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Keeping Honest Systems

Date of publication: 5 October 2018

Oleksandr Fefelov, Attorney at Law, Head of Antitrust and Competition Practice

Source: Yurydychna Praktyka

“A company’s good-faith efforts to comply with rules of competition can and should be honed and encouraged by the state”

The question of introduction within the Ukrainian companies of an internal system of observance and prevention of violations of the legislation on the protection of economic competition (the so-called antimonopoly compliance programs) is currently on the agenda of virtually every large enterprise. The importance of antimonopoly compliance programs has grown in connection with the sharp increase in the development of regulatory control and legislative and regulatory compliance practices in the field of competition protection. This is due, inter alia, to the emergence of new sub-areas of competition law and establishment of new powers of the committee, in such areas as, for example, regulation in the field of state aid and entrusting the AMCU with corresponding functions. In addition, the relevance of the implementation of antimonopoly compliance programs to a large extent was also affected by strengthening of sanctions imposed for violations, which is perfectly demonstrated by the decisions upheld in cases of Google, the cartel of truck manufacturers and the decision of the Antimonopoly Committee on violations in Ukraine. Among the most recent cases the most well-known is the case of over 400 million fine imposed on Tedis, or recent decisions upheld in cases related to the concerted actions of pharmaceutical companies and distributors.

Negative stimulus

Unlike some neighboring countries, we really do not have even a normative definition of such a program. However (by analogy to banking law), antitrust compliance could be defined as “a set of rules, standards and procedures for detecting, counteracting and preventing violations of legislation on the protection of economic competition in the activities of a business entity”.

The country has a problem of protection and competition, although the Antimonopoly Committee of Ukraine has intensified its activities in this area in the course of the recent years. In order to increase the attractiveness of Ukrainian companies to foreign partners, it is strongly recommended that companies, their owners and managers and other responsible employees be fully aware of the main aspects of competition protection legislation, which is designed to allow the introduction of antitrust compliance among Ukrainian companies.

Therefore, understanding of the foundations of competition law, development and implementation of standards of conduct and response to certain circumstances and business processes within companies, in one way or another, affect competition, the development of a common internal position, if you want, attitude towards such circumstances, is of enormous importance for the significant reduction of business risks in this area.

It is also important not only to develop a uniform document (instructions), which thoroughly and clearly outlines the rules governing competition issues from the legal standpoint, norms of conduct that exclude violations of competition law, but also the sequence of actions of each corresponding employee of the company in identifying the risks of violation. Such instructions must describe the risks and possible consequences that the economic entity may encounter not only in case of a violation, but even in case of suspicion of a violation. Perhaps it is worth determining the degree of familiarization with these rules for different categories of employees. For them, it is necessary to organize certain events (trainings, seminars, etc.) relevant to their category, whose purpose is to ensure understanding by the employees (and owners) of the consequences of their actions or inactivity related to the sphere of competition and clear awareness how to respond the risks identified. Therefore, the most important stage in the implementation of the antimonopoly compliance program is training, assessment of awareness and of specific behavior (reactions) under various circumstances.

Advantages of introduction

What positive effects can be expected from the implementation of antimonopoly compliance programs? For the state and the economy in general, the implementation of compliance programs is expected to lead to a certain reduction in the degree of monopolization of the economy and further improvement of competition as a result of avoidance by business entities at the primary stage of, at least, gross violations of competition law. The AMCU will also feel the positive effect due to certain reduction of the burden in terms of detecting violations and investigating the relevant cases.

For business entities the implementation and good-faith observance of the compliance program would drastically reduce the risk and violation of the competition protection law and, as a result, the negative consequences of such violations. In addition, it would provide the opportunity to save significant amounts of costs that could be sustained in connection with the protection from defamation allegations (both within the AMCU investigations and in the courts), and possibly achieve a reduction in the volume of sanctions in case of unintentional violations.

Experts, as before, are discussing the question if the sanctions for violations should be reduced when the offender has antitrust compliance program or, conversely, if the existence of such program is an aggravating circumstance. Regardless of the fact that in a number of European countries the availability of the program is a circumstance mitigating blame, and contributes to reducing sanctions for violations, it is not worthwhile taking a formal approach towards this issue in Ukrainian realities. It would be inappropriate to stimulate the formal implementation of the compliance program only to enable a potential offender to account for a certain “discount” (in the foreseeable amount of a fine) in his business plan.

At the same time, the bona fide approach of the company that introduced the program and ensured its proper implementation, in case of detecting a violation, may indicate the fault of certain employees or managers who committed a violation contrary to the company’s desire to strictly comply with the competition rules. In such cases it would be fair for the AMCU body to take such circumstances as mitigating the company’s fault and, accordingly, apply less severe sanctions than are applied usually.

In any case, the good faith of an economic entity in trying to comply with competition rules can and must be honed and encouraged by the state.

However, to make the anti-monopoly compliance programs meet the AMCU’s expectations, the business, in its turn, has the right to rely on obtaining from the latter the advisory (methodological) instructions regarding the minimum amount of information required, description of the rules, regulations and procedures to be implemented into the program, for such program to be properly perceived by the agency and to have the corresponding effect.

The matter of full formal coordination of the certain person’s program with the AMCU, is probably not of interest at this time, because the program (its content and the measures it stipulates) is a voluntary matter. At the same time, it would be desirable to have certain comments and recommendations of the committee already at the stage of its development, implementation and further improvement.

In addition, the analysis of the compliance program and the person’s good-faith exercised during its execution may serve as a necessary element for the objective evaluation of such person’s actions, both in the process of consideration of the case subject to the signs of violation of competition legislation, as well as in the process of establishment of sanctions.