Office of Fair Trading publications on competition law: “Company directors and competition law” and “How your business can achieve compliance”
The Office of Fair Trading has today published four guides with the aim of helping businesses comply with competition law. The guides can be read at these links:
- Company directors and competition law – explains the level of understanding of competition law that directors are meant to have.
- How your business can achieve compliance – sets out the OFT’s risk-based four step approach to achieving a competition law compliance culture.
- Quick guide on competition law compliance – aimed at the owners and directors of small businesses; this combines guidance from the two publications above.
- Understanding competition law compliance – a short film with dramatised footage of a dawn raid, an explanation of competition law and why it matters.
The OFT press release launching these guides is here.
Company directors and competition law guide
The OFT guidance on “Company directors and competition law” (the Directors’ Guidance) summarises the many potential consequences of infringing competition law, including:
- Financial penalties of 10% of group turnover
- Disqualification orders for the directors of offending companies – a Competition Disqualification Order (CDO) may stop an individual from being a director for up to 15 years
- Criminal convictions for those individuals involved in a cartel
- Unenforceability of restrictions in agreeements that infringe the law
- Adverse reputational impact
The Directors’ Guidance sets out the background to CDOs and then looks at factors that the OFT will take into account in considering whether to apply for a CDO, including whether the director has an executive or non-executive role, the director’s specific responsibilities within the company, and the size of the company and (if any) of the wider corporate group.
On the level of understanding of competition law that the OFT expects directors to have, the Directors’ Guidance states that:
“As a general principle, all directors are expected to have the standard of skill and knowledge that is appropriate for their position and the nature of the company in question. Directors are also expected to update and refresh their knowledge on an ongoing basis.
The OFT considers that it is reasonable to expect all directors to understand that compliance with competition law is important and that infringing competition law could lead to serious legal consequences for the company and for them as individuals. The OFT expects all directors to be committed to competition law compliance.
The OFT recognises that not all directors have specific competition law expertise. However, it does expect directors to understand the most serious forms of infringement of competition law.”
Cartels and the abuse of a dominant position – two of the most serious forms of competition law infringement – are summarised in the Directors’ Guidance, which also lists various forms of commercial arrangements that may give rise to competition law risks. The final part of the Directors’ Guidance sets out the factors that the OFT will take into account when deciding whether a director had reasonable grounds to suspect a breach of competition law by the company but took no steps to prevent it, or whether a director did not know but ought to have known that the company’s conduct constituted a breach of competition law.
How your business can achieve compliance guide
The OFT guidance on “How your business can achieve compliance with competition law” (the General Guidance) is “intended to help all businesses to comply with competition law, by describing the OFT’s suggested four step process for achieving a compliance culture”. That process is:
- Core – Commitment to compliance from the top
- Step 1 – Risk identification
- Step 2 – Risk assessment
- Step 3 – Risk mitigation
- Step 4 – Review
and is illustrated with various short case studies.
The Quick Guide is a useful summary of the key points from the Directors’ Guidance and the General Guidance.
The OFT has also published today the results of a survey that it commissioned on business understanding of competition law. That survey involved 2,009 telephone interviews across a range of business sectors. The most interesting statistic in the survey is that of businesses looking for further information on competition legislation:
- 39% would use the internet
- 22% would go to the OFT
- 20% would consult a legal adviser
- 10% would contact the Citizens Advice Bureau.
The balance would try a trade association, a local authority, the police or friends and family.
Friendly Corporate PSL
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