As a result of the FTC’s “Operation Short Change,” a number of firms and individuals have settled claims that they swindled millions from consumers by making unauthorized charges and debits to their bank accounts. The FTC press release highlights that, in addition to a $2.08 million fine (judgment suspended due to bankruptcy filing), the FTC barred the principal from engaging in a number of related business activities:
Under the settlement Greenberg is banned from owning, controlling, or consulting for any Internet-related business that handles consumers’ credit card or debit card accounts. He also is prohibited from making unauthorized charges to consumers’ accounts, making false or misleading statements while selling any goods or services, and using any false or assumed name, including an unregistered, fictitious company name, in his business dealings.
As Douglas Ginsburg and I point out in our piece on Antitrust Sanctions in Competition Policy International, debarment of this sort is common in these FTC enforcement actions, at the SEC for other forms of white collar crime (e.g. debarring a director from sitting on the board of a publicly traded company), and as an antitrust sanction for naked price-fixing in a number of countries, e.g. in the U.K. pursuant to the Company Directors Disqualification Act of 1986.
Debarment, however, is not currently in the mix of antitrust sanctions employed by the DOJ in criminal antitrust enforcement actions. In the article, we make the case that debarment is desirable from an optimal deterrence perspective:
The U.S. Department of Justice should consider taking a similar approach to sentencing individuals convicted of a criminal violation of § 1 of the Sherman Act. We are aware of no reason for which the Department needs to wait for statutory authority to get started, as did the SEC, by negotiating consent orders providing for debarment.74 Prosecutors might, for example, if the conditions for leniency are met, agree to allow individual defendants to reduce or avoid jail time, in return for debarring them from working as a manager or director of any publicly traded corporation or for any company in a particular industry if it is either located in or sells into the United States.75
Negotiated orders of debarment would allow the Antitrust Division to accrue much of the benefit of a prison sentence—publicizing the offense and keeping the offender from recidivating— without undertaking the risk and cost of a criminal trial. The period of debarment should be calibrated to have the same average deterrent effect as jail.76 Further, as we have pointed out, debarment would bolster currently weak reputational penalties, thereby reducing the need for individual fines, which are less likely to deter efficiently because of individuals’ wealth constraints.
