This is part 2 of a ten part series - that was authored by AnantLaw and published by Lexology on 30 April 2020. All laws stated in this series were accurate on 24 February 2020.
Part2: Implementing a competition compliance programme
Commitment to competition compliance
How does a company demonstrate its commitment to competition compliance?
The first step in demonstrating commitment towards competition compliance is to have a guidance for competition law available, which may be in the form of a manual or a guidebook. Second, depending on the nature of the business and the sector, it is important to ensure all employees are aware of competition law and related developments, which can be done through training programmes, with visible engagement of senior management. The training programmes and manuals may be made available online over the company’s intranet as well. The employees should undertake those training and guidance sessions on a periodic basis, and a record of attendees should be maintained. Every newly inducted employee must be required to undertake the necessary training at the earliest time possible, perhaps as part of their induction programme. It is important to establish that the company has made sincere efforts towards the adoption and implementation of policies and practices (in letter and spirit) that comply with the Competition Act.
Risk identification
What are the key features of a competition compliance programme regarding risk identification?
As part of an effective compliance programme, an enterprise must actively identify its compliance risks and reassess those risks at regular intervals. An indicative list of methods for identifying possible competition risks is:
the demarcation of the scope of the roles and functions of employees who are likely to interact with competitors (including sales, marketing and distribution; those participating in tenders; those participating or representing in trade or industry association activities, etc) and identify them as those at risk;
periodic assessment of, among others, the same suppliers and customers as those of competitors;
proposed or existing collaborations, partnerships and joint ventures with competitors;
periodic assessment of market shares;
periodic internal audit of procedures and documents;
periodic internal audit of commercial agreements or arrangements (undertaken and proposed);
periodic evaluation of market conduct and proposed schemes;
a whistle-blower policy to ensure timely escalation and effective resolution of competition law breaches, with unequivocal assurance on confidentiality;
periodic audits to test the employees’, senior management’s and related stakeholders’ awareness of competition law compliance; and
identification of whether the industry or sector experiences movement of employees between competitors at ‘short’ intervals
In addition, conducting periodic training programmes for employees and senior management may help in the early identification and detection of competition risks, which will ultimately help in reducing the costs and negative effects of litigation and regulatory interventions and will help companies to enhance their reputation and build goodwill.
Risk assessment
What are the key features of a competition compliance programme regarding risk assessment?
Once the risks have been identified by periodic internal audits or other means, companies should assess those risks and perform a cost-benefit analysis, keeping in mind the penal provisions and implications (eg, reputational harm) of non-compliance with competition law provisions. Risks faced by the company, in the context of the market, competitors and related stakeholders, should be analysed based on seriousness (if possible, quantified) and the impact on the overall business of the company. It may even be useful to curate a risk matrix or scale (using a matrix to grade the performance of employees is common in the human resources-related functions of most companies). The onus is likely to be on the senior management along with the legal team, if any, of the company to ensure that the risks identified have been duly assessed and resolved. In this regard, the company can resort to legal advisories from external and internal legal teams. The risk assessment should consider, inter alia, the legal and regulatory impact (in the form of investigations, dawn raids resulting in search and seizure orders, penalties, actions against individual employees and senior management, modification of agreements, division of the company enjoying dominance, etc.); the financial impact (in terms of share prices, loss in investor confidence, etc); operational impact on conducting business as usual; and reputational damage. A credible risk assessment requires interdepartmental participation of counsel (in house and external), assessment of the compliance and operational aspects of the business; and identification of the individuals responsible for the implementation of the compliance programme.
Risk mitigation
What are the key features of a competition compliance programme regarding risk mitigation?
Risk mitigation for companies involves putting in place policies, procedures and training sessions (including online compliance tools) on a regular basis to ensure they:
abstain from entering into any communication with competitors regarding prices, production, market division, bid participation, etc;
abstain from incorporating and enforcing terms in agreements that may be considered as anticompetitive under the Competition Act;
immediately and completely exit from arrangements that may have already raised or may raise potential anticompetitive concerns;
disclose (in appropriate cases) to the Competition Commission of India (CCI) any participation in a cartel-like arrangement;
periodically review policies, agreements, commercial arrangements, market conduct and schemes for the early detection of competition risks;
have a robust competition law compliance manual in place;
educate (train) and brief the employees and top management frequently; and
conduct mock drills to test compliance preparedness at all levels of the organisation.
The CCI has observed in various cases that a violation occurring despite the existence of a vibrant compliance programme is normally considered as a mitigating factor. However, whether the benefit will be extended to the parties or not will entirely depend on the facts and circumstances of each case. In addition, as a part of risk mitigation, it is important to identify a point of contact (external or internal legal team) for seeking assistance if there is any doubt.
Compliance programme review
What are the key features of a competition compliance programme regarding review?
Periodic review of compliance programmes is required to keep pace with changes to the circumstances of the company (in terms of market share, market position, etc) and also to incorporate amendments to laws and regulations and introductions of new rules or regulations and requirements. It is reiterated that periodic review of compliance programmes must incorporate and take note of inputs received as a result of interdepartmental participation of counsel (in house and external), assessment of the compliance and operational aspects of the business and the sharing of insights of changes in experiences owing to changed business circumstances. Evaluation (and incorporation) of relevant (practical) questions received since the implementation of the compliance manual may help in crafting an updated compliance manual as well.