Competition Law and Compliance Law

Marie-Anne Frison-Roche, Droit de la concurrence et droit de la compliance, novembre 2018, Concurrences N° 4-2018, Art. N° 88053, pp. 1-4

This article was originally published in French. A translation in English is available below.

English Translation of the original article:

Confrontation of competition law with the "restrictive definition" of compliance law as increased effectiveness of unchanged rules

One can conceive of compliance law as a movement from the normative devices of the Ex Post to the Ex Ante. The essential thing is therefore to increase the effectiveness of the rules, the nature of which is not called into question in this change of method and implementation. Competition law is a privileged field for this.

Compliance, shifting from Ex Post to Ex Ante for increased efficiency of devices that are normatively unchanged

In Europe, compliance is rather called "conformity". The idea is that the rules must be respected. This is true of any rule, but it is even more required when the rules are of public order, which is the case for competition law. The classic presentation is therefore the enactment of a rule by a public standard (the Act) and its compliance by the person subject to it (the company). It is in a pathological way that the company violates the prescription and that the public official (the Administration or the judge) intervenes to sanction it. This schema, which situates the activation of the rule in Ex Post in relation to the behaviour of the company, seems to be intangible from the moment one adheres to the liberal principle of free enterprise which can act without prior authorisation from the law, a principle belonging to the constitutionality block and the basis of European Union law.

But the idea has arisen that compliance with the standard that prescribes or prohibits conduct (e.g., compelling access or prohibiting cartels) is not necessarily contrary to the interests of the compelled company. Indeed, independently of the principle of freedom of action, the company has an interest in respecting the rules, because in general it has an interest in living in a universe where the Law is respected by all, which prevents it from being a victim of violations that others might make of it. Moreover, it is detrimental to its interests if it uses its forces to disregard the law, the Court of Cassation having thus recalled that it was necessarily contrary to the social interest of a company to bribe in order to obtain a public contract, even if it enriches it.

It is therefore in the company’s interest to "comply" with the Law itself, to use its forces ex ante to prevent itself from being violated, or to sanction them internally. This ability to "prevent" itself shows the points of contact between compliance and ethics. To this end, the company will issue standards in addition to public standards, various internal documents, charters and programmes in which it takes on board external legal requirements. These "codes of conduct" are accompanied by educational programmes in which the company asks each person representing it, its employees but also its suppliers - in anticipation of the so-called "Vigilance" law - to respect the Law.

It is therefore a question of transferring the Right, which in the classical scheme is only exceptionally activated ex post and by the effect of a violation, to an Ex Ante where the company actively takes charge of its "conformity" with respect to a Right whose prescriptions do not change in substance.

Everyone must be able to find reasons for satisfaction in this development. On the one hand, the public authorities, since the rules they have issued are effectively put into practice, the Law is therefore more than ever "positive", and this at a lower cost since it is the companies that take charge of the implementation of the Law, the abyss of information asymmetry thus being somewhat filled by this passage from the Ex Post to the Ex Ante. Moreover, when it comes to standards of prohibition, this leads to the very goal sought by the Law, namely the absence of the fact prohibited by law (for example, no agreement), rather than the sanction of the prohibited but committed fact (an agreement certainly punished but nevertheless carried out).

On the other hand, companies may also find some advantages. The most important is to "show" their concern for the law, the efforts they make to ensure that everyone respects it within themselves and in their relationship with others. This is particularly true in the fight against corruption and money laundering. The positive reputational effect thus obtained compensates for the cost that such a transfer from the Ex Post to the Ex Ante through the internalisation of the rules implies for companies.

This explains why compliance techniques, in their very conception and in the more specific mechanism of "compliance programmes", will develop in competition law.

Competition law, a privileged field of compliance conceived as a method of increasing the effectiveness of unchanged rules

As Bruno Lasserre has shown, competition law since 1962 has actively taken charge of the "conformity" of companies’ behaviour through exemptions, but this control, both direct and ex ante, by public authorities has proved impossible because of the mass of cases. Ex Post control by the public authorities lightens the burden but reduces effectiveness. The "compliance programmes" have made it possible to get out of the aporia since it is the company itself that in Ex Ante controls the compliance of its behaviour with competition rules: this is why they have received full support from the authorities. Thus, by means of a compliance programme, the company decides to become an "actor" of competition law and to "promote" it itself, the French and Community authorities, as do all other authorities, encouraging it, since this is an alternative way of increasing the enforcement of the rules.

This concern has always existed and applies to all rules, but it is now more acute and particularly acute with regard to competitive behaviour, since the activities of companies are no longer hardly stopped by borders, while the rules of competition law remain fragmented and the prospect of a global competition law is still remote. Internalisation through the compliance of a bid within companies with competition law is therefore all the more valuable. The effectiveness of competition law is served not only because the company does not take advantage of its mobility, but also because it usually chooses the highest normative standard of requirement in order to generalise it to the whole group.

It is surprising that in banking and finance, companies are so desperate for compliance law to be imposed on the rest of the world by the United States, while in the area of competition law, companies complain that economically dominant countries do not further limit the normative autonomy of the smaller ones, making it more difficult for them to establish their compliance programme. As in all things in law, one is never satisfied....

Nevertheless, the public authorities strongly and publicly encourage the adoption of these programmes. Thus, in its Framework Document of 12 February 2012, the Competition Authority promoted them based on its experience with commitments, as did the Brazilian Competition Authority on 18 February 2016.while the European Commission in 2013 published a document with the remarkable English title Compliance Matters , while the French title is Le respect des règles, ça compte! This means that this corporate discipline "counts"; but counts for what? And here’s where the rub lies...

