get in trouble for doing something like this, so let’s start figuring out how our business can be nimble and adaptive, without getting caught off guard.”
Matt: You know, here’s a good question from the audience, and anybody else who’s listening, by all means, feel free to submit more questions. We have a bunch. But somebody writing in, and Chuck, maybe I’ll put this to you first, and then Erik. “Can you distinguish between the roles of legal and compliance in these discussions?” And Chuck, I’m asking you because I assume that, you know, FedEx has a very sophisticated legal and compliance functions. But Erik, to you, I also want some advice on what does a company do if they don’t have separate legal and compliance functions? But Chuck, what would you say to this first?
Charles: Yeah, I think, I mean, for subject matter like antitrust, it’s such an inherently legal subject matter that I think that distinction between…in my personal opinion, the distinction between legal and compliance is a bit illusory for antitrust. Now, maybe anti-corruption’s a bit different, because you have the financial control side, etc. I think the main… But I think, despite the distinction between, you know, whether compliance should be separate from legal, do you have two reporting lines, do you have one, I think the main, from my perspective, the main structure thing is whoever is in charge of compliance, the chief compliance officer, which we, you know, Justin Ross is ours, does that person… I mean, let me take a step back.
Who has overall governance responsibility for the compliance program? That’s…to the board of directors, and that is usually delegated to the audit committee. So, you have that, you know, the buck stops there. You have a chief compliance officer. Whether that person sits in a compliance department or legal department, from my perspective, that’s not as important as does that chief compliance officer have direct access, direct, unfettered access, to the audit committee, and as part of that, is there a regular briefings calendar, you know, quarterly, monthly, what have you, where that chief compliance officer briefs the audit committee on the compliance issues, whether it be antitrust or otherwise, facing the company?
And then, the third layer of that, and this is where guys like me come in, is…the company does have an antitrust person, whether it be dedicated, or they do that and other stuff, does that antitrust person have direct access to the chief compliance officer? That’s how it’s structured at… But, I mean, the answer to those questions are yes at FedEx. And I think having that clear line of responsibility, audit committee, chief compliance officer, subject matter expert, I think, whether that sits technically in a compliance department or legal department, I don’t think that’s as important as having that structure. And I think if you read the DOJ’s compliance guidelines, they reflect that. They don’t opine on if you have to have an independent compliance program. It’s you have to have board responsibility, and that direct communication line, both from the compliance, you know, the…subject matter expert to the CCO, and CCO to the board.
Matt: Okay. Erik, what do you think?
Erik: Yeah. Again, agree with everything that Chuck said. So, I, and specifically to your, the question within the context of if you don’t have separate compliance and legal functions, I think, you know, that is not infrequently the case with many companies. And whether you have a distinct role between compliance and legal, I think the best thing that companies can do, particularly if you’re thin on employees who have antitrust knowledge or antitrust responsibilities, is to set up, you know, systems in place that allow the business to, within reason, do what they want to do, but when they’re gonna bump up against one of these guardrails, they need to then raise issues with compliance or legal, or both. And specifically what I mean there is, you know, most of the risk that I see in antitrust, you know, not surprisingly, would relate to pricing decisions and competitor communications.
And so, what companies can do, again, regardless of whether you have dedicated functions between compliance and legal, is say, in order for employees of this company to, for example, participate in trade association meetings, or any type of gathering where competitors are gonna be present, we need to A, approve, on a company level, that that is an organization that we are willing to, you know, pay for our membership in, or pay for our, you know, reimburse employees to go to and attend and whatnot. And you need to then kick the tires on the organization or the association, to make sure that they are following best practices for antitrust compliance. Do they have an antitrust compliance statement that they read at the beginning of every trade association meeting? Do they have a, you know, a lawyer who’s sitting in, just making sure that it isn’t just an excuse for people to get together and talk about things they shouldn’t be talking about?
So, you know, that’s one example on the competitor communications side. On the pricing side, set up, you know, again, guardrails within which the business can operate, where they don’t have to go to legal, and they don’t feel that they gotta check in every day. And again, it could be different from every company, but you can raise price, or adjust price, up or down, whatever, you know, only once a year, or every six months. And then, within that timeframe, if you’re gonna raise your prices over X percent, and it’s gonna be different from every company, then you probably should, or you should check in with legal, and make sure those prices are okay, and you need to document why you’re going to raise those prices, internally, so that legal or compliance can focus on the justifications, and make sure, like in weird situations like we’re in now, that if you need to have a cost-based justification for price increases, that you have one, and that it’s a legitimate one.
