Comparative guide to designing antitrust compliance programmes: Does Italy now lead the way?
This article is part of the November 2018 edition of our competition newsletter, focusing on some recent key competition developments.
In certain jurisdictions having an antitrust compliance programme in place is recognised as a potential mitigating factor by the local regulator when setting fines for breaches of competition law. Italy is one of those jurisdictions. On 25 September 2018, the Italian Competition Authority ("AGCM") adopted formal guidelines covering: (a) the content that compliance programmes must have to benefit from a fine reduction; (b) the level of fine reduction that can be obtained from the AGCM; and (c) what criteria will be applied by the AGCM in deciding whether, and to what extent a fine reduction will be awarded (the "AGCM Guidelines"). Part A of this article summarises the key points of the AGCM Guidelines, while Part B provides a comparative guide to how competition authorities in other jurisdictions around the world treat the existence of an antirust compliance plan when it comes to the setting the level of fines.
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Part A: Italian AGCM Guidelines on the content of the compliance programme
The AGCM Guidelines clarify that only a compliance programme that is designed and implemented consistently and takes into account the characteristics of the company, such as the nature of its business and its size as well as its market position, is considered appropriate and potentially effective. Furthermore, in line with international best practices, the AGCM Guidelines confirm that the main elements of an effective antitrust compliance programme should include:
- a clear recognition of the value of competition as an integral part of corporate culture and policy;
- the identification and assessment of antitrust risk specific to the company based on a thorough risk analysis;
- a suitable system (such as internal reporting, regular due diligence and internal audits) to manage processes to reduce antitrust risk;
- an adequate system of disciplinary measures and incentives aimed at encouraging compliance with the programme; and
- the execution of training and periodic monitoring and updating of the compliance programme.
AGCM Guidelines on requesting possible mitigation
If a company wishes to obtain a reduction in the fine in view of the quality of its compliance programme, the burden of proof will fall on such company to demonstrate the adequacy and effective implementation of its compliance programme. The AGCM Guidelines set out that, in order to benefit from a reduced fine, a company must submit a request to the regulator, accompanied by an explanatory report that:
- illustrates the reasons why the compliance programme is to be deemed adequate for the prevention of competition infringements; and
- provides examples of concrete initiatives put in place by the company, which need to be substantiated by documentary evidence, to ensure the effective and efficient implementation of the compliance programme.
The AGCM Guidelines emphasise the importance to include in the report internal documents evidencing:
- the holding of regular staff training programmes;
- the periodic updating of the programme and training; and
- the appointment of programme managers and staff assigned to implement the compliance programme. These individuals must have appropriate powers of supervision and must report to senior management.
What level of discount is available?
The AGCM Guidelines provide the following criteria applied by the AGCM in assessing potential reductions to fines.
Compliance programmes in place before an investigation:
Where compliance programmes were adopted before the opening of antitrust proceedings, a regulatory fine may be discounted by:
- up to 15% where the company has an "effective" compliance programme in place prior to the investigation which should lead to:
— prompt detection of the infringing conduct;
— prompt interruption of the conduct; and
— where applicable, a leniency application being made; - up to 10% for compliance programmes which are not "effective", but are not "manifestly inadequate". A discount may be awarded provided that:
— the company adequately amends its compliance and implements those changes within six month after the opening of an investigation; and
— the compliance programme is not "manifestly inadequate". In this regard, the company needs to demonstrate that:
— the original compliance programme was carefully and consistently implemented, with appropriate gravity, throughout its lifetime , even though it did not ultimately prevent the occurrence of unlawful conduct; and
— the changes to the compliance programme correct any previous deficiencies which prevented the original programme from being fully "effective". - up to 5% where the company has a pre-existing programme which was "manifestly inadequate" but has modified it within six months after the opening of an investigation. The AGCM Guidelines provide examples of compliance programmes that are deemed to be "manifestly inadequate":
— a compliance programme which has serious deficiencies in its content;
— there is absence of evidence of the effective implementation of the programme; and
— top management where involved in the infringement.
Compliance programmes implemented after an investigation:
Where compliance programmes were adopted after the opening of antitrust proceedings, a fine reduction will be capped at 5%. Such a reduction will only be considered if the company effectively implements a compliance programme within six month after the start of an investigation.
Other design features
The AGCM Guidelines also provide the following guidance in terms of the design of a compliance programme:
- compliance programmes should be tailored to the activity, market position and antitrust risks of the company;
- "sufficient resources" must be dedicated to the design, implementation and monitoring of the programme. In this regard, a more direct reporting line with senior management might be required in cases where current compliance programmes are managed by lawyers who report to the internal legal function;
- regular monitoring and updating of the adequacy and efficacy of the programme is required;
- the guidelines also advise regular training on antitrust risks as the law and/or company's activities develop, especially for employees operating in the divisions most exposed to the risk of anticompetitive behaviour;
- a whistleblowing system is strongly advised and, if adopted, should ensure anonymity and protection of the reporting agent from possible retaliation.
