A cartel investigation is an MD's worst nightmare, but don't fear - Mark Clough explains how to avoid the dreaded scenario.
It's a scenario that keeps managing directors awake at night. Imagine there is a knock at your door, you open it to find yourself face-to-face with an Office of Fair Trading (OFT) official. Warrant in hand, he informs you that he is about to search your premises as part of an investigation into a price fixing cartel.
After the initial urge to slam the door shut has subsided and your head has stopped spinning, all that dim and distant competition training trickles back into the brain. The knowledge that you could face five years' imprisonment, director disqualification orders and a company fine up to 10 per cent of worldwide group turnover for the last financial year.
To top it off, a difficult customer wants to sue for damages (or have a lifetime supply of your product at knock down price instead). What about your professional reputation and that of your company? There's a very real prospect that you'll be expected to account for your actions on the 10 o'clock news – or, worse: be grilled by Jeremy Paxman on Newsnight, and it's not only your tie that doesn't look straight…
Can that scenario been avoided? The simple answer is yes, and this is how…
Familiarise yourself with your compliance guide
To start with, as MD, you should dust down your competition compliance guide (ten pages of plain English with a few do's and don'ts and extra warnings), and reacquaint yourself with your responsibilities under competition law.
Ensure your staff understand the guide and are properly trained
It's your responsibility, as MD, to ensure that your staff have been given a competition compliance guide and training that is relevant to their job.
Lead by example
Make sure you lead from the top and tell your team that competition law will make your business more competitive and more successful.
Make sure your organisation understands the consequences of non-compliance
Tell your team about the downside of competition law infringements: The risk of a five year jail sentence and the general crumbling of the business.
Inspire your team
If you don't, the OFT might take that into account when deciding to bring director disqualification proceedings against you.
Be the first to act
Competition law is not a TV soap – it can ruin the lives of business people. For this reason, you need to make sure that you can be the first to discover any cartel infringement in your business and to blow the whistle to the OFT or European Commission.
Whistle blowing can spare you pain in the long run
If you are the first to blow the whistle when the Competition Authority has no knowledge of the infringement, you will avoid all penalties save for adverse publicity and potential civil damages claims. Even if you are not the first you may still escape some penalties and receive much reduced fines.
Beware the smoking gun
Watch out for the trail of smoking guns that electronic communication may leave today, whether by e-mail or mobile phone.
Talk is not cheap
To avoid the tricky situations that arise if key personnel talk to competitors, whether socially in the pub or at trade association meetings, a business must update its compliance guide and train staff regularly.
Forewarned is forearmed
Some businesses are more vulnerable than others. The chemical industry has a history of cartel cases going back over the last 50 years. When a new business is acquired, due diligence is often not sufficient to reveal the existence of a cartel. It is useful to carry out audits of vulnerable sections of the business, such as the sales department, using up to the minute IT software to search everything from laptops to servers.
Emphasize the advantages that are available from competition law compliance and promote them in your business: remember to lead from the top and from the front. All new recruits need to be trained on why the competition compliance guide is a necessary part of their induction pack. In this way, a culture of corporate responsibility can be encouraged from the outset. The risks of infringement and the severe punishment that follows will be reduced, if not eliminated.
We can put in place compliance tools and provide practical training to minimise the risks of infringement If things have gone wrong, we can assist you in dealing with investigations and dawn raids, apply for leniency on your behalf, and help you seek immunity from fines, prosecution and director disqualification.
Mark Clough QC is one of the UK's leading experts in competition and merger control law and a partner in the public law and regulatory team of Brodies.
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