Reed Smith Client Alerts

  • Competition law promotes effective competition between companies to the benefit of the economy, consumers, and businesses.
  • An effective competition compliance programme maximises the potential of companies to operate within the law, and helps safeguard businesses from regulatory enforcement action.
  • Compliance programmes also protect companies in the event of a dawn raid, as they outline cooperative steps that must be taken during a raid, which prevents procedural infringements that may result in a fine.
  • In certain jurisdictions, having a tailored and comprehensive compliance programme in place may reduce the size of a fine resulting from anticompetitive activity.
  • Offering discounts from fines may serve as a means to provide an additional incentive for implementing a competition compliance programme.

Authors: Marjorie C. Holmes Edward B. Schwartz Asha Sharma Vaibhav Adlakha Carolyn Chia, and Celine Collis

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. The approach taken may vary between jurisdictions, but there is general acceptance that having a competition compliance programme is best practice. Given the increase in fines for breaches of competition law as well as the rise in private actions for damages due to anticompetitive conduct, it has become more important than ever for companies to have an effective and well-tailored compliance programme. Moreover, several directors and officer’s liability insurers require a compliance programme to be in place in order to obtain coverage, and potential investors in a company often enquire about the existence of such programmes.

It is paramount that businesses identify, evaluate, monitor, and mitigate risks resulting from anticompetitive activity. For any compliance programme to be effective, there must be clear behavioural parameters, along with organisational measures, for its development. Competition compliance must be ingrained into the ethos of the business and must form an integral part of the daily decision-making process. Competition authorities have recommended the adoption of a code for employees and employee-focused compliance training, together with periodic audits. It is also advisable to encourage employees to log all contact with competitors and facilitate confidential reporting of breaches to a compliance officer. For further information on the importance of competition compliance, see our previous alert, The effectiveness of fostering a competition compliance culture – a practical perspective, dated 31 July 2020.

However, there is jurisdictional divergence on the issue of whether companies should receive a discount from competition fines for having a robust compliance programme in place. Some jurisdictions offer discounts while others do not. Furthermore, even where discounts are offered, the fact that a company has a compliance programme in place does not automatically guarantee a discount; there needs to be evidence that the programme is appropriate. In rare cases, for example where the compliance programme is considered a cover for anticompetitive behaviour, a compliance programme could even amount to an aggravating circumstance. See the table below analysing the rules and guidance of key jurisdictions in which discounts are offered.