the icc antitrust compliance toolkit · the icc antitrust compliance toolkit fiw, 43. brüsseler...

The ICC Antitrust Compliance Toolkit

FIW, 43. Brüsseler Informationstagung, November 6, 2014Brussels

Paul Lugard, Chair, ICC Commission on CompetitionBoris Kasten, Co Vice-Chair, ICC Task Force on Compliance and Advocacy

ICC Commission on Competition

© 2014 International Chamber of Commerce (ICC)All rights reserved

© 2014 International Chamber of Commerce (ICC)

ICC’S ANTITRUST WORK

ICC Commission on Competition Working group on Antitrust Compliance and Advocacy Ongoing dialogue with regulators Ongoing advocacy to business Dialogue with ICN and OECD Promoting consistently high global standards for antitrust compliance

to assist companies – and ultimately stimulate trade and investment Aim: develop practical Toolkit for companies Complement existing materials – build on ICC/CLO BluePrint Toolkit should assist companies of all sectors and sizes

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WHY HAVE A COMPLIANCE PROGRAMME ?

Increasing antitrust laws means increasing need for awareness

Compliance helps reputation management and supports good corporate governance

Knowledge of antitrust law requirements and agency expectations can improve compliance in practice, mitigates the risk of a violation and helps avoid fines and other penalties

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KEY CONSIDERATIONS

No “one size fits all” or overnight solutions

No such thing as “zero risk”

What are effective controls?

The people factor (controls alone don’t change behaviour)

Alignment with broader programmes

Reconciling regulatory requirements

Championing compliance for vibrant businesses

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Presentation of the ICC Antitrust Compliance Toolkit

ICC Commission on Competition


5. Antitrust concerns-handling systems

6. Handling internal investigations

7. Disciplinary action

8. Antitrust due diligence

9. Antitrust compliance certification

10. Compliance incentives

11. Monitoring and continuous improvement

1. Compliance embedded as company culture and policy

2. Compliance organization and resources3. Risk identification and assessment4. Antitrust compliance know-how

A Toolkit of 11 Chapters:

TOOLKIT CONTENTS

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Structure: Starter kit for SMEs (or larger companies

starting from scratch) Each Chapter begins with a “Quick

Summary” of the programme elements covered in the Chapter

No “one size fits all”, so each Chapter contains a “menu” of items that could be included

Languages: English from April 2013 French from February 2014 German from October 2014 Russian: 11/2014; Italian, Chinese,

Spanish: WIP

TOOLKIT STRUCTURE

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ANTITRUST PROGRAMME ELEMENTS

Compliance embedded as company culture and policy:

Companies to recognize antitrust risks that they face

Adopt appropriate company standards of behaviour (e.g. Code of Conduct)

Encourage business leaders to actively show personal support for ethical business practices

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Compliance organization and resources:

Senior individual to supervise the implementation of the antitrust CP

Ensure Compliance Officer / Head can make reports to highest levels of management

Decide how to develop policies and/or guidance (depends on resources)


© 2014 International Chamber of Commerce (ICC)9


Risk identification and assessment:

Decide how to identify antitrust risks and trends, ideally as part of a general risk management process

Consider what controls are needed to manage, minimize or eliminate the risks identified

Share insights on the assurance process and scope for improvements with senior management


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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

Use business language, not legal jargon Work to ensure the message is

understood


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Reinforcement of an existing programme:

5. Antitrust concerns-handling systems6. Handling internal investigations7. Disciplinary action8. Antitrust due diligence9. Antitrust compliance certification10. Compliance incentives11. Monitoring and continuous improvement

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ANTITRUST BUSINESS RISK FACTORS

MARKET POSITION /

MARKET POWER

UNUSUAL PRICING ACTIVITY

MULTIPLE TRADE ASSOCIATIONS

INDIRECT SALES MODELS / VERTICAL

AGREEMENTS HISTORY OF COMPLIANCE

MULTIPLE INTERACTIONS WITH

COMPETITORS (EITHER BUSINESS OR SOCIAL)

CONCENTRATED MARKET

EASE OF / BARRIERS TO ENTRY

RISKS WILL DIFFER FOR

EACH BUSINESS

GOVERNMENT INVOLVEMENT /

REGULATED MARKETS

SIMILARITY IN PRICING

BEHAVIOUR

UNUSUAL TENDERING /

BIDDING ACTIVITY

COVERT BEHAVIOUR

ABUSIVE BEHAVIOUR

HISTORIC BUSINESS CULTURE

MULTIPLE JVS WITHCOMPETITORS

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PLACE OF RISK ASSESSMENT?

