On January 26, 2018, the head of the Antitrust Division, Makan Delrahim delivered remarks to the NY State Bar where he discussed his views on behavioral remedies and consent decrees.
He noted that the Division’s recent consent decrees reflect several provisions designed to ensure the Division can meaningfully enforce them. Delrahim stated that the DOJ’s approach will be to enter into consent decrees only when the DOJ can effectively enforce them, and when the DOJ enters into consent decrees, to enforce them effectively.
Consent decrees should be used consistent with a view of the Antitrust Division as a law enforcement agency, not a regulatory one. Faced with a violation, the Antitrust Division has an obligation to the public to ensure any settlement contains meaningful relief and that the settling parties obey its terms. He said that “filing a consent decree that would be difficult to enforce certainly minimizes litigation risk and provides for a quick win in the press, but it goes without saying that the unenforceable decree provisions would not vindicate the Division’s duty to protect competition.”
Delrahim spoke about the difficulties of enforcing behavioral conditions as it puts enforcers and corporate counsel in an untenable position—“how can a small team of lawyers keep capable executives from doing what executives are trained to do, day after day for years?” The free markets depend on businesses taking advantage of their assets to maximize their returns. The risks and penalties of a civil consent decree violation would need to be high enough to deter such conduct. Meanwhile behavioral conditions are fundamentally regulatory, imposing government supervision on what should be free markets. Antitrust enforcers have long preferred structural remedies, in large part for these reasons.
Delrahim announced that all new consent decrees will contain a set of procedural provisions designed to improve their function and enforceability that will be used in future decrees. First, a key provision relates to the burden of proof should the defendant violate the decree and the DOJ move for contempt. The standard for proving a civil antitrust violation is a preponderance of the evidence, however, the default rule for seeking contempt on a settlement is clear and convincing evidence. The new terms contract for the same preponderance standard for decree violations as for the underlying offense and for decree interpretations. (Before these changes, it was difficult for the DOJ to investigate and prove violations of the decree.) This provision will make enforcement of decrees substantially easier. The second decree provision relates to the common practice of parties to a contract agreeing to more efficient fee shifting rules. Before the change, the Division had to bear the costs of decree enforcement investigations and proceedings. The Division’s new fee-shifting provision requires defendants to agree to reimburse the DOJ for attorneys’ fees, expert fees, and costs incurred in connection with any successful consent decree enforcement effort. (This provision should encourage speedy resolution of any potential violations as there will be no advantage for the defendants to delay). Third, a new provision will allow the Division to apply for a one-time extension of the term of the decree, if a firm is found to have violated the decree. (This provision discourages violations.) Fourth, a new term will be included that permits the DOJ to terminate the decree early upon notice to the Court and the defendant(s), if necessary.
The DOJ has adopted new terms in recent consent decrees that enhance DOJ’s ability to enforce its settlements by lowering the evidentiary standard for proving a defendant has violated the terms of a settlement agreement. In the past, the burden of proof in civil contempt cases sometimes forced DOJ to conduct burdensome investigations to prepare its contempt case and encouraged defendants to delay and “exacerbate the situation. In addition to lowering the evidentiary standard, the new consent decree terms require defendants to pay the costs of DOJ enforcement efforts and allow DOJ to extend the term of the decree or terminate it upon notice to the court and defendants. These new terms increase DOJ’s leverage over settling in the event there is a dispute about compliance with the consent decree. Indeed, the fee-shifting provision should encourage speedy resolution of consent decree violation investigations and compensate taxpayers for the cost of enforcement. Permitting the DOJ to extend the decree if a court determines defendants violated the decree is another hammer. It appears that the DOJ will insist on these new terms to be included in all civil merger and non-merger consent decrees so there really will be no negotiation. These new provisions are good for the DOJ but not so good for settling parties because there will be less flexibility in negotiating compliance details and greater potential risks associated with any future violations.