Towards recognition and harmonization of compliance programmes in European competition law
Faculty of Law
LLM of European Competition Law and Regulation (International and European Law) Master Thesis – 12 ECTS
Written by: Romy De Cannière Student number: 12473723 Supervised by: Professor L. Ankersmit Submitted on January 10th, 2020
ABSTRACT
The present necessity for more effective competition law enforcement has urged the Commission to increase its focus on the prevention of antitrust breaches by incentivizing undertakings to implement measures to avoid violation of competition laws. This can be achieved through the use of competition law compliance programmes, consisting of a public commitment by companies to observe competition norms and to take the necessary action to this end. Notwithstanding the benefits of compliance programmes for companies, enforcers and consumers alike, sufficient incentives to put such valuable compliance programmes in place still fall short today.
The objective of the present research is to formulate an answer to the question whether rewarding compliance programmes with a fine mitigation might remedy this lack of incentives. Following a descriptive, evaluative and normative approach, based on a comparison of the existing approaches of competition authorities, an optimal approach in this regard is put forward. In a second phase, this thesis examines how the identified optimal approach should be implemented in order to strengthen its effectivity.
The results of this analysis may be summarized as follows. In the first place, this thesis concludes that rewarding compliance programmes is the most optimal approach, as it sends a clear message to firms on the immorality of non-compliance and provides stronger incentives to stakeholders and employees than the mere threat of fines due to the identifiable economic benefit they might perceive. Furthermore, its contribution to the effectiveness of leniency applications helps competition authorities to unravel cartels more easily. The optimal approach should, however, reward a greater fine reduction for ex ante compliance programmes, implemented before the infringement was detected, as they remain the most adequate form to prevent and detect competition law breaches in time. Besides, in case of recidivism or misleading intentions, compliance policies should be considered as an aggravating factor. This research concludes that harmonizing this optimal approach is necessary to ensure that compliance programmes are effective and uniform both in their application and acceptance, thereby palliating the legal uncertainty surrounding this topic. The ECN+ Directive and accompanying Commission’s guidelines constitute the ideal legal instrument to that effect.
TABLE OF ABBREVIATIONS
CMA Competition and Markets Authority
Commission European Commission
Compliance programme Competition law compliance programme
ECJ European Court of Justice
EP European Parliament
ECN European Competition Network
ECN+ Directive Directive 2019/1/EU of the European Parliament and the Council of 11 December 2018 to empower the competition authorities of the Member States to be more effective enforcers and to ensure the proper functioning of the internal market [2019] OJ L 11/3
EU FCA
European Union
French Competition Authority
ICA Italian Competition Authority
NCA OFT
National Competition Authority Office of Fair Trading
Regulation 1/2003 Council Regulation (EC) 1/2003 of 16 December 2002 on the implementation of the rules on competition laid down in Articles 81 and 82 of the Treaty [2003] OJ L 1
Abstract ... 1
Table of abbreviations ... 2
Introduction ... 1
Chapter I. Compliance programmes ... 3
Section I. Compliance programmes defined ...3
Section II. Compliance programmes to strengthen positive general prevention ...4
Section III. Efficiency of compliance programmes ...6
§1. Importance of an efficient compliance programme ...6
§2. Requirements for an effective compliance programme ...6
A. A tailor-made approach ...6
B. Four steps to avoid risks and good practices...7
1. Four steps to avoid risks ...7
2. Good practices for effective compliance programmes ...8
§3. Problem statement: insufficient incentives for the implementation of effective compliance programmes ...9
§4. Creating better incentives ...10
A. individual sanctions ...11
B. Rewards for efficient compliance programmes ...12
Chapter II. Rewarding compliance programmes to enhance effectiveness... 13
Section 1. Compliance programmes as a mitigating or aggravating factor ...13
§1. Approach of the Commission ...13
A. Compliance programmes as a mitigating or aggravating factor ...14
B. Neutral approach to compliance programmes ...14
C. Arguments in line with the Commission’s approach ...16
§2. Approach of French, UK and Italian Competition Authorities ...17
A. Approach of the French Competition Authority ...18
B. Approach of the UK Competition and Markets Authority ...19
C. Approach of the Italian Competition Authority ...20
Section 2. Optimal approach ...21
A. Arguments supporting fine reductions for effective compliance programmes ...21
B. Optimal approach ...24
Section 3. Appropriate instrument to achieve optimal approach ...25
§1. Hard law instruments ...26
§2. Soft law instruments ...27
§3. Combination of hard law and soft law instruments ...28
Chapter III. Harmonizing rewards for compliance programmes in practice... 28
Section 1. No harmonization of rewards in ECN+ Directive ...29
§1. ECN+ Directive ...29
A. The European Competition Network and the need for more effective enforcement ...29
B. Fostering more coherent fining policies...30
§2. Reasons of EU legislator for leaving out the harmonization of compliance programmes ...31
Section 2. Harmonizing rewards de lege ferenda ...31
Conclusion ... 34
INTRODUCTION
Over the past decade, competition authorities in multiple jurisdictions have increased their interest in the enforcement of competition laws. Significant efforts to detect and sanction anticompetitive practices have been undertaken. The increase in number of cartel cases handled by the European Commission (Commission) and the impressive rise in the amount of imposed fines on anticompetitive conduct are a testimony of this new tendency.1 However, European competition authorities have maintained their focus for a long time on negative general prevention mechanisms, which involve deterrence through the imposition of civil, administrative or criminal sanctions on the violations of the respective norms.2 Recently, the growing consideration of the Commission for effective enforcement has triggered the necessity for undertakings to implement measures that prevent employees from violating competition laws. This might be realized through the internalization of competition rules by undertakings. Indeed, the main reason for violations, is that most infringing companies are unaware of competition norms and their underlying ethic. Henceforth, compliance norms need to be incorporated into the firm’s culture and employees must be sensitized about the advantages of compliance and the consequences of their acts.3 This can be achieved through the use of competition law compliance programmes (compliance programmes).
Compliance programmes can be defined as the public commitment of companies to take competition rules into consideration through a fully-fledge public document and the required action to observe them. Such programmes benefit both the undertaking implementing it, through the prevention of sanctions for infringements, and competition authorities who will be able to devote their resources to more complex issues. Ultimately, customers and consumers will also perceive benefits from effective compliance programmes, as fair competition will be reinforced, and efficiencies will be generated.4 Despite the various advantages engendered by compliance programmes, it is regrettable that companies are insufficiently incentivized to implement effective compliance regimes.
1 J. Paha, Competition Law Compliance Programmes. An interdisciplinary Approach (Springer 2016) 30. 2 A. Pera and G. Pisanelli, ‘Antitrust fines, alternative measures and compliance’ in E. A. Raffaelli, Antitrust
between EU law and National law - X Conference / Antitrust fra diritto Nazionale e diritto dell'Unione Europea - X Convegno (Bruylant 2013) 471.
3 E. J. Janger, ‘Constitutive Compliance Antitrust Marathon VI/ Compliance Matters/ Symposium’ (2018) 30 Loyola Consumer Law Review 104.
