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Do you have competition law in your remit? Yes, partly, maybe? Some E&C Teams I know have a joint responsibility with the legal team: while the latter answers day to day questions, and advises on agreements, Ethics & Compliance professionals bring a systematic approach to risk prevention and mitigation. In today's blogpost, we refresh our knowledge on competition law, provide best practices concrete guidance to operational teams and discuss how we can best use our Ethics & Compliance program methodology to effectively prevent violations.
Competition law is a pretty fascinating topic, about which top management in companies are usually pretty aware. They’ve all seen the press releases with cartel sanctions hitting huge organizations they know extremely hard. That being said, if you look more downstream in organizations, you may be surprised by practices may be more fluid and rules being misunderstood. Indeed, it’s one topic where rules can be extremely counter intuitive, for example:
Training is key.
Competition law has also been evolving quite significantly in the past 20 years: we’re no longer dealing with the old school cartel partitioning agreements, signed by the CEOs of two competing companies with big cigars in armchairs in a club. Rather, today’s violations take the shape of very porous and continuous exchanges of sensitive information, leading to coordinated behaviors between competitors and are overall much more subtle.
Anyhow, anti-competitive behaviors should be avoided, and our Ethics & Compliance methodology is a wonderful toolbox to systematically address these risks, help avoid them and react appropriately if and when they materialize. There’s even some great guidance by authorities on what competition law compliance programs should look like, for example by the French Competition Law Authority (Framework document of 23 May 2022 on competition compliance programmes - the French Competition Law Authority).
To quote this document:
“These programmes are a tangible illustration of proactive governance strategies, through which economic stakeholders express their determination to instill an ethical internal culture in order not only to ensure that their behavior complies with the rules of law, but also to prevent the risks of infringement of these rules and deal with them without delay when the infringement could not be avoided” (Framework document of 23 May 2022 on competition compliance programmes - the French Competition Law Authority).
This was a way too long introduction! Let's jump right at it, with the goal will to refresh our knowledge on the topic and discuss how we can best use our E&C program methodology to effectively prevent, detect and address competition law violations.
Businesses compete on price, quality or services, in order to win new customers and new markets. When businesses collude and don’t compete, customers don’t get the best products at the best prices. It’s as simple as that.
Having a solid compliance program in this domain will promote the value of doing business fairly and will help avoid the competition risk materializing.
What are the consequences in case of violations? They’re pretty harsh, and may include:
I recommend having a scroll on the website of the EU Commission for some insightful data related to cartel enforcement cases: amounts at stake are huge and all industries are being looked at. Take a read at this report to see in detail the sectors, verticals and industries being scrutinized, as well as the reality of the % of the group turnover fine amount (EU Commission, Cartel Statistics, 7 December 2023). Very interesting!
And, to be honest, these huge fines and consequences come from the fact that it’s healthy values we’re protecting there. Competition law is about protecting consumers and benefiting all operators. It protects innovation to offer the best products, best quality, at the best price, ensuring a healthy competition on the merits between all operators.
So, it’s a perfect area to deploy our methodology, including “preventing the risk of infringement, providing the means to detect and deal with cases of infringement that could not be avoided, and providing for regular updates” (Framework document of 23 May 2022 on competition compliance programmes - the French Competition Law Authority).
As for all the other topics in our remits, our competition law compliance program should be tailored to our organizations and the risks we face. It will certainly not be the same to create and maintain a program for a tech giant in a dominant position, or a distributor of wholesale products in a sector where prices used to be state regulated and so on.
Similarly, as for all our other programs, the team in charge should have the right authority and competence, as well as time and resources. And of course, the person leading this initiative should have the ability to reach out to the highest level of the organization, as well as the independence and autonomy to carry out this mission. You know the drill.
As for any Ethics & Compliance Program, we first want to assess the risks we face, in order to address them effectively, in a way that is tailored to our organization.
One exercise that could definitely be interesting to assess the risks we face in the most pragmatic manner would be to adopt the same approach as the EU Commission or other national competition authorities: seize a few key mailboxes and filter them out using some relevant keywords. There is no better way to quickly spot the areas of risks for our group, and fuel our training material with extremely relevant examples.
This is also the opportunity to sensitize top management and leaders as to the fact that such a seizure may happen one day.
Definitely a fun exercise to run, making sure you are well prepared and have all the safeguards in place, including:
Once you're safe and set, the more fun part starts:
This exercise will for sure provide you with the best insight, the most practical and reliable examples to then use in your training, and a great plan to train your organisation.
If you cannot or do not want to make your assessment such a practical exercise, then just go for the traditional risk mapping assessment, asking key questions, including some competition law specifics:
Which teams are in contact with competitors, distributors, suppliers?
Where and how often do our teams meet with competitors (JVs / professional associations / geographical area where they work)?
Do we have agreements in place with competitors? Distributors? Suppliers?
Once we know the risks we face as an organization, we can continue with deploying our methodology, by first and foremost making sure our organization is committed to adhere to competition law.
As for any other E&C related topic, having the right tone at the top is key, and a commitment by the company at the highest level is a prerequisite to a successful program.
Then, we need rules and guidance. Do you have a reference to competition law in your Code of Conduct? Should it be complemented by a dedicated Competition Law Policy? What about additional procedures?
Who’s in scope of the rules? All employees and more particularly, anyone in contact with:
Training is extremely key on this topic, as the rules as so counter intuitive. It should be extremely concrete guidance to the teams.
