UK: OFT Consults on New Guidance on Competition Law Compliance and Directors’ Responsibilities

Last Updated: 22 October 2010
Article by Susan Hankey and Caroline Hobson

The OFT has today published consultation drafts on two new important compliance guidance documents. These documents, which can be found here are intended to provide businesses and company directors with practical guidance on how to comply with competition law.

The first guidance document identifies how companies can achieve a culture of compliance and sets out the OFT's recommended four-step risk-based approach.

The second guidance document, which sets out the level of knowledge company directors should have and the steps they should take to ensure competition law compliance, is particularly useful. The guidance sets down clear standards of what is expected of directors and it provides valuable guidance for those personnel within companies who are responsible for identifying the level and nature of competition law training to be given to directors. The guidance reinforces the need for a comprehensive compliance training programme, for directors to be fully involved and for the implementation of effective internal procedures and reporting requirements so that directors have full knowledge of their company's activities.

The OFT has asked for responses to both consultation documents by 21 January 2011 and the final versions of the guidance will be published in the course of Spring 2011.

To view the article in full, please see below:




The OFT has today published consultation drafts on two new important compliance guidance documents.  These documents, which can be found here are intended to provide businesses and company directors with practical guidance on how to comply with competition law.

The first guidance document identifies how companies can achieve a culture of compliance and sets out the OFT's recommended four-step risk-based approach.

The second guidance document, which sets out the level of knowledge company directors should have and the steps they should take to ensure competition law compliance, is particularly useful.  The guidance sets down clear standards of what is expected of directors and it provides valuable guidance for those personnel within companies who are responsible for identifying the level and nature of competition law training to be given to directors.  The guidance reinforces the need for a comprehensive compliance training programme, for directors to be fully involved and for the implementation of effective internal procedures and reporting requirements so that directors have full knowledge of their company's activities.

Full Article

The OFT has asked for responses to both consultation documents by 21 January 2011 and the final versions of the guidance will be published in the course of Spring 2011.

Guidance on Achieving Compliance

The first guidance document sets out the OFT's risk based, four-step process for creating a culture of compliance within an organisation.  The guidance has been produced following the OFT's report on the drivers of compliance issued in Spring 2010 and specifically is in response to comments received whilst carrying out research for the report which called on the OFT to provide further guidance on how to achieve compliance.

Rather than adopting a one-size fits all approach, the OFT suggests that companies should structure their compliance measures around the nature of the competition law risk they face and recommends that companies should take the following four steps:

Step 1 – Identify the key competition law risks faced by the business;

Step 2 – Assess the level of risk identified;

Step 3 – Develop appropriate policies, procedures and training to ensure behaviour change within the business to achieve compliance;

Step 4 – Regularly review all stages of the process.

Although the guide provides guidance on all four steps and certainly helps companies identify the level of training and compliance guidance that is needed, it does not set out in detail the type or scope of measures that should be taken, for instance specifying the regularity of compliance training.

Company Directors and Competition Law

The second guidance document sets out the level of competition law knowledge a director is expected to have and the steps a director should take to detect and prevent infringements of competition law. 

The guidance follows the OFT's recently issued revised guidance on director disqualification orders (our earlier LawNow on this can be found here).  The OFT's revised approach means that now the OFT may bring disqualification proceedings not only against directors who were directly involved in an infringement, but also against those directors who should have known or suspected competition law breaches within a company.

Whilst the new guidance explicitly states that it does not expect all directors to have specific competition law expertise, it clearly identifies that all directors are expected to have a basic understanding of competition law and to be able to recognise the most serious forms of infringement in particular price fixing, bid-rigging, market-sharing, agreements between competitors to limit production, exchanging commercially sensitive information between competitors and resale price maintenance.

However, the OFT also sets out the minimum level of knowledge it expects directors with specific responsibilities should have:

  • A director with responsibility for compliance with competition law should be able to identify and assess the type of risk to which the company is exposed and be expected to take reasonable steps to address those risks;
  • A director with responsibility for the company's dealings with commercial partners, such as customers, wholesalers or suppliers is expected to understand that:
    • indirect and direct information sharing can infringe competition law;
    • commercial agreements can raise competition law concerns, in particular:
    • joint ventures
    • long-term exclusive supply arrangements
    • terms which restrict either party's pricing freedom
    • non-compete obligations or terms obliging a buyer to purchase all (or substantially all) of its requirements from the company
    • rebate schemes
    • selective distribution arrangements
    • standardisation agreements
    • if the company has market power that the rules on abuse of dominance could apply and that additional steps should be taken to ensure compliance, in particular that legal advice should be sought when contemplating any new pricing terms, or any conduct or commercial strategy which could exclude competitors from the market or exploit customers.

The OFT has asked for responses to both consultation documents by 21 January 2011 and the final versions of the guidance will be published in the course of Spring 2011.

Comment

The OFT is currently undertaking significant work in producing guidance for companies on compliance and both guidance documents respond to calls from business for greater clarity on what is expected of them to achieve competition law compliance.

The change in the OFT's policy on director disqualification orders places a considerable burden on directors to understand competition law and ensure that all commercial dealings are compliant.  In-house counsel and compliance functions should therefore take steps to ensure that all directors have sufficient, regular and targeted training and are a central part of any compliance programme.

This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq

Law-Now information is for general purposes and guidance only. The information and opinions expressed in all Law-Now articles are not necessarily comprehensive and do not purport to give professional or legal advice. All Law-Now information relates to circumstances prevailing at the date of its original publication and may not have been updated to reflect subsequent developments.

The original publication date for this article was 19/10/2010.

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