1 45pm creating a robust global compliance program


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1 45pm creating a robust global compliance program

  1. 1. Diamond Sponsors: Platinum Sponsor: Gold Sponsor: Presented By: Creating a Robust Global Antitrust Compliance Program Julie Soloway Blake, Cassels & Graydon LLP
  2. 2. 2 Julie Soloway Partner Blake, Cassels & Graydon LLP Competition, Antitrust & Foreign Investment T: 1.416.863.3327 E: Julie.Soloway@blakes.com www.blakes.com • Chambers Global: The World’s Leading Lawyers for Business 2013 • Global Competition Review 2013 (Women in Antitrust Edition) • Law Business Research’s The International Who’s Who of Competition Lawyers and Economists 2013 • Law Business Research’s Who’s Who Legal: Canada 2012 • Legal Media Group’s Guide to the World’s Leading Women in Business Law 2012 (Competition and Antitrust)
  3. 3. Agenda  Importance of antitrust compliance  Elements of a robust global antitrust compliance program  Role of external legal counsel in supporting in-house counsel and antitrust compliance programs  Privilege and document creation guidelines  Concluding thoughts 3
  4. 4. Antitrust compliance is a competitive advantage  There has never been a greater need for companies to take proactive steps to detect and avoid anticompetitive behavior • Increasing number of jurisdictions with competition laws • Cooperation among regulatory agencies is the norm • Class actions and potential for large damage awards  A strong record of vigorous antitrust compliance is an insurance policy against reputational damage  Structured programs allow corporations maximum flexibility in pursuing business opportunities by identifying for employees the outer boundaries of permissible conduct • Reduces the risk that your organization and employees will be exposed to criminal and/or civil liability  If a breach occurs, the existence of a credible, effective and robust compliance program may facilitate early identification of the violation and more favorable resolution with authorities 4
  5. 5. Five elements of a credible, effective and robust antitrust compliance program 1. Involvement of senior leaders to set the “tone at the top” and foster a culture of antitrust compliance 2. Review and revision of policies and procedures when changes within the business, the industry, or the laws and regulations occur 3. Continuous education and training that lays out acceptable conduct for all employees 4. Monitoring mechanisms with auditing and reporting features to prevent and detect breaches of the program at all levels, including senior management 5. Procedures for both disciplining and creating incentives, which must be applied consistently across the global organization 5
  6. 6. Elements of antitrust compliance programs  Conspiracy and competitor collaboration • Interactions with trade associations  Bid rigging  Abuse of dominant position  Pricing practices  Civil liability  Advertising and marketing practices  Document creation and management practices  The policy should consider the broad reach of laws; laws may apply to activities and employees outside of a jurisdiction that have an effect within that jurisdiction 6
  7. 7. Mergers  Mergers and acquisitions are an important source of growth and efficiencies  Compliance issues associated with merger planning • Discussions with competitors regarding a potential transaction • Information exchange guidelines for due diligence • Document creation and document management • Restriction of competitively sensitive information in data room • Presence of antitrust counsel for certain discussions • Maintenance of privilege  Compliance is equally important throughout the merger process • Use of clean teams for integration planning • Gun jumping 7
  8. 8. Antitrust compliance due diligence in M&A transactions  Antitrust due diligence will enable you to: • evaluate the target’s value more accurately and uncover hidden liabilities • effectively negotiate for the seller to bear the cost of antitrust compliance  Consider use of a “red flags” checklist and engage the deal team in this process  Adopt a risk-based approach; considerations include: • understand the target’s risk profile and the robustness of its compliance policies • review the internal control environment and reporting structure • assess the culture of compliance at the target and determine the appropriate post-merger cultural integration strategy • enquire whether there are any compliance investigations underway and known breaches 8
  9. 9. Abuse of dominant position  Firms that have achieved a dominant position must be more cautious with respect to conduct that could harm competitors  Many key antitrust jurisdictions prohibit certain unilateral conduct by major suppliers • E.U. – Article 102 TFEU • U.S. – Section 2 of the Sherman Act • Canada – Section 79 of the Competition Act  Compliance program should take into account whether an organization is, or is expected to become, dominant • Document creation guidelines and document management is key to avoiding the creation of “bad documents”  “Monopolization” in the U.S. requires a higher market share than “dominant position” in the E.U. 9
