Implementing a competition compliance programme

Commitment to competition compliance

How does a company demonstrate its commitment to competition compliance?

A company may demonstrate its commitment to competition compliance by having a comprehensive and tailored compliance programme, which is endorsed by representatives of the company’s most senior management. The ACCC has identified four principles that it considers underpin successful compliance programmes: commitment, implementation, monitoring and reporting, and continual improvement.

For larger companies, an effective programme typically includes:

  • appointment of a suitably qualified director or senior manager to act as a compliance officer to ensure the compliance programme is effectively designed, implemented and maintained;
  • appointment of a compliance adviser to conduct risk assessments and prepare a risk report;
  • a company policy statement or manual for competition law compliance, which:
    • states the company’s commitment to compliance;
    • states how compliance will be achieved;
    • requires staff to report compliance issues;
    • provides whistle-blower protections;
    • provides internal sanctions for employees who knowingly or recklessly contravene the Act; and
    • is endorsed by senior management;
  • a complaints handling system or processes to detect and escalate competition concerns;
  • whistle-blower protections for employees to come forward with competition concerns;
  • compliance training (eg, online modules and face-to-face) that is specific to the Act, is regularly ‘refreshed’ and delivered to employees (including directors, officers and agents) by a suitably qualified person with competition expertise at least once a year;
  • mechanisms for regular reporting to the board or senior management on the programme’s effectiveness;
  • regular (eg, annual) and independent reviews of the compliance programme, including compliance reports that identify material deficiencies and recommend steps to address these;
  • mechanisms for the company to address issues identified in the compliance reports;
  • legal approval processes, for example, before entering into arrangements involving competitors, or attending industry functions where competitors may be present, etc; and
  • sanctions by the company for individuals for non-compliance with policy.

Companies should be able to demonstrate that the programme is actively maintained and that the company is not merely paying lip service to it.

Risk identification

What are the key features of a compliance programme regarding risk identification?

To properly identify competition risks, a compliance programme should be tailored to the company and the industry in which it operates. This may involve identifying the extent to which:

  • employees have contact with competitors at industry events, socially or move between competing businesses or have relatives who are employed by a competitor (the latter factor may be managed by the company putting in place a conflicts of interest policy);
  • customers of the company are its competitors;
  • the company collaborates with its competitors (including through joint selling or procurement);
  • the company has long-term exclusive contracts;
  • the company shares with competitors, or receives from them, information about prices, business plans or other commercially sensitive information;
  • the company has a substantial market share in any market; and
  • the company imposes resale restrictions on resellers of its products.

To identify the risks, a compliance officer, the legal department or other personnel with appropriate competition expertise may interview or survey different personnel to understand their daily operations and determine which parts of the business face specific competition law risks.

Risk-assessment

What are the key features of a compliance programme regarding risk-assessment?

The ACCC emphasises that effective compliance programmes, particularly in global companies, should have specific regard to the Act. To assess the seriousness of the identified risks, companies may adopt a ‘traffic light’ system or classify the risks as low, medium or high. For example:

  • procurement functions may be at higher risk of cartel conduct involving big rigging or allocating markets or customers (eg, when pitching for tenders);
  • sales teams may be at higher risk of price fixing or anticompetitive information sharing, particularly if they have frequent contact with competitors, eg, at industry forums; and
  • IT, administrative and other back-office functions generally may be low risk.
Risk-mitigation

What are the key features of a compliance programme regarding risk-mitigation?

See question 5 for some of the key features for risk mitigation.

In relation to compliance training for employees in particular, this is likely to involve:

  • focusing on the particular provisions in the Act that are likely to be most relevant to individuals within the company and the risks they may face in their specific roles;
  • identifying and focusing on the individuals most at risk by reference to what they do within the company. For example, sales personnel, persons responsible for setting strategy or tactics, persons who represent the company at industry forums and persons involved in procurement are usually in the ‘at risk’ category;
  • explaining inappropriate conduct to employees and officers, as well as the potential sanctions. In our experience, this is usually more effective if it involves ‘war stories’ and hypothetical examples directly linked to the company’s business and providing employees and officers with adequate opportunity to ask questions without feeling they are being judged;
  • identifying the types of behaviour or commercial dealings that require legal advice or approval, dedicating a person within the company to provide the advice or approval and effectively communicating to the company’s employees and officers how to contact that person;
  • having an effective complaints handling procedure for representatives of the company and customers and suppliers. In our experience, an effective complaints handling procedure (which deals with all complaints in a timely and transparent manner) can go a long way to reducing actual risk of prosecution because most prosecutions commence with a complaint that is not effectively managed through to resolution; and
  • providing ‘dos and don’ts’ lists to employees and officers.
Compliance programme review

What are the key features of a compliance programme regarding review?

The ACCC encourages voluntary compliance programmes to include regular reviews to ensure the programme is effective and is continually improved.

Companies should undertake annual reviews of their compliance programmes and adjust them to take into account any changes to the Act and the way the company operates as well as to reflect any trends in complaints and any remedial steps required (including by the ACCC) where breaches or potential breaches have been identified.

In some cases, an independent review of the effectiveness of the compliance programme may be desirable. The review could be undertaken by external legal counsel who could provide a privileged report to the company’s General Counsel or Board recommending changes.