One of the greatest challenges for competition lawyers is persuading clients that the law is not only relevant to major PLCs. Anyone can be party to an anticompetitive agreement, and agreements can be unlawful even if their effect is within a limited geographical area. Crucially, some prohibited behaviour may seem like sensible business practice, and not obviously wrong.
The European Commission has released Guidance to help companies "stay out of trouble", to quote the Foreword of Joaquín Almunia, the Competition Commissioner.
The document is called "Compliance Matters". Its chapters crescendo in relevance:
- Chapter 1 paints an idyllic portrait of competition law compliance as a route to corporate utopia. (Compliance giving staff a "sense of belonging and pride", anyone?)
- More credibly, Chapter 2 focuses on the drawbacks of non-compliance; including fines of up to 10% of worldwide turnover, contracts declared void, damages actions by victims and directors' disqualification.
However, it is not until Chapter 3 that the reader is told what the law actually is.
Article 101: prohibits agreements between companies which may distort the normal play of competitive forces. However, agreements of benefit to consumers may be exempt.
Article 102: outlaws abuses by dominant companies.
These Articles are only triggered if the behaviour affects interstate trade, but the Competition Act contains similar prohibitions on behaviour whose affect is confined to (some part of) the UK, so the Guidance provides incidental assistance in complying with domestic law too.
A fuller explanation of the law can be found in our Introduction to Competition Law. Suffice to say, the Article 101 prohibition ranges from flagrantly abusive price fixing, bid rigging and supply limitation to seemingly sensible agreements to divide the market in the interests of efficiency. Competitors should also be wary of sharing confidential or strategic information if this could lead to an unspoken understanding or "gentlemen's agreement".
Agreements may be unlawful if they have:
- the effect of distorting competition, regardless of their object; or
- the object of distorting competition, regardless of their effect.
There are Block Exemptions, for example, for:
- vertical agreements; or
- horizontal R&D or joint production agreements.
The Block Exemptions may permit such agreements where the parties have beneath a specified market share. Agreements above that threshold may still qualify for individual exemption; but in either case, agreements containing "hardcore" restrictions - which are presumed to have the object of harming competition - are not exempt.
Chapter 4 advises companies on what programs they can install to aid compliance. Those familiar with the Ministry of Justice Guidance to the Bribery Act will note striking similarities.
- The first step should be a risk assessment so the program can be tailored to those risks. For example:
- Does the company's sector have a bad history of infringement?
- What is the level of interaction with competitors?
- Does the company have significant market power or does the market have significant barriers to entry?
The program should be written, published internally, and proportionate to the company's size.
The compliance culture should be "top down", with a senior officer responsible for the program, who can be the contact point for advice or whistle blowing.
The Guidance makes various suggestions for the content of the program, such as:
- A list of "DON'Ts" such as exchanging future price intentions or agreements about price fixing, market allocation or production quotas.
- A list of "RED FLAGs" identifying situations ripe for infringement, like preparing tender bids or entering new markets.
- A regime for monitoring or auditing such situations. Although auditing may only reveal a problem afterwards it may prevent a recurrence. It may also help the company get the best of the Commission's leniency program, where informants can receive a reduced penalty, or even immunity.
- Asking new staff for written acknowledgment of receipt of the program, to drill in its importance.
- Incentivising staff by building vigilance into appraisal criteria.
- Training - especially where the risk assessment identifies staff members particularly at risk, e.g. sales staff of anyone attending trade association events.
The Guidance warns that, in cases of infringement, the mere existence of a program will not be a mitigating factor in setting the level of fines. In this regard the UK regime is different as, in guidance it released last month the OFT confirmed that adequate programs will be taken into account per se.