UK: You Know It Makes Sense – Competition Law Compliance

Last Updated: 25 January 2012
Article by Jonathan Cornthwaite

One of the few areas of British business that have not experienced a downturn in recent months is the need to comply with competition law. On the contrary, this area is more buoyant than ever before, partly due to the swingeing fines that the competition law regulators continue to dish out, and partly due to a major compliance blitz that the Office of Fair Trading (OFT) (the UK's principal competition law regulator) has recently been waging.

Rather like a crocodile, competition law has a nasty habit of lurking below the waterline, and can therefore easily be overlooked until it suddenly grabs the unwary. Some types of behaviour – price-fixing cartels, for example, or bid-rigging, or resale price maintenance – are widely known to be against the law. But other types of business practices are less obviously non-compliant. How many businesspeople know, for example, that loyalty discounts, or trade association membership rules, or the exchange of commercial information all have the potential of getting them into very hot water with the regulators?

Research published by the OFT indicates that only a quarter of British businesses know even "a fair amount" about competition law ... which is distinctly alarming, given the length of time that competition law has been around, and given the painful consequences of contravening. In order to ramp compliance up the agenda, the OFT has been recently issuing a raft of publications and visual aids. One of them is specifically aimed at helping directors prevent, detect and halt competition law infringements within their companies – rather an important task, not least because directors can themselves be punished by disqualification orders even if their conduct did not contribute to the competition law contravention, and even if they were unaware of the contravention! Other more generally-applicable OFT guidance recommends a colour-coded four-step compliance procedure for all businesses to adopt, as follows:

STEP 1: identify the compliance risks that you face, which will depend upon the nature and size of your business.

STEP 2: assess those risks as low, medium or high. High risk could be present where, for example, the business employs people who are likely to have contact with competitors in sales and marketing roles.

STEP 3: mitigate the risks by setting up policies, procedures and training designed to detect and deal with non-compliance, and ideally to eliminate it altogether.

STEP 4: review the compliance, both on a periodical basis, and also on particular occasions outside the regular cycle (such as taking over another business).

All four steps, according to the OFT, need to be secured by a 'top down' commitment by senior management, which is a sine qua non for the process to succeed.

Love it or hate it (we love it!), competition law is a fact of business life that there is no escaping. Setting up a competition law compliance process – and we have advised on many – will not guarantee that you will avoid competition law headaches, but it will almost inevitably reduce the risk of them occurring. And, even if the worst comes to the worst, the fact that a business has set up a competition law compliance procedure is likely to mitigate the severity of any punishments that the regulators are minded to impose upon it. A stitch in time saves nine, and the establishment of a compliance procedure could reap dividends for a long time to come.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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