Indeed, discussions remain lively on the scope of these kinds of flexible commitments, which companies would like to see justified in the event of subsequent reproachable conduct on their part for which they must answer, as the Court of Justice continues to be unwilling to depart from its "neutrality". Following in its footsteps, the Competition Authority changed its position in 2012 to adopt this principle of neutrality in its turn, the Competition Authority having on 19 October 2017 withdrawn the 2012 framework document in that it combined compliance and leniency. A dilemma’ has rightly been mentioned. But if the compliance programmes are not worthy of justification or aggravating circumstances, then they would be worthless? This is probably not tenable in the future, especially since the law is intended to move from a narrow definition of compliance to a richer one, i.e. to build a genuine substantive law of compliance that is even more demanding for companies. The relationship between competition law and compliance law will also become more complex. More promising too.

Confronting competition law with the rich and substantial definition of compliance law

Compliance law will benefit from being more than a method. It would be such a shame if it were just that... Indeed, through a substantial compliance law, one can increase the goals served by certain companies. From this perspective, a dialectical enrichment of competition law occurs.

The substantive definition of compliance law: inserting "monumental goals" in crucial companies

The future of compliance is to go beyond a definition that reduces it to a method of efficiency and enforcement. A real "compliance law" can then be created. Compliance law consists in determining political goals, expressing "claims" that go beyond the free functioning of markets and consumer welfare. These may include the protection of the planet, the education of children, the protection of women, etc.

This is now a given in what is commonly referred to as "green finance", as there is no justification for excluding companies from the "circle" of entities that care. Classically, these "monumental goals" are expressed by the public authorities and have long been pursued exclusively by them, the States first, in the name of the general interest, notably through public authorities. In establishing an unstable and long-term balance between the principle of competition and other concerns, overcoming technical market failures, regulatory law has and remains a natural link between competition law and compliance law.

In order to serve such "monumental goals" effectively, the public authorities have internalised them in the enterprises capable of achieving them, these "crucial enterprises" being those that have the information to do so, notably the banks. Thus, global compliance systems have developed that have both a negative value (fighting against... corruption, money laundering, pollution, etc.) and a positive value (fighting for... probity, loyalty, education of human beings).

Compliance law is thus the internalisation of regulatory law, an extension of what used to express public service, with a new imperium, since the company under increased pressure and previously described serves new purposes: it can emerge on its own, in a definition that the PACTE law intends to reflect, notably through the notion common in other legal systems of a company with a "mission", which has points of contact with the French idea of "public service mission". This is why companies entrusted with a public service are natural players in compliance law in a competitive market. This rich definition of compliance law, which is the future of this branch of law, particularly reflects the corporate purpose of the "crucial companies" that support sectors, infrastructures, regions, etc., and which are at the heart of regulatory law, from which compliance law as conceived here originated.

To this effect of nature can be added an effect of will. Indeed, the company could integrate into its "raison d’être" its concern for others that this "rich definition" of compliance law expresses. The promoters of the PACTE law often present this as a kind of opposition between, on the one hand, the Company, in that it may not think only of profit, and, on the other hand, the Market, which would only be a machine to produce it. Couldn’t this rich definition of compliance law be seen rather as a proven enrichment of competition law?

The adoption of substantive compliance law: dialectical enrichment of competition law

Indeed, competition law can express "claims", i.e. it can not only target past actions and order the restoration of situations that should not have been appreciably affected by anti-competitive behaviour allowed by market power, but can also target and influence the future.

This is the major challenge of competition law in the future of the digital economy and the rules that will govern and guide the use that companies, whose primary market power is their control of information, will make of their new technology, whether by force or by choice.

It is likely that merger control alone will not suffice, and it is remarkable that the European Commission in its Google decision of 18 July 2018 has imposed a compliance obligation, obliging the company in the future to organise itself according to terms chosen by it, particularly contractual ones, so that competition and innovation are not stifled.

This echoes political assertions, particularly in the European Parliament, that what is known as digital regulation’ will not be done externally by targeting behaviour but by ’supervising’ the operators themselves, that is to say, by integrating within them concerns that are not spontaneous to them, such as the protection of human beings, who must always be considered as persons and not as aggregates of data.

European law on the circulation and protection of data, in particular personal data, is exemplary of an operational concept that could be generalised. This can be done by constraint, but it also corresponds to initiatives of these operators themselves, under their Ex Ante responsibility. They take shape in the compliance programmes spontaneously adopted by companies; the concern for fair competition and the protection of human beings are not differentiated.

Because common regulatory law or sectorial rights are difficult to penetrate (as in the digital space, resisting legal qualifications), competition law must only penetrate it by taking on "monumental goals", which it must internalize willingly or unwillingly in companies. To do this, it must be articulated with substantive compliance law, which was external to it. We already have strong brands of this, and that’s good. Thus, the emotion caused by the Google decision of 18 July 2018 is mainly due to the fact that the Commission is internalizing a goal that is not necessarily its own and that concerns the future. Moreover, if we look at the evolution of merger control in which economists are placing a lot of hope, especially in the digital and media fields, it is above all a question of preserving freedoms and protecting individuals.

The protection of the individual is at the heart of compliance law, which is substantially defined. If we are willing to consider that the method of compliance mechanisms consists of internalising the rules within the company by moving them from the Ex Post to the Ex Ante, if we observe that in digital matters the regulation of this system will be done mainly by supervising the operators themselves and that competition law is for the moment the best way to react to the new power of technological operators, then the enrichment of competition law by compliance law, thus richly defined, is a new excellence.

The intersection of competition law and compliance law could put at the centre of the Market what is the only measure of the Law: the person.