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September 22, 2014

Survey of Corporate Compliance Programs Yields Tips on Effective Programs

The importance of establishing and monitoring an effective antitrust compliance program should be self-evident to businesses, but some companies have ignored that message and suffered because of it. This lesson is reinforced by a report recently distributed by the Japan Fair Trade Commission (JFTC), which enforces the Japanese Antimonopoly Act. The report highlights cases where either failure to take any measures concerning antitrust compliance or insufficient compliance measures has resulted in losses or a negative impact on an enterprise. It contrasts those cases with ones in which the promotion of antitrust compliance has enabled an enterprise to avoid losses or has brought about a positive result. A summary of the report, issued in November 2012, is available at here.

The JFTC report includes responses from more than 800 large Japanese companies and summarizes the follow-up interviews conducted with dozens of them, including companies that had been found to have violated Japan's anti-monopoly law. The results include recommendations that make just as much sense in the United States as they do in Japan.

Among the respondents who had violated Japan's anti-monopoly law during the previous five years, only sixty-one percent had a compliance manual. Given the ease with which such manuals can be drafted and disseminated, that figure seems remarkably low. The JFTC did not name any individual respondents, but perhaps the absence of a compliance manual provides part of an explanation for the large number of Japanese-based manufacturers caught up in international cartel investigations over the past few years.

Of course, the JFTC does not recommend simply throwing together a compliance manual. Instead, the survey showed that the compliance programs most successful in deterring antitrust violations were those that clearly stated the company policy and advice in easily understandable language strongly supported by the company's top management. The best manuals were part of compliance programs tailored to the unique risks faced by each part of the company. For example, many successful programs focused the compliance efforts on the company salespeople and, especially, their contacts with competitors. One multi-product company focused its compliance efforts on a product line whose attributes made it more likely to become part of a cartel. Nor did the best programs begin and end with a manual. They usually included some regular education efforts, whether presentations by company compliance experts or, better yet, interactive sessions such as role-playing exercises.

Because no program can guarantee that all competition law violations will be deterred, the program must include ways to detect violations early enough to limit the damage. Conducting antitrust audits is one good way to do this. Fourteen percent of those audits uncovered violations. One company required that any price increase be approved by a small panel of antitrust experts who would demand to see a legitimate rationale for the increase and evidence of any recent contacts with competitors. Finally, the JFTC emphasized the need for a speedy reaction when a potential violation is detected. Only three percent of the respondents had in place a contingency plan that delineated the steps that specific members of top management would take when a potential violation was detected. In at least one circumstance, that delay cost the company the opportunity to successfully enter the JFTC's leniency program.

The beginning of a new year can be a good time to resolve to create or improve the implementation of an effective compliance program

© 2014 Schiff Hardin LLP

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Since our involvement in the famous Electrical Equipment cases in the early 1960s, Schiff Hardin has been one of the leading antitrust firms in the United States, on the forefront of defending clients against antitrust claims. Our many decades of experience include: Antitrust and trade regulation counseling Civil antitrust litigation Criminal antitrust investigations and prosecutions We have taken major responsibility in antitrust grand jury investigations and in resulting criminal prosecutions under the antitrust laws, as well as in nationwide civil treble damage antitrust litigation...

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