4 B. Lasserre and others, “Part I - Compliance programs how efficient are they really?” in New frontiers of antitrust
This research aims to examine how better incentives can be put in place in order for compliance programmes to reach their full potential. More specifically, it analyzes whether rewarding compliance programmes might provide a sound solution to this issue. Consequently, the research question is formulated as follows:
“Can a fine mitigation or aggravation for (lack of) effective compliance regimes create better incentives for the implementation of such programmes and should this sanction mitigation or aggravation approach be harmonized at EU level?”
In order to develop an answer to this question, this thesis will adopt a descriptive, evaluative and normative research methodology. The research in this thesis is initially descriptive. The first chapter focusses on defining the concept of compliance programmes and clarifying the essential role they play nowadays. It also underlines the necessity of designing effective compliance regimes and provides the adequate steps and good practices to adopt in order to achieve this result. Finally, it emphasizes the lack of sufficient incentives to implement such strong compliance programmes and introduces suggestions in order to remedy this situation. In a second phase, the present study is evaluative. Indeed, the second chapter assesses whether compliance programmes should be rewarded in order to generate more incentives for the implementation of compliance strategies. To formulate a response to this evaluative question, a comparative analysis which seeks to identify the different approaches on the value attached to effective compliance structures is applied. In addition to the approach of the European Union, three relevant jurisdictions, namely France, Italy and the United Kingdom (UK) will be examined. These jurisdictions have been selected for the varying approaches of their competition authorities on the topic. While the Commission adopts a neutral approach, not taking compliance policies into account for the calculation of fines, the UK Competition and Markets Authority (CMA) and the Italian Competition Authority (ICA) are in favor of fine reductions of 10% and 15% respectively for the design of strong and effective compliance programmes. By contrast, the French competition authority (FCA) changed its approach from rewarding compliance programmes to no longer rewarding them. This study will try to understand the reasons behind every standpoint to ultimately attempt to formulate an optimal general approach. Furthermore, the possible legal instruments to set up this optimal approach will be examined and compared in order to define the most adequate mean for its implementation. The last chapter of this thesis is normative, as it seeks to establish how the optimal approach on the recognition of compliance programmes should be implemented in
practice. A legal lacuna will be illustrated, revealing the decision of the EU legislator to leave rewards for compliance programmes out of the recently adopted ECN+ Directive. Finally, a suggestion to incorporate the optimal approach to the ECN+ Directive will be discussed.
CHAPTER I. COMPLIANCE PROGRAMMES
The first section of this chapter aims at formulating a definition of compliance programmes and highlights the concrete implementation action that such programmes necessitate. In the following section, the need for compliance programmes to ensure an effective enforcement of antitrust rules through positive prevention will be explained. The third section illustrates good practices that should necessarily be included into a strong compliance regime. This last section also draws the attention to the current challenges regulators are facing in the promotion of efficient compliance programmes and to the potential solutions to make them more effective.
SECTION I. COMPLIANCE PROGRAMMES DEFINED
Generally speaking, operating a company in today’s market implies the adherence to a large series of rules and prohibitions, ranging from environmental law, safety regulations, food and health regulations to competition law. The latter field will be the main focus of this research. However, it must be noted that compliance programmes are not specific to this field.5
Put simply, a compliance programme can be defined as a way for a company to publicly announce that it intends to follow specific rules, which should be taken into account in the firm’s daily business.6 Compliance programmes are the expression of voluntary governance, whereby companies or organizations state their commitment to certain rules and their underlying values.7 Compliance programmes are mutually beneficial for both competition authorities and companies, as their aim is the prevention of competition law infringements.8
5 E. Lachnit, ‘Compliance Programmes in Competition Law/ Improving the Approach of Competition Authorities’ (2014) 10 Utrecht Law Review 31.
6 Ibid 31; M. Huffman, ‘Incentives to Comply with Competition Law’ (2018) 30 Loyola Consumer Law Review 108.
7 Lachnit (n 5) 31-50.
8 A. Toth, ‘Overview of the National Enforcement of EU Competition Law’ (2018) 4 CoRe 258; Lasserre, ‘Part I - compliance programs’ (n 4) 27.
Compliance does not limit itself to a commitment on paper. More complex factors such as structure, culture and agency come into play, requiring concrete action.9 In our globalized society, most companies are large and structurally complex organizations in which managers and employees operate at multiple levels. Hence, it is challenging for large companies to control the daily management of their various branches. It is particularly complex to monitor remote subsidiaries and business units that are being run in different parts of the world and to supervise their compliance with competition rules.10 For this reason, compliance programmes are an important organizational tool for firms as they ensure that employees are aware of and take steps to comply with relevant antitrust laws and regulations.11 Consequently, a compliance programme must be tailored to the specific needs of a company. They should embrace a set of actions and management techniques intended to assist companies in building a genuine culture of compliance with those rules as well as in detecting acts of misconduct, in remedying them and in preventing recidivism.12
SECTION II. COMPLIANCE PROGRAMMES TO STRENGTHEN POSITIVE GENERAL PREVENTION
In recent years, our global economy has witnessed a rapid and large increase of various antitrust laws and regulations. Through the imposition of these laws and regulations, policy makers seek to enhance market outcomes throughout the correction of market failures created by natural monopolies, externalities or asymmetric information.13
However, the mere creation and implementation of socially desirable norms does not automatically imply that firms have sufficient incentives to comply with them. An effective enforcement of law is essential. Enforcement can be achieved through prevention, including negative general prevention and positive general prevention.14 On the one side, criminal conduct can be avoided through negative prevention, which essentially implies deterrence induced by ex post sanctions. This means that, whenever an employee would be tempted to deliberately infringe competition rules, his decision might imply a cost-benefit assessment. If the benefits of a violation exceed the costs of non-compliance, an infringement is more likely
9 Lachnit (n 5) 31-50; Huffman (n 6) 108-120. 10 Paha (n 1) 11.
11 Ibid.
12 Lachnit (n 5) 31-50; L. Vogel, French Competition Law (Bruylant 2015) 392; Toth, ‘Overview of the National Enforcement’ (n 8) 258-270.
13 Paha (n 1) 11.
to occur. The costs and benefits are determined by factors such as the probability of detection and the severity of the sanction.15 Henceforth, high antitrust sanctions aim to deter companies from engaging in anticompetitive conduct and provide incentives to undertakings and their personnel to invest in compliance.16 Positive general prevention, on the other hand aims at developing a competition culture in which anticompetitive conducts are considered socially reprehensible.17 It focusses on stirring a sense of normative obligation.18
Lately, the enforcement of competition law has proven to be too much focused on general negative prevention, which might lead the legislator and competition authorities into the “deterrence trap”. The “deterrence trap” reveals the difficulty for the legislator to define an optimal level of sanctions. It means that penalties for competition infringements are either not important enough to prevent rational misconduct, which ultimately renders deterrence unsuccessful and fails to improve compliance or on the contrary, are high enough to achieve real deterrence, but are be so high that they exceed the capacity of companies to pay in case of the occurrence of a competition law breach.19 Consequently, employees and stakeholders that were not involved in the violation will be left as ultimate victims of companies that are unable to pay their sky-high fines. In addition, the low probability of detection discredits the effective enforcement of competition law even more.20 Regulators should therefore adopt new strategies to improve compliance and make sure companies and individuals adhere to competition rules by internalizing these norms. This is where competition law compliance programmes come into play. They fulfil the crucial role of educating companies and their employees about the importance of competition rules and establish mechanisms to avoid the occurrence of violations. However, in order to fully attain their objective, compliance programmes must be effective. In the following section, the importance of efficiency and the related requirements are illustrated.
