Antitrust compliance and compliance programmes. Corporate tools for competing safely in the marketplace. English version

Transcription

1 Antitrust compliance and compliance programmes Corporate tools for competing safely in the marketplace English version

2 Compliance with competition law: Why talk about compliance? Companies conduct their business in a complex legal and regulatory environment. The ability to control the risks that can stem from breaching these rules is a major asset. As a result, an increasing number of companies have taken proactive measures to prevent and anticipate risks in areas such as corruption, stock market and financial fraud, public safety, health and environmental protection. The Autorité encourages companies, regardless of their size or the sector in which they evolve, to invest in antitrust compliance. Anticipating risks Bruno Lasserre President of the Autorité de la concurrence ontents PROMOTING A CULTURE OF COMPLIANCE WHY SET UP A COMPLIANCE PROGRAMME? HOW TO STRUCTURE A COMPLIANCE PROGRAMME COMPLIANCE PROGRAMMES MAY BE TAKEN INTO CONSIDERATION IN THE EVENT OF ANTICOMPETITIVE AGREEMENTS OR ABUSES OF A DOMINANT POSITION P3 P5 P8 P10 This brochure, which is published in French and English, aims to enhance public access to information about the missions and activities of the Autorité de la concurrence. It does not constitute professional or legal advice and its content is not binding on the Autorité.

3 PROMOTING A CULTURE OF COMPLIANCE The Autorité de la concurrence supports companies compliance efforts The Autorité de la concurrence enforces competition rules in order to ensure effective competition on the market place. It is an independent administrative agency established by French law, which specialises in making expert assessments of the functioning of markets, conducts prior review of merger transactions and detects and punishes anticompetitive practices. The mission of the Autorité is thus not limited to competition law enforcement, under the control of review courts as well as other courts, in particular criminal courts. Its duties also include competition advocacy. That is why the Autorité encourages companies to adopt a proactive strategy to prevent or minimize the risk of breaching the rules prohibiting anticompetitive agreements and abuses of dominance. The Autorité performs this part of its duties inter alia by regularly issuing opinions and recommendations, in particular on general competition issues. Furthermore, the Autorité also publishes guidelines, i.e. documents that explain certain aspects of its procedures, policy The purpose of this guide is to help you understand how compliance with competition rules can prove to be a winning investment for your company, whether you are a SME or a multinational corporation. It describes some of the best practices identified in that respect and suggests practical initiatives that can be undertaken regardless of a company s size or other characteristics. and enforcement practice (merger review, leniency and settlement procedures, financial penalties, etc.). The Autorité is aware that the efforts made by organisations in order to comply with competition rules need to be encouraged. The Autorité supports undertakings in preventing breaches to competition law. For this purpose, a guide of good practices (see page 8) has been published in February 2012 with a view to assisting companies that wish to set up or improve a competition law compliance programme. This guide was preceded by a broad public consultation in 2011, which gave stakeholders an opportunity to make suggestions on its content and its practical utility. Antitrust compliance and compliance programmes 2 3

4 Compliance programmes enable companies to prevent infringements to antitrust rules. If such misconducts occured anyhow, compliance programmes increase the likelihood of detecting and subsequently remedying them. Therefore, for companies that wish to act pre-emptively, such programmes can become a useful risk management tool. Encouraging a culture of compliance... with a view to obtaining concrete results The French Competition Authority, like several of its European peers, has decided to publish the current brochure in order to clarify what compliance with antitrust rules means. In addition to that, the Autorité has issued a guide of good practices on compliance programmes, that explains its position on the issue and provides a set of tips that can be helpful in building a successful compliance programme. Moreover, this guide explains under what conditions such programmes may be taken into account in the specific context of the settlement procedure. This guidance document is based upon the already significant enforcement practice of the Autorité in this respect. Since 2003, the Autorité has accepted, in the specific framework of this procedure, commitments consisting in setting up or enhancing compliance commitments proposed by companies. In those cases, the Autorité has also sought to prevent reiteration of anticompetitive behaviours and, more broadly, to successfully steer the company towards voluntary compliance with the rules. However, the issue of compliance programmes is obviously not limited to companies that are being investigated by the Autorité. On the contrary, a growing number of companies, ranging from SMEs to multinationals, in numerous business sectors, have taken the lead in establishing such programmes pre-emptively. Such a strategy requires the involvement and the commitment of the company s top management. Even though this is a key element, it is not sufficient. Other important components of compliance programmes include issuing information to the entire management and relevant workforce of the company, raising awareness to competition rules, as well as setting up other tools. The features that may be viewed as being important step-stones of an effective compliance programme are detailed on page 8.