And you could also then… You know, there’s cross-pollination between raising prices and competitor communications, and I ask questions about, well, are we raising the prices based on what we’re seeing in the market? And focus on issues like how are we going to communicate our price increases, to make sure you’re not doing, engaging in price signaling? Or, okay, we decided we’re gonna raise our price, but the market didn’t respond. We’re gonna rescind our price…red flag for regulators on pricing. And so, just put controls in there on big-ticket decisions, like making a price move within your company, or meeting with competitors, but it’s frankly not that difficult to do, and it drives a culture of compliance, where people are thinking, “Okay, well, why do I need to do these things?” and that makes them… So those are just some practical things that I would suggest for most.
Gio: Yeah, and I would just add to that that, you know, we’ve gotten some really good guidance, and there are a bunch of layers to this, of, like, how should this functionally happen, right? Like, what is the meeting? How frequent is it? What guidance do we give? What does the org chart look like? And I think it’s that that is one very important step for us to lead us, lead our entire organization and direction, where we are better in compliance with, or avoiding risk in antitrust. I just encourage everyone that there are steps after that, to actually get this implemented, right. Once you know that the org chart should look like this, or I need this meeting, I assume that if you’re asking, it’s because it’s probably not perfect at your organization, right? Like, raise your hand if your org’s not perfect on antitrust.
Well, once you realize what it should be, then you need to engage in the thought process, in the planning, and the relationship-building, to figure out, “Okay, how do I get there? How do I make the case to the board or my exact team?” Or, “How do I get someone to allow me into that meeting?” And I think that that’s where we’re all gonna grow a lot, especially over the next 5 and 10 years, as we move into a more complex, you know, regulation and enforcement environment, of “Okay, well, I see the need for this change. It’s not as easy as just sending an email and someone’s gonna give me access to everything and tell me everything that they’re doing, and wait for my decision before they make a move.” Thinking through, “Okay, how can I make a step forward here? How can I use the reporting that we get, or some advice from an expert, or some current events, to make the case to my team, to say, hey, here’s the reason. Here’s what I’m asking for. Here’s a step toward that. Let’s get…there and move into it.”
And I think when we can do that, we can start getting this progress, because, as we all know, it’s not enough to know just what is right. We need to get other people to act, and to join our team and our efforts, to get the whole organization on board with this.
Matt: Chuck, let me ask you a question about reporting issues and what you do look for, because I am thinking about last summer, the Justice Department put out its updated guidance on compliance programs, not specific to antitrust, but just general corporate compliance programs. And a big message there was that compliance should have access to whatever data it needs to be able to do what compliance needs to do. So, I am just sort of curious. What’s the data that you would want to look at, say, at scale? Are you looking at, I don’t know, self-reported disclosures of potential competitor communications, or, you know, what’s the stuff that a antitrust program would want to look at and try and figure out, “Here’s what I want to report to the board or the general counsel, or something like that.” What do you think? What would you recommend?
Charles: Yeah, it’s a good question, Matt. And I think we’re still trying to figure that out, what does monitoring mean for an antitrust compliance standpoint? I mean, personally…there’s certain KPIs you can track on a programmatic level. So, the most easy is training completion. You know, if you say, you’ve defined the universe of people who need antitrust training. How many have taken it? What percentage complete are you there? Erik mentioned tracking trade associations. I mean, that’s another metric you can do. I’ve also heard, you know, companies tracking competitor contacts, or, you know, there’s other forums where our folks run into competitors.
You can also track, as kind of a simple thing, is, especially with a large, diversified business like FedEx, and if you’re the antitrust subject matter expert, track the different categories of questions you’re receiving internally, whether from the business directly, or from your fellow lawyers on the legal team, and kind of what categories they fall…do they fall under vertical practices, horizontal practices, joint ventures, etc.? And where in the world are they coming from?
I’m not as… Kind of a controversial issue of whether you should be tracking pricing trends, and looking for, you know, areas where you may be following prices of your competitors, I mean, I am kind of… That’s a hot topic, both in terms of compliance and enforcement. Personally speaking, I’m kind of skeptical of that. I mean, the last time I checked, conscious parallelism is legal under most antitrust and competition laws that I’m aware of, so I’m kind of skeptical. It’s a huge undertaking, and I’m kind of skeptical about how valuable that data is.
