The French Competition Authority : new draft guide on compliance programs

On 11 October 2021, almost ten years after its first publication [1], the French Competition Authority has published, for consultation, a new draft framework document on competition law compliance programs[2] that includes and expands the five essential pillars to the development and implementation of such programs. Stakeholders had until 10 December 2021 to participate though the proposed public consultation[3].

This update of the framework document, presented as a reference text for the development of a compliance program [4], is an opportunity for the French Competition Authority to reiterate the need for all economic structures to set up such programs in order to protect themselves against numerous risks (I), but also to make known the essential pillars for the development of an effective and relevant compliance program (II). Finally, the publication of this framework document also allows the Authority to insist on the crucial role played by the actors of compliance, including the lawyer who can intervene both in the elaboration of the compliance program and in its implementation (III).

I. In order to protect themselves from the risk of competition law infringements, it is now in the best interest of companies to integrate the respect of these rules into their compliance program or to put a dedicated compliance program in place

In this new framework document, the French Competition Authority lists, among the reasons why companies must set up a competition compliance program, the various risks to which they are exposed in the event of an infringement of these rules.

Thus, while reputational risk [5] remains important, it is the financial risks that are the most dissuasive. The amount of the fines is often very substantial: Apple was fined 1.1 billion euros, as well as the wholesalers Tech Data and Ingram Micro for 76.1 million euros and 62.9 million euros respectively, after being found guilty of cartels within their distribution network and abuse of economic dependence [6].

Indeed, the “violation of competition rules, as provided for by French and EU laws, may expose legal persons to significant financial penalties, which may amount to up to 10%[7] of their worldwide turnover” [8]. Penalties of up to 5% of the average daily turnover per day of delay may also be imposed to compel offending companies to cease the infringement of which they are accused of or to put in place provisional remedial measures[9].

Article L.420-6 of the French Commercial Code also provides for penalties of up to four years’ imprisonment and 75,000 euros in fines “for natural persons who have fraudulently taken a personal and decisive part in the design, organization or implementation of anti-competitive practices” [10].

The implementation of an adequate compliance program can also reduce the impact of sanctions imposed by the French Competition Authority. The latter recalls that by allowing the early detection of potential anti-competitive practices, the compliance program offers the possibility for companies to benefit from favorable treatment in the framework of the leniency procedure provided for by IV of Article L.464-2 and R.464-5 et seq[11]. Indeed, companies and associations of companies can benefit from a total or partial exemption from financial penalties by informing the French Competition Authority of the existence of cartels and by cooperating with the latter to put an end to them[12].

The French Competition Authority also emphasizes that since the transposition of ENC+ Directive[13], the incentive for companies to uncover possible secret cartels has been further strengthened as an immunity from, or a reduction in, criminal penalties can also be obtained by natural persons[14].

While the French Competition Authority, in a 2017 decision[15], considered that compliance programs were not intended, in a general way, to justify a mitigation of sanctions[16], it nevertheless considers that the development and implementation of compliance programs, which are “intended to be part of the day-to-day management of companies, in particular when they are of a significant size[17]”, make it possible to prevent financial risks and offer the possibility of obtaining less significant sanctions.

They are thus an essential preventive tool, in line with the proactive approach of companies encouraged by the French Competition Authority.

II. The French Competition Authority identifies five essential pillars to an effective and useful competition compliance program

According to the French Competition Authority, a compliance program is only useful and effective if it prevents the risk of infringement and provides the means to detect and deal with infringements should they occur[18]. It therefore advocates a “tailor-made program, which must be adapted to the markets, activities and products, the internal organization and culture, as well as the decision-making chain and the governance mode” [19].

The compliance program must therefore enable the company to anticipate new risks[20], and to this purpose, it must regularly monitor the legislative and case law framework as well as the decision-making practices of the competition authorities, while taking care to adapt this vigilance to the specific characteristics of the company, as well as to the market in which it operates[21].

To achieve this, the compliance program must be built on 5 pillars:

A public commitment by the company through “a clear, strong and public statement by the management bodies, and more generally by all executives and corporate officers, on the need to respect competition rules and to support the company’s compliance program”[22]. In this case, the objective for the company is that all its bodies act collectively and in concert. Everyone must be aware of the existence of the compliance program and their obligation to apply it strictly and rigorously[23].
The French Competition Authority strongly recommends that the management bodies appoint persons internally responsible for the management and application of the compliance program[24] when the structure and organization of the company permit it. These persons must have the unquestionable authority and skills to carry out such a mission, but also the necessary time and resources, as well as the ability to access the company’s management bodies directly[25].
All staff and management must be provided with information, training, and raising awareness measures[26], so that they are all aware of the compliance program’s existence, its usefulness, its content, the meaning and practical scope of the competition rules[27] and the internal alert mechanisms[28]. Regarding of competition rules’ training and raising awareness, it is necessary that “these exercises are adapted to each target internal public, according to the professions and responsibilities exercised” [29].
The establishment of effective monitoring and alert mechanisms is also crucial to the effectiveness of a compliance program. Indeed, while the control mechanisms “must ensure that the compliance program is respected at all levels of the company” [30], the alert mechanism allows “employees or members of the business association to communicate appropriately with the designated compliance officers, whether to seek their advice or to alert them on actual or potential violations” [31].
Finally, the compliance program shall have a monitoring system that must “include the establishment of a procedure for handling requests of advice and alerts (what examination is made and what response is given), a procedure for sanctions in the event of the compliance program’s infringement”[32].

III. Among the compliance actors, the French Competition Authority recognizes the role of the lawyer as a real support for the company’s compliance function

The French Competition Authority reminds us that the lawyer brings “additional know-how” in terms of compliance policy that can be useful to the company[33]. This may involve “advising the company or association of companies on the design of its general compliance policy”[34], and “assisting in the practical implementation of compliance programs[35]” by explaining the programs and making all staff aware of their objectives, particularly through training[36]. It may also “regularly evaluate compliance programs and companies’ behavior through legal audits so as to identify and adjust possible program malfunctions or competition law violations”[37].

Finally, for medium-sized companies and small and medium-sized companies (SMEs) without compliance officers, the lawyer, who is subject to legal privilege, “can make it possible to outsource the compliance function and its related services”[38]. Indeed, SMEs are equally concerned by the challenges of competition law and more broadly of compliance. Although the costs of such measures can be significant, they are offset not only by the reduced risk of prosecution, but also by the competitive advantage that a solid and effective compliance program provides in the relationship with customers, but also with large companies and financial actors.