The ICC Antitrust Compliance Toolkit

Transcription

1 ICC Commission on Competition The ICC Antitrust Compliance Toolkit FIW, 43. Brüsseler Informationstagung, November 6, 2014 Brussels Paul Lugard, Chair, ICC Commission on Competition Boris Kasten, Co Vice-Chair, ICC Task Force on Compliance and Advocacy All rights reserved

2 ICC S ANTITRUST WORK ICC Commission on Competition Working group on Antitrust Compliance and Advocacy Ongoing dialogue with regulators Ongoing advocacy to business Dialogue with ICN and OECD Promoting consistently high global standards for antitrust compliance to assist companies and ultimately stimulate trade and investment Aim: develop practical Toolkit for companies Complement existing materials build on ICC/CLO BluePrint Toolkit should assist companies of all sectors and sizes 2

3 WHY HAVE A COMPLIANCE PROGRAMME? Increasing antitrust laws means increasing need for awareness Compliance helps reputation management and supports good corporate governance Knowledge of antitrust law requirements and agency expectations can improve compliance in practice, mitigates the risk of a violation and helps avoid fines and other penalties 3

4 KEY CONSIDERATIONS No one size fits all or overnight solutions No such thing as zero risk What are effective controls? The people factor (controls alone don t change behaviour) Alignment with broader programmes Reconciling regulatory requirements Championing compliance for vibrant businesses 4

5 ICC Commission on Competition Presentation of the ICC Antitrust Compliance Toolkit

6 TOOLKIT CONTENTS A Toolkit of 11 Chapters: 1. Compliance embedded as company culture and policy 2. Compliance organization and resources 3. Risk identification and assessment 4. Antitrust compliance know-how 5. Antitrust concerns-handling systems 6. Handling internal investigations 7. Disciplinary action 8. Antitrust due diligence 9. Antitrust compliance certification 10. Compliance incentives 11. Monitoring and continuous improvement 6

7 TOOLKIT STRUCTURE Structure: Starter kit for SMEs (or larger companies starting from scratch) Each Chapter begins with a Quick Summary of the programme elements covered in the Chapter No one size fits all, so each Chapter contains a menu of items that could be included Languages: English from April 2013 French from February 2014 German from October 2014 Russian: 11/2014; Italian, Chinese, Spanish: WIP 7

8 ANTITRUST PROGRAMME ELEMENTS Compliance embedded as company culture and policy: Companies to recognize antitrust risks that they face Adopt appropriate company standards of behaviour (e.g. Code of Conduct) Encourage business leaders to actively show personal support for ethical business practices 8

9 ANTITRUST PROGRAMME ELEMENTS Compliance organization and resources: Senior individual to supervise the implementation of the antitrust CP Ensure Compliance Officer / Head can make reports to highest levels of management Decide how to develop policies and/or guidance (depends on resources) 9

10 ANTITRUST PROGRAMME ELEMENTS Risk identification and assessment: Decide how to identify antitrust risks and trends, ideally as part of a general risk management process Consider what controls are needed to manage, minimize or eliminate the risks identified Share insights on the assurance process and scope for improvements with senior management 10

11 ANTITRUST PROGRAMME ELEMENTS Antitrust compliance know-how: Tailor antitrust know-how guidance to the risk profile and needs of the company Decide on the best way to deploy interactive training and updates Use business language, not legal jargon Work to ensure the message is understood 11

12 ANTITRUST PROGRAMME ELEMENTS Reinforcement of an existing programme: 5. Antitrust concerns-handling systems 6. Handling internal investigations 7. Disciplinary action 8. Antitrust due diligence 9. Antitrust compliance certification 10. Compliance incentives 11. Monitoring and continuous improvement 12

13 ANTITRUST BUSINESS RISK FACTORS EASE OF / BARRIERS TO ENTRY COVERT BEHAVIOUR INDIRECT SALES MODELS / VERTICAL AGREEMENTS MARKET POSITION / MARKET POWER ABUSIVE BEHAVIOUR SIMILARITY IN PRICING BEHAVIOUR UNUSUAL PRICING ACTIVITY CONCENTRATED MARKET RISKS WILL DIFFER FOR EACH BUSINESS HISTORY OF COMPLIANCE MULTIPLE JVS WITH COMPETITORS GOVERNMENT INVOLVEMENT / REGULATED MARKETS MULTIPLE TRADE ASSOCIATIONS MULTIPLE INTERACTIONS WITH COMPETITORS (EITHER BUSINESS OR SOCIAL) UNUSUAL TENDERING / BIDDING ACTIVITY HISTORIC BUSINESS CULTURE 13

