Compliance policies are unlikely to win competition fine reductions, says OFT

The OFT has published research into companies' compliance with competition law and, as part of that project, reviewed its policy on discounts for companies which commit competition law offences but have compliance policies in place.

"After thorough consideration, we have decided not to change our penalties policy in relation to compliance activities," it said in its report. "We will continue with our current neutral starting position with regard to competition law compliance activities when setting financial penalties. The key reward of an effective competition law compliance programme is the avoidance of an infringement decision in the first place."

The OFT said that in some cases a compliance policy will qualify a company for a small fine reduction, but that in other unusual cases it will be cause for an increase in fines.

"Where, in an individual case, we consider that the existence or adoption of a compliance programme should be regarded as a mitigating factor, we will generally reduce the financial penalty by up to 10 per cent," it said. "Save for exceptional cases, we will not treat the existence of a compliance programme as an aggravating factor justifying an increase in the financial penalty, since we recognise that such an approach might create disincentives for engaging in competition law compliance activities."

The OFT research focused on the reasons why some companies put in place robust policies to ensure that employees behave in a way that is in line with competition law and some don't. It said that real-world examples were a good basis for other companies seeking to make sure their staff are compliant with the law.

"We undertook research into the drivers of compliance and noncompliance with competition law in order to gain a better understanding of the practical challenges faced by businesses seeking to achieve a competition law compliance culture," said the OFT report. "Our aim was to learn what motivated businesses to comply with competition law and what businesses had found worked well in practice to achieve this. We also explored with them competition law compliance challenges that might arise in their businesses despite their compliance efforts."

The OFT published details of the steps taken by some companies to ensure that employees stay within the law. It said it hoped that other companies would be guided by its examples of good practice.

"The key drivers for competition law compliance mentioned by respondents were the fear of reputational damage and financial penalties," it said. "A number of respondents mentioned the importance of individual sanctions, such as the risk of criminal proceedings, director disqualification, personal reputational damage or internal disciplinary sanctions, in encouraging individuals to focus on competition law compliance."

"A commitment to competition law compliance from the top of the organisation down was a key driver of compliance in the organisation as a whole. Certain respondents specifically mentioned that they viewed competition law compliance as helping them to win business through being able to position themselves as ethical businesses," it said.

"Any apparent ambiguity or lack of management commitment to competition law compliance was mentioned by the majority of respondents as creating the risk of non-compliance," it said. "Other possible reasons for non-compliance mentioned include rogue employees, confusion or uncertainty about the law, employee error or naivety, loss of trust in legal advice, a ‘box-ticking’ approach to compliance and competition law compliance having to compete for attention with other compliance activities."

The OFT listed some of the attributes of successful compliance programmes. These included testing of employees on their understanding after they attended competition compliance workshops; the display of tangible evidence, such as personal communications, that senior executives treated competition issues seriously; the placing of compliance policies on the company's website; and the use of financial rewards for compliant behaviour and disciplinary action for non-compliant behaviour.

"An effective programme needs to have the full 'buy-in' of management at all levels," said Guy Lougher, a competition law specialist at Pinsent Masons, the law firm behind OUT-LAW.COM. "This is key, with the OFT keen to see that programmes engineer or reinforce a genuine unambiguous commitment to placing adherence to competition law at the centre of a business's trading ethics."

"If there are signals which cut across this commitment – for example, if employees are encouraged to meet sales targets by 'whatever means necessary' without regard to competition law risks – then this commitment will be lost and the programme risks being undermined," said Lougher.

Lougher said that the OFT wanted companies to adopt policies and programmes that governed employees' behaviour on a day to day basis rather than tokenistic manuals that were never consulted.

"It is not enough to have a lengthy all-embracing document sitting on the shelf," he said. "All relevant employees should have tailored training, suitable both for their level of responsibility and their exposure to situations that may readily involve being drawn into anti-competitive arrangements. The OFT also cautioned against programmes being too legalistic, excessively risk-averse or impractical in content or approach."

Lougher said that the OFT report makes it clear that the existence of a policy will rarely lead to an increase in fines for breaches of the law, but that such a situation was possible.

"An exceptional case might arise where a company uses the existence of a programme as a smokescreen to conceal or facilitate an infringement or to mislead the OFT during its investigation," he said. "This change in stance is a welcome move and follows the OFT's explicit recognition that the majority of businesses want to comply with competition law."