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IMPA Competition Law Compliance Policy

The specimen form of compliance manual is intended to address competition law compliance issues which are likely to be common to trade associations such as IMPA. To ensure an effective competition compliance programme, and an active culture of compliance, ideally the manual should be used in conjunction with other measures such as regular training (e.g. face-to-face and/or online) and other more specific guidelines for the most sensitive areas of conduct for the business.

Whether a particular practice infringes the competition rules will often depend on the market share of the parties involved and conditions in the market at issue. The text of this draft compliance manual should therefore be reviewed carefully in the context of your company’s particular circumstances. It provides a framework which must be added to or amended as necessary by the user in order to meet the specific requirements of the user’s organisation. As market share can be a difficult and changing concept, some companies choose to inform their employees of the competition law risks but retain decision- making powers around certain areas of risk, i.e. by requiring in-house counsel review before embarking on certain commercial strategies.

The manual deals primarily with UK competition law. Although, in some places, suggested language is included for use in the context of whatever national rules may be applicable, the manual and such suggested language will need specific adaptation in order to cover the national competition rules of the jurisdiction in which it is to be used. That said, the same or similar compliance procedures will often apply at both EU and national levels.

Introduction

Why Competition Compliance is so important

Competition compliance is how companies make sure that they comply with the legal rules which are designed to ensure that competition within the UK is not restricted.

Under the Competition Act 1998, there are prohibitions on anti-competitive agreements and abusive conduct by dominant businesses. These are closely modelled on Articles 101 and 102 of the Treaty on the Functioning of the European Union (TFEU). Whereas the EU competition rules will apply where an agreement or conduct affects trade between EU member states, the UK competition prohibitions will apply where the effect is mainly on trade within the UK.

The Enterprise Act 2002, as amended by the Enterprise and Regulatory Reform Act 2013, makes it a criminal offence for individuals to enter into an agreement relating to a company’s involvement in a price-fixing, market-sharing, bid-rigging or production-limiting cartel.

The object of these competition laws is to prohibit agreements or behaviour that damage competition in the UK market.

Compliance with UK competition rules is an important issue for this company. Failure to comply with competition rules can have an extremely high financial cost. The Competition and Markets Authority (CMA) can impose fines of up to 10% of an undertaking's turnover worldwide. In addition to the risk of large fines, compliance with competition rules is vital for the following reasons, among others:

• Agreements that infringe competition laws may be wholly or partially invalid, which means that the company cannot enforce them.
• Third parties who suffer loss as a result of anti-competitive behaviour may bring an action for damages or, in appropriate cases, an injunction in the civil courts.
• Investigations into the company and findings of infringements usually give rise to adverse media comment and reputational damage with customers and investors.
• Investigations and possible legal proceedings resulting from infringements can take years to resolve, leading to high costs and taking up management time that should be devoted to more profitable projects.
• Increased risk of further complaints against the company and ongoing surveillance by the competition authorities.

The Enterprise Act 2002, as amended by the Enterprise and Regulatory Reform Act 2013, introduced two new legal risks for individuals:

• It is a criminal offence to enter into certain “hardcore” cartel arrangements.
• Directors of companies that have infringed UK or EU competition law face potential disqualification as a director.

This manual provides an overview of the main rules of UK competition law and sets out procedures and guidelines which must be followed when dealing with matters to which competition laws may apply. If you have any queries or are uncertain whether competition laws may apply to specific activities, you should contact in-house counsel.

The management of IMPA is committed to complying with competition laws, and all employees should be aware that any infringements of the procedures or guidelines in this manual will be viewed very seriously. You should take the time to read this manual carefully. Compliance with competition law is in all our interests.

Susan Wraae Koefoed
Chief Executive Officer
10 December 2020

SUMMARY OF THE MAIN RULES

Chapter I prohibition - Anti-competitive arrangements

The Chapter I prohibition of the Competition Act 1998 prohibits any agreement or practice between two or more businesses that restricts competition in the UK and has an effect on trade within the UK. The effect on trade and competition can be actual or potential, but must be appreciable.

If, for example, you arrange with a competitor to fix prices, or to allocate customers or markets, the arrangement will be prohibited by Chapter I. More routine commercial agreements such as distribution agreements can also be caught.

