(by Andreas Stephan) The UK’s Office of Fair Trading should be applauded for making concerted efforts to promote competition law compliance. Today they published new guidance for businesses and directors (amended following a public consultation), as well as simple advice on compliance presented in the form of a ‘Quick Guide’ and ‘Four Step Compliance Wheel’. They have even produced a compliance film.
They have also published a competition law compliance survey which involved more than 2,000 telephone interviews with a representative sample of businesses in seven sectors (manufacturing, hotels, restaurants, transport, financial intermediation, real estate and recreational, cultural and sporting activities). The findings reveal just how much work still needs to be done in disseminating information about competition law and educating businesses in effective compliance. In particular:
- Knowledge of what competition law is trying to prevent is low, but a greater proportion of businesses knew that specific practices were illegal.
- 20% claimed to have come across breaches of competition law by others.
- Only 3% say they have abandoned or changed arrangements in the last two years because of the risk of infringing competition law.
- 23% claim they do not take action to ensure compliance or do not know whether it happens (despite holding a relevant position of responsibility).
There was little variation between sectors or regions, but big businesses were far more knowledgeable about competition law, what it is designed to prevent and what is illegal. Successful dissemination of the materials published today should help close this gap between small and large businesses.
The OFT’s efforts to promote compliance include a willingness to grant a discount in fines of up to 10 per cent where appropriate compliance efforts are taken. The OFT also recognise the importance of building a competition culture, beyond simple enforcement of the law. Promoting compliance helps avert the serious harm caused by competition law violations in the first place. This is far more important than detecting and punishing infringements ex post.
By contrast, many other competition authorities show a limited willingness to really engage with businesses in this way. As pointed out in a previous blog post, one would be excused for thinking that they do not really want businesses to comply with the law at all. The efforts made by the OFT will also help to improve the perceived legitimacy of competition policy among members of the business community. An emphasis on enforcement-only risks creating an image of an anti-business regulator extorting money through antitrust fines.
There are a number of concerns over the OFT’s recent enforcement practice (e.g. the fines imposed for cover pricing or the collapse of the BA criminal trial), but it is nevertheless unfortunate that the UK government placed so much importance on the comparative number of cases completed by the OFT, in its recent review of the UK’s competition law regime. This is a very poor measure of how effective a competition authority can be.
Today’s achievements should not distract from the many uncertainties which still persist in relation to compliance, such as whether internal compliance documents can later be used against the firm in proving the existence of an infringement. Legal privilege in Europe generally only protects communications with external counsel. It should also be noted that the OFT has not listened to the consultation responses in all areas. A number of submissions were unhappy with the arbitrary nature of the 10 per cent discount, while others argued it was not high enough.