Department of Justice Civil Investigative Demands and Hidden Risks

Jarod BonaPartner, Bona Law PC

Author: Jon Cieslak

The United States Department of Justice Antitrust Division recently announced changes to its Civil Investigative Demand (CID) forms and deposition process.  While these changes are cosmetic—the Antitrust Division acknowledges that the changes “are consistent with long-standing division policies”—they serve as a good reminder of risks that always exist when communicating with the government.

Background on Civil Investigative Demands

CIDs are one tool the Antitrust Division uses to conduct investigations into potentially anticompetitive conduct.  The Antitrust Division is authorized to issue a CID to any person or entity that may have documents or information “relevant to a civil antitrust investigation.”  15 U.S. Code § 1312.  CIDs can require the recipient to produce relevant documents, answer interrogatories, and/or give oral testimony through a deposition.  Id.  The Antitrust Division issues CIDs in a variety of civil proceedings, including investigations related to corporate mergers as well as investigations into potential anticompetitive conduct.  Any person or company who may have relevant information, including both the targets of the investigation and third parties—such as potential victims of the anticompetitive conduct being investigated—can receive CIDS.  Id.

The Difference Between Civil Investigation Demands and Subpoenas

It is important to recognize the differences between CIDs and subpoenas issued by federal grand juries.

CIDs are issued directly by the Department of Justice, and are only used in civil investigations in which the Antitrust Division has determined that a criminal investigation would be inappropriate.

The Antitrust Division uses grand jury subpoenas, by contrast, when it has determined that the investigated conduct merits criminal sanctions.  According to the Antitrust Division’s current policy, it conducts criminal investigations and prosecutions “in cases involving horizontal, per se unlawful agreements such as price fixing, bid rigging, and customer and territorial allocations.”  Antitrust Division Manual, Fifth Edition, at III-12 (available at https://www.justice.gov/atr/file/761141/download).

The Antitrust Division’s Changes to CIDs

The Antitrust Division’s changes will remind CID recipients and deponents that the information they provide can be used by the Department of Justice in other matters.  Specifically, the Antitrust Division stated that:

all CIDs issued by the Antitrust Division — including CIDs for documentary material, written interrogatories, oral testimony, or any combination thereof — will now provide notice to all recipients that their documents, answers to interrogatories, and/or testimony may be used by the Department of Justice in other civil, criminal, administrative, or regulatory cases or proceedings.

Antitrust Division lawyers will provide a similar notice on the record at the outset of depositions.

The key takeaway here is that once a party provides information to the Antitrust Division in response to a CID, the entire Department of Justice can use that information in any other matters it may be investigating or prosecuting.

Beware of Hidden Risks When Responding to a CID

The fact that the Antitrust Division can use CID responses in other matters is important because federal antitrust laws provide for both civil and criminal penalties for anticompetitive conduct, Northern Securities Co. v. United States, 193 U.S. 197, 401 (1904), and the Antitrust Division has long enforced the antitrust laws through both civil and criminal proceedings.  So while the recipient of a CID can be sure that the Antitrust Division is engaged in a civil investigation, there are no guarantees that it will stay that way.  As the Antitrust Division is now reminding CID recipients, its civil investigations can become, or lead to, new criminal investigations.

In fact, this is not some theoretical possibility.  I recently represented a company in a criminal investigation which arose from a completely unrelated merger investigation.  My client was not involved in the merger, but one of the merging parties produced email communications with my client to the Antitrust Division.  Those emails caused the Antitrust Division to launch a separate criminal investigation.  In another matter, a company applied to the Antitrust Division’s leniency program after discovering anticompetitive conduct while preparing pre-merger disclosures pursuant to the Hart-Scott-Rodino Act.  Accordingly, civil investigations can and do lead to criminal investigations.

This highlights how seriously companies should take Antitrust Division CIDs and, really, any communication with the Department of Justice.  It is crucial that CID recipients take steps to protect against potential civil liability, but also potential criminal sanctions such as fines and prison sentences for employees involved in the anticompetitive conduct.

Most importantly, a CID recipient should retain experienced antitrust counsel to represent them regarding the CID.  That counsel can take steps to mitigate risks, including trying to determine whether the recipient is a target of the Antitrust Division’s investigation, negotiating the scope of the CID to limit burden on the recipient, conducting an internal investigation to identify the scope of the risk, strategizing ways to resolve the investigation favorably, and ultimately responding to the CID.

Image by Sarah Richter from Pixabay