Presented at the london shipping law centre by marjorie holmes 29 may 2007
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Presented at The London Shipping Law Centre by Marjorie Holmes 29 May 2007. PRACTICAL COMPETITION COMPLIANCE. Compliance with Competition Laws (1). Around 110 jurisdictions with competition/anti-trust laws General rules – no price fixing no market sharing no capacity management

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Presented at the london shipping law centre by marjorie holmes 29 may 2007

Presented

at The London Shipping Law Centre

by

Marjorie Holmes

29 May 2007

PRACTICAL COMPETITION COMPLIANCE


Compliance with competition laws 1
Compliance with Competition Laws (1)

  • Around 110 jurisdictions with competition/anti-trust laws

  • General rules –

    • no price fixing

    • no market sharing

    • no capacity management

    • no abuse of a dominant position

  • Exceptions different, e.g. : US – 60/65% of market share generally not viewed as sufficient for dominance – Europe can be as low as 39%; at national member state level as low as 30%: e.g. Austria – significant market power is enough in Germany to require non-discrimination between users. [Scandlines/Deutsche Bahn –Putgarden]. Individual and block exemptions vary.

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Compliance with competition laws 2
Compliance with Competition Laws (2)

  • Starting point is an audit

  • Record of Restrictive Activities/Agreements (e.g. consortia, pool or trade association membership, as well as distribution agreements)

  • Identify the relevant jurisdictions

  • Self Assessments

  • Compliance Manual

  • Regular training, monitoring and auditing

    Safetrac


Regulation compliance
Regulation/Compliance

  • US Sarbanes-Oxley –CEO & CFO must sign Certificate of Proper Internal Controls

  • Japan – Corporate Law 2006 (Legally requires companies’ effective internal controls)

  • UK

  • Turnbull Combined Rules on Corporate Governance do not require compliance with the Code – they require companies to state whether they have complied with the Code provisions and to explain and justify any non-compliance


Revaluation compliance
Revaluation/Compliance

Survey carried out by Japanese Competition Authorities January 2006

  • 86% of companies listed on the Japan Stock Exchange had a manual

  • 77% have installed a help line

  • 72 % have established a compliance committee

    Of this

  • 50% established after 2003

  • 81% the help line had never been used

  • 38% only top management took responsibility

  • 7% conducted internal audit in response to revision of the Antimonopoly Act


Compliance self assessments
Compliance/Self Assessments

  • Required Council Regulation 1/2003 – From May 2004

  • 10% turnover fine [Reputation e.g British Airways shares fell 5.50 points on ftse [OFT/DOJ]

  • Criminal sanctions (UK and other jurisdictions)

  • Damages claim from Third Parties

  • Enforcement of Arrangements/Agreements

  • Arriva PLC/First Group PLC CA 98/9/2002 10% reduction on fine


How do you make your agreement ec compliant
How do you make your agreement EC compliant?

  • Is it a restrictive Agreement? – 81(1)/Chapter 1 applies

  • Block exemptions – Individual exemptions

  • Since 1 May 2004, notifications of agreements to the Commission for clearance abolished

  • Self- assessment means applying to your agreement the four exemption criteria in Article 81(3) as interpreted by EC case law

  • Detailed economic assessment of impact of agreements on the relevant market – market definition is key


Self assessment
Self Assessment

What do you need to show?

  • promotion of technical/economic progress (e.g. agreement achieves economies of scale leading to better and more efficient services)

  • agreement gives shippers a “fair share” of the benefits (e.g. lower prices)

  • no restriction on the parties that are not “indispensable” (e.g. reasonable notice periods, no oppressive exit penalties for withdrawing from the agreement)

  • no elimination of effective competition in the market


Self assessment cont d
Self Assessment / cont’d …

Where to start?