15 Lachnit (n 5) 31-50; H. Gilliams, ‘Proportionality of Fines for Infringements of Competition Law’ in D. Arts
Mundi et Europae civis – Liber Amicorum Jacques Steenbergen, (Larcier 2014) 415, 417; A. Sinclair, ‘Proposal
for a Directive to Empower National Competition Authorities to be More Effective Enforcers (ECN+)’ (2017) 8 Journal of European Competition Law & Practice 625-633; Huffman (n 6) 108-120.
16 Paha (n 1).
17 Pera and Pisanelli, (n 2) 471. 18 Lachnit (n 5) 31-50.
19 C. Parker, ‘The ‘‘Compliance’’ Trap/ The Moral Message in Responsive Regulatory Enforcement’, (2006) 40 Law & Society Review 591; C. Ehlermann and M. Marquis, European Competition Law Annual 2008: Antitrust
Settlements under EC Competition Law, European Competition Law Annual (Bloomsbury Publishing 2010) 105.
SECTION III. EFFICIENCY OF COMPLIANCE PROGRAMMES
§1. Importance of an efficient compliance programme
Setting up an effective compliance programme is of crucial importance and is beneficial for companies, customers and enforcers alike.21 First of all, it incites companies to abide by the rules and in turn limits risks of financial sanctions, prevents reputational damage and protects shareholders’ interests. Besides, a spill-over effect will result from the decision of one company not to be involved in anticompetitive conduct, entailing that cartel behavior will be made less attractive and therefore less likely for other firms.22 Indeed, compliance programmes give clear signals both within and outside the firm. Outside the firm the signal is one of responsibility and respect for the law.23 Inside the firm, it is a signal of support for a top-down culture of compliance that affects managers' decisions. Investing in an efficient compliance programme demonstrates to employees to what extent the management and the board of directors value compliance.24 Finally, customers will also benefit from fruitful compliance programmes in so far as compliance by all competitors enhances innovation and ensures competitive pricing policies. Enforcers, on the other side, will be able to deploy their resources, energy and time on other tasks, instead of dedicating them to the detection and sanctioning of antitrust infringements.25
§2. Requirements for an effective compliance programme
A. A tailor-made approach
In the absence of legal rules and judicial guidance for corporations and competition authorities to evaluate the effectiveness of a compliance programme, commonly recognized standards on what constitutes a robust compliance policy can be set up by the regulatory authority.26
21 Lasserre, ‘Part I - compliance programs’ (n 4) 27. 22 Ibid.
23 Huffman (n 6) 117. 24 Ibid.
25 Lasserre, ‘Part I - compliance programs’ (n 4) 27.
26 G. Gürkaynak and D. Durlu, Harmonizing the Shield to Corporate Liability/ A Comparative Approach to the Legal Foundations of Corporate Compliance Programs from Criminal Law, Employment Law, and Competition Law Perspective (2013) 47 The International Lawyer 99; Lachnit (n 5) 31-50.
The rationale behind setting up effective compliance programmes lies in nurturing a culture of ethics and legal compliance within companies.27 Due to the vast range of different types of companies and their underlying complexities, the best possible compliance strategy for a given company depends on external and internal factors, including the respective industry, the market position, the size of the firm and its organizational structure.28 Hence, it is of paramount importance that undertakings are given the freedom to tailor their programmes effectively to their specific industries and business models and are not constricted by any legal mechanical method.29
B. Four steps to avoid risks and good practices
Bearing in mind that there is no “one-size-fits-all” approach when it comes to compliance programmes, it may nevertheless be helpful to clarify the principal features of robust compliance programmes. Some competition authorities, such as the FCA, the CMA, the ICA and the Commission have been willing to issue guidance on the matter.30 Based on their approaches, it can generally be held that four steps might be followed to manage risks and that certain good practices can be observed in order to accomplish a deeply rooted compliance culture.31
1. Four steps to avoid risks
In order to create a strong best practice compliance programme, four important steps can be followed: risk identification, risk assessment, risk mitigation and review.32 The first step consists of risk identification, meaning that the risks that are specific to the sector and functions of the business are identified. These could include, among others, cartels, vertical agreements or abuse of a dominant position. Secondly, the purpose of risk assessment is evaluating how
27 Gürkaynak and Durlu (n 26) 99-121. 28 Paha (n 1) 22.
29 Gürkaynak and Durlu (n 26) 99-121.
30 CMA’s guidance as to the appropriate amount of a penalty (CMA73), 18 April 2018 (CMA’s penalty guidance)
available at
https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/700576/final_ guidance_penalties.pdf accessed 31 December 2019; ICA guidelines on antitrust compliance (n. 27356), 4 October 2018 (ICA compliance guidelines) available at https://en.agcm.it/dotcmsdoc/guidelines-compliance/guidelines_compliance.pdf accessed 30 December 2019; E. Sakkers and J. Ysewyn, European Cartel
Digest, (Kluwer Law International 2008) 105-116; K. Coates and A. Zulli, ‘Compliance Plus? Proposed Fine
Reductions for Audited, Strengthened Compliance Programmes’ (2018) 9 Journal of European Competition Law & Practice 351, 353; OECD, ‘Promoting compliance with competition law’, (Policy roundtables) DAF/COMP (2011) 20.
31 Gürkaynak and Durlu (n 26) 99-121. 32 Paha (n 1) 22.
serious the identified risks are. Risks will be ranked as low, medium or high. Risk mitigation constitutes the third step, which is achieved thanks to appropriate training activities and the implementation of adapted procedures.33 The last step of periodic review means the effectiveness of abovementioned steps are reassessed regularly.34
2. Good practices for effective compliance programmes
The following good practices can be observed in order to accomplish an effective compliance culture:
(i) The senior management personnel shall support the compliance program. This entails that the management body shall be familiar with the programme, shall monitor its implementation and actively participate in it.35 This reminds managers to consider ethical aspects and the rules in the first place36;
(ii) The basic compliance rules and procedures must be communicated to all employees. All employees must understand and abide by the compliance rules;
(iii) training for all employees and subsidiaries ensuring that employees are specifically instructed in competition law matters37;
(iv) effective supervision of the programme and responsibility for its actual implementation. One specific person, disposing of sufficient powers and resources must be designated to bear the overall responsibility for the implementation of the compliance programme. This person should report regularly to the management team38;
(v) measures ensuring conformity with the provisions of the compliance programme. Companies must provide incentives to employees to observe the compliance programme;
33 Pera and Pisanelli, (n 2) 471.
34 Ibid; these four steps are proposed by the CMA, which was at the time called the OFT (Office of Fair Trading), in its guidance document ‘How your business can achieve compliance with competition law’, (OFT1341), 1 June 2011 (OFT compliance guidance) available at www.oft.gov.uk/shared_oft/ca-and-cartels/competition-awareness-compliance/oft1341.pdf accessed 30 December 2019.
