In today’s antitrust world the level of the financial penalties, the trend towards criminalization, the fear of damages to corporate or individual reputations, morality or a strong culture of compliance are the main arguments in favour of establishing effective compliance programmes. Compliance programme should consequently be part of the agenda of any company, and should cover antitrust as well as a number of other legal fields, such as bribery, tax, corruption, health and safety, ethics. While there is an increasing consensus on the benefits of compliance programmes, such benefits are associated only with efficient and effective programmes. Companies must make efforts when designing compliance programmes to ensure that they are tailored to the specific needs and structure of the company.
Keywords: compliance, leniency, amnesty, immunity
In recent years, intense competition enforcement by antitrust agencies has brought a renewed focus on compliance programmes. The amount of fines imposed for antitrust infringements – particularly cartel violations – has significantly increased in most jurisdictions, and at the same time some jurisdictions have moved towards criminalisation of cartel violations. These factors resulted in an increased awareness by companies of the harsh legal consequences stemming from anticompetitive conduct and of the fact that breaching competition law increasingly exposes them to a “stigma” from public opinion. Well-designed compliance programmes provide advantages to companies in terms of increasing the rate compliance with the legal framework and make it easier to obtain positive ratings. Companies should not only adopt such programmes but should review them and update them on a regular basis to ensure effective prevention and detection of antitrust violations.
This article provides a short guidance on how to create an efficient and effective antitrust compliance programme, and also highlights the challenges that companies may face.
What are the main objectives of an antitrust compliance programme? Why is it important for a company?
An effective antitrust compliance programme can help companies avoid anticompetitive conducts or identify potentially anticompetitive activities soon enough to eliminate or reduce their negative consequences under competition laws. Compliance programmes are important tools not only for large corporations, but for small and medium-sized enterprises (SMEs) as well. Managers in smaller companies can capitalise on the manageable size of their companies and address most or all employees personally to encourage a compliance culture in a more hands-on manner. Managers in large companies, however, may have to invest more time and resources in compliance efforts. It is clear, however, that effective programmes can result in an extensive savings for companies of all sizes, both by avoiding infringements in the first place and the negative reputational impact associated to them, but offering them an opportunity to take advantage of leniency or amnesty programmes. (1)
What are the main challenges in establishing an efficient programme?
The literature suggests that the creation and implementation of a sound antitrust compliance programme must rely on “the 3 D’s” – Design, Deterrence, and Detection.(2) The OECD Compliance Roundtable (3) added two “Cs” and pointed out that the main objectives and principal features of the good compliance programmes can be summarised in: (i) Commitment, (ii) Culture, (iii) Compliance know-how and organisation, (iv) Controls and (v) Constant monitoring and improvement.
It is widely accepted that there is no “one size fits all” antitrust compliance programme. The characteristics of each industry, the market dynamics or the regulatory background will play a key role in tailoring a company’s effective and efficient programme. The potential risk areas of the company have to be carefully identified and assessed. That could be done by product, by job description, by geographic area, or with other specific characteristics in mind. In particular, activities which bring competitors in contact with each other, for example at trade association meetings or similar events, may expose the company to serious risks and have to be carefully assessed. While interactions with competitors may be completely legitimate in certain context, these interactions may also represent opportunities for inappropriate communications. An effective compliance programme must be able to monitor any such risky activities and identify any other potential problem as soon as possible.
It might be quite challenging to create a compliance programme that covers all potential kinds of antitrust infringements. Antitrust compliance programmes are more likely to prevent some types of misconducts better than others. Programmes are not especially well-suited to a conduct that is known to require complex economic analysis as well as in-depth inquiries into facts and market effects, such as abuse of dominance cases. But compliance programmes can be very helpful in preventing and exposing hard core cartels, which are per se illegal and which people can more easily understand. Companies – on the basis of their profile or even risk-based approach – should initially prioritize the prevention of more “relevant” competition law infringements (i.e. cartels).
Crucially, the design of a sound compliance programme must include means for its effective enforcement. First of all, the creation of an efficient programme requires a constant support and involvement of the entire company, starting from the top management of the company. It involves regular training, on-going monitoring/auditing and defined reporting mechanisms. Compliance programmes also have to be reviewed regularly to ensure that they are up-to-date and reflect the evolving risks that companies face over time.
Reporting infringements to antitrust agencies
Most jurisdictions today have developed programmes that offer leniency or amnesty for cooperation with antitrust agencies (NCAs) in cartel cases. Accordingly, when a company believes it may have detected a violation time is crucial. Compliance programmes should clearly identify the persons within the company who must be consulted in order to determine whether to alert to the authority.
It is often disputed whether reporting to antitrust agencies should be considered a fundamental component of a compliance programme. Companies could decide that stopping the infringement is a sufficient result for them, or leniency/amnesty could be seen as a natural outcome when infringement has been detected. Moreover, it must be kept in mind that internal reporting might be extremely risky in antitrust investigations, as well as discovery obligations in the context of damages claims. A factor that might discourage the internal reporting might be the general absence of legal privilege for in-house lawyers, as is the case in the EU.
Role of compliance programmes in calculating antitrust fines
At present, there is no common approach among the NCAs concerning the question of whether the existence of an antitrust compliance programme should be considered an attenuating circumstance when determining the amount of the fine. While some NCAs have adopted guidelines recognizing the possibility to grant a fine reduction to companies, that have established a compliance programme (i.e. UK, France, Italy, Australia, Canada, Israel and Singapore), other authorities argue that compliance is a legal obligation of the company and thus there should be no additional reward for not observing the law. Most authorities are neutral towards compliance programmes, neither awarding reductions nor increasing the fine if a defendant has one in place.
Antitrust authorities share a common desire for companies – large, medium and small companies alike – to comply with antitrust law. Companies need to be aware of the risks of infringing competition rules and how to develop a compliance strategy that best suits their needs. An effective compliance programme advance two significant objectives; the prevention and detection of anticompetitive behaviour. It enables a company to minimize the risk of involvement in competition law infringements, and the costs resulting from anti-competitive behaviour.
Despite the lack of consensus on fine reductions, the view that compliance programmes should be encouraged is generally accepted. An effective compliance programme will not only help preventing infringements in the first place, but it will also save the undertaking from fines, civil damage redress or reputational losses. Even if the programme fails to prevent the infringement, it still would bring substantial benefits in the leniency race: the undertaking would be more likely to discover infringements on its own (and faster than other cartel members) and would therefore be much more likely to qualify as an immunity candidate. The same holds true even in cases where the competition authority has already become aware of the violation, as the undertaking will likely be in a better position to present evidence swiftly and thoroughly, which in turn will raise the chance of obtaining a fine reduction within the leniency programme. Similarly, the likelihood of reaching a quick and satisfactory settlement would be higher for undertakings that are able to get an early and a good internal overview of the alleged infringement through the work.
- The term “leniency” is used to describe all programmes that provide for any reduction in sanction in exchange for information and cooperation. “Amnesty” is used to describe a programme that promises no penalty to the first party to come forward to the enforcement agency and comply with the agency’s requirements. See also OECD (2014), Use of Markers in Leniency Programmes, 24 March 2015, available here.
- Mahoney S.A. (2015), The Three “Ds” of a Top-Marks Antitrust Compliance Program: Design, Deter, Detect, NYSBA Inside, Fall 2015 Vol. 33, No. 2
- OECD (2011), Roundtable on Promoting Compliance with Competition Law, 30 August 2012. [DAF/COMP(2011)20], available here.