And then there’s also, be another area of how companies consider… I mean, you know, do you track, do you try to do some kind of proactive kind of audit or tracking of email communications? I mean it’s, solutions I’ve seen in my career, it’s pretty easy to do an automated tracking of, let’s say if you’re a FedEx employee, and you’re emailing someone at ups.com, you know, that’s easy to track, and probably doesn’t…not that, frankly, informative, but do you do some kind of tracking of trying to do some proactive kind of email monitoring of what people actually are saying and doing on their email? And if so, do you give disclosure to employees, or do you do it covertly? And if you do it covertly, that may have knock-on effects on corporate culture, and…run into some privacy difficulties, privacy law difficulties outside the United States. So I think it’s something, I mean, there are, in some, there are programmatic elements you can track pretty easily, like training or trade association participation, but when you get beyond that, I think it’s still an emerging, growing area, and for me, I don’t have all the answers to that.
Matt: Erik, what do you think? Because this does seem like as much as we all love to talk about data analytics everywhere we look, this is, it’s tricky to do this at the programmatic level. What would your thoughts be?
Erik: Yeah. I agree with Chuck’s skepticism about, you know, whether the ROI on doing data analytics on pricing really produces much value. And maybe in some businesses or industries, it does, but I just haven’t seen the ROI there. I think the other tools that Chuck mentioned are very useful. They’re fairly traditionally used, but they’re for good reason. They work. One thing that we did recently for a client was, it was, this is a, following a fairly protracted litigation, we were getting together with the plaintiffs, and you’re discussing what are the search terms that you’re gonna apply across your emails and your custodial documents and whatnot. And you arrive on those search terms, which are, you know, at least the ones designed by the plaintiffs, initially very broad, and then of course you narrow them, to get more real.
But one client, what they did, was they now have, I don’t know if it’s run every month or every six months, but they’ll run tweaked versions of those same search terms that were used across the static group of documents that were produced in the document, in a litigation, across their email systems. And, you know, you’ll have, like, the word “price” within, you know, 20 words of “increase” or something like that. And, you know, within 10 words of a competitors’ name. And those will produce, you know, if we’ve gotta narrow these things so that you don’t produce an unusable number of documents. And then, in house, they don’t rely on outside counsel to look at these documents, they’ll do, you know, what they call as a truncated audit process. They’ll pull 10% of those documents out. They get contract lawyers to come in at much lower prices. And they look at those documents to see, are there any issues here? And if there are, then they scratch further below the surface.
And they have found instances where employees have, you know, not been outright engaging in direct communications with competitors, but having, at a minimum, loose language that, if something happened, where documents were then produced, and this is my life, where, you know, there are documents that sound bad but really aren’t indicative of anything bad, that are used with a jury all the time. You know, like, “Oh, my god. If only that person just wrote more carefully, we wouldn’t be in his courtroom today.” Literally…they’re nipping those types of communications in the bud, which are, you know, it’s hugely valuable for a bunch of reasons.
It could be a big issue, too, when you’re looking at mergers and acquisitions, where you’re checking people’s language, and making sure they’re not using words like “dominance,” and all the types of things that people wish they didn’t say when they wanted to merge with the entity that…
So anyways, that’s one practical, not particularly expensive protocol, that can be put in place to monitor communications with competitors, or monitor, you know, frankly, a bunch of other conduct in addition to competitive communications that companies can consider important.
Matt: So, we have only about 5 minutes left here, and we need to wrap it up. I wanted to maybe just ask one closing question of each of you, and I’ll start with you, Erik, and then Chuck. And then Gio, I’ll let you have the last word, but if we have this webinar again in 18 to 24 months, what will we be talking about then that…you know, what’s gonna be new? And I don’t know if it is social justice issues that somehow get applied to antitrust, or more zealous enforcement or whatever, but, you know, if you could look into your crystal ball at what we will be talking about, maybe if each of you take about a minute to give me your thoughts. But Erik, and then Chuck, and then Gio, you know, what do you expect to see?
Erik: Yeah, I think what we will be talking about is an activist FTC, that is engaged in rulemaking, that will give it much broader powers, that are not given to it by any, you know, democratically elected system, and that they will be focusing on vertical issues. They’ll be focused on social justice issues. We saw in the last few weeks the National Grocers Association, and the, I always call it the CSPI, the Center for Science in the Public Interest, sent communications to the FTC and others, encouraging 6(b) studies related to, and I’ll just broadly describe it as they describe it. You know, looking at food deserts, and disproportionately affected areas, and how grocery retailers’ conduct, with contracting and slotting arrangements and all that kind of stuff, are disproportionately affecting certain populations.
