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Until recently, the field of ethics and compliance focused almost exclusively on the fight against corruption, and was seen as separate and distinct from other matters of compliance. In the last few years, however, there has been a growing awareness that the areas of antitrust and anti-corruption, while facing different challenges, share similar features and are often brought together under the common denominator of “corporate compliance”. This Chapter introduces the global antitrust landscape and describes the main legal instruments governing antitrust in the United States and the European Union. We, as compliance practitioners, learn about the tenets of competition rules and the key features of antitrust compliance programmes.

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INTRODUCTION

The management of antitrust risk has become a real challenge, especially for companies operating in numerous countries across several continents. Yet, this challenge arises not only in countries where competition legislation has been on the statute books for a long time but also in countries where competition law has only been recently adopted and is being implemented pursuant to standards ‘imported’ from so-called mature jurisdictions.

Assessing the competition risk for your company and defining the proper compliance standards to be followed by its business units will not be an easy task. You may be confronted with at least three categories of countries when making such assessment:

1. Jurisdictions where sophisticated legal instruments and clear guidelines exist (for example, the United States and the European Union);
2. Jurisdictions which have enacted competition legislation but which have weak enforcement authorities and have provided little guidance as to the interpretation of their legislation; and
3. A small number of jurisdictions where no competition law is yet in place.

As a result, it is difficult to come up with uniform compliance standards that are applicable worldwide. However, as a matter of consistency, a global corporate approach is required despite existing discrepancies
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between legal frameworks. Whatever jurisdiction is at stake, the challenge is to protect the global reputation of the company by mitigating exposure to potentially significant financial penalties, civil suits as well as criminal sanctions. As it is often rightly said, reputation is the main asset of a company and global compliance is critical in this respect.

THE ORIGINS OF COMPETITION LAW – AND MOST RECENT DEVELOPMENTS WORLDWIDE

Competition law was ‘invented’ in the 19th century in the United States. The European Union came long after the United States and more precisely in the 20th century, calling it competition law rather than antitrust law. Thereafter, and especially under the influence of the International Monetary Fund, the World Bank and the OECD, a vast majority of countries around the world decided to implement competition legislation which broadly mirrored European and United States standards. The best symbol of this ‘globalization of competition legislation’ is the adoption in 2008 by the People’s Republic of China of competition rules largely inspired by European standards. It is fair to say that competition rules, along with anti-corruption rules, are now quite similar in the vast majority of countries. There are only a handful of countries without competition law, making the challenge of global compliance even more complex.

THE NEED FOR A WORLDWIDE COMPETITION COMPLIANCE PROGRAMME

Establishing a worldwide competition compliance programme is now a ‘must-do’ for multinational companies and other businesses with international operations. Such antitrust compliance programme should clearly define which behaviour is acceptable and which is not. Defining the company’s ‘do’s and don’ts’ will only be possible after having done a thorough and complex risk management analysis, which should involve business people as well as competition lawyers.

How do you shape and enforce your company’s compliance commitments in less mature jurisdictions? This is a serious task for companies operating in countries where there are still significant discrepancies in the way competition laws are construed and enforced. And the challenge of interpreting different competition laws will become even more important. For instance, the use of economics to bring evidence of possible collusion among competitors differs from one jurisdiction to another. The structure of some markets and certain pricing trends are increasingly challenged by competition authorities, even though they may be the natural result of the evolution of supply and demand. Assessing the potential infringement of competition rules is sometimes far from being clear cut. As a result, there is a significant ‘risk management’ element in any global antitrust compliance programme, and your company will need to provide sufficient expertise and resources to help employees face complex dilemmas.

A compliance programme should not be purely ‘process-driven’, but rather designed to foster a sustainable culture of antitrust integrity in all entities and countries where the company operates. In that sense, it should
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also be ‘value-based’. A training programme focusing solely on rules and processes may prove ineffective if it falls short of creating a culture of compliance through senior management buy-in and commitment.

Smaller companies are also required to establish and communicate on internal compliance rules, especially when operating in multiple jurisdictions. However, this should be done in a way to minimize the associated cost and additional organizational complexity.

