On 19 May 2010, the UK competition enforcement agency, the Office of Fair Trading ("OFT"), published a report link to on the drivers behind competition law compliance and non-compliance. The report follows consultation on the issue with lawyers and businesses and is a first step towards the publication of practical guidance for companies on how best to ensure competition compliance within their businesses.
The OFT found that key drivers for competition law compliance were primarily the avoidance of negative deterrent effects, such as reputational damage, financial penalties, and individual sanctions.
Some respondent companies identified positive reasons also, for example, that competition compliance could be used as a tool to win new business by enabling a firm to position itself as an ethical company with sound business modelling.
Several respondents suggested that the OFT could encourage compliance programmes by increasing the amount by which fines are reduced where a company has a compliance system. A reduced fine would acknowledge that a rogue employee acted in clear contravention of company policy. Respondents indicated that a reduction in fines of between 10% and 30% might be appropriate as a mitigating factor.
The OFT did not accept this proposal. It is concerned that automatic discounts might diminish the deterrent effect of potential fines and encourage “sham” compliance programmes. Accordingly, the OFT will remain neutral on reductions in fines. However, it recognises that a compliance programme may be a mitigating factor capable of reducing a fine by up to 10%, though this will be assessed case by case.
OFT compliance recommendations
The OFT says the most important factor in having an effective competition compliance programme is management’s commitment to compliance: "if senior management does not care about competition law compliance, or sees competition law as something to be evaded, then that will drive non-compliance."
The OFT identified four key elements to an effective competition compliance programme:
- Risk identification. Identify the personnel most likely to have contact with competitors, customers, and suppliers and those working in businesses with high market shares.
- Risk Assessment. Assess whether the risk of infringing competition law is high, medium, or low for each staff member. For example, new sales and marketing staff joining from competitors may be high risk, but back office function personnel are likely to pose a low risk.
- Risk Mitigation. Implement policy and training activities to address the risks in a proportionate manner. Low risk staff may need limited compliance training, but high risk personnel may require regular one-to-one training.
- Process Review. Keep compliance procedures under review, in recognition that “competition law compliance is not static” and that industry market shares and practices can fluctuate over time.
Further OFT guidance
The OFT’s report will be followed by guidelines on various compliance issues. Business may look forward to further guidance including:
- An update to current guidance on competition law compliance to reflect current best practice.
- New specific guidance for directors, including competition compliance measures required, and details of changes to the OFT policy on director disqualification orders that can be imposed on individuals (currently the UK courts must disqualify a director from acting as a director for up to 15 years if his company breaches competition law and he is considered unfit to manage a company).
- Expansion of a pilot "short form" opinion scheme, under which businesses can seek the OFT’s opinion on prospective horizontal collaboration agreements that raise novel or unresolved questions of competition law. The OFT aims to publish around four short form decisions each year.
The report reaffirms the OFT’s position that the existence of a compliance programme should result in a reduced fine for antitrust infringements. Despite calls from businesses to mitigate this view, its position remains that, while not automatic, the existence of a competition compliance programme may justify a reduction in penalty. The report serves to remind companies of the importance of keeping compliance programmes up to date, actively enforced with regular staff training as appropriate, and supported by a culture of compliance from senior management down to the most junior staff.
Future guidance from the OFT can be expected to help firms to identify the key features to be included in their antitrust compliance programmes.