The first thing to do will be to make a training plan. The key point of this plan is to determine the audience for your training, probably making several different groups and adjusting the content to be relevant for each group. Our training should of course not be the same whether we are speaking to sales, public affairs or sourcing. We want to be relevant and to the point.
How will we deploy this training? Which waves? Which countries and teams first?
Once your plan is set, let's make sure the content is right.
And then, touch upon the topics that are relevant to your business, providing concrete examples. I wanted to take the opportunity of this section to refresh on the key rules when it comes to competition law. Important point: in the content below, I choose to focus on horizontal agreements and concerted practices, as well as exchanges of sensitive information. Please don't disregard abuse of dominant positions, vertical relationships and indirect exchanges of sensitive information if these are relevant to you as well.
Key principle: agreements with competitors are possible, BUT anti competitive agreements are prohibited.
The following type of agreements are typically always a problem:
The key message for the operational teams should be: "if you plan any agreement involving a competitor, make sure to involve the legal team and have a competition law analysis carried out".
Provide various examples that may be relevant to your industry, maybe some concrete cases that have been investigated and fined.
Lastly, don’t forget to remind them that the collusion itself is typically illegal, even if no one acts upon it afterwards. Then you can move on to exchanges of sensitive information.
Key principle: exchanges of information with competitors are allowed, they are indeed at the center of economic activity. However, exchanges that restrict competition are prohibited.
This rule comes from the fact that competition is based on uncertainty, and decisions must be made autonomously. Exchanging sensitive information with competitors reduces my autonomy as a player on the market, and hence are prohibited. The million dollar question is…
What’s sensitive information?
I’ll give below the key criteria to bear in mind, but my fifty cents on this one is that your operational teams absolutely know what’s sensitive: it’s this juicy piece of information that they just got that they can’t wait to share with their management.
They should trust their guts and get in touch as soon as they have a doubt about any information they share or receive.
Of course, provide them with the criteria to help assess what a sensitive information is:
And these criteria are also assessed based on the general environment and the market and environment: how transparent is the market? How concentrated? How frequent are the exchanges? How are such exchanges organized?
Make sure everyone understands that the following two things are punished in the same way:
Then you may want to go through the types of meetings or encounters your teams typically have with competitors, and provide guidance on how to react.
Formal meetings (industry association meeting for example):
Before the meeting: ask for the agenda and have it checked by your legal team.
During the meeting:
Informal meetings (lunch / social occasions): don’t discuss work. Change topic diplomatically. Take distance formally if needed. Contact your legal team immediately if you feel the exchange went too far.
Hiring someone coming from a competitor: apply a Chinese wall for the early days, knowing that the first months are the most sensitive. Avoid contacting former colleagues to get information.
Provide a few quiz examples and Q&A to make sure everyone understands. Lastly, the most important point is to train team members on the importance of communication.
This was for direct exchanges. On indirect exchanges, the (very quick) rule of thumb is as follows:
As emails may be seized and read many years later, taken out of context by authorities who may assume that a piece of information was obtained from a competitor unless demonstrated otherwise, it is really important to train the teams in writing effectively in order to minimize the risk of misinterpretation.
This is one of the most important points of the training process in my opinion.
Often in my career I have found that emails that appeared terrible were actually OK when digging further. For example: “I have this sensitive information from a reliable source… read and destroy”, only to find out that the information was not really sensitive as the attachment was public information provided by a trade association, not a competitor. That’s really just clumsiness and “secret agent” talk at play, and that can be costly to everyone down the line.
Hence the importance of training your teams to write properly, including giving them the following guidance:
A pro-tip: this is a lot of practical guidance. Based on the training content, prepare one pagers summarizing the guidance in an easy to read format (maybe an infographic? Maybe a digital decision tree?) and containing the key persons to contact in case of doubt or question. This will make it easy for the teams to remember.
As for any training program, it’s always a good idea to measure the impact and effectiveness of your training by asking people how it was. Feedback is the best way to continuously improve what we do and keep learning!
Lastly, training people as well as being ready and practicing for dawn raids may be a good idea. Check out my blogpost Maximizing Preparedness: a Guide for Ethics & Compliance Professionals to Navigate Dawn Raids to do so.
Ok, we're done with training and we've taken the opportunity to remind ourselves with the practical guidance to deliver to our teams. Let's continue briefly on the remaining elements of our compliance program.
Make sure to identify clearly who is responsible to answer questions and available to be contacted. This needs to include short notice contacts as people may need help while a meeting is happening. It is really important to include a way to report any violations. This latter point can lead to your speak up hotline of course.
You will need a procedure for handling requests for advice and alerts (how they are reviewed and what response is given) and a procedure for sanctions in the event of a breach of the compliance programme.
You will want to develop other processes enabling a systematic following of the above rules. It could be a good idea to enable tooling to keep track, record and advise along the way of your process in a systematic manner. This is also perfect to ensure that anyone who attends such meetings in your organization receives additional training and guidance and confirms that they have understood.
You could also have a competition meeting registrar where you record planned meetings with competitors in the framework of trade associations or other formal events, and where you ensure whoever attends follows the dedicated process: ask for the agenda, submit it for review, confirm formally that they have understood the rules etc.
Lastly, as in any other topic, we need to monitor our environment and have a way to:
Like in any other topic, the work just never ends and our program will require constant adjustments 🙂.
I hope the above few points are a helpful way to refresh, get started on or strengthen your competition law compliance program!
Follow Upright Solutions on LinkedIn for more inspiration.
Love from Copenhagen 💜