Both agreements and behaviour are caught by the Chapter I prohibition. Agreements can be either written or oral and can be informal arrangements such as a “gentleman’s agreement”. For example, a social meeting at which competitors informally agree to share customer information and not to undercut each other’s prices will be caught by the prohibition.

An agreement caught by the Chapter I prohibition is automatically void and unenforceable, and the parties to it may be subject to heavy fines.

Under the Enterprise Act 2002, the directors of a company found to have infringed the Chapter I prohibition may face disqualification for up to 15 years.

Chapter II prohibition - Abuse of a dominant position

The Chapter II prohibition makes it illegal for companies with very strong market power (referred to as a dominant position) to exploit their position in a way which may affect trade within the UK, for example, by imposing excessively high or predatorily low prices, or discriminating between customers without justification. A long-term supply arrangement where the customer is tied-in for too long may also be considered an abuse.

Generally speaking, a company will be in a dominant position if it can take business decisions without regard to its competitors. Assessing whether a company is in a dominant position depends on a variety of factors of which market share is only one. However, as a general guide, there is a high risk that companies with a market share of 40% or more would be regarded as dominant. If the market share is below 40% the company is unlikely to be dominant.

It is worth noting that above 50% market share, a rebuttable presumption of dominance exists.

Cartel offence

The Enterprise Act 2002 made it a criminal offence for individuals to dishonestly enter into an agreement relating to a company’s involvement in hardcore cartel activity. The Enterprise and Regulatory Reform Act 2013 amended the Enterprise Act by removing the requirement that an individual must be acting "dishonestly”. It also introduced three defences to the commission of the cartel offence:

• In a case where the arrangements would (operating as the parties intend) affect the supply in the UK of a product or service, it is a defence to show that, at the time of the making of the agreement, he or she did not intend that the nature of the arrangements would be concealed from customers at all times before they enter into agreements for the supply of the product or service.
• It is a defence to show that, at the time of the making of the agreement, the individual did not intend that the nature of the arrangements would be concealed from the CMA.
• It is a defence to show that, before the making of the agreement, the individual took reasonable steps to ensure that the nature of the arrangements would be disclosed to professional legal advisers for the purposes of obtaining advice about them before their making or (as the case may be) their implementation.

The cartel offence, as amended by the Enterprise and Regulatory Reform Act 2013, only applies to agreements that are made after 1 April 2014.

In all cases, it is an offence for two competing companies to agree to fix prices, share markets, limit production or supply, or to rig bids.

An individual found guilty of the cartel offence will be liable to a criminal sentence of up to five years’ imprisonment instead of, or in addition to, an unlimited fine. This is also an extraditable offence.

It is irrelevant whether the company has been, or will be, found to have infringed the Chapter I prohibition (or Article 101 of the TFEU). If the elements of the cartel offence are satisfied, you, the individual, will be liable to prosecution and investigation by the CMA and the Serious Fraud Office.

Territorial application

The Competition and Markets Authority can investigate and impose fines in respect of agreements made outside the UK by UK-registered companies or companies registered in other jurisdictions where the agreement in question is intended to be implemented in the UK.

Do’s and Dont’s

The Chapter I and II prohibitions establish a framework of general principles. This section of the manual describes some of the specific situations that you may come across and gives guidance on how to deal with them. In cases of doubt, you must refer to in-house counsel.

You may be subject to disciplinary action if you engage in any of the following practices which are described as likely to be illegal or if you fail to consult in-house counsel before engaging in any of the practices where prior clearance is required.

Bear in mind that where conduct is classified as potentially illegal, this merely indicates that competition issues frequently arise in situations of this type. It is often possible to overcome the potential problem by careful drafting or obtaining a clearance from the competition authorities.

Pricing

Likely to be illegal

• Contacting a competitor to ask whether, if you were to raise your prices, he would do the same.
• Discussing with a competitor the prices of key raw materials that you both purchase.
• If you have a dominant market position, making sales below average variable cost to drive competitors out of the market.
• You have a dominant market position and want to offer an extra discount to customers who buy exclusively from you.
• Current or future pricing, or matters affecting prices which includes:
• Price changes.
• Profit margins.
• Discounts.
• Rebates.
• Surcharges.
• Credit lines offered.
• Other terms of sale.
• Company cost information which includes:
• Cost accounting.
• Distribution costs.
• Production costs.
• Salaries and wages, or limitations on hiring a competitor’s employees.
• Commercial planning or strategy information including geographic growth and business expansion or contraction plans.
• Any matters relating to specific suppliers or customers.