Looking at Commission exemptions given pre modernisation in various sectors, but particularly in shipping

  • 12 consortia exemptions 823/00 (as amended 611/05)

  • 4056 exemptions

  • Failed applications

  • Informal discussions


Self assessment cont d1
Self Assessment / cont’d …

Courts decisions commenting on 81(3) Assessments

  • GSK v Commission re dual pricing with Spanish purchases

  • Ramsey pricing

  • Parallel trading

  • CFI agreed with GSK that Commission rejection without proper review of the effects was incorrect


Self assessment cont d2
Self Assessment / cont’d …

  • Horizontal Guidelines (2001/C3/02) (http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:32001Y0106(01):EN:HTML )

  • Vertical Guidelines (2000/C291/1) (http://eur-lex.europa.eu/LexUriServ/site/en/oj/2000/c_291/c_29120001013en00010044.pdf)

  • Commission Guidelines 81(3) (2004/C101) (http://europa.eu/scadplus/leg/en/lvb/l26114.htm )

  • Notification Questionnaire

  • 13 Questions

  • Key issues are

    • What is the market? Supply/Demand

    • What are the benefits?

    • What do your customers say about you?

  • Review your Self-Assessment annually


Self assessment market share
Self Assessment – Market Share

How do you calculate market share?

a) Geographical Scope – World, Europe to Far Eastern; Country by Country or local (e.g: 30 miles radius for ready to use Ready Cement)

b) Product ) – demand side

or Services ) – supply side


Compliance manual
Compliance Manual

  • a brief overview of the relevant competition rules;

  • a statement endorsed by the Board/Management of the business, that the company aims to comply with the relevant competition rules;

  • a bullet point list of ‘dos’ and ‘don’ts’;

  • a clear statement that it will be a disciplinary matter if any employee breaches the compliance requirements;

  • tie participation in competition compliance programme in with annual objectives and appraisal;

  • details of the compliance officer or person to whom all queries on competition issues can be referred;


Compliance manual cont d
Compliance Manual / cont’d …

  • details of any training or seminars organised by the company for it staff, including employees and/or agents;

  • advice on what to do if the company receives an unsolicited approach from competitors who wish to discuss matters relating to prices and the relevant market; and

  • guidance on how to deal with dawn raids.


Investigatory powers european commission
Investigatory powers – European Commission

  • Requests for information – significant fines for not answering or providing misleading information can be up to 1% of turnover

    When a company is subject to a dawn raid by the Commission, the investigators have the following specific powers:

  • Ask any representative or member of staff for explanations of facts relating to the subject matter and purpose of investigation

  • Use reasonable force


Arrival of investigators
Arrival of Investigators

  • First task will be to investigate the investigators’ mandate

  • Will enable lawyers to advise on precise scope of investigators’ powers

  • E.g. only warrant permits the Commission to use reasonable force

  • Seeking a delay of the investigation pending arrival of company’s lawyers


Golden rules 1
Golden Rules (1)

  • Each investigator must be shadowed by an appropriately briefed person

  • Do not volunteer information or documents unless necessary to clarify a response

  • Inspectors can only examine documents relevant to matters under investigation

  • Do not lie or deliberately mislead officials


Golden rules 2
Golden Rules (2)

  • Do not tamper with, hide or destroy documents or records, including e-mails

  • Inspectors not permitted to examine legally privileged documents (extent of what is legally privileged will depend on type of investigation)

  • Detailed records should be kept of all documents copied or taken by inspectors

  • Write down every question asked and every answer given

  • If uncertain of an answer, do not hazard a guess but promise to find out and provide answer later


Safetrac
Safetrac

On-line Compliance system launched by Minter Ellison, Australian lawyers in 1999 – provides courses and test which is monitored

Customers include Air New Zealand, AMP, Quantas

Reed Smith Richards Butler provides the UK/European Competition Compliance content


Conclusion
Conclusion

  • With approximately 110 jurisdictions with Competition Rules in place, Competition Compliance requirements here to stay

  • Part of overall Corporate Social Responsibility

  • 10% reduction in fine just for having some compliance in place (Arriva)

  • Commercial advantages to being compliant

  • [email protected]


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