It is clear that one of the most (if not the most) effective deterrents to being involved in a serious competition law breach is the risk of personal liability. The UK Office of Fair Trading has recognised this on numerous occasions, for example: “sanctions on individuals play a crucial role in encouraging individual employees and executives to take competition law compliance seriously” (John Fingleton, OFT Chief Executive Officer, 2010).
At the same time, it is clear that prosecutors in the UK will be keen on going after individuals when enforcing the UK Bribery Act. Many readers will be well aware of Section 14. This allows a prosecution of senior individuals if with their “consent or connivance” a bribery offence was carried out by the company. So, even if an individual isn’t prosecuted for actually bribing or being bribed (which is of course possible), a senior person can nevertheless be punished. He must have a “close connection” with the UK, but this includes any British citizen and anyone “ordinarily resident” in the UK.
The meaning of “consent or connivance” will ultimately become the subject of much litigation. Nevertheless, the effect of Section 14 is to ensure that directors and other senior individuals of a company have a direct individual incentive to be committed to ensuring that their company has an effective bribery law compliance culture. They will wish to minimise the risks of their company infringing bribery law. They will also wish to take steps to prevent, detect and bring to an end any infringements, so as (hopefully) to avoid being chased under Section 14 for conniving or consenting should an infringement take place.
How do you go about removing or reducing the “consent/connive” risk? There is extensive guidance on how to implement a corporate bribery compliance programme, but no guidance on measures which individual directors should take. Recent OFT competition law guidance (in the context of whether it will seek a “competition disqualification order” (CDO) against a director following a competition law breach by his company) does however provide a useful parallel. The OFT states: “Where a director is genuinely committed to competition law compliance and has taken reasonable steps to ensure that the company has an effective compliance culture (which may include asking questions, making enquiries and taking steps to prevent or bring to an end any infringements of competition law as appropriate), it is unlikely that the OFT would apply for a CDO against a director on the basis that the director had failed to take steps to prevent a breach of competition law or ought to have known of conduct that constituted a breach of competition law” (Company directors and competition law, OFT Guidance, June 2011 (publication OFT1340)).
The OFT goes on to look at the differences between executive and non-executive directors. The former should have a detailed understanding of, and familiarity with, the way in which the company operates on a day-to-day basis. The latter are not expected to have an intimate knowledge of day-to-day activities and transactions, but are expected at least to ask appropriate questions of the executive directors in order to ensure that appropriate compliance measures have been put in place. Executive directors with sales responsibility will be expected to ensure amongst other things that appropriating mitigating activities are put in place to reduce risks arising from contacts with competitors at, for example, trade association meetings. In the bribery field, a parallel can be drawn with a senior individual responsible for personnel active in high-risk countries. The risk is greater, so you will have to do more to reduce your potential Section 14 exposure.
“In all cases”, the OFT says “company directors are expected to demonstrate a commitment to competition law compliance, and to ensure that their organisation is taking steps to identify and to assess the company’s exposure to competition law risks and put in place appropriate steps to mitigate those risks, reviewing these activities on a regular basis”.
This commitment to compliance, and risk identification, assessment and mitigation, plus review, has clear parallels in the bribery field.
The OFT then turns to expected knowledge of competition law. A director is expected to have the standard of skill and knowledge that is appropriate for his position and the nature of the company in question. This doesn’t necessarily help much, but in the bribery field the parallel would probably be that all directors and other senior people must be aware of at least the basics of the various offences under the Bribery Act and be able to recognise risks, so as to be able to make further enquiries or seek advice. Senior compliance personnel will probably be expected to have a greater level of knowledge than other senior personnel to reduce their Section 14 risk.
Finally, the OFT turns to how to detect and prevent competition law infringements. It states “the OFT considers that a director cannot be absolved from responsibility for an infringement of competition law through a failure to keep himself informed”. What he should do specifically depends on his position, but broadly the following questions would be a good start:
- What are our competition law risks at present?
- Which are the high, medium and low risks?
- What measures are we taking to mitigate these risks?
- When are we next reviewing the risks to check they have not changed?
- When are we next reviewing the effectiveness of our risk mitigation activities?
This tracks the recommended risk identification, assessment and mitigation, plus review, approach, which as noted has direct parallels in the bribery field.
It is clear that, even if they do not bribe or accept bribes themselves, senior individuals are at risk under the Bribery Act. This OFT guidance, despite being from the competition law field, sets out a useful framework for protecting yourself:
- ensure that your company has appropriate compliance procedures in place; and
- take steps yourself to be aware of what is going on in your area of the business.
The McGuireWoods Guest Blogger is Matthew Hall, a partner based in McGuireWoods LLP’s Brussels office who specialises in all aspects of EU and UK competition law.