35 Pera and Pisanelli, (n 2) 471. 36 Paha (n 1) 22.
37 Pera and Pisanelli (n 2) 471; Lasserre, ‘Part I - compliance programs’ (n 4) 46. 38 Pera and Pisanelli, ibid.
(vi) reporting and disciplinary proceedings where serious infringements have occurred;39
(vii) periodic review for evaluation purposes. The effectiveness of the compliance program must be reviewed on a regular basis to detect how the program can be improved in the future.40
§3. Problem statement: insufficient incentives for the implementation of effective compliance programmes
Despite the convincing arguments supporting the implementation of an effective compliance programme, incentives to implement such programmes seem to fall short. Various reasons justify the poor motivations of firms to opt for the investment in a decent compliance programme.
First of all, many companies are not aware of or do not understand existent competition rules and the seriousness of the risks they might generate in case of a breach.41 Consequently, the implementation of compliance programmes is not on their agenda, or not considered as a priority in their daily business. In addition, competition law rules are formulated in a very abstract manner. The underlying expectations and obligations comprised by the rules are indeed elaborated by case law in a perplexing manner. Even if firms were aware of the competition rules and their accompanying case law, they would have to constantly review the evolving practices of competition enforcers and courts. Besides being a time-consuming exercise, it would require companies to invest more means in compliance programmes. This brings us to an additional reason for the lack of motivators, namely the cost of compliance programmes.42 The implementation of a robust compliance programmes is onerous. This might refrain small and medium-sized companies from investing their scarce resources in such programmes, especially when the fear of detection is not high.43 Indeed, the low probability of detection discredits the effective enforcement of competition law even more, thereby decreasing the perceived necessity for compliance programmes.44
39 Lasserre, ‘Part I - compliance programs’ (n 4) 48.
40 Gürkaynak and Durlu (n 26) 99-121; Lasserre, ‘Part I - compliance programs’ (n 4) 49.
41 A. Riley, ‘The Importance of Compliance/ What Business and Agencies Can Do Better’ (2018) 30 Loyola Consumer Law Review 153-156.
42 A. Toth, ‘Framework for the recognition of competition compliance programs and dilemmas faced by competition authorities’ (2018) 30 Loyola Consumer Law Review 95-103.
43 M. Huffman, ‘Transcript/ Incentives to Comply with Competition Law’ (2018) 30 Loyola Consumer Law Review 121, 144
Additionally, even if regulators adopted new strategies to improve compliance through the internalization of compliance norms, by stating their support for successful compliance programmes and putting efforts in explaining how efficient compliance programmes are designed, they would still be faced with the “compliance trap”.45 The compliance trap entails that companies, despite their understanding of competition rules and of the importance of compliance, do not endorse the regulators view on the application and interpretation of the law. Consequently, the regulator is trapped, as the meaning of compliance is put into question.46 For this reason, it is of utmost importance that compliance policies of antitrust authorities are supported by companies. In order to gain the support of firms, better incentives should be put in place. The following paragraph makes some suggestions in this regard.
Furthermore, notwithstanding all abovementioned restraints, if firms are incentivized to implement a beneficial compliance programme, chances are they will do it for the wrong reasons. Indeed, companies might be tempted to implement them for the sole purpose of avoiding liability and fines. Hence, they will devote the bare minimum and set up so-called window-dressing structures, consisting of an unambitious, compliance programmes.47 These factice compliance programmes are set up at a sub-optimal level: they only have the appearance of a compliance programme, whereas in practice they do not contribute to the detection and the prevention of competition law breaches.
§4. Creating better incentives
Given the lack of incentives to implement compliance programmes, this study aims to find out how better and healthier incentives could be generated. For this reason, the present paragraph will examine two potential solutions to foster effective compliance programmes more closely, namely the imposition of individual sanctions for non-compliance and rewarding compliance structures. The latter potential solution will be further elaborated in the following chapter.
45 Ibid.
46 Ibid; G. De Clercq, Effectiveness in Compliance/ Towards a Convergence of Compliance Systems? in D. Arts (ed), Mundi et Europae civis – Liber Amicorum Jacques Steenbergen, (Larcier 2014) 63-74.
A. individual sanctions
In order to pressure firms to implement adequate compliance structures, the inclusion of individual sanctions on the person infringing competition law, alongside the company’s responsibility, could be an effective stimulator. Indeed, it makes sure compliance trainings send a clear message to the employees that criminal offences are a real threat, and only a known threat can deter.48
At EU level, the imposition of individual sanctions has been rendered possible with the introduction of the ECN+ Directive49, which will be addressed more in detail in Chapter III. Recital 10 of the ECN+ Directive states that Member States should be able to provide their National Competition Authorities (NCAs) with supplementary powers beyond the core set provided by the Directive to further increase their efficiency. This could embrace the power to impose fines on natural persons, or on an exceptional basis, the power to conduct an inspection with the permission of the persons subject to inspection.50
In the UK, the possibility of disqualifying an individual from holding company directorships, where that individual has infringed UK or EU competition law, exists under Section 9A of the Company Directors Disqualification Act 199851.52 Under section 188 of the Enterprise Act 2002, the CMA is also able to impose a five year imprisonment and an unlimited fine on individuals in relation to specific competition law infringements.53 The UK government introduced this individual sanction for competition law breaches, as it believes it would make compliance more successful. France also disposes of individual penalties. Article L. 420-6 of the French Commercial Code54 deals with the situation where an individual plays a personal and decisive role in competition law infringement and provides criminal penalties for such conduct.55 In Italy, on the other hand, there are no criminal sanctions for breaches of
48 Paha (n 1) 135.
49 Directive 2019/1/EU of the European Parliament and the Council of 11 December 2018 to empower the competition authorities of the Member States to be more effective enforcers and to ensure the proper functioning of the internal market [2019] OJ L 11/3 (ECN+ Directive).
50 Rizzuto (n 53) 97.
51 Company Directors Disqualification Act (1986), s 9A. 52 Pera and Pisanelli, (n 2) 471.
53 Enterprise Act (2002), ss. 188A-188B as amended by the Enterprise and Regulatory Reform Act (2014). 54 Loi n° 2001-420 du 15 mai 2001 relative aux nouvelles régulations économiques.
competition law. Only administrative and civil sanctions may be imposed.56 Even though violations of competition law do not result per se in criminal sanctions, in certain instances, antitrust infringements may constitute criminal behavior as well and therefore result in sanctions provided for under criminal law.57
B. Rewards for efficient compliance programmes
A second possible motivator for firms to implement compliance programmes consists of granting rewards for effective programmes. In practical terms, this means that, whenever a company is fined for anticompetitive conduct, antitrust enforcers will take into account the efforts put in the establishment of a successful compliance structure. Compliance programmes can either be set up prior to the finding of a competition law infringement, or adopted or improved as a consequence of the detection of a competition law breach. They will respectively qualify as ex ante or ex post recognition of compliance programmes. However, there is still much debate among competition enforcers as to whether and if so, how these programmes should be taken into account for the calculation of fines.
