Chillin'Competition

A nice lunch, and we are back on track.

We start with Cédric Argenton‘s (TILEC) presentation. Cédric seeks to identify a system of penalties that achieves optimal deterrence considering that firms are akin to black boxes, in other words that the management board has little control over what managers actually do. But they can design compensation schemes that seek to incentivize managers ex ante. With this background, Argenton and Van Damme build an economic model that tries to assess how  individual managers will behave, considering that they know that the management board has imperfect information over what they actually do. They explain that manager have three options: do nothing, achieve high profits by cutting costs, achieve high profits with collusion. The conclusions they reach in their paper are that individual sanctions are a very good way to increase the optimality of the current sanctioning mix. They are actually a “help” to firms that attempt to comply with the law. But individual sanctions should not come alone. They should also be accompanied by corporate sanctions. Cédric and Eric’s economic model is currently undergoing experimental testing at Tilburg university. Looking forward to read their empirical results.

The following speaker is Stefan Thomas (Tubingen University). His speech is essentially about the “single economic entity” doctrine. According to Stefan, this doctrine is in plain contradiction with the principle of personal liability, as protected by several constitutional rules and international instruments. The German supreme court actually recognized this. Moreover, this doctrine is also injurious of another fundamental principle, i.e. “nulla poena sine culpa“. Stefan also takes a shot at the inconsistency of not entitling the companies to rebutt the parental liability presumption, simply by showing that they have not known or that they have not participated to the infringement. Stefan says that the Commission should  assess if the parent firm has done everything possible to avoid infringement. If this is the case, this should exculpate it from liability, or mitigate it, under the competition rules.

The third speaker is Anny Tubbs (Unilever). To her, no one is perfect and a fortiori, no company is perfect. Agencies should recognize this rather than using sabre-rattling words to talk of competition infringements.  Anny then goes on to explain what she views as  necessary components of an effective compliance programme. In this context, I advise the reading of the slides, where there is a nice one on the 5 Cs of a good compliance programme. She also explains the internal hurddles within companies to establish competition compliance programmes. Competition law is not the sole area of law where compliance matters. Money laudering, corruption, personal data, etc. are all areas where compliance is critical. In house lawyers from the same company, but representing distinct disciplines thus often compete to convince management to allocate compliance resources towards them. Anny also indicates that lawyers are often their worst ennemies when it comes to compliance, because when they talk to salesmen, they use words that are so complex that no one ever wants to listen to them. This makes it important for in house lawyers involved in compliance to develop clear and simple messages at the attention of businesses.

A recurring issue in the presentations was the parental liability doctrine.

Very fortunately, a Commission official who was sitting in the room accepted to make some remarks (in personal capacity).He first vindicated that compliance programmes are, at any rate, a good thing, and that there is no need for additional discounts because those programmes (i) diminish the risk of infringement in the first place; and (ii) decrease the duration of infringements with efficient self reporting mechanisms.

He also gave some thoughts on parental liability, being supportive of AG Kokott’s opinion in the Gosselin case. To him, parental liability is not a problem, because the mother company, even if it is very remote from the subsidiary, derives some profit from the cartel at any rate. In reaction to this, S. Thomas counter-argued that we had spent decades to build fundamental principles such as “nulla poena sine culpa“. Those are great progresses of the rule of  law. They should not been thrown away, simply for the sake of designing an optimal sanctioning programme.

This led me to a puzzling analogy: to me the Gosselin’s Kokott doctrine is akin to sanctioning with criminal fines the heirs of criminals, simply because they have given birth to a delinquant, and that they may have profited from it through presents and other gifts. Unless those persons are actual accomplices (they have instructed or assisted to illicit activities), there should be no ground to blame them.

Cedric Argenton – Optimal Deterrence of Collusion in the Presence of Agency Problems within Firms

Anny Tubbs – Compliance Programmes Codes of Conduct and Social Responsibility