On 19 May 2010 the Office of Fair Trading (OFT) published its report on competition law compliance. The report is based on results of qualitative research conducted by the OFT into what motivates businesses to comply with competition law, and the measures that businesses have used to achieve compliance with competition law. The research was carried out with larger companies with compliance policies in place, and discussions were held with private practice lawyers and in-house counsel.
The report outlines findings in respect of the potential competition challenges faced by businesses, and presents examples of compliance activities that businesses have undetaken The aim is to aid businesses in creating or refreshing their competition law compliance programme, and to share best practice ideas. The report also addresses ways in which the OFT can drive compliance with competition law, and identifies a 4-step approach to effective competition law compliance strategies.
The main findings of the report are set out below:
General Approach to Compliance
The majority of businesses interviewed adopted a risk-based approach to competition law compliance, focussing efforts on the areas of greatest risk within the business. The OFT supports this approach to compliance, along with a principles-based approach as opposed to a rules-based approach. The OFT fears that a rules-based approach could lead to businesses adopting a 'box-ticking' approach, imposing unecessary burdens on the business.
While research was conducted with larger businesses, the OFT acknowledges that one size will not necessarily fit all, and it intends to look at how these findings might relate to smaller businesses.
Best Practice
Businesses gave examples of activities they had undertaken to promote compliance with competition law. These included obtaining the commitment of senior management to competition law compliance, tailoring training to the areas and employees most likely to be dealing with compliance issues, ensuring that employees can access guidance and legal advice, and appointing a "compliance champion" to promote compliance issues.
Drivers of compliance and non-compliance
The main drivers of compliance with competition law were identified as fear of damage to reputation, financial penalties, individual sanctions, the ability to position business as an "ethical business," and an apparent commitment to compliance law from the top of the organisation.
Drivers of non-compliance identified included ambiguity or lack of management commitment to compliance, rogue employees, uncertainty about the law, employee error, loss of trust in legal advice, and a 'box-ticking' approach to compliance.
How the OFT can drive compliance
A number of businesses suggested that the OFT change its policy in relation to setting fines. It was submitted that increased discounts apply where a party had undertaken appropriate competition law compliance prior to an infringement. Businesses believed that this would demonstrate the importance of implementing a compliance programme. Businesses were also concerned that the OFT would regard a pre-existing compliance programme that failed to prevent a breach of compliance law, as an aggravating factor in the infringement.
The OFT has, however, decided not to change its policy in respect of fines. The main reason is that it considers that the avoidance of a breach in the first place is the product of an effective competition law compliance programme. The OFT recognises that if it were to treat an ineffective compliance programme as an aggravating factor, this could act as a disincentive to businesses engaging in compliance activities.
The OFT also considered whether its penalties policy should take account of breaches caused by a rogue employee in an otherwise compliant business. It concluded that this would not be appropriate for a number of reasons, including the possible risk of incentivising businesses to find a scapegoat to present as a rogue employee in order to obtain a penalty discount instead of dealing with the actual compliance issues.
Four-step approach to compliance
The OFT proposes to adopt the following four-step approach to effective competition law compliance:
- Risk identification
- Risk assessment
- Risk mitigation
- Review
It is intended that a draft guidance document with further detail on these steps will be published for consultation later this year.
Next steps
The OFT plans to implement the follow steps to drive compliance:
- Update its current guidance on competition law compliance to reflect current best practice
- Issue guidance for directors on steps which need to be taken to comply with competition law, and how to create a culture of compliance within a their business
- Provide further guidance to businesses on novel or unresolved questions of law through the new short-form opinion process
- Consider the how the findings of its research might be applicable to smaller businesses.
The OFT also intends to continue discussing competition law topics of interest with legal advisers, economists and other interested parties by running 'round-table' discussions and other public events.
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 20/05/2010.