5 WHY SET UP A COMPLIANCE PROGRAMME? Competition rules The Autorité enforces both French and European rules. Undertakings have a responsibility to comply with these rules, which are laid down in Articles 101 and 102 of the Treaty on the Functioning of the European Union (TFEU) and Articles L , L and L of the French Commercial Code. Both the Autorité de la concurrence and the European Commission apply and enforce competition law in France, and coordinate their actions in appropriate cases. The two main types of infringement are anticompetitive agreements between companies and abuses of a dominant position (see box on page 6). Such behaviours artificially distort the functioning of the economy, to the benefit of the wrongdoers but to the detriment of other companies, customers, consumers and, ultimately, the well-being of society as a whole. That is why the law provides for very heavy penalties in cases where competition rules are infringed. When discovered, anticompetitive agreements and abuses of a dominant position can prove very costly to infringing companies, which risk high financial penalties, with fines of up to 10% of their consolidated global turnover. The risk of infringing competition law Undertakings may be tempted, in the short run, to engage in illicit practices in the hope of gaining an economic advantage they feel would be unattainable by following competition rules. This calculation always proves to be a losing strategy because commercial success that relies on infringement of competition rules is necessarily fragile and may be disclosed at any time by a competitor, customer, partner or former employee, or in the course of antitrust investigations. The risk of engaging in anticompetitive practices has become a major part of the risk mapping used to assess business risks, as proved by recent fining decisions issued by the Autorité de la concurrence or the European Commission. Fines may reach tens, even hundreds, of millions of euros. The very substantial costs that infringements to competition law might generate (long and costly proceedings requiring a significant allocation of resources, the risk of fines, etc.) are a very good reason to undertake in earnest the necessary efforts to ensure compliance with competition rules. Antitrust compliance and compliance programmes 4 5

6 Anticompetitive practices Anticompetitive agreements Anticompetitive agreements include cartels, in which competitors jointly fix prices, allocate markets or customers among themselves or share production quotas, as well as other concerted horizontal practices (between competitors) or vertical practices (between undertakings operating at different levels of the supply chain). All agreements between undertakings, irrespective of the level of the value chain in which they do business (and whether or not formally set out in a contract), whose purpose or actual or potential effect is to impede effective competition, may be considered anticompetitive agreements. The most striking examples of anticompetitive agreements include price fixing, sharing markets or customer allocation, production or output limitation. Such practices, which are often kept secret, are serious infringements to competition law. They can result in companies being heavily fined. Furthermore, exchanges of confidential or strategic information (e.g. relating to production costs, sales, marketing plans, etc.) between competitors or companies at different levels of the supply chain that reduce strategic uncertainty in the market can give rise to competition concerns. Lastly, agreements between competitors or between a manufacturer and businesses further down the value chain (wholesalers, retailers, etc.) may be qualified as illegal horizontal or vertical agreements, e.g. agreements by which a producer imposes retail prices to its retailers, or agrees to include them in its distribution network providing they agree not to sell the products on the Internet. Abuses of a dominant position Strategies in which one or more companies that hold market power exclude their competitors or exploit customers by limiting choice, raising prices, etc. Undertakings that have a predominant position in the market in which they do business (measured by market shares or other indicators of economic power) are likely to hold a dominant position in that market. Such companies have a particular responsibility compared to other companies: they must not engage in behaviours that are considered abusive, such as preventing their competitors from doing business in the market or attempting to drive them out of the market. Setting artificially high prices (which exploit captive consumers), artificially low prices (with the aim of driving competitors from the market) or imposing unjustified general terms and conditions of sale on business partners are all practices that may be considered an abuse of a dominant position.