Regarding the question as to whether compliance programmes should be taken into account, it should be pointed out that the ECN+ Directive doesn’t shed a new light on this issue, as the EU legislator decided not to address the topic of compliance programmes. While the possibility for the imposition of individual sanctions on the infringer of competition law is explicitly provided for by recital 10 of the ECN+ Directive, the opposite is true concerning rewards for compliance programmes. However, interestingly, the examples mentioned in recital 10 are not exhaustive, and Member States are allowed to endow their NCA with additional powers beyond the core set provided for in the ECN+ Directive to develop a more effective and coherent fining policy across the EU. This could include which aggravating and mitigating factors should be taken into account, such as efficient compliance programmes.58 Nonetheless, as will be demonstrated in the following chapter, Member States’ competition authorities and the Commission have established different approaches on the recognition of compliance programmes. In order to elucidate the areas of uncertainty surrounding this topic, the second
56 A. De Stefano and L. Toffolletti, ‘Cartels 2019 – Italy’ (2019) available at
https://www.globallegalinsights.com/practice-areas/cartels-laws-and-regulations/italy, accessed 30 December 2019.
57 M. Siragusa and others, ‘Competition Law in Italy: The first 20 years of law and practice’ (2011) available at
https://www.clearygottlieb.com/~/media/organize-archive/cgsh/files/other-pdfs/competition-laws-outside-the-united-states.pdf, accessed 20 November 2019.
chapter will examine whether granting fine reductions for the implementation of compliance programmes would amount to a positive incentive and enhance the effectiveness of such programmes.
Different means can be used to take compliance programmes into account in order to create sufficient incentives. One approach consists of the adoption of EU secondary legislation or national legislation, which could vary in degree of forcefulness. Another approach would be that competition authorities, both at EU and Member State level, implement soft law documents, providing the necessary guidance on the topic. Combining soft and hard law would be another possibility. In section 3 of the following chapter, these different instruments will be assessed and compared to define the most suitable mean.
CHAPTER
II.
REWARDING
COMPLIANCE
PROGRAMMES
TO
ENHANCE EFFECTIVENESS
The present chapter seeks to define an optimal approach on the recognition of compliance programmes and to identify through which adequate means this beneficial approach might be implemented. With this objective in mind, the first section adopts an evaluative methodology, comparing the approaches on the recognition of compliance programmes of different competition authorities including the Commission, the FCA, the ICA and the CMA. After having weighed the arguments pro and contra rewarding compliance structure against each other, the second section outlines the preferred approach flowing from this thesis. Finally, the third section touches upon the different means that might be deployed to put the optimal approach into effect, and which one deserves to be selected.
SECTION 1. COMPLIANCE PROGRAMMES AS A MITIGATING OR AGGRAVATING FACTOR
A. Compliance programmes as a mitigating or aggravating factor
The approach of the Commission has shifted over time. In the 80s and 90s, the Commission treated the implementation of serious and efficient compliance programmes as a mitigating factor, whereas failed compliance programmes were treated as an aggravating factor.59 In the British Sugar case, the Commission considered the non-observance of a compliance programme as an aggravating factor leading to higher fines. Due to this shortcoming and additional aggravating factors, the basic amount of the fine imposed on the company was increased by 75%. The Commission held that:
“British Sugar acted in a manner contrary to the clear wording contained in its compliance programme [...] British Sugar promised in its compliance programme to take every step to ensure compliance with the Community competition rules, even to go beyond its strict legal obligations and avoid any doubtful behavior, and to pass this message on to every level of the company’s hierarchy. The infringement found in this Decision shows that this promise has not been fulfilled”.60
B. Neutral approach to compliance programmes
The European Parliament (EP), on the other hand, is in favor of a so-called carrot and stick approach, with penalties that serve as an effective deterrent, more specifically for recidivism, while supporting compliance with fine mitigation.61 The EP encouraged the Commission to review its fining guidelines by taking into account that the implementation of effective compliance programmes should not have negative consequences for the infringer beyond what is proportionate to the violation and imposing a different level of fines for companies who have acted deliberately and companies who have acted negligently.62
This is how, by the 2000s the Commission changed its approach. Nevertheless, instead of adopting the proportionate negative approach that had been suggested by the EP, the
59 Napier Brown/British Sugar (Case IV/30.178) Commission Decision 88/518/EEC [1988] OJ L 284/41 para 85;
British Sugar plc (Case IV/F-3/33.708) Commission Decision 1999/210/EC [1988] OJ L 076/1.
60 Lasserre, ‘Part I - compliance programs’ (n 4) 53; S. Pieri and others, ‘In-house Compliance of EU Competition Rules in Practice’ (2014) 5 Journal of European Competition Law and Practice 71.
61 Pieri, ibid, 72; Lasserre, ‘Part I - compliance programs’ (n 4) 35, foonote 14. 62 Pieri, ibid.
Commission adopted a neutral position. Accordingly, the implementation of a compliance programme was considered neither as an aggravating factor, nor as a mitigating factor.63
Based on the previous approach of the Commission, several firms endeavored to rely upon their compliance programmes as a mitigating factor in proceedings before the Commission. The Candle Waxes case illustrates this well. The infringing company invoked that it had implemented a zero-tolerance compliance programme, which consisted of regular trainings, written information, and constantly available support. On top of that it required the yearly approval of its employees.64 Relying on this argument, the company applied for a lower fine. The Commission did not grant any sanction reduction to the firm but changed its paradigm and sent the following clear message:
“While the Commission indeed welcomes the existence of compliance programmes and policies, it considers compliance with the law as a natural obligation of each company and does not consider such compliance, or a programme ensuring such compliance, as going beyond what is already expected. The existence of a compliance programme cannot, therefore, be accepted as an attenuating circumstance”65.
The Commission’s argument for this switch relates to the belief that if an infringement has occurred, it demonstrates that the compliance programme was inadequate in the first place, as it was unable to prevent the violation from taking place.66 Besides, the harm to the economy and society is done and this circumstance cannot be attenuated by the existence of a compliance programme.67 This new approach was confirmed by the European Court of Justice (ECJ). The ECJ stated that the Commission is not obliged to consider the existence of a compliance programme as a mitigating circumstance.68 Nevertheless, this new policy entails that the
63 P. L. Parcu, ‘ECN+ Directive Consequences for Fines and Compliance Programs – Advanced Competition Seminar’, European University Institute Florence (2018) 8 available at http://fcp.eui.eu/wp-content/uploads/sites/7/2019/02/3_Final_PARCU-ECN-plus-Directive-1-1.pdf accessed 5 November 2019; Pieri (n 60) 71.
64 Lasserre, ‘Part I - compliance programs’ (n 4) 32; Candle Waxes (Case COMP/39181) Commission Decision [2008], para 697.
65 Ibid; Candle Waxes (Case COMP/39181) Commission Decision [2009] OJ C 295/17 para 698. 66 PO/Elevators and Escalators (Case COMP/E-1/38823) [2007] OJ C 512 para 688.
67 Pieri (n 60) 72.
68 Ibid 71; Joined cases C-189/02 P, C-202/02 P, C-205/02 P to C-208/02 P and C-213/02 P Dansk Rørindustri A/S (C-189/02 P), Isoplus Fernwärmetechnik Vertriebsgesellschaft mbH and Others (C-202/02 P), KE KELIT Kunststoffwerk GmbH (C-205/02 P), LR af 1998 A/S (C-206/02 P), Brugg Rohrsysteme GmbH (C-207/02 P), LR af 1998 (Deutschland) GmbH (C-208/02 P) and ABB Asea Brown Boveri Ltd (C-213/02 P) v Commission of the European Communities [2005] ECR I-5425.