Prior clearance by in-house counsel needed

• Suggesting that you and a competitor increase leverage with a supplier of non-key items by purchasing jointly.
• Making an announcement of price changes in advance of the effective date (and retracting it when other companies do not follow suit).

Generally permissible

• You offer customers discounts related to the volume of their individual orders.

Supply

Likely to be illegal

• Discussing a supply arrangement with a competitor in order to get a feel for selling prices in the market.
• Agreeing resale prices with a supplier or distributor.
• Company sales information which includes:
• Sales volumes.
• Sales revenues.
• Stock levels.
• Market share calculations.
• Production volumes.
• Production capacity.
• Bid amounts and terms, including the decision whether to bid or not.
• Limits on sales levels or sales of certain products to certain regions.

Prior clearance by in-house counsel needed

• Entering into product-swap arrangements with a competitor.
• Entering into exclusive distribution agreements.
• Discussing with a competitor the possibility of closing one of your plants and substituting a product supplied by him.

Generally permissible

• Recommending resale prices or conditions of resale to a distributor provided that no pressure is exerted on the distributor to adhere to the recommendations.

Import and export

Likely to be illegal

• Specifying one price to a distributor if he is selling the product in the UK and a higher price if he is going to export it to another EU country.
• Requiring a distributor neither to resell the product for export to another EU country nor sell it himself to a customer in another EU country.

Prior clearance by in-house counsel needed

• Requiring an exclusive distributor not actively to seek customers outside his allocated territory.

Internet selling

Likely to be illegal

• Placing restrictions on a distributor or customer making online sales.
• Charging higher prices to a distributor or customer for products intended for online resale.

Refusing to deal

Likely to be illegal

• If you are in a dominant position, refusing without any objective justification to deal with an existing customer.

Generally permissible

• Making an independent decision not to deal with a certain party on credit because of justified concerns about creditworthiness.

Trade associations

Likely to be illegal

• Discussing at an IMPA or trade association meeting at which competitors are present product prices, terms of sale, product or marketing plans, or business relations with suppliers or customers.

Prior clearance by in-house counsel needed

• Joining a trade association.

Generally permissible

• Attending trade association meetings generally (subject to having reviewed agendas in advance with in- house counsel if possible.)
• Discussing health and safety issues at a trade association meeting.
• Discussing proposed changes in the law relevant to the industry.
• Discussing any publicly available information relevant to the industry.

Acquisitions and disposals/business structures

Prior clearance by in-house counsel needed

• Buying or selling all or some of the shares of another company or merging with it.
• Buying all or part of the business or assets of another company or selling all or part of the business or assets of your company.
• Establishing a joint venture or making a joint investment in a business with another company.

Technological co-operation

Likely to be illegal

• Agreeing with a competitor the exact introduction time of new technology which you are both developing independently.

Prior clearance by in-house counsel needed

• Discussing the possibility of carrying out joint R&D with a competitor.
• Entering into technology licensing arrangements.

Generally permissible

• Undertaking joint R&D, where all parties participating are free to exploit the results.

Information gathering

Likely to be illegal

• Exchanging individualised, private, current/recent information on sales, prices, discounts, terms of business etc. directly with a competitor.

Generally permissible

• Participating in a scheme approved by competition law counsel in which sales volumes are supplied to an independent third party which aggregates the figures and distributes the aggregated industry-wide sales figures to participants.
• Obtaining information on competitors' sales and prices from publicly available sources, such as the media, or from customers (except where you think it is reasonably foreseeable to the competitor that the customer might pass the information on to you, which could be treated as an indirect anti-competitive information exchange between you and the competitor).

Tying

Likely to be illegal

• If you have a dominant market position, informing a customer that you will only supply product A (in which you are dominant) if he also purchases product B from you.

Prior clearance by in-house counsel needed

• If you have a dominant market position, informing a customer that you will supply product A (in which you are dominant) at a discounted price if he also purchases product B from you.

