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Compliance in the UK

Personal views of author. Does not represent opinion or position of any institutions to which he is affiliated. Compliance in the UK. David Stallibrass. Shanghai | December 2012. Three pillars of compliance. OFT 1391: The impact of competition interventions on compliance and deterrence.

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Compliance in the UK

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  1. Personal views of author. Does not represent opinion or position of any institutions to which he is affiliated. Compliance in the UK David Stallibrass Shanghai | December 2012

  2. Three pillars of compliance OFT 1391: The impact of competition interventions on compliance and deterrence

  3. Deterrence is key to effective compliance Stopped through enforcement Never started because of fear of enforcement

  4. Deterrence is key to effective compliance OFT 1391: The impact of competition interventions on compliance and deterrence

  5. Deterrence is key to effective compliance Often not even considered! Less clarity and enforcement OFT 1391: The impact of competition interventions on compliance and deterrence

  6. The agencies’ responsibility

  7. A note on “private enforcement of public law” • 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

  8. Compliance in the UK: lack of knowledge 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

  9. Compliance in the UK: all sanctions relevant OFT 1391: The impact of competition interventions on compliance and deterrence

  10. 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

  11. 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

  12. 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

  13. A note on penalties Though still less than likely overcharge! Substantial increase in likely fines (though still capped at maximum 10% of global firm turnover) 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).

  14. Compliance in the UK: Individuals comply for different reasons • 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

  15. 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 OFT 1330: Quick guide to competition law. OFT 1340: Company directors. OFT 1341: Achieving Compliance OFT 510 : Director Disqualification.

  16. Four step guidance to firm compliance OFT 1341: Achieving compliance

  17. Four step guidance to firm compliance • 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

  18. Four step guidance to firm compliance • Where is your risk highest? • Which staff? • Which events? • Which contracts? • Which business practices? • Which relationships? OFT 1341: Achieving compliance

  19. Four step guidance to firm compliance • Mitigate the risk • External legal advice • Training • Compliance programs • SME awareness • Creating a compliant culture OFT 1341: Achieving compliance

  20. Four step guidance to firm compliance • 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

  21. Four step guidance to firm compliance • Ensure a core commitment to compliance from the top down • Appoint a responsible director for compliance with competition law OFT 1341: Achieving compliance

  22. 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 OFT 423 guidance on appropriate penalty (2012).

  23. Conclusion

  24. Resources • www.oft.gov.uk • http://www.oft.gov.uk/OFTwork/competition-act-and-cartels/competition-law-compliance/

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