Compliance Glossary

Leniency

In the United States, the Antitrust Division of the Department of Justice (DoJ) takes charge of detecting and investigating corporate cartel activities. To support this mandate, the DoJ enacted two leniency policies: a Corporate Leniency Policy in 1993, and an Individual Leniency Policy in 1994. These policies offer leniency to entities who voluntarily self-report antitrust violations, if they meet certain conditions.

What is Corporate Leniency?

The DoJ Corporate Leniency Policy (also known as Corporate Amnesty or Corporate Immunity) was issued on August 10th, 1993. Leniency is defined as “not charging a firm criminally for the activity being reported”. Under the policy, corporations who come forward to report illegal antitrust activity may be granted either type A or type B leniency depending on the circumstances.

Type A Leniency: Leniency Before an Investigation Has Begun

A corporation must meet 6 conditions to qualify for Type A Leniency:

  1. It must report illegal activity that the antitrust division has not received information on from another source.
  2. It must have taken prompt and effective action to terminate its role in the illegal activity.
  3. It reports its actions completely and cooperates with the DoJ.
  4. It confesses wrongdoing as a corporate act, not as the isolated confession of an individual.
  5. It makes restitution to any injured parties.
  6. The corporation was clearly not the leader of the illegal activity and did not coerce others to participate.

If a corporation does not meet all 6 of these conditions, it fails to qualify for Type A leniency but may still qualify for Type B leniency.

Type B Leniency: Alternative Requirements for Leniency

A corporation that is disqualified from Type A leniency may receive Type B leniency by satisfying these seven conditions:

  1. The corporation is the first entity to qualify for leniency with respect to the illegal antitrust activity that is reported.
  2. The antitrust Division does not yet have sufficient evidence to obtain a conviction against the corporation.
  3. The corporation takes prompt action to terminate its role in the illegal activity.
  4. The corporation reports its actions completely and cooperates with the DoJ.
  5. The corporation confesses wrongdoing as a corporate act.
  6. The corporation makes restitution to injured parties.
  7. The antitrust Division determines that granting leniency would not be unfair to others.

Leniency and Non-Antitrust Crimes

The DoJ corporate leniency policy also covers non-antitrust crimes that are “acts or offenses integral to” the antitrust violation. There are several potential examples here:

  • Parties who collaborate in an antitrust violation may also be guilty of conspiracy.
  • Parties who conspire to defraud a bidding process may commit mail or wire fraud in the process of submitting their bids.

Under the policy, the DoJ states that it will not prosecute these offenses if they occurred prior to the time when the illegal activity was reported – however, this clause does not prevent other federal or state prosecuting agencies from criminally prosecuting these offenses.

What is the “First in the Door” Policy?

A notable feature of corporate leniency policy is that only the first corporation to report an illegal antitrust activity to the DoJ can qualify for leniency with respect to that activity. This creates a massive incentive for corporations to apply for leniency as soon as they become aware of their involvement in antitrust violations.

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