Build a compliance culture

Nov 22 2013, 04:34 IST
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SummaryCCI must move from simply adjudicating anti-trust law violations to fostering an environment of competition compliance

Every country needs a healthy competition culture through regulation of anti-competitive practices, removal of competition impediments and awareness generation. In many competition regimes, penalties for violating firms are reduced if the said firms have compliance programmes in place; such provisions incentivise businesses to be competition-friendly.

Hitherto, the role of CCI has been restricted to limited awareness generation without any proactive advocacy. So, the unilateral awareness-generation approach of CCI seems to be short-sighted and misses the ultimate goal of building a culture of competition and self-compliance. Building a culture of compliance is a step ahead of plain awareness generation. It involves the market players ensuring that their organisations do not engage in anti-competitive conduct.

Typically construed, a competition compliance programme should include risk identification, assessment and mitigation, and review. Organisation-wide commitment to competition compliance is at the core of such culture-building. Worldwide, the importance of competition compliance programmes is reflected in the enforcement and advocacy practices followed by competition authorities in their respective jurisdictions. For compliance to be effective, it is necessary to create an environment where businesses comply with the law on their own.

To make businesses follow the path of compliance, a carrot-and-stick approach is needed. In the current scenario, the carrots can be incentives for businesses to comply with the competition law, a path endorsed by businesses themselves through the CII platform. Moreover, initiatives like leniency programmes, guidance on compliance and penalty guidelines are some of the required sweeteners. Proactive checking of anti-competitive practices and deterrent penalties could act as sticks. In one of my earlier columns (FE, Need for a realistic penalty regime, goo.gl/ydM6lq), I had said that there is a lack of clarity and systemisation in levying penalties. COMPAT averred the same in a judgment on October 29, 2013. While upholding CCIís decision that the companies involved had contravened the Competition Act, it modified the penalty awarded by the competition watchdog. The appellate body observed, ďTime and again we have been reiterating the necessity of the reasons while ordering the penalty. We hope that the CCI take serious note of that factorĒ.

Alas, the CCI is yet to evolve a set of guidelines for penalties. The prospect of damage to reputation and financial penalties are the key drivers for businesses in taking up competition law compliance. This aside, companies could also face division of the dominant enterprise in case of abuse of position, loss of business from

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