  10. 10. Continuous education and training which lays out acceptable behavior for all employees  Tailor education and training to the compliance risks, the geographic spread of those risks, and employees subject to a high degree of risk  Goal is to have compliance be a part of an employee’s day-to-day business activities, business judgment and analysis  Actions should be reasonably necessary; not have negative impacts on output, pricing or innovation; and not generate complaints  Consider training received by third parties, such as joint ventures, distributors and trade associations and the interaction of these parties with your employees  Consider translation issues; concepts such as “bribery” may not translate well into other languages and cultures 10
  11. 11. Mechanisms to monitor, audit and report breaches of the program at all levels and jurisdictions  Effective monitoring, auditing and reporting mechanisms function to prevent and detect misconduct, educate employees and provide oversight into the efficacy of the compliance program • Monitoring – ongoing procedures to prevent contravention of antitrust, anti- corruption and other compliance regimes • Frequency of monitoring should be proportional to the risk • Continuous monitoring may provide a due diligence defense in some jurisdictions • Auditing – detect if a law or corporate compliance policy has been breached • Reporting – encourage employees to provide timely and accurate information in the event of a breach of the law or corporate compliance policy  Leverage existing internal controls where possible 11
  12. 12. Procedures for both disciplining and creating compliance incentives across the global organization  Establish a disciplinary code or policy to discipline those that breach relevant laws and the code or policy • Clearly lay out the specific actions that will be taken for each breach  Disciplinary action should be taken against those that do not take reasonable steps to prevent or detect a breach or do not report a breach in a timely manner  Create incentives for employees to report breaches  Consider compliance initiatives in performance reviews  Effective use of a confidential whistleblower hotline administered by a third-party • Language and translation barriers need to be considered for global hotlines and training materials 12
  13. 13. Role of external legal counsel  Develop, maintain and monitor antitrust compliance programs • Facilitate seminars for employees (including sales and marketing personnel) • Develop a list of practical do’s and don’ts • Develop scripts for meetings with competitors (e.g., in trade associations) • Advise on whether specific conduct is consistent with a company’s corporate compliance program and relevant laws • Perform periodic audits of the corporate compliance program • Complete due diligence specifically related to antitrust compliance and anticorruption in M&A transactions Antitrust specialists complement and support the day-to-day compliance activities of in-house counsel 13
  14. 14. Thoughtful privilege practices limit unnecessary disclosure  To preserve privilege, consider including in-house counsel in potentially sensitive discussions such as drafting of board materials and other communications • Mark such documents “Privileged & Confidential”  Documents, including e-mails, can become evidence in a government investigation and in lawsuits if not readily identifiable as legal material  Be conscious of varying strengths of protection for legal privilege in different jurisdictions 14
  15. 15. Document creation guidelines may avoid unnecessary risk  Adopt effective document creation and retention policies • Ask yourself if it is necessary to create a document, and how the document will be perceived by a regulator, such as an antitrust regulator • Do not speculate about the competitive impact of actions, competitor reactions or market positioning • Avoid boastful, vague or suggestive language and be clear about the sources of information • Do not suggest or reflect any agreement or understanding between competitors to fix prices, allocate markets or customers or negatively affect production or supply  Competition law agencies often prove the existence of an unlawful “agreement” by showing that competitors inappropriately exchanged competitively sensitive information • Any disclosure of sensitive information must be necessary to achieve legitimate business objectives • Disclosure of information that is aggregated raises fewer issues because the disclosure of specific information or data is minimized 15
  16. 16. Concluding antitrust compliance thoughts  Credible, effective and robust compliance programs are now more critical than ever  Antitrust compliance programs function to prevent and detect breaches of relevant statues and compliance policies. However, ultimately, processes and systems alone will not manage risks, individuals will  Active and visible support of compliance programs by senior leaders is essential to the effectiveness of an antitrust compliance program  Robust antitrust compliance requires diligent monitoring and policy revisions to ensure that the policies meet evolving business needs  External legal counsel can support and complement the compliance activities of in-house legal counsel 16