Commission will no longer sanction companies for the adoption of ineffective compliance policies:
“the existence of a compliance programme will not be considered an aggravating circumstance if an infringement is found by the enforcement authorities: if the programme has failed to deliver results, the sanction will come in the form of the fine imposed”.69
In 2011, the Commission issued a Compliance Brochure70 which sought to achieve two objectives. The first is to provide a framework for corporate compliance programmes. The Commission underlines that it fully supports compliance programmes and endorses the crucial importance of promoting a compliance policy in every firm. The second is to reaffirm its position relating to the non-recognition of awards for implemented compliance programmes.71 It might seem that this latter objective was the main reason for the European Commission to adopt a Compliance Brochure, making the policy more official rather than to offer extensive guidance. Indeed, as compared to the guidance provided by other competition authorities such as the ICA an CMA discussed below, the Commission’s Compliance Brochure is rather light.72
C. Arguments in line with the Commission’s approach
The strongest argument provided against the recognition of compliance programmes relates to the observation that it would amount to rewarding a failed compliance structure as was underlined by the Commission in the Candle Waxes case previously discussed.
Opponents also argue that it is the legal obligation of every company to observe competition law rules. Though not mandatory, the adoption of a compliance programme should be a natural consequence of the firm’s genuine desire to respect the law. Besides, an adequate compliance programme brings its own reward, namely not getting involved in an unlawful behavior in the first place, thereby avoiding the burden of a fine.73
69 Lasserre, ‘Part I - compliance programs’ (n 4) 53; Pieri (n 60) 71.
70 Commission, ‘Compliance matters. What companies can do better to respect EU competition rules’, (2013), available at
https://op.europa.eu/en/publication-detail/-/publication/78f46c48-e03e-4c36-bbbe-aa08c2514d7a/language-en accessed 27 November 2019.
71 Commission, ‘Compliance matters. What companies can do better to respect EU competition rules’, ibid 9-12; Lasserre, ibid 33.
72 N. Jalabert – Doury, ‘Compliance Matters - What Companies can do Better to Respect EU Competition’ (2012) 3 Journal of European Competition Law and Practice 260-261.
Furthermore, another argument contra is the idea that leniency applications already serve the purpose of providing sufficient incentives to implement a decent compliance programme, making the necessity for rewards to create better incentives superfluous. Leniency programmes are an efficient tool for competition authorities to uncover secret cartels.74 Their aim is to encourage companies to provide relevant information about cartels in which they took part. In return, the firm might benefit of full immunity, which is the total absence of sanctions, or of an attenuated fine.75 Consequently, a strong compliance programme would allow the company to detect the violation promptly, which in turn assures the undertaking would benefit of full immunity if they inform competition authorities about the identified anticompetitive behavior in time.76
Additionally, rewarding compliance programmes would discriminate against small and medium-sized enterprises that do not have sufficient time and resources to develop compliance programmes, and would accordingly be unable to benefit from this reward.77 The adoption and implementation of a serious and consistent antitrust compliance programme bears an important burden of effort and organization for them.78
Another problem engendered by rewarding compliance programmes is that companies might be even more inclined to implement a sub-optimal compliance structure in order to avoid corporate liability (see chapter I, section III, par. 3). Setting up a factice compliance structure would enable undertakings to maximize the profits arising from illegal behavior, while having the certainty that they will benefit of a fine discount in case an infringement is nonetheless detected.79
§2. Approach of French, UK and Italian Competition Authorities
The Commission set a clear trend in the EU of not taking compliance programmes into account for the calculation of fines. Most NCAs generally follow this trend. However, the European landscape varies as the FCA, CMA and ICA have adopted somewhat different approaches to
74 Sinclair (n 15) 628; F. Rizzuto, ‘The ECN Plus Directive/ Empowering National Competition Authorities to be more effective enforcers of EU competition law’ (2019) 2 CoRe 80, 90.
75 Ibid.
76 Lasserre, ‘Part I - compliance programs’ (n 4) 49. 77 Toth, ‘Framework for the recognition’ (n 42) 97. 78 Pieri (n 60) 73.
79 Gürkaynak and Durlu (n 26) 99-121; Huffman (n 6) 108-120; Toth, ‘Framework for the recognition’ (n 42) 95-103.
that of the Commission. The ICA and the CMA have adopted fining systems that reflect the efforts put in the operation of genuine compliance programmes, while the FCA recently changed its approach and decided not to reward compliance programmes anymore.80 This paragraph examines each of these NCAs’ policies regarding compliance programmes as well as their underlying motives.
A. Approach of the French Competition Authority
Interestingly, the FCA’s approach evolved over time. In 2012, the FCA was the only NCA that had adopted a systematic method, supporting ex post compliance programmes under certain conditions. The FCA accepted the adoption or improvement of effective compliance programmes as commitments in the course of a settlement procedure and could make them binding, in return for a fine discount that could be up to 10%.81 Indeed, once an infringement
has been detected, a company might commit to improve its current compliance programme and to cooperate with the Commission in a settlement procedure.82 An additional discount of 10% could be granted if the company did not contest the grievance, as well as a further 5% reduction for other commitments.83
Regarding ex ante compliance programmes, the FCA took a neutral stance, considering them neither as a mitigating nor as an aggravating factor, as they did not prevent the occurrence of the infringement.84 The company was, however, responsible to bring the infringement to an end immediately.85
In order to help companies to maximize the success of their programmes, the FCA established a framework document on antitrust compliance programmes (the 2012 Framework Document).86 The 2012 Framework Document contained extensive guidance aimed at assisting companies in the design of effective compliance programmes. In its 2012 Framework Document, the FCA underlined two main objectives of compliance policies. Firstly, they should prevent risks of infringements and secondly, they must put in place mechanisms in order
80 Toth, ‘Overview of the National Enforcement’ (n 8) 258-270; A. Toth, ‘How Could Competition Authorities Reward Competition Compliance Programmes?’ (2017) 1 CoRe 4-10.
81 Lachnit (n 5) 37 F. Puel, ‘Le recours stratégique aux programmes de compliance en droit de la concurrence’ in H. Bouthinon-Dumas, Stratégies d’instrumentalisation juridique et concurrence (Larcier 2013) 135, 139. 82 Lachnit, ibid.