How are repeat offenders treated?
Any discount awarded under the AGCM Guidelines will be capped at 5% if the company has previously been found to have infringed competition law, provided they can demonstrate the changes made to the compliance programme after the opening of proceedings. However, any such discount will not be available at all if the repeat offender has in the past already benefited from a discount under the AGCM Guidelines in view of the adoption of a compliance programme.
How are group companies treated?
For a compliance programme to benefit from a discount under the AGCM Guidelines, it must cover the whole group. A compliance programme which has only been implemented at the parent company level will not release the parent from any liability for the subsidiary's conduct.
Part B: Antitrust Compliance Programmes in other Jurisdictions
Compliance with competition law is a priority for many competition regulators around the world. To this end, various competition regulators have issued helpful publications to encourage and assist businesses to implement compliance programmes.
Sometimes these authorities have also provided, as the AGCM has, clear indications as to what may be considered as an effective compliance programme. However, at the time of writing, most antitrust authorities will not grant fine reductions for the implementation of a compliance programme.
Set out below is a summary of the positions in a number competition law jurisdictions around the world.
| country | Compliance programme as a mitigating factor | extent of potential fine reduction |
|---|---|---|
| Australia | Yes. The regulations and guidelines do not provide express guidance on this point. In practice, however, the ACCC and Federal Court have proceeded on the basis that an effective and well-managed antitrust compliance programme may be a mitigating factor when assessing penalties. The mere existence of a compliance programme is not sufficient. |
Not explicitly defined in regulations or guidelines. |
| Belgium | No. The Belgian Competition Authority's fining guidelines follow the principles of the European Commission's 2006 guidelines, which do not include the existence of a compliance programme as a mitigating factor. | N/A |
| Brazil | Yes. The guidelines provide that a robust compliance programme may be considered as an attenuating circumstance leading to a lower fine. A robust program must include: (a) an effective commitment by the company through the involvement of senior management, proper allocation of resources and granting the programme manager autonomy; (b) the identification and assessment of antitrust risk specific to the company, prioritizing compliance in areas that pose greater competition risks; (c) development of internal training, inclusion of compliance provisions in the company's code of conduct, effective monitoring and documenting compliance activities and enforcement; and (d) continuous review and adjustment of the programme. |
Not explicitly defined in regulations or guidelines.
|
| China | No. The regulations and guidelines do not provide express guidance on this point. In practice, the mere existence of a compliance programme is not sufficient to impact the level of the fine. However, parties can approach the regulators to request that any such compliance guidance is taken into account and/or implement a compliance programme as part of any remedies. | Not explicitly defined in regulations or guidelines. |
| European Union | No. The European Commission's 2006 fining guidelines do not include the existence of a compliance programme as a mitigating factor. | N/A |
| France | No. Not after October 2017. The French competition regulator, the Autorité de la concurrence ("Autorité") had, until October 2017, a framework document on antitrust compliance programmes which encouraged companies to set up or to upgrade an existing compliance programme according to a list of "best practices". However, the Autorité repealed this framework document in October 2017, after the entry into force of a settlement procedure (procédure de transaction) repealing the former "no contest of objections procedure". | N/A |
| Germany | No. Historically, the FCO (German competition authority) has, so far, has not considered compliance programmes as a mitigating factor. However, in a case in 2017 which concerned tax law breaches, the Federal Court of Justice (FCJ) recognised a compliance management system as a possible mitigating factor when setting administrative fines. In the competition law community, it has been argued that the reasoning of the FCJ's decision could also apply to competition law infringements. Whether the FCO will follow the FCJ's decision remains to be seen. |
N/A |
| Hong Kong | Potentially. Only the Hong Kong Competition Tribunal can impose pecuniary penalties, and it has not yet ruled in any case. However, the Hong Kong Competition Commission Enforcement Policy states that, in choosing an enforcement response (including whether to seek a pecuniary penalty), it will consider the compliance efforts of the persons involved and whether they can demonstrate that they have made a genuine effort to comply with the law. |
Not explicitly defined in regulations or guidelines. |
| Italy | Yes, provided that the programme meets the guideline's minimum criteria, which differ based on whether the programme was in place prior to, or introduced after, the commencement of an investigation. | Up to 15% where the compliance programme was in place prior to the investigation, led to prompt detection and interruption of the infringement, and a leniency application has been made (where applicable). Up to 10% where the company has modified a pre-existing programme which was not totally effective. Up to 5% where the company has modified a pre-existing programme which was "manifestly inadequate", or has introduced a satisfactory programme after the launch of an investigation. |
