Do we really want Fair Competition in doing business?
We in business are basically in favor of fair competition. But, in doing business, we are often confronted with competitors who are misbehaving.
The good guys want antitrust enforcement being more effective. This means corporate compliance officers need to consider whether their compliance antitrust process is keeping pace with the increasing level of enforcement risk.
What does that mean in a practical sense for compliance leaders? What must your program be able to do? And here in the real world of tight budgets and too many other demands, how do you get those tasks done?
Compliance 101: Antitrust Basics
Antitrust violations can come in many forms. Some of the most common are:
•Boycotts: where two or more companies agree not to buy goods or services from some other business.
•Monopolies or dominant market positions: where one business amasses so much market strength it can dictate prices to customers or prevent new competitors from entering the field.
•Tying: where you will only sell Product 1 to a customer if he also buys Product 2.
•Bid-rigging: where competitors agree either to coordinate their bids on a transaction (say, building a bridge or buying raw materials) or to take turns bidding on multiple projects.
•Corruption: where competitors bribe the technical and/or purchasing staff of clients or government officials involved in bidding processes.
On the surface, those are very different types of misconduct. All of them, however, do have one common thread—the company is seeking to exercise undue influence over others. So when you perform an antitrust risk assessment, that’s the fundamental question you want to answer: How could our company exercise undue influence over customers or competitors?
For example, a company with only one product is at low risk for tying, because it has no Product 2 to sell. But that same company could be at higher risk for collusion with other businesses that do sell Product 2, where employees for both try to foist some mandatory exclusive arrangement on customers.
That example also underlines the other common thread in most antitrust behaviors. They involve employees exchanging information with others to advance those antitrust schemes. So that’s another fundamental question your antitrust risk assessment should answer: By what means could our company gain or exchange information that would trigger an antitrust violation?
One common example: trade associations. Your sales executives or dealmakers might participate in those associations, hob-nobbing with competitors over drinks at a conference. Do they hatch boycott plans there? Do they carve up potential markets? Do they swipe a competitor’s contract somebody left on the table? These are all real threats to your organization that are likely more common than you’d think.
Building a Compliance Antitrust Process
Those are the basic antitrust behaviors, and the fundamental questions you want to answer in an antitrust risk assessment. That still leaves the challenge of building an antitrust program that can answer those questions at scale, across thousands of employees and amid a complex regulatory environment.
The good news is that compliance antitrust processes are like any other. You need a strong tone at the top, effective risk assessment, clear policies and procedures, training for employees, and monitoring and auditing of the program. So important antitrust compliance program capabilities would include…
Developing clear, relevant policies
Once you perform an antitrust risk assessment, you need to adopt appropriate policies to guide employee behavior: how people interact with competitors, what they can offer to customers, how they participate in trade associations, and so forth.
Matching policies and training to employees
Much antitrust risk involves employees engaging in business practices they shouldn’t. Therefore, do you know which employees might be able to commit those infractions? When employees move into such roles, does the compliance program know about those moves, and can you quickly roll out appropriate correction training for them?
Integrating market information into risk analyses
For example, if your business wants to acquire a competitor or supplier, would the resulting business then have a market share large enough to trigger monopoly risks or enough products to trigger new tying risks? A compliance officer can’t answer those questions about antitrust risk unless he or she has accurate, complete data about how your company fits into its market sector overall.
This point is also important for compliance with the Philippine Competition Commission (PCC) which requires companies to submit extensive filings with the PCC if companies want to consummate mergers over a certain size. A company needs proper disclosure controls to capture that information and assure that its PCC filing is accurate and complete.
This may all sound like a lot of work because it is a lot of work—but it’s work that compliance professionals already know how to do. Antitrust or Fair Competition expands the range of your compliance program, rather than reinvents it. With a bit of subject-matter expertise, good technology, and a savvy understanding of how compliance programs need to work, you’ll be in good shape for the enforcement environment that confronts us.
In the end, companies have to make a choice: Do we want to run our business with Integrity? – if the answer is YES, compliance management is a must!!! And compliance management involves fair competition, anti-corruption, data protection, paying the right taxes, adhering to the labor regulations and protecting the environment.
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