As the automotive and mobility industry continues to grow under the watch of a new US presidential administration, it is important for key players to better understand the government agencies charged with enforcing the rules governing the market’s potentially criminal activities and the administration’s existing enforcement priorities. Here we discuss how the Biden-Harris administration’s enforcement priorities are likely to impact the automotive and mobility industry, as well as focus on special purpose acquisition companies (SPACs), possibly the newest frontier for parallel criminal and civil enforcement.
The US Department of Justice (DOJ) encompasses myriad divisions and offices. A survey of enforcement actions announced in recent years—including a series of cases involving emissions control manipulation and product safety concealment—indicates that automotive and mobility companies are most likely to interface with the following:
Emphasis on Climate
The Biden-Harris administration has voiced its commitment to combating climate change, which will impact the auto industry, through these proposed actions:
Pro-Enforcement Antitrust Policy
The Biden-Harris administration has signaled its pro-enforcement stance toward antitrust in several ways, including the following:
Global Corruption Stance
The Biden-Harris administration has announced its offensive stance on anticorruption enforcement, with intentions to do the following:
As enforcement actions against individuals and companies in the automotive and mobility space have persisted over the past several years, the importance of a company’s compliance program—both at the time of any alleged misconduct as well as at the time of any resolution—has increasingly been emphasized by the DOJ and can play a critical role in interactions with the government.
On June 1, 2020, the DOJ Criminal Division updated its Evaluation of Corporate Compliance Program guidance, which had been issued roughly a year prior to set forth a framework for how prosecutors should evaluate corporate compliance programs, consistent with the Filip Factors. The 2019 guidance incorporated and expanded upon the sample question format from the earlier Fraud Section guidance, providing examples of how prosecutors would probe compliance program adequacy. In parallel with the guidance, the Criminal Division trained its prosecutors (rather than relying on a single compliance counsel role), bringing in outside experts to provide a range of perspectives and insights on difficult compliance topics.
The 2020 update to the Evaluation of Corporate Compliance Program guidance brings greater emphasis to the following:
Recent resolutions involving the industry have largely focused on emissions and product safety, with investigations into the alleged misreporting of emission test results to the sale of defective airbag inflators. The increasing emphasis on DOJ’s evaluation of a company’s compliance program can be seen in many related statements of facts found in the resolutions. These resolutions provide helpful lessons for the industry, such as the following:
There has been an increase in electric vehicle startups and auto tech companies going public through SPACs. There are a number of benefits to going public through a SPAC, including that the marketing process provides an avenue to discuss projections and forward guidance. This is especially helpful in justifying future revenues because the market for electric vehicles has untapped potential. Despite their popularity, however, it is important to note that the fast-moving nature of SPACs may make them targets for investigations, as we recently have seen. The accelerated timeline to go public creates pressure for investors to move at a fast pace. This, coupled with the risk of having to return the seed money to investors if the company does not become public, may result in inadequate due diligence. There may also be potential securities fraud charges resulting from representations made to potential or actual investors about the health of the newly merged company.
For more on criminal enforcement issues and trends impacting global automotive businesses, check out our Automotive Hour presentation, White Collar and Government Enforcement Developments Affecting the Automotive and Mobility Industry. If you are interested in learning more about SPACs, tune into our upcoming program, SPACs and Other Vehicles for Investment in the Automotive and Mobility Sectors.