The US Congress recently passed a bill which preserves the restriction of damages against immunity applicants defending private enforcement proceedings to actual harm suffered. It has done this by removing the sunset clause in the Antitrust Criminal Penalty Enhancement and Reform Act of 2004 (ACPERA), an essential tool in the Department of Justice’s Corporate Leniency Program and antitrust enforcement.
This post outlines some key features of US competition law and enforcement before delving into the importance of the ACPERA regime and the implications of making it a permanent part of US antitrust enforcement.
Relevant US competition laws
Among the key pillars of the US federal competition law regime are the Sherman Act 1890 and the Clayton Act 1914. Both the Federal Trade Commission (FTC) and the US Department of Justice (DOJ) Antitrust Division enforce federal antitrust laws.
Treble Damages Regime
An important feature of US antitrust law is the treble damages regime established by section 4 of the Clayton Act 1914, now codified in 15 U.S.C 15. This section allows a private party plaintiff injured by an antitrust violation to sue for treble damages. The existence of this power is one reason that private actions have played an important role in US antitrust enforcement.
There are several rationales behind the treble damages regime, including to:
- remediate the plaintiff for injury;
- act as a deterrent against cartel and other anticompetitive activities;
- encourage injured parties to bring private actions and therefore transferring some of the antitrust enforcement burden to the private sector and away from the regulator, providing incentives for private parties to expose cartels that might not otherwise have been pursued in court; and
- serve a punitive function, punishing violators of antitrust law and recovering from them the benefit obtained as a result of the contravening conduct.
Antitrust Criminal Penalty Enhancement and Reform Act
One of the DOJ’s most important tools for detecting and responding to cartel activity is its Antitrust Division’s Leniency Program, established in 1978 and most recently revised under its Corporate Leniency Policy in 1993. This program allows corporations and individuals to avoid criminal convictions, fines and jail time by being the first corporate or individual participant to self-report their involvement in a cartel and by fully cooperating with the DOJ and complying with other conditions thereafter. Apart from its focus on criminal matters, this is similar to the ACCC immunity and cooperation policy for cartel conduct, under which it can also make recommendations to the Commonwealth DPP (in relation to criminal prosecution).
Previously in the US, a major deterrent to self-reporting, however, was the threat of treble damage lawsuits.
Congress remedied this by enacting the Antitrust Criminal Penalty Enhancement and Reform Act of 2004 (ACPERA). Under ACPERA, a person covered by an antitrust leniency agreement with the DOJ Antitrust Division, who provides satisfactory and timely cooperation to the plaintiff in a civil action for a violation of antitrust law, would only be liable for the actual damage sustained by the plaintiff (e.g. damages attributable to a leniency applicant’s own sales to the plaintiff), and not treble damages. In conjunction with removing the threat of treble damages for a person who cooperates, ACPERA increased penalties for violations of antitrust law including increasing maximum statutory fines for corporations and individuals from $10,000,000 to $100,000,000 and $350,000 to $1,000,000 respectively and the maximum prison sentence from three years to ten years. However, the Act provided for a sunset clause of 5 years after the date of enactment, being renewed in 2009 and in 2010 extended for 10 years to 2020.
On 25 June 2020, both the House of Representative and the Senate passed an identical bill repealing ACPERA’s sunset provision. Pending the President’s signature, the bill will effectively make ACPERA a permanent feature of the US’ antitrust regime, subject to future amendments or repeal by Congress.
If signed, ACPERA will continue its role in substantially strengthening the Antitrust Divisions’ ability to detect and prosecute anticompetitive cartel conduct in the US. Whilst ACERPA has been criticised for being unclear in defining the scope of key provisions such as “satisfactory cooperation’ and “timeliness”, not providing enough certainty whether a leniency applicant’s cooperation will be successful and not sufficiently reducing civil damages, it also contributed to over $9 billion in fines and penalties and jail terms for more than 250 individuals as a result of the Antitrust Division’s criminal prosecutions from 2010-2019. The continuation of the ACERPA framework for incentivising self-reporting means the DOJ retains one of its most valuable tools for enforcement of antitrust laws.