© 2014 International Chamber of Commerce (ICC)14


ANTITRUST RISK ASSESSMENT

What potential risks does a company face?

How likely are they to occur?

How big will the impact be if they occur?

Estimating gross and residual risk

Are the company’s controls effective?

Can the company show it has a well thought-out approach?

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STARTING POINTS

Align with company’s existing risk assessment and management functions?

– Learn from experience

– Share resources

– Mutually reinforcing framework

Get management buy-in

There is no one-size-fits-all solution!

– Focus on needs and constraints of the company

– Consider the context of relevant industry

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IDENTIFY POTENTIAL VIOLATIONS

Manage real-world – not theoretical – risks

Typical antitrust violations that may be relevant:

– Cartel activity

– Anticompetitive information exchanges

– Other anticompetitive agreements

– Resale price maintenance (where prohibited)

– Types of manifestly exclusionary conduct

Focus on most problematic risks first

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EVALUATE PROBABILITY

Distinguish between:

– Clearly illegal conduct (no cost-benefit analysis) and

– Conduct that is legitimate in certain circumstances

Factors that can affect probability:

– Local legal and enforcement framework

– Enforcement focus on specific conduct or markets

– Compliance history of company and industry

– Company strategies

– Employee turnover/hires from competitors

– Opportunities for interaction with competitors

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EVALUATE POTENTIAL IMPACT

For each potential violation, what harm will the company suffer if it actually happens?

– Reputational damage?

– Corporate fines (recidivism multipliers)?

– Damage claims?

– Legal fees?

– Management diversion?

– Lose key personnel through disciplinary proceedings, criminal or administrative sanctions?

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ESTIMATING (GROSS) RISK

(Gross) Risk = likelihood of violation x likely impact

Matrix approach may be helpful

Tailor to needs of company – e.g. to set materiality criteria

Likelihood of Violation

Impa

ct

Critical 4 8 12 16

Material 3 6 9 12

Marginal 2 4 6 8

Negligible 1 2 3 4

Unlikely(<10%)

Possible(10-

25%)

Likely(25-50%)

Very Likely

(>50%)

Basic Risk Matrix

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RESIDUAL RISK

No such thing as “zero risk”: what to aim for?

Are controls in place to reduce gross risk?

– Does a control exist?

– How is it documented?

– How is the control expressed (is it clear)?

– Is control documentation accessible and updated?

– How are people made aware of the control?

– Does the control reach the target population (hit rate)?

– What structures to track awareness of and compliance with the control?

– What sanctions exist for failure to operate the control?

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SAMPLE RISK REGISTER

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FOLLOW UP

Report on the process and results to senior management

Caveats?

Introduce or improve controls

Deep dives?

Consistent re-evaluation

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TYPICAL BEHAVIOURAL RISKS

Turning a blind eye

• Outsourced risk (third parties, etc.)

• Tolerance of successful shortcuts

• Little oversight of unregulated processes

• Over-reliance on budgetary controls

Tick-box compliance

• One size fits all• Abstract or overly

general principles• Compliance fatigue• Lagging behind legal

and business change

Cultural issues

• Ambiguous or formulaic language

• Misalignment between Group strategy and local targets

• Disengagement by remote operations and stressed management

• Local administrative and business culture

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BEHAVIOURAL CONSIDERATIONS

Likelihood and the “human factor”:

Recent ICC UK Workshop on behavioural issues

Speakers included a psychologist and behavioural economist

Individuals are complex, largely irrational and highly dependent on the communities in which they operate for validation and social acceptance

Compliance cultures start at the top: leadership by example, consistency

Need to encourage appropriate risk taking behaviour but promptly identify and challenge overly risk averse or risk seeking approaches

Putting a price on non-compliance may undermine the moral compulsion to “do the right thing”

Get the right people into the right roles – includes internal risk managers

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PUTTING A PRICE ON BAD BEHAVIOUR

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82%

91%

0% 50% 100%

Private damagesIndividual reputation

Early resolutionLeniency policiesInternal discipline

Director disqualificationFirm reputation

Criminal prosecutionFirm penalties

What creates a deterrent - companies

OFT 1391. % important or very important.

OTHER INCENTIVES?

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FURTHER LEARNINGS

Compliance: not just about content, quality and relevance of materials

Ideally companies should make clear why it is in their interest to champion and comply with antitrust rules

Companies clearly benefit from assessing issues from a behavioural lens to improve compliance programmes

Need a joined-up approach across different functions (HR, Legal, Compliance & Risk)

Regulators that focus on conduct of companies (without scope to apportion liability to individuals) can still support best efforts in this area

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Panel and Audience Discussion

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