7 Why take control of a company s risks in the field of competition law? Setting up a compliance programme is, at the outset, a protective measure. First of all, a company that takes this step protects itself from a legal point of view: compliance programmes can contribute to decrease the risk that would ensue from being targeted by a complaint filed by a competitor or being involved in an investigation initiated by competition authorities themselves. Setting up a compliance programme can also help in detecting and assessing misconducts that may have taken place within the company. If misconducts are detected, choosing to ignore them is never a fruitful strategy. On the contrary, it is in the company s best interest to detect likely wrongdoings as soon as possible and remedy them on its own. If the misconduct consists in a cartel, the company s best interest lies in submitting a request for leniency to the Autorité de la concurrence, which could grant the company full or partial immunity from fines (see box on page 11). In addition to legal concerns, compliance to competition rules is an asset for the company s reputation. Undertakings that are fined for infringing competition law tarnish their public image and lose their customers, partners, employees and shareholders trust. On the other hand, a proactive strategy of compliance with competition law can enhance a company s reputation and make it more attractive to the public. It can heighten the company s appeal for recruitment purposes and increase the confidence of customers, as well as fostering a sense of loyalty among employees. Positive impact in terms of effectiveness and reputation Translating sound ethics into concrete actions Raising the awareness of an organisation s members about competition rules cannot simply consist in reminding them of the said rules. Above all, it should be treated as an opportunity to exercise managerial and company-wide leverage. By involving the whole company s payroll in the compliance process, a company can translate its values and its ethics into concrete actions. It increases individual responsibility and provides the company with more effective tools for expanding its reach. Playing by the rules of competition in a national or regional market is an undeniable asset in worldwide business competition. When a company is more confident about sticking to the rule, it can only grow stronger. The cost of compliance How much does a compliance programme cost? Preparing and implementing a competition law compliance programme may require a nonnegligible allocation of resources over time. However, feedback from companies that have already implemented such programmes emphasize the positive impacts thereof, in terms of legal security, involvement of their staff, public image, reputation and, as a consequence, benefits in terms of commercial development. These benefits outweigh the costs of the compliance process alone. The incentive to implement compliance programmes is even higher when considering the reduction in the risk of incurring penalties. Antitrust compliance and compliance programmes 6 7

8 HOW TO STRUCTURE A COMPLIANCE PROGRAMME The requirement for an effective programme: anticipate rather than react Based on its current practice and the feedback gathered from good practices adopted in other fields in France and abroad, the Autorité recently published a framework document that provides guidance on how to structure an effective competition law compliance programme. It is essential to the success of a compliance programme that it is designed by and for the company. It must be a tailor-made project to fit the company s markets, products, organisation, culture and decision-making structure. There is no one size fits all programme. In assessing the relevance and the likely robustness of compliance programmes submitted in the course of an antitrust settlement, the Autorité takes into account the specificities of each organisation and the resources at its disposal. In that respect, SMEs are not expected to set up programmes that are identical to those of larger firms. The good practices described in the framework document and summarized beside must therefore be considered in light of each company s resources. However, the Framework Document on Competition Law Compliance Programmes details five key elements, which, in the opinion of the Autorité, are important features to ensure the effectiveness and credibility of an antitrust compliance programme. Each company must reflect on the manner in which it shall implement and incorporate these features. Useful link: The Framework Document on Competition Law Compliance Programmes issued on 10 February 2012 is available on the Autorité de la concurrence website, in the section devoted to compliance with competition law. This document details the essential features of a compliance programme.

