Thursday 21 September 2017

Compliance is top issue in competition law for Irish companies -- no contest

AS a direct fallout from the economic recession, the Government, under the direction of the EU and IMF, has been forced to strengthen competition law. The EU/ECB/IMF bailout arrangement will shortly lead to powers being given to the Irish courts to impose greater fines and terms of imprisonment for breach of EU and Irish competition law.

While the Irish Competition Authority cannot impose sentences for breach of competition law, the Irish courts have imposed significant fines on individuals and businesses for cartel activity and have imposed suspended prison sentences. The recent pronouncement of the Irish courts is that heavier sanctions for breaches of competition law will be imposed.

The laws -- the Competition Act 2002 and the Treaty on the Functioning of the European Union -- are clear. Breaching them is serious and can result in companies facing fines and individuals facing fines and imprisonment.

The Irish Competition Authority's twin efforts to promote competition to achieve public policy goals while helping the Irish economy regain competitiveness were key features of Ireland's legislative and policy-making agenda in 2011. The authority sought to raise awareness and understanding of the benefits of competition law. Despite this, practical guidance to help businesses and individuals better understand the law is a work in progress.

There are key risk areas that businesses and their directors need to be aware of to fully understand their role in minimising the danger of breaching competition law.

Activities prohibited by Irish and EU competition law include cartel activity (price fixing, bid rigging, customer allocation), abuse of market dominance (predatory pricing and refusal to supply), and other anti-competitive agreements (supplier/distributor restrictions).

Businesses that breach competition law could face fines of up to 10pc of their worldwide group turnover, up to five-year prison sentences, financial damages in respect of harm caused by infringement, and serious reputational damage. A compliance policy is an effective means of protecting against these hazards.

Sales people are in the front line and need to be able to identify high-risk behaviour, including price fixing, market sharing, bid-rigging and customer allocation with competitors, which are serious breaches and criminal offences. Similarly, those responsible for commercial contracts should be aware of potential competition concerns arising from various types of agreements such as a supplier fixing a price floor at which a distributor sells a product or preventing a distributor from responding to requests from outside an exclusive territory for the product.

Managers (including directors) must also be aware of how exposed to competition law their employees might be. If so, management should implement proper training to materially reduce the risk of breaching competition law. Prevention is the best solution. A compliance policy that addresses the businesses specific circumstances and addresses certain businesses' specific risks is the only effective way of communicating the message and it is a message that deserves being repeated at appropriate intervals.

A compliance policy can include examples of red-flag situations to avoid cartel or abuse of dominance risks. As well as reducing risks and avoiding costly infringements, a top-to-bottom culture of compliance can also deliver valuable benefits to the business. The business can then position itself as a compliant, well-governed and ethical organisation.

Alan McCarthy is a partner at A&L Goodbody.

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