14 PLACE OF RISK ASSESSMENT? 14

15 ANTITRUST RISK ASSESSMENT What potential risks does a company face? How likely are they to occur? How big will the impact be if they occur? Estimating gross and residual risk Are the company s controls effective? Can the company show it has a well thought-out approach? 15

16 STARTING POINTS Align with company s existing risk assessment and management functions? Learn from experience Share resources Mutually reinforcing framework Get management buy-in There is no one-size-fits-all solution! Focus on needs and constraints of the company Consider the context of relevant industry 16

17 IDENTIFY POTENTIAL VIOLATIONS Manage real-world not theoretical risks Typical antitrust violations that may be relevant: Cartel activity Anticompetitive information exchanges Other anticompetitive agreements Resale price maintenance (where prohibited) Types of manifestly exclusionary conduct Focus on most problematic risks first 17

18 EVALUATE PROBABILITY Distinguish between: Clearly illegal conduct (no cost-benefit analysis) and Conduct that is legitimate in certain circumstances Factors that can affect probability: Local legal and enforcement framework Enforcement focus on specific conduct or markets Compliance history of company and industry Company strategies Employee turnover/hires from competitors Opportunities for interaction with competitors 18

19 EVALUATE POTENTIAL IMPACT For each potential violation, what harm will the company suffer if it actually happens? Reputational damage? Corporate fines (recidivism multipliers)? Damage claims? Legal fees? Management diversion? Lose key personnel through disciplinary proceedings, criminal or administrative sanctions? 19

20 ESTIMATING (GROSS) RISK (Gross) Risk = likelihood of violation x likely impact Matrix approach may be helpful Tailor to needs of company e.g. to set materiality criteria Impact Likelihood of Violation Critical Material Marginal Negligible Unlikely (<10%) Possible (10-25%) Likely (25-50%) Very Likely (>50%) Basic Risk Matrix 20

21 RESIDUAL RISK No such thing as zero risk : what to aim for? Are controls in place to reduce gross risk? Does a control exist? How is it documented? How is the control expressed (is it clear)? Is control documentation accessible and updated? How are people made aware of the control? Does the control reach the target population (hit rate)? What structures to track awareness of and compliance with the control? What sanctions exist for failure to operate the control? 21

22 SAMPLE RISK REGISTER 22

23 FOLLOW UP Report on the process and results to senior management Caveats? Introduce or improve controls Deep dives? Consistent re-evaluation 23

24 TYPICAL BEHAVIOURAL RISKS Turning a blind eye Outsourced risk (third parties, etc.) Tolerance of successful shortcuts Little oversight of unregulated processes Over-reliance on budgetary controls Tick-box compliance One size fits all Abstract or overly general principles Compliance fatigue Lagging behind legal and business change Cultural issues Ambiguous or formulaic language Misalignment between Group strategy and local targets Disengagement by remote operations and stressed management Local administrative and business culture 24

25 BEHAVIOURAL CONSIDERATIONS Likelihood and the human factor : Recent ICC UK Workshop on behavioural issues Speakers included a psychologist and behavioural economist Individuals are complex, largely irrational and highly dependent on the communities in which they operate for validation and social acceptance Compliance cultures start at the top: leadership by example, consistency Need to encourage appropriate risk taking behaviour but promptly identify and challenge overly risk averse or risk seeking approaches Putting a price on non-compliance may undermine the moral compulsion to do the right thing Get the right people into the right roles includes internal risk managers 25

26 PUTTING A PRICE ON BAD BEHAVIOUR 26

27 OTHER INCENTIVES? What creates a deterrent - companies Firm penalties Criminal prosecution Firm reputation Director disqualification Internal discipline Leniency policies Early resolution Individual reputation Private damages 82% 91% OFT % important or very important. 0% 50% 100% 27

28 FURTHER LEARNINGS Compliance: not just about content, quality and relevance of materials Ideally companies should make clear why it is in their interest to champion and comply with antitrust rules Companies clearly benefit from assessing issues from a behavioural lens to improve compliance programmes Need a joined-up approach across different functions (HR, Legal, Compliance & Risk) Regulators that focus on conduct of companies (without scope to apportion liability to individuals) can still support best efforts in this area 28

29 Panel and Audience Discussion 29