How companies can guard against collusive behaviour among employees
THE Competition Commission’s investigation of several top banks, including three South African ones, for collusive behaviour highlights once again the importance of mitigating this type of risk.
Dentons, the largest global law firm, says that companies must take proactive steps to reduce the chances that their employees engage in anti-competitive practices, and to strengthen their bargaining position if it becomes necessary to negotiate a settlement with the competition authorities.
“The investigation into the alleged fixing of exchange rates joins heavyweight scandals relating to collusive practices in the bread, aviation and construction industries.
Companies are extremely vulnerable because these types of actions may be undertaken by incentivised individuals acting in contravention of company policy, and yet it is the companies that are, in the first instance, held to account,” said Anthony Crane, a partner at Dentons South Africa.
“Indeed, cases like the SAA/ Comair matter are opening the door for aggrieved third parties to sue for damages, and directors and executives may also find themselves personally liable for illegalities that happen on their watch.”
To help reduce the risk of collusive behaviour by its employees, Crane advises companies to implement and manage a vigorous programme to support compliance. In practice, he says, most competition matters are settled and the Competition Tribunal is likely to accept such a compliance programme as a mitigating factor. However, all programmes are not equal, and the tribunal will carefully assess how robust and effectively managed the programme is.
Crane offers some guidelines for crafting a compliance programme that will reduce the risk of collusive behaviour, and could help establish the company’s bona fides in the event of an investigation:
Implement a comprehensive training and education programme for all affected employees.
Such a programme needs to be ongoing to account for changing laws and circumstances, industry-relevant and also tailored to each job category. Learning should be reinforced by regular testing and, if thought necessary, by obtaining a personal undertaking where employees are made aware of and are accountable for their actions.
Keep excellent records Who took which training, what the training consisted of and what tests were taken – all this information needs to be meticulously recorded .
Demonstrate commitment to compliance This will require a multi-pronged approach. Executives and the board will need to ensure that the company’s commitment to competitive practices is sincere through what they say and do, and in the corporate literature. In particular, executives and managers should not turn a blind eye to anti-competitive behaviour no matter what the business pressures for results might be.
Crane says that it might be wise for companies to put in place a formal mechanism for identifying and investigating the reasons behind exceptionally high performance in case it results from non-compliant practices. It is also advisable to spell out the company’s commitment to competitive practices in employee contracts.
Implement a robust whistle-blowing capability Tip-off lines remain one of the primary sources of information about illegal or unethical practices.
“Money spent on a rounded and well-managed compliance training and management programme is well spent when compared to the potential cost with the scale of the fines for anti-competitive behaviour, legal costs and the spectre of damages claims from third parties,” Crane notes.
“In addition, the hidden costs in the form of lost management focus, and reduced employee morale and engagement are substantial. We should also not lose sight of the fact that collusion is seen as a form of private-sector corruption, and so carries a high reputational price tag, especially in South Africa.”