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Compliance in the UKDavid Stallibrass
Shanghai | December 2012
Personal views of author. Does not represent opinion or position of any institutions to which he is affiliated.
Three pillars of compliance
OFT 1391: The impact of competition interventions on compliance and deterrence
Deterrence is key to effective compliance
3
Never started because of fear of enforcement
Stopped through enforcement
Deterrence is key to effective compliance
4
OFT 1391: The impact of competition interventions on compliance and deterrence
Deterrence is key to effective compliance
5
Less clarity and enforcement
Often not even considered!
OFT 1391: The impact of competition interventions on compliance and deterrence
The agencies’ responsibility
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A note on “private enforcement of public law”
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Limited private enforcement in UK and EU
Strong private enforcement in US
Judges rule on whether a contract or action is legal based on whether it is compatible with the objectives of the law Not on the extent to which it harmed the
plaintiff
Private enforcement can support the role of competition agencies
Compliance in the UK: lack of knowledge
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Firms think knowledge of
competition law is important, but don’t really know what the
law is!
OFT 1391: The impact of competition interventions on compliance and deterrence
Compliance in the UK: all sanctions relevant
OFT 1391: The impact of competition interventions on compliance and deterrence
Compliance in the UK: all sanctions relevant
Though damage is often done by the
investigation, not the finding of guilt
OFT 1391: The impact of competition interventions on compliance and deterrence
Compliance in the UK: all sanctions relevant
Though much lower than likely benefits of
collusion
OFT 1391: The impact of competition interventions on compliance and deterrence
Compliance in the UK: all sanctions relevant
Probably considered more important by
small businesses than large ones
OFT 1391: The impact of competition interventions on compliance and deterrence
A note on penalties
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Substantial increase in likely fines (though still capped at
maximum 10% of global firm
turnover)
Though still less than likely
overcharge!
And chance of capture is <100% so if fines are the only
sanction, it’s profitable to break the law!
Connor (2006). Connor and Lande (2007). OFT 423 guidance on appropriate penalty (2012).
Compliance in the UK: Individuals comply for different reasons
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In a behavioral experiment, different people reacted to different incentives
Some people care about expected returns Deter through high fines, effective enforcement
Some people care about personal risk Highlight risks, create individual sanctions
Some people want to do the right thing Educate industry, and the public
OFT 1391: The impact of competition interventions on compliance and deterrence
Compliance in the UK: Policy response
Continued high-profile enforcement Detailed decisions, strong media presence, high fines
Focus on individual incentives Director Disqualification and Criminal Sanctions
Guidance to company Directors
Increase transparency and guidance New competition law guidance
New guidance on compliance
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OFT 1330: Quick guide to competition law. OFT 1340: Company directors. OFT 1341: Achieving Compliance OFT 510 : Director
Disqualification.
Four step guidance to firm compliance
16OFT 1341: Achieving compliance
Four step guidance to firm compliance
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What competition compliance issues might your firm face? Dominant?
Involved in bidding?
Regular contact with competitors?
Joint ventures and partnerships?
Complex vertical contracts?
OFT 1341: Achieving compliance
Four step guidance to firm compliance
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Where is your risk highest? Which staff?
Which events?
Which contracts?
Which business practices?
Which relationships?
OFT 1341: Achieving compliance
Four step guidance to firm compliance
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Mitigate the risk External legal advice
Training
Compliance programs
SME awareness
Creating a compliant culture
OFT 1341: Achieving compliance
Four step guidance to firm compliance
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Review your effectiveness Has your mitigation been
successful?
Are there any new risks?
Have any old risks changes or decreased?
Is there a clear culture of compliance at all levels?
OFT 1341: Achieving compliance
Four step guidance to firm compliance
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Ensure a core commitment to compliance from the top down
Appoint a responsible director for compliance with competition law
OFT 1341: Achieving compliance
A note on fine reduction
The OFT will sometimes reduce a firms fine if it had a compliance program in place and shows good faith during the investigation
Other authorities think that “compliance is its own reward”
Compared to getting the big things right, it’s not very important
22OFT 423 guidance on appropriate penalty (2012).
Conclusion
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Resources
www.oft.gov.uk
http://www.oft.gov.uk/OFTwork/competition-act-and-cartels/competition-law-compliance/
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