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US senator Elizabeth Warren has urged the Department of Justice to reverse a new policy aimed at encouraging companies to report misconduct at businesses they buy, calling it a “massive step backwards” in the clampdown on anti-competitive deals.
In a letter sent on Thursday and seen by the Financial Times, the Democratic senator from Massachusetts said the “new policy represents a betrayal of the department’s mission ‘to uphold the rule of law’, and a massive step backwards in the Biden administration’s approach to preventing anti-competitive mergers”.
She added: “This policy would reduce competition and encourage corporate crime — and you should act quickly to reverse it.”
The letter comes a day after Lisa Monaco, deputy US attorney-general, announced an enforcement policy that would offer “safe harbour” to companies that voluntarily disclosed malfeasance at businesses they acquired.
Monaco had told the FT that the measures sought to “incentivise that type of responsible corporate behaviour”. The DoJ did not want to discourage companies with strong compliance programmes from purchasing businesses that may “have a history of misconduct”, she added.
Warren disputed this argument, however, saying the measures “would incentivise corporations to engage in illegal activity of all kinds — knowing that they could simply wipe the slate clean during a merger”.
The senator, a strong advocate of the tougher antitrust enforcement stance adopted by the Federal Trade Commission and the DoJ under President Joe Biden, also said the plan “makes it easier for companies that have engaged in illegal activity to get bought up — reducing competition and eliminating penalties for bad behaviour”.
In her speech on Wednesday, however, Monaco stressed that the policy would not affect civil merger enforcement and that each DoJ unit would “tailor its application of this policy to fit their specific enforcement regime”.
She added that incentivising self-disclosure could “result in a virtuous cycle: by giving a path to [safe harbour] to companies trying to do the right thing, we are able to identify and prosecute the individuals who are not”.
A DoJ spokesperson confirmed the department had received the letter but declined to comment further as per “standard practice”.
She reiterated that the policy would not affect civil merger enforcement, adding: “This is about driving and promoting compliance and holding individual wrongdoers accountable.”
Under the policy, the DoJ will not bring charges against an acquirer that reports wrongdoing committed by a company it buys within six months of the deal closing, whether the illegal activity was identified before or after the purchase.
Self-disclosing companies must then rectify the misconduct within a year of the deal’s completion, although the precise timelines are subject to prosecutors’ discretion.
The policy change comes as the number of big agreements resolving criminal cases against companies that have national security implications had doubled since last year, Monaco said on Wednesday. “We are operating in a new era of greater complexity, greater geopolitical risk for corporations, multinational corporations in particular,” she added.
Since taking office in 2021, Monaco has focused on boosting companies’ voluntary self-disclosures as part of a broader set of enforcement reforms that seek to crack down on corporate malfeasance.
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