The CMA ‘Cheating or Competing?’ campaign
In February 2020, the UK Competition and Markets Authority (CMA) launched a new cartels awareness campaign, ‘Cheating or Competing?’, aimed at creating a greater understanding among businesses so that they fulfil their competition law obligations and appreciate the importance of competition compliance. The focus of the CMA’s campaign is to raise awareness and increase applications for leniency, so that more cartels are brought to the attention of the CMA. The backdrop to the campaign was a 2018 survey of the construction industry, which showed a general lack of awareness and understanding among UK businesses of what constitutes anti-competitive conduct. This CMA survey established that:
- 22% of companies believed it was not against the law for competitors to agree prices in order to avoid losing money.
- 6% of senior representatives were familiar with competition law.
- 29% of senior representatives thought it was acceptable to attend a meeting at which competitors fix prices.
- 32% thought agreeing not to supply each other’s customers was legal.
- 25% saw no problem with discussing bids and agreeing who would get which tenders.
Recently, the CMA secured its first contested application for the disqualification of a director whose estate agency breached anti-cartel laws. This underscores the CMA’s commitment to using all of the regulatory tools at its disposal in order to raise greater awareness of competition rules and the consequences of breaching them.
The importance of compliance programmes
Having an effective competition compliance culture within an organisation can be the best way to ensure that competition law is effectively followed and its provisions not breached. Unlike many jurisdictions, when calculating cartel fines, the CMA has given discounts to companies that have a robust compliance programme in place. However, the mere existence of a compliance programme is not sufficient to justify a discount. The CMA will take into account the evidence of the ‘adequate steps’ taken by businesses to improve compliance. For example, in the Heathrow-Arora car parking fine case, Heathrow was given a 10% reduction because it had implemented an enhanced competition compliance programme. On the other hand, the CMA may treat the existence of a compliance programme as an aggravating factor if it is used to conceal or facilitate an infringement or to mislead the CMA.
The Spanish competition-enforcement agency (CNMC) has recently released a public consultation on the criteria it will apply when assessing the effectiveness of competition compliance programmes. The guidelines set out what compliance programmes should include to maximise their efficacy. It also considers the possibility of reducing fines to incentivise the adoption of such programmes. This approach is not universally accepted. The European Commission, for example, does not offer discounts for compliance programmes.
‘A stitch in time saves nine’ – guidance for regulatory compliance
The objective of compliance programmes is to prevent, detect and react early to unlawful conduct that may restrict competition, and that could result in civil, criminal and administrative liability under competition law as well as damage to the reputation of the business. The CMA has set out a four-stage risk management process for businesses to ensure effective competition law compliance:
- identify the key competition law risks faced by the business;
- analyse and evaluate the seriousness of the risks;
- manage the risks through policies, procedures and measures to detect and address breaches; and
- monitor and review the risks regularly through annual reviews or after a significant event.
For any compliance programme to be most effective there must be clear behavioural parameters, together with organisational measures, for its development. Competition compliance must be ingrained into the ethos of the business and form an integral part of the daily decision-making process. Therefore, the CMA advises companies to make a public statement that anti-competitive conduct has no place within the organisation and affirm their commitment to competition compliance through a board resolution.
Other steps recommended to ensure effective compliance include logging all contact with competitors and facilitating confidential reporting of breaches to a compliance officer. Furthermore, the CMA recommends the adoption of a code for employees and employee-focused compliance training, together with periodic compliance audits. As noted above, the CMA may offer a discount of up to 10% from any fine for a breach of competition law for businesses with a well-designed compliance programme. However, the principal benefit of a comprehensive compliance programme is to allow businesses to avoid being involved in anti-competitive conduct in the first place, as well as to protect them from liability for the anti-competitive conduct of a rouge employee.
Concluding remarks
Encouraging businesses to take active steps to comply with competition law remains a key priority for the CMA. The ‘Cheating or Competing?’ campaign is the latest in a series of initiatives to educate businesses and encourage compliance, as well as deter infringement through enforcement action. The CMA’s current push to pursue the disqualification of directors of infringing companies, in particular, seeks to foster the top-down commitment to compliance that the guidance encourages.
The CMA has stressed that companies should not simply pay lip-service to competition compliance. It is also clear that off-the-shelf compliance training delivered once and then ignored in practice will not persuade the CMA that a company has shown an appropriate level of commitment to compliance. Given the increase in fines for breaches of competition law as well as the rise in private actions for damages due to anti-competitive conduct, it has become, more important than ever, for companies to have an effective and well-tailored compliance programme.
How Reed Smith can help
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Client Alert 2020-465