ANTITRUST LEGAL INSTRUMENTS IN THE UNITED STATES AND IN THE EUROPEAN UNION

The past decade has witnessed a greater convergence between the United States and the European Union with regard to law enforcement by their respective competition authorities. While there still are a number of technical (and sometimes not insignificant) discrepancies between both legal systems, it can be said that there are now more similarities than differences between both jurisdictions.

Why are these two jurisdictions setting global antitrust standards? Among the various reasons are (i) the existence of mature and long-standing antitrust systems and instruments; (ii) the presence of influential antitrust policy-making bodies (such as the OECD and the International Competition Network); (iii) the existence of large databases of case law; and (iv) the substantial policy-making activity on both sides of the Atlantic. Last but not least, the vast majority of antitrust lawyers, policy-makers and economists still originate from European and North American universities. However, it is fair to say that law enforcement in Asia is such that, in few years time, Asian countries will most likely play a key role in global standard-setting.

The United States antitrust model

The United States has a complex and sophisticated antitrust legal system derived from the very nature of its federal political system. In a nutshell, the following acts are in force:

• The Sherman Act is the original, principal and foremost antitrust statute in the United States. It provides both civil remedies and criminal penalties for the principal antitrust violations: conspiracy to restrain trade, monopolization, attempted monopolization, and conspiracy to monopolize.
• The Clayton Act is a federal statute that imposes restrictions on proposed mergers and acquisitions to control the formation of trusts and monopolization.
• The Robinson-Patman Act prohibits specific business practices such as price-discrimination.
• The Federal Trade Commission Act establishes the Federal Trade Commission, which has regulatory authority to enforce the antitrust acts.
• The Hart-Scott-Rodino Antitrust Improvement Act imposes premerger notification requirements for certain kinds of mergers, acquisitions, and other concentrations of two or more business operations.
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• The state statutes: in addition to the federal statutes, each state in the United Stated has its own antitrust statutes, often similar to, but in some instances significantly different from, the federal acts.

The Antitrust Division of the Department of Justice and the Federal Trade Commission generally have concurrent jurisdiction for civil enforcement actions for violations of the federal antitrust laws. Only the Department of Justice can bring criminal actions for violations of the Sherman Act, and it is the sole jurisdiction for certain industries.

At state level, state attorneys general may bring federal antitrust lawsuits on behalf of individuals with residence in their respective states.

Private parties can also bring lawsuits to enforce antitrust laws, especially through “class actions”. In fact, most antitrust lawsuits are private actions brought by legal entities and individuals seeking damages for violations of either the Sherman Act or the Clayton Act. This is one of the main differences with the European Union system, where private parties are limited in their ability to introduce class or civil actions to obtain compensation for competition law violations by businesses. However, as we will see hereafter, this situation may soon evolve.

The United States may cooperate in cross-border investigations with foreign competition authorities on matters having an impact on United States consumers.

In the United States, federal law and state statutes provide for both criminal and civil sanctions. Criminal sanctions are mostly applied to ‘hard core’ antitrust violations (as for instance price-fixing, market allocation and bid rigging).

The Department of Justice is the principal government enforcer of the criminal aspects of the law. Exemptions or immunities may be available in very limited circumstances, based either on the protection of constitutional rights (for instance certain government petitioning activities) or on a legislative exemption created by Congress to protect certain industries or activities (for instance a regulated activity/industry under pricing approval regime by a regulatory agency).

The Sherman Act provides for a maximum fine of up to US$ 100 million for a legal entity or a fine of up to twice the gain derived from the criminal conduct or twice the loss suffered by the victims. For individuals, the same Act provides for fines of up to US$1 million and prison sentences of up to 10 years or alternatively, fines of up to twice the gain to the individual or twice the loss suffered by the victims. However, when it comes to individuals participating in a cartel, the sanctions have focused on jail time rather than large fines.

