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What Every Multinational Company Should Know About … the U.S. DOJ’s Safe Harbor Policy and What the Antitrust Division Requires
Wednesday, June 19, 2024

In October 2023, the Department of Justice (DOJ) announced a new Mergers & Acquisitions Safe Harbor Policy (“Safe Harbor Policy”) designed to encourage acquiring companies to voluntarily disclose criminal misconduct discovered at acquired companies in exchange for certain benefits and protections. Under this policy, there is a presumption that the DOJ will decline to charge acquiring companies that disclose criminal misconduct in the acquired company within a specified “Safe Harbor” period and cooperate in an ensuing investigation.[1] This Safe Harbor Policy requires the disclosure of misconduct in a “timely manner,” which generally means within six months of the closing date of the acquisition (regardless of whether the wrongdoing was discovered pre- or post-closing), and fully remediating the misconduct in a “timely manner,” which generally means within one year from closing. To qualify, the acquiring company also may be required to pay restitution, or disgorgement, depending on the underlying conduct.[2]

In announcing the new Safe Harbor Policy, Deputy Attorney General (DAG) Monaco “instruct[ed] that this Safe Harbor policy be applied [DOJ]-wide. Each part[3] of the Department will tailor its application of this policy to fit their specific enforcement regime and will consider how this policy will be implemented in practice.”[4] Pursuant to DAG Monaco’s instruction, in March 2024 the Antitrust Division quietly implemented changes to its Leniency Policy and Procedures (the “Leniency Policy”) that could impact companies that uncover criminal antitrust violations as part of a merger transaction. Since the U.S. government enforces its antitrust laws against foreign entities where there is a direct, substantial, and reasonably foreseeable effect on commerce in the U.S., even when the conspiratorial action takes place outside of the U.S., multinational corporations should be aware of how the Antitrust Division implemented the DOJ’s Safe Harbor policy and its interaction with the Antitrust Division’s longstanding Leniency Policy.

What is the Antitrust Division Leniency Program?

The Antitrust Division offers leniency[5] to organizations or individuals that promptly[6] and voluntarily self-report their participation in criminal violations of Section 1 or 3(a) of the Sherman Antitrust Act,[7] such as price or wage fixing, bid rigging, and market allocation agreements. A company may receive either Type A or Type B Leniency depending on whether it self-reports conduct before the Antitrust Division has opened an investigation or after the Antitrust Division has opened an investigation but prior to the Antitrust Division obtaining sufficient evidence against the company that is likely to result in a sustainable conviction. The company also must satisfy other obligations to receive leniency, such as prompt reporting, full cooperation, harm remediation, and payment of restitution.[8]Once a company (or individual) self-reports a violation, the Antitrust Division issues a “marker,” which precludes another applicant from receiving leniency for the same conspiracy while that marker is pending.[9]

What Are the Safe Harbor Updates to the Antitrust Division Leniency Policy?

As noted, the Antitrust Division updated its Leniency Policy in March 2024 to comply with DAG Monaco’s directive that each part of the Department “tailor its application of [the Safe Harbor] policy to fit their specific enforcement regime. . . .” In doing so, the Antitrust Division has imposed requirements for reporting criminal antitrust misconduct in order to qualify for the Safe Harbor that appear more challenging to satisfy than other types of criminal conduct discovered in the context of an acquisition.

The updated policy, as implemented by the Antitrust Division, impacts acquirors in a merger or acquisition who discover a potential antitrust violation before closing the deal. Pursuant to the Antitrust Division’s policy:

When an acquiror discloses illegal activity by the acquired entity, a presumption of declination under the Safe Harbor Policy can only be met if the parties:

  1. Satisfy the requirements of the Antitrust Division’s leniency policy.
  2. Voluntarily disclose the misconduct to the Antitrust Division (and the Federal Trade Commission (FTC) if the FTC is reviewing the transaction) before the deal closes.
  3. Agree to suspend any review period until a conditional leniency letter is issued or the marker lapses, and/or they otherwise commit not to close the merger or acquisition for a period of time determined by the Antitrust Division (and, when relevant, the FTC). [10]

Additionally, pursuant to the Antitrust Division’s implementation of the policy, “the presumption of declination applies only to the acquiror, not the acquired entity.”[11]

Notably, the Antitrust Division’s implementation of the Leniency Policy differs from the DOJ’s announced Safe Harbor Policy in at least two significant ways: It requires the acquiror to (1) disclose the alleged conduct before closing the transaction when the conduct is identified prior to closure (as opposed to within six months of closing), and (2) hold open the transaction while the applicant navigates the leniency process (which can take many months and often years) and for some unspecified period after a conditional leniency letter issues or the marker is allowed to lapse.[12] Only when the Antitrust Division concludes that the parties have satisfied these requirements will the Antitrust Division provide a presumption of declination “for potential violations of the Sherman Act by issuing a conditional leniency letter or its functional equivalent, pursuant to the Division’s leniency policy.”[13]

How Will This Leniency Policy Impact Potential Mergers and Acquisitions?

