Competition policy enforcement is a top priority for the European Commission and national competition authorities. The consequences of non-compliance with competition laws are severe. In the aftermath of decisions imposing heavy fines upon companies for violating competition rules, their customers and other contracting parties frequently claim damages for alleged antitrust injuries.
The issues are often international. A growing number of Finnish companies are subject to antitrust investigations by foreign competition authorities. Such investigations are not necessarily restricted to companies suspected of competition law infringements, but may concern an entire business sector.
Recent developments – such as the enlargement of the European Union and the revised Russian competition act adopted in late 2006 – have further increased the number of countries employing stringent competition rules.
Following these trends, competition law risk management has become a crucial element of corporate governance in particular for companies with international operations.
What Is A Competition Audit?
Competition law training sessions, compliance manuals and dawn raid guidelines are standard tools when a company seeks to reduce its competition law related risks. Recently, we have witnessed a growing demand also for extensive competition audits of entire companies or company divisions, often located in several countries.
A competition audit is typically comprised of one or several of the following components: (i) review of agreements and other corporate documents, (ii) review of electronic files and documents, and (iii) interviews with key employees.
When the element of surprise is important (e.g. when there is a risk that employees could destroy relevant material), the audit may take the form of a mock dawn raid. In such a case, the attorneys are requested to make a surprise inspection of the company, simulating the way competition authorities would normally conduct a dawn raid.
When Is A Competition Audit Needed?
In many cases, a company's decision to undertake a competition audit is not associated with any dramatic circumstances. Such an audit can be an efficient way for a company that has not employed any compliance programme to form an overall picture of the competition law issues associated with its activities. Correspondingly, some companies use regular competition audits every three or five years to monitor compliance with internal company procedures.
Competition audits may, however, also be triggered by a more urgent need. Should a company have identified potential competition law issues concerning certain products or certain countries, it often wants to ascertain the scope of the problems and also that such problems do not exist in relation to other products or countries.
Competition audits can also be undertaken in connection with transactions, e.g. as part of the vendor due diligence when a company is about to divest a business through an auction sale. Similarly, the purchaser may, in connection with its own due diligence, wish to ascertain that there are no major competition law risks associated with the target company's activities. Post-transaction, a competition audit can be employed as part of the integration process.
Competition Audits In Practice
In a recent competition audit conducted jointly by Hannes Snellman teams in Helsinki, Moscow and St. Petersburg, the client had identified around 30 employees who were likely to be exposed to antitrust risks due to their positions and responsibilities within the organisation. These employees had consented to the review of their electronic files and documents. Approximately 200,000 electronic documents and emails were collected and uploaded into a virtual data room. These documents were then filtered using a keyword search reducing their number to approximately 50,000 documents. The key employees were also interviewed.
The listing and choice of keywords is a critical stage. While too long a list renders the exercise overly burdensome and costly, too restrictive a list may not enable the detection of problems.
An extensive audit requires sufficient resources as a massive amount of information has to be reviewed in a relatively short time period. In the above case more than 20 Hannes Snellman lawyers were employed simultaneously.
In the best case scenario, the competition audit will not lead to findings of serious competition restrictions. However, even then it may help the company to improve its internal procedures. The language used in internal correspondence often raises doubts on competition restrictions even when the intentions have been good. The gathering of market information is another sensitive area. Data on competitors may be obtained from customers and found from public sources. Therefore, in order to avoid awkward questions in the future, it is of vital importance that the origin of this information is clearly marked.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