I think those are the…you’re gonna see more outreach by private organizations, trying to play into the agenda items of people like Chairperson, Acting Chairperson Slaughter, and that the Commission’s gonna act on those things. And the DOJ will eventually come online, as Chuck said earlier, you know, with a little bit more of a black box now, and they’ll be pretty active, too. Probably more on the merger side. But you’re gonna see a more active government, and a lot harder environment within which for businesses to anticipate what’s gonna happen, and therefore, how to tailor your compliance programs.
Matt: Okay. Chuck, what do you think we’ll be talking about?
Charles: I think it’s an open question. It’s a very good question. I think it’s an open question whether we’ll be talking about actual amendments to U.S. antitrust law. That one can go either way. But I think what’s almost virtually guaranteed, to pick up on what Erik said, is 24 months from now, we will be talking about, I would virtually guarantee, aggressive, you know, these two years of aggressive enforcement in the U.S., at both the FTC and DOJ level, and at the…and at the state level, and internationally, we will be looking at aggressive enforcement, both in Europe, at the Commission level, member state level, including now the UK…CMA, with an expanded remit and expanded budget, and beyond.
So, I think, big question whether the actual laws themselves will change, but I have no doubt that we’re gonna see some aggressive enforcement of, over the next two years, at several layers, both, you know, both state, federal, and international, and then the knock-on effect of that enforcement to corporate compliance programs.
Matt: All right. And Gio, you can give us your closing thoughts, and wrap it up for everybody.
Gio: Yeah, sure. Thanks, Matt. Yeah, I mean, what I predict is we’ll see the continued, I think Erik used the word “activism,” the continued effort of regulators to use the antitrust apparatus to push forward things that they care about. So that can be, you know, diversity and inclusion initiatives. We’re seeing some of that. We’re seeing, you know, the European Green Deal being used to enforce around utilities. We’re seeing stuff around privacy, and, you know, how big tech handles customer data, all using this antitrust apparatus. And again, it’s not only around, kind of, monopoly enforcement, but it’s around that misbehavior, and it’s around anticompetitive actions that may happen at the individual employee level, of, you know, this employee kind of said the wrong thing, but it also may just be, “Hey, this business model is not working right, in our modern age,” and, you know, I think that we’ll see…I think that’s gonna be part of the growth of, you know, this antitrust topic being interesting, and potentially exciting, but also challenging for us as leaders.
So, you know, I would just encourage everybody to, you know, continue to learn about this, figure out how you can take that next step. You don’t have to go from A to Z, but you can figure out what B is if you’re at point A right now, and figure out how you can be prepared for that, you know, that this is gonna… You know, a lot of times, this moves very slow and then very quickly, so you gotta be trying to move while it’s slow, and get ahead of it. So, you know, you can, you know, reference our experts on the panel here, and, you know, kind of learn what they learned. You know, obviously, you can get your own advisors. You should be partnering everywhere you can, with other divisions, within your organization, with senior leadership, partner with your employees, and build that speak-up culture.
There’s, you know, also, we’re seeing, you know, OSHA, being again, get involved with whistleblowers at a new level, and, you know, partner with your vendors, to find out how can they help you be prepared for this, and use tools that you already have in place, to be sharper on this issue. So, anything you wanna add before I wrap up, Matt?
Matt: No, I think there’s, like everybody has said here, it’s been a great conversation, and I really appreciate everybody’s time, but we’ve got a ton of stuff we can keep an eye on from a year forward.
Gio: Yeah, for sure. Well, I do want to thank our panelists. Thank you, Erik, thank you, Chuck, thank you, Matt, for joining us today. This has been a really interesting discussion, and everyone in the audience, I hope that you’ve gotten something out of this, I hope that this has encouraged you, and given you some insight to be a better leader within your organization. As a reminder, we will send around a recording. SHRM credits are available, and keep an eye out for an opportunity that you’ll have, for joining this webinar today, to look at some free training. You can just try it and see if you’re interested in delivering some antitrust training to your employee base, to help make sure that everyone knows, you know, the clear things that they should know to be a partner with you in antitrust compliance. Thanks for joining, everyone.