The Antitrust Division’s implementation of the Safe Harbor Policy as part of its Leniency Program raises several questions and challenges for companies that discover potential criminal antitrust violations during an acquisition. Prior to closing a deal, the acquiring company may face legal impediments to reporting criminal conduct learned through “clean room” materials and indeed may be unable to report such conduct due to nondisclosure agreements. An acquiring company likely would not have the authority to conduct an internal investigation for the target company and may have limited access to information that may only suggest the potential of wrongdoing, and no access to witnesses to verify the allegations. If an acquiror does not report, however, and the Antitrust Division determines that the acquiror had sufficient knowledge of the wrongdoing, the acquiror likely would not be eligible for protections under the DOJ Safe Harbor Policy for failing to report promptly (i.e., before the deal closed) and may not meet the prompt reporting requirements of the Antitrust Division’s general leniency policy.

While in many cases an acquiror may have enough leverage to promote self-disclosure, the Justice Manual indicates that this Safe Harbor Policy may also apply to a “merger of equals.”[14] In this case, it may be difficult for an acquiror to insist on an acquiree report and may have to decide whether to disclose with limited knowledge of the potential criminal violation. While it would be more feasible for the target company to report discovered antitrust violations before the deal closes, pursuant to the Antitrust Division’s guidance, it is only an acquiring company that qualifies for the Safe Harbor.[15] Given an acquiring company’s limited ability to compel disclosure, the transaction may be jeopardized if an acquiree refuses to report the misconduct.

The Antitrust Division’s implementation of the Safe Harbor Policy also may cause transactions to face substantial delays, should either the acquiring or acquiree company choose to report potentially criminal conduct. This uncertainty results from the Antitrust Division’s requirement that acquirors report the suspected conduct prior to the deal closing, coupled with the requirement that the transaction remain open and the parties agree to suspend any review periods under the Hart-Scott-Rodino Act until a conditional leniency letter is granted.

Similar safe harbor policies have not been widely adopted in non-U.S. jurisdictions; however, multinational corporations should be aware of relevant leniency policies and how to comply with the various requirements of each (as well as the potential implications) when reporting misconduct in the U.S. discovered during a merger.[16]

[1] U.S. Department of Justice, Deputy Attorney General Lisa O. Monaco Announces New Safe Harbor Policy for Voluntary Self-Disclosures Made in Connection with Mergers and Acquisitions (Oct. 4, 2023), https://www.justice.gov/opa/speech/deputy-attorney-general-lisa-o-monaco-announces-new-safe-harbor-policy-voluntary-self [hereinafter Safe Harbor Policy Announcement].

[2] U.S. Dep’t of Just., Just. Manual § 9-28.99 (2024) [hereinafter Justice Manual].

[3] The Department of Justice includes eight divisions and/or litigating offices: the Antitrust Division, Civil Division, Civil Rights Division, Criminal Division, Environment and Natural Resources Division, the National Security Division, and the Tax Division, as well as U.S. Attorneys’ Offices and the U.S. Trustee Program.

[4] Safe Harbor Policy Announcement, supra Note 1.

[5] Justice Manual, Supra note 2 at§ 7-3.300.

[6] The Antitrust Division defines “promptly” in an FAQ on the Leniency Program to be based on an “assessment based on the facts and circumstances of the illegal activity and the size and complexity of operations of the corporate applicant. It is the applicant’s burden to prove that its self-reporting was prompt.” U.S. Dep’t of Just., Frequently Asked Questions ¶ 22 (Jan. 3, 2023). In some instances, a company may need to self-report prior to concluding an internal investigation of the conduct.

[7] 15 U.S.C. §§ 1, 3.

[8] Justice Manual, Supra Note 2, at §§ 7-3.310, 7-3.320.

[9] Justice Manual, Supra Note 2, at § 7-3.340.

[10]Justice Manual, Supra Note 2, at §§ 7-3.340, 9-28.900 (A)(3)(c).

[11] Id. at § 9-28.900 (B).

[12] Justice Manual, Supra Note 2, at § 7-3.330.

[13] Id. at § 9-28.900 (B).

[14] Justice Manual, Supra Note 2, § 9-28.900 (B)

[15] An acquired company would still be eligible for leniency outside of the Safe Harbor provisions. But the Antitrust Division did not address whether merging co-conspirators could both participate in the leniency program.

[16] To name a few, the European Union, Singapore, South Korea, Argentina, Mexico, Brazil, and Germany all have leniency provisions in their antitrust regimes.

Jacqueline Beveridge also contributed to this article.

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