83 Lasserre, ‘Part I - compliance programs’ (n 4) 25; Coates and Zulli (n 30) 354. 84 Coates and Zulli, ibid.
85 Lachnit (n 5) 31-50.
to detect and tackle infringements that could not be avoided. These preventive and corrective measures determined the value of a compliance programme.87 The Framework Document also underlines the importance to develop and maintain a culture of compliance amongst all levels of the hierarchy and to train the company's supervising personnel.88 Finally, compliance programmes should reflect the size of the company and the nature of its activities, along with its organizational structure.89
However, in October 2017, the FCA repealed the 2012 Framework Document and announced that compliance programmes should be part of the day-to-day management of companies. Hence, the FCA will no longer award a fine reduction for commitments to implement such programmes, especially in the case of serious competition law infringements.90 This implies that from now on, the only guidance on compliance programmes is enshrined in the FCA’s case law, which determines good practices to be observed so as to set up an effective compliance strategy. These good practices mostly coincide with the ones identified in the 2012 Framework Document.91
B. Approach of the UK Competition and Markets Authority
The CMA also published several guidance documents on compliance programmes. The guidance on how businesses can achieve compliance programmes92 emphasizes the importance of introducing a culture of compliance adapted to the company’s organizational structure.93 The guidance on the appropriate amount of penalties94 provides for a fine reduction of up to 10% for compliance programmes, if the company demonstrates that it has implemented the four steps risk analysis elaborated in chapter 1.95 The four steps may be implemented prior to the detection of the infringement into an ex ante compliance programme, or quickly following the discovery of the competition law violation into an ex post compliance programme.96 The
87 Gürkaynak and Durlu (n 26) 99-121; Lachnit (n 5) 31-50. 88 Gürkaynak and Durlu, ibid.
89 Ibid.
90 Autorité de la concurrence, 18 october 2017, 17-D-20, §462-464; Parcu (n 63) 9.
91 Schallenberg K. and Lavenir A., ‘Competition compliance in France’ (2019) available at
https://gettingthedealthrough.com/area/97/jurisdiction/28/competition-compliance-france/ accessed 14 November 2019.
92 OFT compliance guidance (n 34). 93 Gürkaynak and Durlu (n 26) 99-121.
94 CMA’s penalty guidance (n 30), para 2.19 and footnote 33. 95 Coates and Zulli (n 30) 353.
company must demonstrate that the steps taken were appropriate to the size of the undertaking and its general level of competition law risk.97 Moreover, in order to be eligible for a fine reduction, the company must show evidence of a clear and unambiguous commitment to compliance.98 Existent compliance programmes will not be considered as an aggravating factor, except in specific circumstances. Such exceptional circumstances might encompass compliance structures which are adopted to cover or facilitate an infringement, or to mislead the CMA during its investigation.99
In the UK, directors have a strong additional incentive to adopt effective compliance programs, as their efforts to introduce and maintain a compliance culture so as to prevent competition law infringements will be taken into account in the antitrust proceedings. In such situation the CMA is unlikely to disqualify the director.100
C. Approach of the Italian Competition Authority
In Italy, the ICA published its “Guidelines on antritrust compliance” in 2018. The ICA may award a possible fine reduction of up to 15%, in case an ex ante compliance programme has worked effectively to enable the early detection and interruption of the violation before the opening of proceedings.101 The mere adoption of a compliance programme will not suffice, as a reduction will only be accorded if an effective and concrete commitment to applying the programme is shown by the firm.102 Besides, the ICA underlines that the compliance programme should be implemented consistently with the specific market characteristics of the undertaking.103 In order to be fully effective, the compliance programme should be drafted on the basis of a thorough risk analysis.104
If an ex ante compliance programme is manifestly inadequate, no reduction of the sanction may be granted. However, if the undertaking demonstrates it made substantial changes to the compliance programme after the opening of proceedings, it may benefit from a potential reward
97 OFT compliance guidance (n 34), para 7.3.
98 Pera and Pisanelli (n 2) 471; Coates and Zulli (n 30) 354. 99 CMA’s penalty guidance (n 30) para 2.19 and footnote 33. 100 Pera and Pisanelli (n 2) 471.
101 ICA compliance guidelines (n 30) para 31.
102 ICA compliance guidelines (n 30) para 17; Coates and Zulli (n 30) 354.
103 B. Klaus and E. Saltalamacchia, Italian Antitrust Authority Guidelines on Antitrust Compliance with Relevance for the Food Sector (2018) 6 European Food and Feed Law review 560-562.
of up to 5%.105 An ex ante compliance programme that is not totally effective, but not manifestly inadequate either, may qualify for mitigation of up to 10%, provided that the undertaking adequately amends the compliance programme. An ex post compliance programme can be rewarded with a fine reduction of up to max 5%.106
The ICA does not consider the existence of a compliance programme as an aggravating circumstance, save in exceptional cases which, for example, occur when the programme was used to facilitate or cover an infringement or to mislead the ICA about the existence or the nature of an infringement.107
The Guidelines on antitrust compliance further emphasize the importance of training employees to make sure they have a thorough understanding of competition laws and are aware of the related risks, as well as the introduction of a system to detect and manage risks. The Guidelines also underline the importance of review and continuous improvement of compliance programmes.108
SECTION 2. OPTIMAL APPROACH
A. Arguments supporting fine reductions for effective compliance programmes
From the abovementioned analysis, it appears that the Commission highly stresses the importance of antitrust compliance programmes and gives its total support to them, but does not, in practice, reward companies who implemented effective programmes. The present thesis finds this approach incoherent as it leads to unequal treatments. At the end of the day, whenever there is an infringement, companies who have invested in strong compliance programmes are treated exactly the same way as companies who haven’t undertaken any compliance efforts at all.109 This thesis argues that such an approach does not incentivize businesses to adopt efficient compliance strategies and therefore underestimates the importance of prevention in enhancing effective enforcement of competition law in the first place.
105 ICA compliance guidelines (n 30) para 33. 106 ICA compliance guidelines (n 30) paras 27 and 36. 107 ICA compliance guidelines para 45.
108 ICA compliance guidelines paras 11 and 15.
The arguments put forward by those opposing the idea of rewarding robust compliance programmes are not convincing either. The argument affirming that granting fine reductions for compliance regimes would mean rewarding a failed compliance structure can be solved by only rewarding successful compliance programmes. As has been demonstrated in section III of Chapter I, effective compliance structures do not only benefit companies, but also society as a whole. They raise antitrust awareness and they eventually help to deter infringements or to narrow down their impact as anticompetitive behavior will be detected and terminated earlier.110 It would be disproportionate to sanction the entire business for the misbehavior of employees, whereas the firm invested in raising consciousness about the importance of compliance. Consequently, if a company has managed to limit any illegal activity, it should be rewarded accordingly.111
Introducing clear guidance on what constitutes a strong compliance programme is essential to make the distinction between window-dressing and genuine compliance policies. Hence, it would palliate the issue of factice compliance programmes used as a cheap insurance against competition liability. The mere adoption of a compliance programme cannot automatically lead to immunity or the total reduction of fines.112 Instead, an optimal approach would be made conditional upon a few criteria in order for a compliance policy to qualify as effective and be eligible for a fine reduction. This optimal approach is further elaborated under point B.
Instead of arguing that the adoption of a compliance programme should be a natural consequence of a company’s commitment to respect competition rules, the present research argues that granting significant rewards might be a stronger incentive to stakeholders than the mere threat of fines. Stakeholders with lower compliance motivation will be more easily convinced to invest the appropriate amount of money in compliance structures, if such an investment results in an identifiable economic benefit.113 In addition, from a psychological and normative perspective, the recognition by the legislator of the importance of well-implemented compliance programmes in the calculation of fines would send a clear message to firms on the immorality of non-compliance.114
110 Toth, ‘Framework for the recognition’ (n 42); 95-103; Lasserre, ‘Part I - compliance programs’ (n 4) 21-57. 111 Lasserre, ibid (n 4) 21-57; Paha (n 1) 5; Toth, ‘Overview of the National Enforcement’ (n 8) 258-270; M. Clough, ‘Competition Law Compliance and Leniency’ (2018) 30 Loyola Consumer Law Review 179-185. 112 Gürkaynak and Durlu (n 26) 99-121; Huffman (n 6) 108-120.