The United States was the first jurisdiction to introduce a leniency policy in 1978. In order to encourage cartel members to self-report, immunity from criminal sanctions is granted under certain conditions (including voluntary disclosure and timely reporting). This policy was substantially developed in 1993, and in 2008, additional clarifications
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and detailed public guidance were provided in order to make the leniency programme more transparent and easier to apply.

A settlement is a system of individual plea negotiations between the Department of Justice and the participants in a cartel. The Department of Justice is allowed to ‘settle’ criminal cartel charges bilaterally and consecutively with different parties, applying its sentencing guidelines with a large discretion to offer rebates and to cut the scope of the alleged cartel in order to reach an agreement.

For the Department of Justice, the settlement procedure is a dynamic investigation tool, with a ‘generous’ discount for the first company to plead guilty and with progressively smaller discounts for the latecomers.

The European Union competition law model

The main European Union legal provisions on cartels derive from the Treaty on the Functioning of the European Union, which regulates horizontal and vertical agreements and also provides for possible exemptions.

Article 101 of the Treaty on the Functioning of the European Union refers to agreements and practices that have the effect or the object of distorting competition (such as price fixing, market sharing, and more generally any type of agreement, in whatever form, restricting competition to the detriment of consumers).

Article 102 of the Treaty on the Functioning of the European Union prohibits any abuse by one or more undertakings of a dominant position. A dominant position may be held either independently or collectively. Dominance is not a problem in itself, only the abuse of a dominant position is prohibited (through ‘exploitive’ or ‘exclusionary’ practices).

Besides the basic provisions contained in the Treaty on the Functioning of the European Union, a number of regulations adopted either by the Council of the European Union or the European Commission as well as non-regulatory documents adopted by the European Commission (such as notices and guidelines) also form part of the European Union’s legal framework.

The European Commission’s Competition Directorate General is the main actor in the fight against cartels at European Union level. The European Commission has extensive investigative powers. For instance, it has the power to conduct investigations not only at a company’s premises but also, with a specific search warrant, at the homes and vehicles of employees of a company suspected of having participated in a law infringement. The European Commission decisions may be ultimately challenged before the Court of Justice of the European Union.

The National Competition Authorities are national agencies in charge of fighting cartels in the member states of the European Union. European law has primacy over national law and takes precedence in case of conflict.

Article 101.3 of the Treaty on the Functioning of the European Union provides for exemptions from the prohibition of restrictive practices
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when certain conditions are met. This will be the case, if the agreement
(i) improves the production or distribution of goods or services or the promotion of technical or economic progress;
(ii) allows consumers a fair share of the benefit; (iii) does not contain any unnecessary restriction; and (iv) does not eliminate competition in the relevant market. However, it will be up to the companies to conduct, at their own risk, a self-assessment as to the legality of the agreement they intend to conclude.

Certain agreements, which are called ‘hard core’ cartels (such as price fixing and market allocation agreements) are considered restrictive of competition ‘as such’ and cannot be redeemed.

Bilateral cooperation agreements between the European Union and certain non-European Union countries may allow the European Commission to obtain information and evidence from outside the European Union. Any agreement concluded outside the Union, but affecting competition within its territory, can be tested against the European Union competition rules.

Unlike the United States, the European Union competition law does not provide for criminal sanctions against individuals who infringe competition rules.

In addition, no fine can be imposed against individuals, but only against legal entities. However, in some member states of the European Union, such as the United Kingdom and France, criminal penalties can be imposed on individuals.

Fines cannot exceed 10% of the sanctioned company’s turnover. These are imposed based on the seriousness and the duration of the infringement.

In 2006, the European Commission published new guidelines for the determination of fines. As we will see below, these guidelines have led to a considerable increase of their monetary amount.

A leniency policy was first introduced in the European Union in 1996 and was further developed in 2002. This policy is inspired from the United States model but with some minor changes, such as the amount of the reduction and the rules to be followed by the company to which leniency is granted.

Total or partial immunity from fines is granted to companies collaborating with competition authorities and bringing evidence against cartels (for instance, a complete immunity from fines will be given to the first company reporting a cartel and bringing evidence about it, provided however that the same company did not coerce other companies to participate in the cartel). This leniency policy proved to be successful in practice. In the last few years, the vast majority of cartels were discovered thanks to this leniency technique.

