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Competition law compliance

Competition law compliance is a business necessity. This is not just because there are substantial fines for a business concerned in breaches of competition law, there are also significant personal liabilities for its staff.

• A director may be disqualified from holding office as such if he is culpable in relation to a breach of competition law by the company;
• a director engaging in unlawful acts may face an action in damages for breach of duty owed to the company;
• individuals who commit the criminal cartel offence face imprisonment for periods of up to five years and/or an unlimited fine when tried in the UK;
• individuals who commit criminal anti-competitive acts may face extradition to other countries to face trial there.

These are not just idle threats. In recent months record fines have been imposed on undertakings for competition law infringement in the US, the EU and the UK. UK citizens found guilty of criminal cartel activity in the US have been sent to jail. Others remain threatened with extradition to the US and the strong possibility of jail sentences if they are found guilty at trial. The UK authorities recently indicated that they are investigating the marine hoses cartel under criminal powers.

Typically a business which is in breach of competition law may find itself the focus of attention from the authorities as a result of a complaint from a customer or competitor or possibly of a tip off by a disgruntled employee, particularly one who has been dismissed. Sometimes unlawful behaviour comes to light as a result of an investigation in one jurisdiction which spreads rapidly to another jurisdiction. Members of the marine hoses cartel were caught at a cartel meeting being held in the US.

Those who blow the whistle on cartels receive substantial inducements to do so. They may as a result of whistle blowing reduce the fines to which the company is liable. An individual could avoid prosecution and the threat of going to prison as a result. The US, EU and UK all operate similar leniency programmes which deal with whistle blowers.

So compliance really is a business necessity. Compliance requires the adoption of a compliance plan and its proper enforcement. Any effective compliance plan must be supported with buy-in from senior management, including the board. Leadership on compliance issues must come from the top. The company should appoint a compliance officer who is senior enough to ensure respect fro compliance and who will have responsibility for establishing a plan; enforcing it and updating it.

The plan will typically comprise a number of different types of action:-

The Audit

• an audit of important agreements and standard terms;
• an audit in relation to conduct at trade associations;
• an audit of staff behaviour of those who mix with competitors;
• an audit of compliance with specific regulatory requirements, such as licences, undertakings etc.

The Training

• a training manual which will inform staff of the important provisions of competition law and how to avoid infringing those provisions;
• training staff with the benefit of the manual;
• refresher training from time to time;
• training of new joiners, as part of the induction process, to ensure that they are also informed about their duties.

Enforcement

• possibly use a system of annual returns for those who could be involved in competition law breaches (this requires them to certify that they have been trained in the requirements of competition law, that they understand them and that they have not been involved in any infringements of competition law);
• competition law compliance should form a part of the appraisal process for relevant senior staff.

If in the course of setting up a plan or, if despite having introduced a plan, problems are discovered or suspected it is important to appoint an investigator who will be able to examine the evidence in circumstances of privilege. This is typically an outside lawyer in private practice, as the report of an in house lawyer may not be privileged, for example if the problem relates to EU law.

If as a result of the investigation it appears that there has been a serious competition breach urgent consideration must be given whether to make an application for leniency. Senior staff should consider the issue in conjunction with their lawyers to evaluate all the implications, including how long an infringement continued, how long ago it ended, how serious it was, and the danger and likely costs of actions for damages from third parties injured by the unlawful acts.

key expertise

Geraldine Tickle
Partner
geraldine.tickle@martjohn.com

James Dilley
Partner
james.dilley@martjohn.com

Martineau Johnson's publications are no substitute for taking advice before reaching a decision on your individual problems. If you would like any further information about any of the issues raised in our publications please email us at lawyers@martjohn.com.