Answer: NO. (But read the following fine print).

The passage of the Antitrust Criminal Investigation Improvement Act of 2005 (March 9, 2006) authorizing antitrust wiretapping for the first time has generated plenty of comment. And, in some circles, alarm. None of the comments, however, have been authored by practitioners experienced with wiretaps. That is not surprising. Almost all wiretaps are used in drug cases — not an area generally frequented by antitrust lawyers.

To understand why boardrooms are not going to be bugged, a brief primer on wiretap procedure is necessary. A wiretap application is probably the longest, most detailed document drafted by a federal prosecutor. There are several rigorous internal levels of review both within the F.B.I. and Department of Justice. The affidavit in support of the wiretap often can exceed 100 pages. Having it right is critical. While federal judges approve the applications very nearly 100% of the time, the evidence obtained by wiretap can be and sometimes is suppressed post indictment after the affidavit is fly-specked by defense lawyers. Suppression of the fruits of a wiretap always spells doom for the prosecution.

The wiretap statute, 18 U.S.C. § 2518, prescribes the following basic requirements:

(1) probable cause to believe that an enumerated crime —now including antitrust offenses — has been or is about to be committed;

(2) probable cause that communications concerning the offense will be intercepted;

(3) a finding that "normal investigation procedures have been tried and have failed or reasonably appear to be unlikely to succeed or to be too dangerous"; and

(4) that a particular communication facility [e.g., a phone] is or will be used in connection with the offense.

What this means is that there must be a serious showing of "necessity" — that the wiretap is necessary because other methods have failed and the particular telephone will produce evidence of the crime. The primary reason why boardrooms will not be tapped or bugged is that CEO’s and board members almost never are involved in price-fixing. And competitors do not typically call each other from their boardrooms or senior executive suites.

Lower-level employees, however, do fix prices and do make telephone calls to competitors from their sales offices and their cell phones. So: how likely is it that salesmen and sales offices will be tapped or bugged? Answer: Not very.

Consider the following statistics on recent, pre-antitrust authorization wiretaps:

Second, it is relatively easy to make a case for a wiretap aimed at drug offenses. Drug cartels — unlike price-fixing cartels — are universally violent. "Necessity" is a fairly straightforward proposition in drug cases. The main issue generally is whether other methods at least have been tried. Moreover, all federal judges despise drug offenses and are inclined to credit representations of necessity in those cases. Put another way, a judge confronted with evidence of widespread drug dealing and attendant violence probably has a signing pen in hand very quickly. 

There is no reason to expect that an antitrust wiretap application would be viewed in the same way. Antitrust offenses are very different. They are never violent. Rarely, if ever, is there an impending catastrophe that needs to be averted. Current investigation methods — the grand jury subpoena, search warrant and amnesty program — are working very well.

None of this is to say that a wiretap in an antitrust case would never be justified. In fact, it is a certainty that the Division either already has or is looking intently for its first investigation to employ its new weapon. But an enforcement agency that already is noted for care and attention to detail will be even more careful with its first wiretaps. Having an early wiretap suppressed would be viewed as a disaster and a major embarrassment. There is no doubt that the Division will need to enlist other federal prosecutors experienced with wiretaps until the Division develops its own expertise. Supervising a wiretap is a prosecution specialty and not one for beginners. 

What sort of evidence might support an antitrust wiretap?

Surely, similar pricing would not be enough. Other evidence would be needed — tips, amnesty cooperators, for example. That kind of evidence, however, might be the very same kind of evidence suggesting that a wiretap is not necessary. Finding the right case, in other words, may not be easy.

In short, antitrust wiretaps will be:

• relatively rare, especially at the outset
• aimed at sales offices and staff
• based on strong evidence of wrongdoing — not simply suspicion stemming from similar pricing

Does this mean that senior executives should breathe a sign of relief?

Absolutely not. There is a relatively high probability that price-fixing, especially long-term price-fixing, will be detected. The Division’s Amnesty and Amnesty Plus programs have proven to be among the most successful and effective law enforcement tools ever devised by DOJ. Those programs offer a pass to companies (no fine) and individuals (no jail) who are the first to blow the whistle on cartel activity or provide DOJ with information to make a case against others. These are powerful incentives.

According to the Division, they receive roughly two amnesty applications per month and have 56 grand juries currently investigating cartel activity. Scott Hammond, "An Update of the Antitrust Division’s Criminal Enforcement Program, November 16, 2005. http://www.usdoj.gov/atr/public/speeches/213247.

There are, in other words, at least 56 reasons for senior executives to maintain serious and effective antitrust compliance programs.

For further information, contact Jim McGinnis, a partner in the firm’s antitrust and white collar groups who specializes in international cartel cases. Mr. McGinnis is a former federal prosecutor who supervised wiretaps in addition to trying cases and arguing appeals. He can be reached at: jmcginnis@sheppardmullin.com or 415-774-3294.