Competition and Antitrust Compliance Programs for Business VI Competition Forum of Ukraine Kyiv, 2-3 March 2017 RENATO FERRANDI INTERNATIONAL AFFAIRS

PILLARS OF COMPETITION COMPLIANCE AND DETERRENCE

Knowledge

Knowledge

LOW COMPETITION AWARENESS BY SMES Knowledge LOW COMPETITION AWARENESS BY SMES Competition awareness among businesses Source: ICN AWG Competition Culture Project (2015)

AWARENESS OF COMPETITION BENEFITS Knowledge AWARENESS OF COMPETITION BENEFITS Sound competition promotes a level playing field and increased innovation and efficiency Sound competition protects businesses from artificial barriers to entry, creating opportunities to enter markets and grow   Competition improves resource allocation and efficiency, and increases the ability to compete internationally Businesses have the opportunity to inform competition policy and support competition law enforcement Source: ICN AWG “Explaining the Benefits of Competition to Business” Project (2016)

WHAT COMPETITION AGENCIES CAN DO Knowledge WHAT COMPETITION AGENCIES CAN DO Source: ICN AWG “Explaining the Benefits of Competition to Business” Project (2016)

Sanctions and enforcement

INCENTIVES FOR COMPLIANCE Enforcement INCENTIVES FOR COMPLIANCE Stronger sanctions increase the cost to a business if non-compliance is found More enforcement increases the probability that non-compliant behaviour is detected and penalised

EXPECTED EXTRA PROFITS FROM VIOLATION Enforcement EXPECTED EXTRA PROFITS FROM VIOLATION OPPORTUNITY COST OF NON COMPLIANCE PROBABILITY TO BE DETECTED RISK Deterrence if RISK OPPORTUNITY Example: €100,000 x 0,25 = €25,000 > €20,000

Voluntary compliance measures

COMPLIANCE PROGRAMS HELP COMPETITION Antitrust compliance programs may strengthen the development of a common antitrust culture Increase legal certainty for undertakings (better assess both internal behaviors and the activities of their competitors) Increase the cases of infringement spontaneously reported by undertakings

Wide range of different approaches Compliance HOW FAR SHOULD COMPETITION AGENCIES GO? Wide range of different approaches Guidance on how to design an effective compliance programs Assessment of compliance programs Recognition of compliance programs as a mitigating factor for fines

THE ITALIAN EXPERIENCE Compliance THE ITALIAN EXPERIENCE Guidelines on fines (October 2014) Possibility for a reduction up to 15% of the fine in case of “adoption and observance of a specific compliance program, in line with European and international best practices”

… in light of the specific characteristics of the Italian economy Compliance … in light of the specific characteristics of the Italian economy Micro-enterprises (9 employees or less): 4,2 million, 95% Very few big companies (>250 employees): 0,15% Average size: 3,9 workers (European average: 6,8 workers) 47% of employees work in micro-enterprises (European average: 29%), 19% work in big companies Source: Annual Report on the Italian economy, ISTAT 2015 .

Decision taken after internal and external discussion… Compliance Decision taken after internal and external discussion… Internal: need for an enrichment of the “toolbox” of competition policy (fines, leniency, private enforcement, competition advocacy and social disapproval) External: pros and cons of a discount on fine (market consultation)

… aware of the possible downsides Compliance … aware of the possible downsides Main issue: how to distinguish a real from a “cosmetic” compliance program Guidelines: “Actual and concrete commitment to respect what envisaged in the program” full involvement of the management appointment of responsible officers risk assessment training courses rewards and penalties monitoring and auditing

FIRST RESULTS OF THE ITALIAN EXPERIENCE Compliance FIRST RESULTS OF THE ITALIAN EXPERIENCE Adoption of 32 new compliance programs Mostly in regional or local markets By SMEs In markets prone to endemic collusion (14 cases in the cement/concrete sector) In one case, the trade association included compliance programs as a requisite for members

Compliance In April 2016 the main Italian association of businesses Confindustria adopted Compliance Guidelines Include indications on how to draft and put in place an effective compliance program Guidelines disseminated among members

HOW FAR SHOULD COMPETITION AGENCIES GO? Compliance HOW FAR SHOULD COMPETITION AGENCIES GO? No “one size fits all” Factors: particular characteristics of each country and industry, market dynamics and national or sector-specific regulation Need to work in parallel on: reputation of the authority, transparency and credibility in setting fines, advocacy and social disapproval