9 1 5 key features for the development of an efficient programme A public commitment on the part of the company Under French law, ignorance of the rules does not justify illegal conduct. Therefore, it is essential that all staff members within an organisation receive proper information about competition rules. The culture of compliance should permeate all levels of the company, from senior management to sales teams and legal affairs managers, for example. Moreover, a clear message from senior management and the company s broader leadership is extremely valuable in encouraging all teams and motivating the company to commit effectively to the compliance process. A clear, firm and public position that there will be compliance with competition rules and in support of the company s compliance programme is therefore the first indispensable feature for a successful programme. 2 In-house contacts and experts Another good practice is having the company s management bodies appoint persons in charge of the management of the in-house antitrust compliance programme. A compliance officer will have more weight if he/she belongs to the senior management and has direct access to the company s supervisory bodies. Information, training and awareness-raising measures 3 Another indispensable feature is the distribution of documents that explain the practical scope of competition rules to corporate officers, managers, supervisors and all employees that may be exposed to the risk of violating competition law. Such documents can go a long way in raising awareness as to the importance of complying with these rules, at an individual and collective level. Internal communication measures and mandatory training sessions on competition rules may also be implemented within the company. 5 A monitoring system The success of a compliance programme depends on the company s capacity to monitor its implementation. Such system must include a procedure for handling requests for advice and reviewing reports of infringements, and provide for the possibility of penalties in the event the company s compliance policy is infringed. 4 Audits and alert systems Adopting measures to ensure and evaluate individual conformity with the compliance policy will promote the effectiveness of the programme. Furthermore, setting up a portal accessible to all employees who wish to request advice about how to act in specific situations or to report a proven or possible infringement of competition rules, may prove, in practice, to be decisive. Antitrust compliance and compliance programmes 8 9

10 COMPLIANCE PROGRAMMES MAY BE TAKEN INTO CONSIDERATION in the event of anticompetitive agreements or abuses of a dominant position Compliance as a forward-looking prevention tool If an anticompetitive agreement or abuse of a dominant position case is already being investigated before the Autorité de la concurrence, if the parties are willing to settle the case and if the Autorité considers that the case leads itself to such as settlement, the parties may offer to commit themselves to setting up a compliance programme or to enhancing a pre-existing programme. This may enable the company, under certain conditions, to obtain a reduction of the fine of up to 10%. This specific measure takes the company s willingness to adopt effective tools to prevent anticompetitive behaviours in the future into account when setting up the fine. Still, a competition law compliance programme does not operate as a all-risks insurance policy. If the company breaches the law despite the safeguards it has put in place, it will not obtain a reduction of the fine simply because it has set up a compliance programme. Once an investigation has begun, it is not the company s efforts that count, but only the programme s outcome with respect to the specific behaviour that is being investigated. Lastly, the Autorité de la concurrence does not approve or certify compliance programmes and, therefore, its role is not to comment on proposed compliance programmes. Each company is responsible for its own compliance programme. After engaging in anticompetitive agreements there is always a lingering risk. A company that has engaged in an anticompetitive agreement takes a significant risk if it does not submit a request for leniency to the Autorité de la concurrence. Any of the participants in the agreement may at any time disclose such practice by submitting a request for leniency seeking full immunity from penalties. The other participating companies will not be eligible for such immunity. An anticompetitive agreement, no matter how perfect, is never eternal.

11 A procedural notice relating to the leniency programme was issued in March A procedural notice relating to the settlement procedure was issued in February Both of these procedural notices, which are still in force, are available on the following website: Compliance as a tool for detecting infringements Compliance programmes may include control and whistleblowing systems. A whistleblowing system making it possible for all employees to report likely wrongdoing to the company s management as soon as possible are highly recommended. When a misconduct is detected, interaction with the leniency programme may be possible. If a company is not eligible for the leniency programme, it may still be able to obtain a reduction in penalties by waiving the right to challenge the statement of objections issued by the Autorité de la concurrence (under the settlement procedure ) and, if applicable, by making commitments regarding future actions. If the Autorité deems that this procedure is appropriate in a specific case, in exchange, it will commit to granting the relevant company a reduction of up to 10% of the penalty incurred, solely under the settlement procedure. Further reductions may be granted if additional commitments are made, such as setting up a competition law compliance programme that includes the five indispensable features discussed on page 9 or improving an existing programme. What is the leniency programme? Leniency programmes enable National Competition Authorities to more easily detect, stop and punish anticompetitive agreements, in particular cartels, in exchange for favourable treatment granted, under certain conditions, to companies that report such practices and cooperate in the proceedings initiated against them. By doing so, a company may obtain full immunity from the penalties it would otherwise have incurred. Antitrust compliance and compliance programmes 10 11

12 - Photos: Getty images - February 2012 Autorité de la concurrence Communications Department 11 rue de l Echelle, Paris Tel.: