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4350924 PRACTICAL COMPETITION COMPLIANCE Presented at The London Shipping Law Centre by Marjorie Holmes 29 May 2007.

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Presentation on theme: "4350924 PRACTICAL COMPETITION COMPLIANCE Presented at The London Shipping Law Centre by Marjorie Holmes 29 May 2007."— Presentation transcript:

1 4350924 PRACTICAL COMPETITION COMPLIANCE Presented at The London Shipping Law Centre by Marjorie Holmes 29 May 2007

2 2 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. } hardcore

3 3 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

4 4 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

5 5 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

6 6 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

7 7 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

8 8 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

9 9 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

10 10 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

11 11 Self Assessment / cont’d …  Horizontal Guidelines (2001/C3/02) ( http://eur- )  Vertical Guidelines (2000/C291/1) ( http://eur-  Commission Guidelines 81(3) (2004/C101) ( )  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

12 12 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

13 13 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;

14 14 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.

15 15 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

16 16 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

17 17 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

18 18 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

19 19 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

20 20

21 21 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 

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