Risk management is a subject on everyone’s minds, particularly ours, as our event, Competition Law Risk and Managing Employees in the US, EU, and Canada: Guidelines, Pitfalls, and Challenges, demonstrated. Managing risk with regards to competition law can be a difficult minefield for clients to navigate, and what we have seen is that anti-corruption and bribery laws, e.g., the UK Anti-Bribery Act (ABA) and the US’s Foreign Corrupt Practices Act (FCPA) create similar headaches. While based on different principles, the two types of law raise similar risk and compliance issues in part because their enforcement systems share common features:

  • Extra-territorial reach
  • Cooperation among agencies
  • Sanctions against individuals on the rise
  • Incentives to self-report violations and early settlements
  • Private follow-on actions

The other reason may be that typically both types of investigations, at least if it is an Article 101 TFEU allegation, rely on similar or interrelated fact patterns as was the case in the infamous Marine Hose Cartel/ Bridgestone saga.

Reporting Obligations

Competition law has been a part of doing business in Europe for some time. As a result, most companies understand when it is necessary to disclose inter alia any exposure they may have as a result of a competition proceeding. Apparently, the same cannot be said for information relating to anti-corruption and bribery matters. As a result, the European Commission has recently adopted a proposal to amend existing accounting legislation that would affect companies’ obligation to report certain non-financial information in their annual reports.

The amended legislation would specifically affect limited liability companies incorporated under the law of a Member State or EEA and those listed on EU regulated markets even if they are registered in third countries. In either case, if the company (i)has on average more than 500 employees and (ii)exceeds either a balance sheet total of 20 million euros or a net turnover of 40 million euros it would have to abide by the new reporting obligations (unless it falls within one of the few exceptions).

Any company that meets the above rather limited criteria would need to include in its annual report a non-financial statement containing information about at least:

  • Environmental matters
  • Social and employee matters
  • Respect for human rights
  • Anti-bribery and corruption matters

With respect to the above matters, the company would need to:

  • Describe the policies pursued by the company in relation to the matters
  • Describe the results of these policies
  • Describe the risks related to these matters and how the company manages those risks

If a company did not pursue policies in relation to one or more of the specified matters, it would need to provide an explanation for not doing so.

Moving Forward

Right now this proposal is only a proposal – it still has to wind its way through the European Parliament and Council. However, the European Commission seems fairly optimistic about its adoption. In the FAQs accompanying the proposal, the Commission states that companies can start preparing now for the eventual adoption of the text so that they are ready to comply as soon as it enters into force.