113 Lasserre, ‘Part I - compliance programs’ (n 4) 21-57. 114 Ibid.
The argument supporting that the adoption of a compliance programme should be a natural consequence of the firm’s genuine desire to respect the law and to avoid the burden of a fine is erroneous, as this research demonstrates a serious lack of incentives for companies to implement effective compliance programs.115 This demonstrates that the mere threat of a fine does not suffice for businesses to implement effective compliance programme. A reward, on the other hand could help achieve this objective.
Besides, contrary to the argument that leniency applications already create sufficient motives to implement adequate compliance structures, this thesis maintains that leniency applications equally fail to provide the necessary incentives. However, rewarding successful compliance programmes would contribute to the effectiveness of leniency.116 A company will only be able to benefit from immunity if they detect the infringement early on and are first in line to report the conduct to competition authorities.117 Prompt discovery can be guaranteed by a strong compliance programme. Moreover, it will strengthen incentives to provide information about infringements to the relevant competition authorities, as businesses understand that they might benefit from leniency and a reward for their effective compliance programme.118
As a response to the problem of discrimination against SMEs, it must be noted that competition authorities, such as the Italian authority and important organizations and associations supporting companies to achieve full compliance, emphasize that the specific features of SMEs should be taken into consideration when developing instruments and that adequate support must be granted to SMEs.119 Relevant from this standpoint is the Antitrust Compliance Toolkit120, which has recently been established by the International Chamber of Commerce (ICC). The Toolkit gathers recommendations from NCAs and the Commission as well as experience of businesses and more specifically, of in-house competition counsels and specialists. It has been designed to support both SMEs and large companies through practical
115 Toth, ‘Framework for the recognition’ (n 42) 95-103. 116 Toth, ibid (n 42) 95-103; Clough (n 110) 179-185.
117 D. Geradin, ‘Antitrust Compliance Programmes & Optimal Antitrust Enforcement: A Reply to Wouter Wils’ (2013) 1 Journal of Antitrust Enforcement 328; Toth, ‘Overview of the National Enforcement’ (n 8) 258-270. 118 J. Maillo, ‘Chapter 6 - Rewards and Whistleblower’s Protection in Europe/ a Comparison with Third Countries’ in J. M. Beneyto, The Fight against Hard Core Cartels in Europe (Bruylant 2016) 127-153.
119 Pieri (n 60) 69-77.
120 ICC Commission on Competition, ‘The ICC Antitrust Compliance Toolkit’ (2013) available at
https://iccwbo.org/content/uploads/sites/3/2013/04/ICC-Antitrust-Compliance-Toolkit-ENGLISH.pdf accessed 15 November 2019.
advice on the appropriate design of compliance programmes. It introduces a general pattern that can be used by all businesses.121
B. Optimal approach
Drawing some inspiration from the examples of the UK and Italy previously discussed, the most optimal approach appears as follows. A line has to be drawn between ex ante and ex post compliance programmes.
Concerning ex ante programmes, it can be inferred from the analysis of the UK and Italian approaches that only genuine compliance efforts should be recognized. In practice, it is required that an undertaking demonstrates how its ex ante competition compliance policy resulted in the finding and termination of the infringement and in the detection and sharing of new evidence that was previously unknown to the competent competition authorities in the relevant case.122 Secondly, it is expected from high-level officials, such as a senior manager, that they fully commit to ensure the successfulness of compliance programmes. Hence, they cannot be the ones committing the infringement.123 If they succeed to do so, competition authorities might reduce the sanction by 5 to 10% of the total fine.124 This percentage range seems an adequate compromise between all the approaches previously mentioned, as it is flexible and is the right balance between the approach of the Italian competition authority, granting reductions of up to 15%, and the approach of the Commission opting not to grant fine reductions at all.
As far as ex post compliance programmes are concerned, it is worth pointing out that the recognition of ex post compliance regimes, set up or upgraded after the infringement has been discovered, also brings positive outcomes. The attractiveness of a reward might boost companies to cooperate with the antitrust authorities and to comply with competition rules. It reinforces the appeal to get involved in settlement or non-full leniency procedures, which would save the administration some precious time.125 For this reason ex post compliance programmes should also be rewarded, nonetheless, to a lesser extent. This can be explained by the fact that ex post compliance rewards should not incentivize companies to favor ex post
121 Pieri (n 60) 69-77.
122 ICA compliance guidelines (n 30) 4. Toth, ‘Framework for the recognition’ (n 42) 95-103. 123 Toth, ibid (n 42) 95-103.
124 Toth, ibid (n 42) 95-103; Toth, ‘How could competition authorities’ (n 80) 4-10. 125 Coates and Zulli (n 30) 355; Parcu (n 63) 11; Toth, ibid (n 42) 95-103.
compliance over ex ante compliance policies. More value must be attached to the reward of ex ante compliance structures as they are the ones truly contributing to the detection and prevention of illegal behavior.126 Therefore, a maximum reduction of up to 5% can be granted for ex post compliance programmes established or improved in a settlement or leniency application if the relevant compliance programme in question is viable and strong.127
As a counterbalance to the benefits companies might obtain by implementing a successful compliance strategy, this thesis argues that under certain circumstances, and in order to truly motivate companies to invest in decent compliance structures, compliance programmes should be considered as an aggravating element.128 Firstly, this should be possible in case of recidivism, if the company deliberately breaches its compliance programme that has been adopted in a previous competition law procedure. Secondly, if the compliance programme is set up to facilitate a violation or to mislead the authorities, by setting up a factice or non-effective compliance programme that was doomed to fail.129
SECTION 3. APPROPRIATE INSTRUMENT TO ACHIEVE OPTIMAL APPROACH
As discussed in the previous chapter, several instruments may help achieve the identified optimal approach. Three different approaches consisting of hard law, soft law and a combination of both will be illustrated in the present section so as to reflect on their positive and negative characteristics. The present thesis distinguishes hard law from soft law based on the classic binding versus non-binding criteria. Hard law refers to legally binding obligations that can be enforced in court, whereas soft law comprises non-binding legal arrangements which can, notwithstanding their non-binding character, have potential legal effects in national legal systems.130 Given that each field of law has its own needs of hard and soft legal processes, the analysis must be carried out in the specific context of competition law.131
126 Toth, ibid (n 42) 95-103. 127 Toth, ibid (n 42) 95-103.
128 ICA compliance guidelines (n 30) 8.
129 Toth, ‘How could competition authorities’ (n 80) 4-10; Toth, ‘Framework for the recognition’ (n 42) 95-103. 130 G. C. Shaffer and M. A. Pollack, ‘Hard vs soft law: alternatives, complements and antagonists in
international governance’ University of Minnesota Law School Legal Studies Research Paper Series Research Paper No. 09-23, 712-713
131 D. M. Trubek and others, 'Soft Law,' 'Hard Law,' and European Integration: Toward a Theory of Hybridity (2005) University of Wisconsin Legal Studies Research Paper No. 1002, 3 available at SSRN:
