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Antitrust Law Compliance

Abstract

How can firms prevent their employees from engaging in conspiracies in restraint of trade? This question is answered by a joint research project of researchers at the Universities of Florida (USA) and Giessen (Germany):

The first pillar of this study is an online survey that explores the set of measures that have already been implemented by firms to ensure adherence with antitrust laws. In 2014, data has been collected from German, Austrian, and Swiss firms. In 2015, the survey will be extended to firms in the English-speaking world. As a second pillar, we provide formal-analytic analyses of antitrust law compliance programs. For example, recent work has explored the economic effects of compliance training and suggested payment-schemes that promote compliant behavior.

We will be glad to answer your questions on this research project. Please email us or call Dr. Paha:

We need your help.  The survey is for in house counsel and compliance officers who are involved in cartel compliance. 

  • If you are such a compliance professional, please take the survey here
  • If you are outside counsel, a government enforcer or academic, do not take the survey.  However, please forward the survey to as many people in our target audience as possible.

Overview on Antitrust Law Compliance

Competition authorities impose considerable fines on cartels, i.e., firms agreeing to fix prices, rig bids, or to allocate customers or regions. For example, the European Commission regularly sets fines in the range of several hundred million Euros (see the EU cartel statistics). Firms engage in attempts to manage this business risk by the introduction of antitrust compliance programs, which shall ensure that the firms' employees abide to antitrust laws such as Section 1 Sherman Act in USA or Article 101 TFEU in Europe. The European Commission defines:

Compliance means respecting the law. In the competition field, it means business proactively respecting competition rules.

It appears important to create and strengthen the research-based groundwork of antitrust law compliance programs. This will help to foster the acceptance of such programs by competition authorities who may still be somewhat hesitant when it comes to recognizing the value of such programs. For example, the European Commission does not consider antitrust law compliance programs when setting fines:

The Commission welcomes and supports all compliance efforts by companies [...]. For the purpose of setting the level of fines [...] the mere existence of a compliance programme will not be considered as an attenuating circumstance.

Research Objective

This project researches how antitrust law compliance programs can be designed and implemented best. Existing research is augmented by providing empirical results from a comprehensive survey of firms' compliance efforts. Moreover, we provide model-theoretic analyses of compliance, e.g., information acquisition and compliance training, or the optimal design of payment schemes. This will help to strengthen the scientific foundation of compliance and facilitate the design of effective compliance programs in practice.

The main objective of this research project is to scientifically identify a solid basis of knowledge on compliance. This will help firms to design antitrust compliance programs effectively and discuss the value of such programs with competition authorities most stringently. Our work complements existing research that identifies facilitating factors for collusion. We contribute to this literature by explicitly focusing on events that trigger the start of a collusive agreement rather than concentrating on factors that make a market more conducive to collusion in general. Based on this work, we research how these factors can be mitigated effectively, which promotes compliant behavior and benefits both the firms and their customers.

Findings

One part of our survey was conducted in Germany, Austria, and Switzerland in 2014. It contains responses from about 90 large companies. They provided answers to our questions on the design and effectiveness of the measures implemented to ensure compliance with antitrust laws.

More than 80% of these companies reported that imperfect knowledge of their employees about antitrust laws constitutes a risk for violations of these laws. This also includes imperfect knowledge about the consequences of such violations (e.g., fines and damages). However, less than 40% of the respondents considered changes in the economic environment of a firm (e.g., a decline in demand or increased competition from imports) a risk factor that facilitates antitrust violations. This is surprising because – in the past – reductions of profits that were caused by changes in the economic environment could frequently be observed constituting triggers for collusive conduct.

Following this risk assessment, 90% of the participating firms engage in compliance training to educate their employees about antitrust laws. More than 80% provide guidelines how to behave correctly in meetings with employees of competitors (e.g., meetings of business associations). About 70% of the firms actively search for anticompetitive conduct that is possibly exercised by their employees. However, these investigative measures are mostly triggered by specific suspicions or are carried out as a by-product of other investigations. Purely preventive antitrust investigations are relatively uncommon.

Our study shows that antitrust compliance measures are mostly carried out by large companies and past cartel offenders. There is potential to increase the effectiveness of measures aiming at an early detection of risks (e.g., the active and preventive screening for risks in the competitive environment of a firm).

Publications

  • Götz, G., Herold, D. and Paha, J. (2014.a). „Kartellrechtliche Compliance-Programme – Vom Risikobewusstsein zur Risikosteuerung.“ Forthcoming in: BCM-Anthology “Compliance”
  • Götz, G., Herold, D. and Paha, J. (2014.b). "Forschungsprojekt Kartellrechts-Compliance: Wie Compliance-Maßnahmen Kartellrechtsverstöße verhindern und zum Unternehmenserfolg beitragen können." Forthcoming in: FIW-Schriftenreihe
  • Herold, Daniel (2014). "A Principal-Agent Model of Competition Law Compliance." Unpublished Working Paper
  • Paha, Johannes (2014). "Lower Sanctions, Greater Antitrust Compliance? Cartel Conduct with Imperfect Information about Enforcement Risk." MAGKS Discussion Paper No. 60-2014
  • Paha, Johannes (2013.a). "Cartel Formation with Endogenous Capacity and Demand Uncertainty." MAGKS Discussion Paper No. 43-2013
  • Paha, Johannes (2013.b). "The Impact of Persistent Shocks on Concave Objective Functions on Collusive Behavior." MAGKS Discussion Paper No. 28-2013

Third-Party Funding

  • DAAD, conference grant: Earie 2014, Daniel Herold, M.Sc.
  • DAAD, conference grant: Earie 2014, Dr. Johannes Paha
  • DFG, grant to support the initiation of international collaboration, Dr. Johannes Paha
  • Justus-Liebig-University, grant for early career researchers, Dr. Johannes Paha

We would like to thank these institutions for supporting our research project on antitrust law compliance.

Schedule

  • 2015, January: Start of the survey period in English-speaking countries
  • 2014, October: Initiation of an international collaboration with prof. Daniel Sokol (University of Florida)
  • 2014, September: Presentation of results at international, academic conferences
  • 2014, July: Publication of results
  • 2013, November: Start of the survey period in Germany, Austria and Switzerland
  • 2013, June: Start of planning phase

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