by Harry First*
Corporations sometimes argue that individuals who engage in cartel behavior are “rogues,” a term often used in two different ways. One is the dictionary sense of a “rascal or scoundrel,” one who “wanders apart from the herd” or varies “markedly from the standard.” The other is a low-level employee who participates in cartel behavior out of view of management. Deterring such people requires an understanding of the psychology of rogue behavior, but it is the rogue who is at fault, not the corporation. Indeed, it is this conclusion that makes “rogues” so attractive an explanation to corporations.
The first question is whether rogues really exist. The conventional wisdom is to be skeptical of the rogue explanation. Brent Snyder, the current Deputy Assistant Attorney General in charge of criminal enforcement in the Antitrust Division, has likened the rogue to the mythical “Yeti.” Experienced defense counsel seem to share that view. One defense lawyer to whom I spoke could recall only one case in which an obscure employee managed to hide his participation in a cartel. Another defense lawyer, who represents non-U.S. employees in U.S. criminal investigations, dismissed the idea that cartelists are deviants. In that lawyer’s experience cartel participants are more likely to be normal business people who find themselves in a job where their predecessor had participated in a cartel and where they believe that their actions, like their predecessor’s, advance their employer’s interests.
Interestingly, there are not much hard data about those who, in fact, participate in cartels or what motivates them or whether these people might be rogues. In an initial effort to remedy this deficiency, I turned to U.S. Justice Department Antitrust Division press releases issued between March 2014 and March 2016 that mentioned individuals. Press releases provide a different cut of information than indictments because they include case dispositions (pleas and sentences) as well as charges, meaning that they cover cartel participation that goes back over a more extended period (individuals who showed up twice were not double-counted). My goal was to get an initial impression of the characteristics of cartel participants and to see what observations might come from this rough-cut of data.
My first finding is the heterogeneity of the cartels and the participants. During this period ninety-eight individuals were mentioned. Of these, approximately half were involved in major international cartels (twenty-seven in auto parts, seven in Libor, seven in ocean shipping, five in cathode display tubes, one in marine hose) and half in relatively smaller domestic cartels (thirty-six in public home foreclosure auctions, five in school bus transportation in Puerto Rico, three in heir location services, two in water treatment chemicals, one each in tax liens, hazardous waste, wall posters, oil and gas leases, and municipal bonds). The nationalities of the participants reflected this spread. Forty-eight appear to be U.S. citizens (this includes five from Puerto Rico), thirty-nine appear to be Japanese nationals. There was far less representation from other countries (five from the UK, three from Germany, and one each from Australia, Canada, Italy, and Taiwan).
My second finding is the consistency of corporate position. Taking out the home foreclosure auctions, which appear to be the activity of non-corporate actors, not one person mentioned during this time period was in a low-level corporate position. Their described positions varied—executive, general manager, group and department manager, high-level manager, director of sales and marketing—and thirteen of them were identified either as president, CEO, owner, or chairman. These are not line-level employees.
The finding of heterogeneity of cartel type and nationality should give pause to those who think that we could easily generalize about who joins cartels and why. This heterogeneity may indicate that compliance efforts in multinational corporations may need to pay more attention to varying national business cultures. It may be that the deterrent message of individual prosecutions is more difficult to transmit across countries than the Justice Department assumes.
The second finding gives some support to the argument that cartel participants are not likely to be rogues, in either sense. The employees mentioned in these press releases were high-level corporate actors, not the sort of people whose conduct is “markedly different from the standard” or who are operating in obscure low-level positions.
Nevertheless, the data also suggest that the rogue idea shouldn’t be dismissed completely. The most likely rogues may actually be those who are at the top of the corporate structure and who operate in a way that seems to pay little attention to legality. For example, included within this group is at least one CEO of a major corporation (Aubrey McClendon of Chesapeake Energy) who was charged with rigging bids on oil and natural gas leases, conduct in which he had reportedly engaged before. Such corporate actors would present particular problems both for deterrence theory and compliance, although their corporations would be unlikely to escape prosecution unless they were in a position to cooperate in the prosecution of their CEOs (which presumably was the case for McClendon’s company, which apparently cooperated and has not been charged).
The bottom line for compliance, at least based on these data, is not to tailor compliance efforts to a search for rogues.
* I thank Michael Casaburi, NYU LL.M. 2016, for his invaluable research assistance. A fuller version of this post is available.
Harry First is the Charles L. Denison Professor of Law and Co-Director of the Competition, Innovation, and Information Law Program at NYU School of Law.
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