“Extraordinary Remedy” in Criminal Deferred Prosecution Agreements

Two recent criminal deferred prosecution agreements (DPAs) contained what the DOJ described as an “extraordinary remedy” which “forces the companies to divest a business line that was central to the misconduct.” These novel terms along with large criminal fines raise questions about whether similar provisions may be imposed in future Antitrust Division cases.

Normally criminal charges are resolved at trial or by plea agreement. Occasionally, the Department of Justice may resolve a criminal investigation by a deferred or non-prosecution agreement, both of which are “an important middle ground between declining prosecution and obtaining the conviction of a corporation.” If specific terms included in a deferred prosecution agreement are completed, the government will dismiss charges. If the terms are not satisfied, the company has usually agreed to the facts to support a conviction.

Two pharmaceutical companies admitted on August 21, 2023, to a Statement of Facts which confirmed agreements to suppress and eliminate competition (a) “for certain drugs by agreeing with competitors to refrain from submitting bids and offers to sell to certain customers” and (b) “by agreeing to increase and maintain the price of” a certain drug.

The first company agreed to pay a $225 million criminal fine and to donate certain products to humanitarian organizations valuing at least $50 million. The second company agreed to pay a $30 million criminal fine. Both companies agreed to certain Cooperation Obligations in the ongoing investigations, recognizing that the failure to do so would void the agreements. The first company also agreed to a corporate monitor, and both companies agreed to modify and report on their compliance programs. If convicted on the charges, including if the DPAs are breached, the companies risk possible mandatory debarment from federal health care programs.

These cases raise important questions and highlight key takeaways:

• Prior to 2019, the Antitrust Division rarely entered into a DPA. The first occurred in 2013 as part of the LIBOR investigation. In 2019, the Antitrust Division announced a “new approach” to allow DPAs “when the relevant factors, including the adequacy and effectiveness of the corporation’s compliance program, weigh in favor of doing so” as part of “an important middle ground between declining prosecution and obtaining the conviction of a corporation.”11 Under this “new approach,” an increasing number of DPAs have been granted.
• These cases raise questions about whether divestiture or other “extraordinary” remedies may be imposed in future cases. By avoiding a criminal conviction and possible debarment, each company was asked to admit to the conduct, pay a large fine, and agree to novel and strict terms.
• There are implementation questions in accomplishing the divestiture. For example, one of the DPAs notes that a divestiture trustee may be appointed based on the failure to timely divest. The divestiture may include the sale of the divested assets. The terms may restrict any contractual relationship with other companies engaged in the conspiracy. It will be important to monitor these and other divestiture issues raised by these novel cases.
• In prior cases, DPAs were negotiated before charges were filed. In these cases, DPAs were reached after charges were filed. Does this signal an opening to negotiate DPAs post-charging?

(This article originally appeared in the March 2024 Cartel Enforcement Trends and Developments newsletter.)