Do Businesses Understand Competition Law?
This spring, the UK Competition and Markets Authority (the “CMA”) published a study on UK businesses’ awareness and understanding of competition law, understanding of anti-competitive behaviors, and penalties for any violations.
The study included interviews of more than one thousand senior personnel with responsibility for sales at private sector businesses in the UK. Among other questions, they were asked to answer a series of 10 true/false questions to evaluate their understanding of competition law. The result? These senior personnel identified only 4.2 statements correctly on average. In this post, we discuss the results of the CMA study and what companies can do to improve their own employees’ knowledge and compliance with competition laws around the globe.
• Over 80% of businesses communicated with other businesses in their sector in the past year, and over 40% of those companies had such contact on a weekly basis. While contact with competitors, on its own, is not anticompetitive conduct, the frequency of such communications may foster an environment where anticompetitive conduct may occur.
• 9% of respondents reported that they had discussed prices with others in their industry (who were not their suppliers or customers).
• 73% of respondents reported that they monitored their competitors’ prices. Of those who monitored, 33% saw them quoted in advertisements; 31% learned the prices through internet searches; and 20% were told their competitors’ prices by other companies.
• Awareness of competition law:
• Only 19% of respondents had discussed their company’s compliance with the dos and don’ts of competition law.
• On average, businesses answered 4.2 out of 10 questions correctly. Less than half of these senior sales personnel understood competition laws relating to resale price maintenance, market-sharing, and abuse of a dominant position.
• Large businesses (250+ employees) tended to have a better understanding of competition law. Only 22% of respondents in large businesses answered 3 statements or fewer correctly, compared to 38% overall. However, even large firms averaged only 4.8 correct answers (out of 10).
• Training increases businesses’ understanding of anticompetitive behaviors: half of respondents from companies who ran training sessions in the last year answered 6 or more questions correctly. But only 6% of businesses reported that they trained employees on competition law within the past year. Even among large businesses, only 41% conducted competition law training in the past year.
While this study was conducted in the UK, its lessons apply in other jurisdictions, including the United States. The results are no surprise: companies cannot comply with the rules and regulations surrounding communications with competitors if they do not understand them. And business personnel cannot be expected to understand competition law unless they receive appropriate training; companies cannot simply assume that their employees—even senior personnel with responsibility for sales—understand the intricacies of antitrust law.
We’ve previously written about the importance of compliance programs (click here) and the key components of effective antitrust compliance programs (click here and here). To be effective, however, those programs must include effective training programs. Effective training requires:
• Reaching the right people: Consider which employees are in a position to engage in conduct with antitrust implications, and identify them.
• Addressing the right issues: Discuss the issues that are likely to affect participants in your industry. Include practical applications of antitrust principles.
• Include training on consequences: The CMA study revealed that many participants did not understand the penalties associated with competition law and how those are applied. Employees who understand consequences—particularly as applied to them—may be more likely to comply, and those who understand leniency programs may be more likely to report violations.
• Frequency: As new employees are hired or existing personnel change responsibilities, they should receive appropriate training. Even for experienced employees, continued training provides a reminder of the policies, keeps them up to date on any changes in the law, and stresses the importance of ongoing compliance.
• Resources: Make compliance a priority. Make sure employees know what resources are available and what to do when an issue arises.