A settlement procedure was introduced in 2008. It starts when the European Commission has finalized its review and its legal assessment of the evidence on file, including the voluntary
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submissions by the companies involved in a leniency notice and the companies’ responses to information requests.

The settlement procedure in the European Union is quite different from the one existing in the United States. A specificity of the European settlement procedure is that no discrimination is allowed between members of the same cartel. It applies to cartels only, such as agreements on prices, outputs, and on market sharing or customer allocation.

Unlike the United States, a settlement procedure in the European Union is not an investigative tool but a case closure mechanism. Once settlement discussions have started, the European Commission will show its charges and will give access to key evidence; the parties will have the right to respond and to present their positions. If they agree on paying a fine, in exchange of renouncing their right to appeal, they will be granted a 10% fine reduction.

Similar mechanisms exist in most of the European Union member states.

THE DIRECT IMPACT OF REGULATORY ENFORCEMENT: AN INCREASING NUMBER OF HEAVY FINES

Fines imposed on companies breaching competition rules can be very severe. In the European Union, the largest fine imposed on a single company (namely Saint-Gobain in 2008) for a cartel prohibition infringement amounted to €896 million.

In December 2012, European competition Commissioner Joaquín Almunia announced a record €1.47 billion fine on companies for running during nearly a decade a price fixing cartel for TV and monitor cathode-ray tubes. This is the highest fine imposed on members of a single cartel by the European Commission to date. Philips (the Netherlands) was imposed the highest penalty (€700 million), followed by Panasonic (Japan), Samsung (South Korea), Technicolor (France), and Toshiba (Japan). The Taiwanese company Chunghwa Picture Tubes had blown the whistle on the cartel and escaped a fine. Until this announcement, the largest monetary penalty for a cartel was imposed on car glass industry companies for a total of €1.3 billion.

Between 2005 and 2009, the overall amount of fines reached over €9 billion, whereas during the period from 2000 to 2004 it totalled about €3.5 billion (and €850 million between 1990 and 2000). This considerable increase is mainly due to the adoption of the 2006 fining guidelines, which aimed at enhancing deterrence against cartels. Between 2008 and 2012, the overall amount of fines already reached €9 billion, notwithstanding the deep economic crisis experienced by Europe.

The fines imposed by the United States Department of Justice are relatively lower: they totalled €1.5 billion between 2005 and 2008 and €2 billion between 2009 and October 2012. However, the amounts of penalties imposed on companies in the European Union and the United States tend to be in balance when adding the total damages resulting from class actions in the United States – not to mention the criminal sanctions imposed against individuals, which are perceived as the most efficient tools to deter cartel infringements. In many other jurisdictions (such as India and Brazil), the authorities are following the trend set by
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the European Union, where the only limit is 10% of the turnover of the sanctioned company (sometimes of the global turnover, like in Malaysia).

KEY FEATURES OF A COMPETITION/ANTITRUST COMPLIANCE PROGRAMME

A global competition compliance programme should be a key component of the company’s broader corporate ethics and compliance programme. Antitrust compliance should go hand in hand with the other compliance policies and initiatives, such as anti-corruption, fraud prevention and the like.

In 2013, the ICC Commission on Competition, and its specialized Task Force on Antitrust Compliance and Advocacy, published an ICC Antitrust Compliance Toolkit, which provides practical tips, guidance and advice to assist companies in building and reinforcing credible antitrust compliance programmes, taking into account both the risks these companies face and the resources available to them.

This global Toolkit, which benefited from contributions from antitrust specialists closely associated with in-house efforts around the world, is available on ICC’s website¹. Its introductory ‘Starter Kit’ (for smaller enterprises and others starting to introduce a compliance programme) is reproduced below.

Starter Kit

Excerpt from the ICC Antitrust Compliance Toolkit (2013)

1. Embedding an antitrust compliance culture and policy

• Recognize that your company faces antitrust risks associated with its activities and objectives;
• Consider how your company can set out antitrust standards all employees must meet when doing business;
• Get business leaders to show personal support actively for ethical business practices.

