Antitrust policy in U.S. law ought to be promoted by two complementary bodies of law: the remedial provisions of antitrust law itself and the compliance obligations imposed on managers by corporate fiduciary law. Antitrust law provides specialized incentives to promote compliance. Automatic trebling of antitrust damages in civil case and fee-shifting for prevailing plaintiffs serve as in terrorem incentives for corporate managers to ensure that their employees comply with antitrust laws. Criminal antitrust sanctions, (1) including potentially large fines and incarceration, contribute another source of compliance incentives. In recent years, federal sentencing guidelines for organizational crimes, including criminal cartel offenses, magnify sanctions for failures to maintain "effective compliance" programs. (2) Civil antitrust risks are enormous and include not only the treble damages exposures but also the high costs of defending discovery-intensive litigation. In these various ways, antitrust remedial provisions are designed to deter violations and to encourage compliance. On the corporate law side, managers owe fiduciary duties of care, loyalty, and good faith to the company and its shareholders. These duties, as articulated in cases like In re Caremark International Inc. Derivative Litigation, (3) require corporate managers to make a good faith attempt to ensure that corporate activities under their supervision comply with applicable laws. Failure to discharge these fiduciary duties faithfully can expose board members and corporate officers to personal liability to the corporation through the mechanism of derivative litigation. (4) Since the company's losses resulting from antitrust violations can be substantial, director derivative exposures are commensurately high. Thus, the combination of antitrust law and fiduciary law potentially operates to advance the broad objectives of competition policy embraced by antitrust laws.
In practice, however, both of these strands have failed to deter antitrust law violations, which continue to occur with disappointing frequency. Some reasons for this failure seem obvious enough. Ever-increasing monetary sanctions, both criminal and civil, place the risks and ultimate costs of unlawful cartel activity on unwitting shareholders rather than board members or senior managers. Since shareholders have no control over the conduct of corporate personnel, imposing the cost of employee noncompliance on shareholders cannot affect anyone's conduct. Furthermore, even if shareholders could influence corporate compliance policies, large antitrust fines barely affect the individual shareholders of public companies because the economic burden of the fine is so broadly dispersed. (5) Criminal monetary fines levied on corporate defendants thus provide no direct incentives for boards of directors to implement sufficiently effective compliance measures to counteract the powerful economic incentives to cartelize. The penalty, if the company's misconduct is even detected and successfully prosecuted, is borne by others who have no particular economic incentive to care very deeply.
The failure of harsh antitrust sanctions is a consequence of their misdirection, loading burdens only on individuals who have no role ex ante in setting corporate compliance policy. For example, when Furukawa Electric Co., Ltd., recently agreed to pay a near-record $200 million criminal fine for price fixing in the automotive parts market, the payment out of the corporate treasury inflicted its most direct pain upon the owners of the company, not its board of directors or senior managers. (6) Three individual employees were also convicted under the plea bargain. These individuals had never had a role in fashioning corporate governance policy. They were managers of a sales division or a subsidiary of Furukawa. The three mid-level managers, Japanese nationals, agreed to plead guilty and to serve prison time in the United States ranging from a year and a day to 18 months. …