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

2. Three pillars of compliance Enforcement Predictable Effective High sanctions Knowledge Transparency Media Training Compliance Core commitment Risk assessment Non-infringement OFT 1391: The impact of competition interventions on compliance and deterrence

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

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

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

6. The agencies responsibility If enforcement is unpredictable Sanctions are just arandom business tax If enforcement is ineffective Firms have no fear of being caught If sanctions are too low Firms wont mind getting caught If agency isnt transparent Then firms dont know how to comply 6

7. A note on private enforcement of public law 7 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 8 Firms think knowledge of competition law is important, but dont 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 13 Substantial increase in likely fines (though still capped at maximum 10% of global firm turnover) Though still less than likely overcharge! And chance of capture is <100% so if fines are the only sanction, its 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 14 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 15 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 16 OFT 1341: Achieving compliance

17. Four step guidance to firm compliance 17 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 18 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 19 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 20 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 21 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, its not very important 22 OFT 423 guidance on appropriate penalty (2012).

23. Conclusion Enforcement is key Predictable, consistent, and transparent Strong sanctions, lots of cases Focus on firms and individuals Sanctions Training and information Training and information helps Cant comply without knowledge of law Public awareness supports moral incentive 23

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