Managing international cartel investigations—strategy and risk management

Competition PSL, produced in partnership with Suzanne Rab, Barrister

Globally, antitrust authorities are maintaining their focus on international cartels, intensifying their investigatory powers and coordinating their investigations worldwide. Corporate fines, criminalisation and follow-on litigation are increasingly common. With over 100 countries now having laws specifically targeted at price fixing, market sharing and other cartel-like practices, managing multi-jurisdictional investigations requires careful risk management and planning.

Corporate internal and external counsel will have to consider and address the multi-faceted and inter-related risks to a company and its executives and employees, which frequently go beyond the immediate competition law issues in one jurisdiction.

It is important to examine up front the risk management issues for the effective handling of an international cartel investigation.

The 7 step process to an effective international compliance programme

It is the case that more rigorous  enforcement practice and the increasing spread of leniency programmes are rendering detection of anti-competitive agreements more likely.

Some businesses may intentionally take the risk of infringing competition whereas others may do so unintentionally through negligence or insufficient awareness of the risk. The European Commission takes the position that neither ignorance nor negligence will be a satisfactory excuse.

The best way to avoid infringement is to adopt an effective compliance programme.

According to international best practice and taking into account guidance from different national competition authorities worldwide, the following are typically recognised as the basic elements for an effective competition compliance programme:

(1) support of senior management;

(2) development of a competition law compliance policy that is aligned to the company’s risk profile and market position;

(3) implementation of the programme through continuing education of employees;

(4) establishing clear procedures for maintaining compliance and detecting and sanctioning breaches;

(5) competition audits to identify the degree of risk exposure;

(6) coordination and integration of competition compliance with other areas of compliance and across all areas where the company does business;

(7) creating systems to continuously monitor compliance.

Amongst the specific factors to take into account when preparing international compliance programmes are the following:

  • Scope: the programme itself can vary in scope. At a basic level, this can be a paper-based manual. However, a paper-based programme has significant limitations not least because competition law issues are generally recognised as being difficult to communicate to non-specialists, and because the law is continually evolving. This has prompted a move to investment in more sophisticated training using different media. Examples include electronic and video-based training, mock investigation simulation and interactive e-quizzes.
  • Global v national approaches: many of the core principles of competition law are common to the majority of jurisdictions. This is particularly the case in the area of cartels. A question often arises as to whether a company should adopt a ‘one size fits all’ approach to cover the company’s entire global operations or whether more tailored approaches should be adopted depending on the country concerned. There can be benefits in a uniform approach in that where the principles are universal this can assist with ease of roll-out. However, there is a danger that the programme can converge to the 'lowest common denominator' and impose tighter controls on the business in certain markets where the rules are more flexible. Every case must be treated on its facts and specific guidance should be sought on the situation of individual companies. In many instances it is possible to adopt an '80/ 20' approach where most of the rules can be applicable to the majority of the company’s business. The general approach can then be supplemented with tailored country-specific or even business line-specific guidance or examples.
  • Practical guidance: competition law can be confusing even for those with a legal background who may not necessarily have specialist competition law expertise. A further challenge for compliance concerns sales employees in markets that have recently adopted competition laws and who are just beginning to grapple with an unfamiliar concept. A list of 'do’s' and 'don’ts' and 'when to ask for expert advice' may prove to be more effective than a translation of the legal rules. Another technique is to use face-to-face communication. Simply explaining the rules allows people to create their own personal interpretations. If the rule is not to share markets then an (inaccurate) interpretation can be 'we did not share markets—we just talked about our target customers'. Role-playing in compliance training can help employees understand how to respond in real life situations and to appreciate the subtleties of practical application of the legal rules.
  • Endorsement by senior management: at the very least, there should be a way for employees anonymously to ask questions about the competition compliance programme or report suspicions. The company policy should firmly state that there will be no retribution against whistle-blowers and senior management should endorse the policy in what they say and do.
  • Culture: creating a 'culture of compliance' can be challenging especially where business practices which previously escaped legal sanctions suddenly become competition law infringements. Such practices (for example bid rigging) may be endemic across an industry and it can be difficult for old habits to die.

An increase in cooperation between authorities worldwide requires implementation of effective and integrated global compliance programmes that are sensitive to the needs of the organisation and the specific risks it faces, wherever it does business. Insights that companies have gained internationally can be useful when grappling with the evolving compliance challenges and integrating those efforts worldwide.

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