Competition Law Compliance Programmes

Improved detection, rising fines, a greater relevance of private damages claims (especially in Europe), and longer prison sentences (for example in USA) have raised the necessity for firms to implement measures that prevent their managers and other employees from violating competition laws (e.g., by engaging in price fixing or the abuse of a dominant position). Competition law compliance programmes have increasingly been implemented by European firms since about the year 2005 while having been in use by, e.g., US-American firms already for a somewhat longer period. Yet, research on this topic is often relatively new and sparse. Such work has mainly been done by legal scholars but increasingly also by researchers in business administration and economics. However, concepts relevant for competition law compliance have been examined by psychologists and political scientists, too. This poses two challenges. First, researchers sometimes work on this topic within the confines of their disciplines without necessarily knowing all the relevant concepts and results established in other fields. Second, practitioners had to implement and design competition law compliance programmes to the best of their knowledge without necessarily getting the scientific advice they may have wished for.

We provide a law and economics perspective on competition law compliance programmes (CLCPs). Building on a general discussion of various motivations to ensure compliance with competition law, we discuss both key challenges in the design of an effective CLCP as well as the main building blocks of such programmes. Subsequently, we provide an overview of recent discussions by both academics and practitioners on the role of CLCPs in fine setting procedures as part of competition law enforcement. We close the article by providing a brief review of its main insights.

This report presents the results of a survey on competition law compliance in Germany, Austria, and Switzerland in which 86 large companies participated. The study shows that 80 % of the firms have implemented measures to identify and mitigate the risks of violating competition laws. The majority of firms and measures concentrate on legal risks (e.g. insufficient awareness of the content and scope of competition laws), whereas risks related to changes in the economic environment (e.g. entry into the market, competition by imports, and more intense competition) are rarely addressed. Risk mitigation heavily relies on competition law training, even though these measures hardly seem sufficient. This is obvious from the fact that 71 % of the firms whose employees had violated competition laws in the past had already trained these employees before the misconduct occurred. We conclude from our study that those measures should be improved that help to detect cartelisation risks at an early stage. Furthermore, sanctions imposed by the firms on the offenders of competition laws require a clearer design and more systematic communication.

In the light of an increasing severity of antitrust enforcement it is of paramount importance to ensure employees’ adherence to competition laws. In many firms, codes of conduct and compliance training are part of intense and widespread efforts to address this issue. Still, violations of antitrust laws occur, making headlines, and causing substantial financial and reputational damages. This raises the questions how effective codes of conduct and compliance training are, and how they must be designed to prevent antitrust incidents best. This chapter answers these questions based on new data obtained from a factorial survey in a European multinational firm. Our results indicate that managers are sometimes unaware that some business situations may constitute a violation of antitrust laws. Codes of conduct along with supplementary compliance training improve this awareness. However, they should be complemented by further compliance measures.

In the discussion of competition law compliance programmes it is important to address the internal delegation problems within the firm. Hard core cartels are typically triggered by economic developments having a strong impact on industry profits, and are formed on a higher level of the firm’s hierarchy. One way to control managerial behaviour is by designing incentive contracts. This chapter argues that compliance measures such as training programmes or internal monitoring should be complemented by an appropriate design of incentive pay. Insights from the economic literature on agency problems and cartels show that particularly profit thresholds that must be met to receive a bonus and bonus caps have a crucial impact on managerial incentives to engage in collusive activity. Properly designed incentive contracts complement other compliance measures and improve deterrence.

The economic literature on antitrust compliance has concentrated on cartels as the most serious competition law violation. There are, however, infringements of competition law in form of an abuse of a dominant position which have not yet been considered in detail in the economics literature on antitrust compliance. This chapter examines how a comprehensive antitrust compliance programme should deal with abusive behaviour. In a first step, such a programme should determine whether the firm under consideration holds a dominant position. This requires the definition of the relevant antitrust market and the assessment of the competitive conditions in this market. If the firm is found to be dominant, the second step of a compliance programme has to ensure that no exploitative or exclusionary practices are employed. While for exploitative abuses screens similar to those in cartel cases can be used, no simple and reliable screens for exclusionary behaviour have been devised yet. Instead, the “no economic sense” test that has been suggested as an administrable rule to identify exclusionary behaviour could be applied. Roughly speaking, this test requires that a firm is able to demonstrate that the conduct under consideration is rational for the firm absent a tendency to eliminate competition. In the digital economy particular problems arise with respect to the definition of the relevant market and the determination of dominance. This is mainly due to the two-sided nature of most platform markets. Also, new forms of abusive behaviour can emerge in the digital economy that are related to the user data a platform has collected.

Most European countries impose criminal sanctions on corporations. This article argues that whereas administrative sanctions should be provided for by law to deter offences in the course of business, there is no benefit in criminalising corporate wrongdoing. If administrative sanctions against corporations and other business enterprises apply, the law might forgo the criminal responsibility of natural persons.

This chapter describes the status quo of criminal enforcement in selected Member States of the European Union and discusses the desirability of criminal enforcement of competition law from a policy perspective. It concludes that at least in Germany the introduction of a criminal offence for horizontal hardcore cartels beyond the existing bid-rigging offence would be desirable, provided an automatic criminal immunity provision for immunity recipients under a leniency programme within the European Competition Network is introduced and the Bundeskartellamt is involved in the criminal prosecution. The introduction of effective criminal enforcement would make compliance training both more important and more effective. Criminalisation makes compliance more important because compliance training helps to spread knowledge about the criminal offence—and only a known threat can deter. Criminalisation makes compliance training more effective because the participants of compliance sessions are motivated to pay attention to avoid criminal liability.

One way to improve antitrust compliance may be to incentivise compliance programmes. Compliance programmes can certainly help undertakings detecting and remedying illegal behaviour. Infringements might be avoided by providing undertakings with incentives to intensify their compliance efforts. On a basic level, legislators can use two different approaches to foster compliance programmes. Undertakings can be legally obliged to introduce compliance programmes. Without a legal obligation, undertakings can still introduce compliance programmes on a voluntary basis, and the legislator can use incentives to motivate undertakings to use compliance programmes. In this chapter, these two ways of promoting compliance programmes are discussed by taking a comparative approach, which takes into account different legal systems. Based on the analysis, reservations in respect of a compliance defence are formulated.

Price fixing and corruption cause immense economic damage. Measures of competition law compliance present a possibility to prevent price fixing and cartelisation. Taking a psychological perspective may help to understand which individual, group, and organisational factors may foster compliance. We explore factors driving compliance and propose the psychological onion model of competition law compliance. The model contains individual, group, and organisational factors determining competition law compliance. These factors are influenced by environmental factors. Within each layer of the onion model, we focus on particularly relevant examples by discussing implicit motives and core self-evaluations (individual), justice (group), and corporate social responsibility (organisation) in detail. Practical recommendations for the establishment of compliance structures in organisations are given, accompanied by theoretical considerations and future research directions.