| Japan | Yes. The regulations and guidelines do not provide express guidance on this point. In practice, however, the fact that a company has a competition compliance programme in place will be considered in the context a cease and desist order, as well as by court as a general mitigating factor for sentencing. However, it is not a mitigating factor when it comes to the setting of an administrative fine by the Japan Fair Trade Commission. |
Not explicitly defined in regulations or guidelines. |
| South Korea | No. The current regulations state that having a highly rated compliance program can only lead to a reduction in the scope of a requirement to publish corrective notices, and an exemption from ex officio investigations, not a reduction in fines. | Not explicitly defined in regulations or guidelines. |
| Netherlands | Yes. In a speech in 2015, the chairman of the Dutch Competition Authority ("ACM") stated that the fact that a company has a compliance programme is not an argument for ACM to reduce the fine. However, in a recent case (2017), the ACM considered that a compliance programme could be a mitigating factor in specific circumstances only (however, the ACM did not ultimately grant a discount in that case). To qualify the ACM has historically considered the following features of a compliance programme when determining the level of a fine, whether: (a) it was implemented prior to the infringement; (b) it was actually implemented; (c) it was effective; (d) it was sufficiently monitored with strict procedures to ensure compliance; (e) the infringement involved senior representatives of the company. | Not explicitly defined in regulations or guidelines. |
| Singapore | Yes. The guidelines indicate that, in considering how much mitigating value to be accorded to the existence of any compliance programme, the regulator will take into account the compliance policies and procedures in place, whether the programme has been actively implemented, whether it has the support of, and is observed by, senior management, whether there is active and ongoing training for employees and whether the programme is periodically evaluated and reviewed. | Not explicitly defined in regulations or guidelines. |
| Spain | No. However, in a recent case the Spanish competition regulator has taken the implementation of a compliance programme after the start of the investigation as a factor leading to a slight reduction of the fine imposed. |
N/A |
| Sweden | No. |
N/A |
| Switzerland | Yes, although not explicit. |
Not explicitly defined in regulations or guidelines. |
| Taiwan | No. The regulations do not expressly permit mitigation on this basis. Instead, they state that reasons for fine reductions include cooperation with the FTC's investigations and taking remedial measures. |
Not explicitly defined in regulations or guidelines. |
| United Kingdom | Yes. Adequate steps taken with a view to ensuring compliance with competition rules will be considered as one of the mitigating factors. Generally, the extent of reduction to potential fines are not explicitly set out, however, the CMA states in its fining guidelines that it may consider a discount of the penalty of up to 10% where the infringing company "demonstrates that adequate steps, appropriate to the size of the business concerned, have been taken to achieve a clear and unambiguous commitment to competition law compliance…". |
Up to 10% if adequate steps are taken. |
| United States of America | Yes, but only on very limited occasions, and only for extraordinary compliance measures taken after the discovery of wrongdoing. For example the Department of Justice agreed to a fine reduction for Barclays in the 2015 Euro/USD rigging case, a fine reduction for Kayaba in the 2015 auto parts case, and took into account the compliance efforts of BNP Paribas in determining the ultimate fine in the 2018 foreign currency rigging case. In May 2018, the Department of Justice year was considering whether it might recognise pre-existing compliance programs with some form of credit. |
N/A |
Summary
The adoption of the AGCM Guidelines provides welcome clarity and some certainty on what companies can expect if they have an effective compliance programme in place, at least in relation to conduct in Italy. It remains to be seen whether the move by the AGCM will set a trend amongst other competition regulators.
They also provide some helpful guidance in relation to how such compliance programmes might be designed.
Whilst the potential reduction of any regulatory sanctions is an important reason for business to implement effective antitrust compliance programmes or review existing ones, the driving factor behind any business' compliance programme should be to avoid an investigation in the first place.
The AGCM Guidelines are available at: http://www.agcm.it/dotcmsdoc/linee-guida-compliance/linee_guida_compliance_antitrust.pdf, an English version is also available at: http://en.agcm.it/dotcmsdoc/guidelines-compliance/guidelines_compliance.pdf
See here for key competition law contacts across Ashurst's global network.
With thanks to the following for their contributions: Akihiro Kudo of Ashurst, Vivian Fraga of TozziniFreire Advogados (regarding Brazil), and David Mamane of Schellenberg Wittmer (regarding Switzerland).
1. i.e. have not promptly detected or interrupted the conduct
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Comparative guide to designing antitrust compliance programmes: Does Italy now lead the way?
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