2. Compliance organization and resources

• Nominate a suitably senior individual to oversee the implementation of the antitrust compliance programme;
• Make sure that they can and will report to highest levels of management;
• Decide how to involve subject matter experts (including antitrust lawyers) to develop policies and/or guidance.

3. Risk identification and assessment

• Decide how to identify antitrust risks and trends, ideally as part of your general risk management process;
• Consider what controls are needed to manage, minimize or eliminate the risks identified;
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• Share insights on the assurance process and scope for improvements with senior management.

4. Antitrust compliance know-how

• Tailor antitrust know-how guidance to the risk profile and needs of the company;
• Decide on the best way to deploy interactive training and updates.

5. Antitrust concerns-handling systems and investigations

• Embed a successful reporting culture that supports timely reactions and fair outcomes;
• Consider the merits of appointing an external provider to act as a ‘hotline’.

6. Internal investigations/due diligence and disciplinary action

• Consider the most efficient way of investigating potential concerns (time may be of the essence);
• Devise a simple but effective way of dealing with individuals who violate company policy.

7. Antitrust certification or incentives

• Think about asking employees to certify their understanding and commitment to compliance requirements;
• Consider compliance incentives (in reward structures or promotion processes) to reinforce engagement.

8. Monitoring and continuous improvement

• Decide how you will monitor the effectiveness of your controls (e.g. periodically run targeted in-depth reviews);
• Introduce a compliance improvement plan if necessary (e.g. if concerns arise or the company risk profile changes).

DO COMPETITION COMPLIANCE PROGRAMMES HAVE A MITIGATING EFFECT?

As stated by the European Commission in its brochure on Compliance Programmes, “the mere existence of a compliance programme will not be considered as a mitigating circumstance, nor an aggravating circumstance”, “the purpose of a compliance programme is to avoid infringement in the first place”, and “the mere existence of a compliance programme is not enough to counter the finding of an infringement of competition rules”.

The same may not be said about certain member states of the European Union. In the United Kingdom, the Office of Fair Trade may reduce the financial penalty by 5 to 10% in the presence of an effective compliance programme. In France, the competition authority (‘Autorité de la Concurrence’) issued guidelines intended to encourage and possibly reward (through reductions of fines for infringement of competition rules) companies having established an effective compliance programme.
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In the United States, compliance programmes do not seem to be taken into consideration when determining issues of corporate liability according to the Attorneys’ Manual of the United States Department of Justice. The same principle is applied when it comes to prosecuting companies. However, under the Federal Sentencing Guidelines, compliance programmes are taken into account when determining sentences for corporations.

All in all, when seeing the scant effect, in certain jurisdictions, of competition compliance programmes in terms of fine reduction, companies may ask themselves whether it is still worthwhile establishing one. There are, nonetheless, many good reasons for companies to develop their own competition compliance programme:

• First, a compliance programme helps creating and maintaining a global ethics and compliance culture through continuous awareness-raising and training initiatives.
• Second, a compliance programme helps improving the company’s governance by introducing appropriate checks and balances. Transparency and segregation of duties are necessary to make sure that rules are set, applied and controlled in the best interest of the company.
• Last but not least, competition authorities are expected to become increasingly sympathetic to the idea that corporate compliance programmes yield positive effects on the economy at large and for the benefit of consumers in particular. One may equally hope that the authorities will consider, when determining a sanction for an unintentional breach of competition rules, whether and how a compliance programme was implemented. There is no reason for the authorities not to at least consider the effective implementation of a compliance programme as a potential attenuating circumstance, likely to decrease the amount of the fine – as is the case in corruption and other criminal law matters.

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About the author

Jean-Yves Trochon is an international in-house lawyer who held successive positions in the legal and international departments of various companies operating worldwide, including Lagardère, Bouygues, EADS, and Lafarge. He is currently Deputy General Counsel of Lafarge and Vice-Chair of ICC France’s Competition Commission.

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