This year’s Compliance Week Europe conference began on Monday morning in Brussels with a keynote address by Ewoud Sakkers of the Directorate-General for Competition of the European Commission on the topic of compliance with European antitrust laws and regulations.
Beginning in 2001, Sakkers worked in the area of antitrust enforcement in DG Competition, where was a head of unit in the Cartels Directorate. From July 2010 until September 2012 he was head of unit of the European Competition Network in the Policy and Strategy Directorate. Currently, he operates as an adviser within the Policy and Strategy Directorate.
Europe takes its antitrust laws and regulations very seriously – Google, Apple, and Amazon are just a few of the many companies that have learned that the hard way recently. Evidence of that focus on anti-competition matters is borne out by the unique nature of DG Competition; it is the only enforcement entity devoted to market oversight within the EC.
Fines imposed are typically at least one-third higher than those delivered by regulators in the United States for comparable cases, Sakkers told the audience of compliance professionals from 22 countries. Over the past 25 years, anti-trust violations in Europe have led to more than €22 billion in fines; over the past five years nearly €9 billion were levied.
The silver lining for companies is that a quality compliance program can lead to reduced fines, or none at all. In 2013, The European Commission fined eight banks €1.71 billion for participating in cartels in the interest rate derivatives industry. For their cooperation with the investigation, the Commission granted fine reductions to Citigroup, Deutsche Bank, RBS, and RP Martin, under the its leniency program. Barclays received full immunity for revealing the existence of the cartel, avoided a fine of €690 million.
More controversial, however, is the tradition of bringing punitive actions against companies in all cases, rather than targeting responsible individuals. “The EC enforces against companies, not private individuals,” Sakkers said. “In terms of deterrence, there is a philosophy of parental liability that is very central and important to our enforcement practice.”
Companies have argued against this blanket approach. If something happens in an otherwise compliant environment, perhaps in a subsidiary in one particular member state, why should the fine be adjusted to the size of the parent company? If the guilt is personal, why doesn’t it stick to that person?
The response, as described by Sakkers, is that officials want to avoid having to defend in court why one company is deserving of a reduction in fines while another isn’t. “If a violation continues for seven years and we see about 23 individuals who, in some way or another, are connected to the infringement, how can you say this is an accident that happened somewhere in a smaller part of your organization. It must have been something more basic,” he added.
“The aim is to be forward looking,” Sakkers said. “Do we over-punish? In a certain sense we do. But the aim is forward looking. We want to make sure the parent company, and its board, makes a decision to support the rollout of a compliance program and we incentivize that by making sure the fine applies to the parent company. That is, perhaps, a negative incentive, but we think it is a useful and important one to ensure that companies are ultimately the ones responsible for taking compliance as seriously as possible.”
The EC also considers ways to prevent anti-trust violations without having to resort to increased fines. “The stakes for non-compliance are high in Europe, not only in terms of sanctions but the chances of detection. The question is how to prevent it,” Sakkers said.
To offer clarity on regulator expectations, DG Competition has published a downloadable guide (although its advice is not to be taken as specific, one-size-fits-all guidance). The hope is that the booklet can provide perspective on business norms in straightforward, simple terms. Don’t get into rice fixing. Don’t give forward-looking, commercially relevant information to your competitors. Don’t share markets. “These things clear as crystal,” Sakkers said, adding that enforcement actions are well-publicized so companies can learn from the mistakes and misdeeds of others. Extensive case law from European courts, although more technical, is an evergreen resource on the nuances of anti-competition trespasses.
Getting the word out that cooperation with officials, and evidence of a strong compliance program will be rewarded, is an ongoing, crucial effort “Our big carrot for companies that roll out good compliance programs is that if they do detect some kind of infringement they can come in and talk to us,” Sakkers said. “If they are the first ones in the door with something that indicates a violation, they will not be fined.”