Dealing with competitors generally

As soon as you are dealing with a competitor alarm bells should ring. Do not have any discussion with a competitor concerning prices, price changes, discounts, pricing methods, costs, warranties, transportation charges, terms of sale, marketing initiatives or product plans without first consulting in-house counsel. See also the sections above on Pricing, Supply, Trade associations, Technological co-operation and Information gathering.

Likely to be illegal

• Dividing up different projects between you and a competitor, for example by agreeing to bid for different contracts.
• Having discussions or making plans with a competitor to keep a new arrival out of the market.
• Warning a competitor or new market entrant to stay off your patch.
• Discussing with a competitor possible investments that you or the competitor are considering making in a particular country.
• Agreeing to boycott particular customers or suppliers.
• Making an agreement or acting with a competitor in such a way as to allocate sales, territory, customers or products between you and the competitor.

If you are in a meeting with a competitor at any time (including trade associations) and the conversation veers onto improper subjects such as those identified above, you must:

• Expressly state that you cannot be party to discussions on this subject due to competition law concerns and ask that the subject is changed.
• If the conversation does not change, then you must leave the meeting and ensure that your departure is recorded in any formal minutes if being taken.
• It is not enough to remain in the room/on the telephone and simply not participate in the conversation. You must remove yourself from it. It can be difficult for anyone in this scenario to feel confident in taking this course of action however it is necessary to protect the individual raising the concern and ultimately the others in the conversation.
• You should promptly report the incident to group legal/group compliance or your manager.

Prior clearance by in-house counsel needed

• Discussing a joint venture proposal.

Generally permissible

• Non-confidential information that is in the public domain.
• Industry standards that increase product interoperability, compatibility or safety.
• Lobbying efforts.
• Technical industry issues including standards and health and safety matters.
• Industry public relations or lobbying initiatives.
• Non-strategic technical or scientific data that results in consumer benefits.

Contact forms

It is strongly advisable to complete a contact report (a form is set out in the Appendix to this manual) after each meeting that you have with competitors, suppliers or major purchasers (such as distributors, agents or any other purchasers whose contracts are significant. The report should consist of a brief record of the meeting, including a note of any potentially anti-competitive behaviour on the part of the company with whom you have met. You must keep a copy on your file.

Contact reports may help to demonstrate that the company has not acted in breach of competition rules if your conduct is subsequently called into question, for example if the company’s offices are inspected by the Competition and Markets Authority. They may also help in establishing that a competitor has committed a breach of the competition rules and provide useful evidence if the company decides to complain to the competition authorities about that competitor’s behaviour.

What to do if you have concerns

If you are in a trade association meeting (or meeting with a competitor at any time) and the conversation veers onto improper subjects such as those identified above, you must:

Expressly state that you cannot be party to discussions on this subject due to competition law concerns and ask that the subject is changed.

It is worth noting that this can feel like a difficult thing to do for some, particularly where the individual is perhaps more junior or less experienced. Consider what senior guidance or support can be given to those participating in trade associations in advance of their participation to ensure that they feel this action will be supported by their management.

If the conversation does not change, then you must leave the meeting and ensure that your departure is recorded in any formal minutes if being taken.

It is not enough to remain in the room/on the telephone and simply not participate in the conversation. You must remove yourself from it. Again, it can be difficult for anyone in this scenario to feel confident in taking this course of action however it is necessary to protect the individual raising the concern and ultimately the others in the conversation.

You should promptly report the incident to group legal/group compliance or your manager.

Watch your language

Take care with your language in all business communications, whether in writing or in the course of telephone conversations or meetings. Careless language could be very damaging if the company is subject to an investigation by the competition authorities or is involved in litigation with another company. A poor choice of words can make a perfectly legal activity look suspect.

Many internal documents are likely to come under scrutiny during an investigation or legal proceedings involving a third party, even those which you might believe to be confidential such as diaries, telephone call records or personal note books. Documents in this context are not limited to papers, but will include any form in which information is recorded: computer records and databases, e-mail, microfilms, tape recordings, films, videos and so on can all be examined - as can content on mobile devices such as smart phones, tablets and laptops, including personal equipment used for business purposes.

You should therefore follow these guidelines:

• Consider whether you need to write anything down at all.
• If you think it might be a sensitive area, speak to in-house counsel before committing it to paper.
• Whenever you write something down, remember that it could be made public one day.
• Avoid giving the impression that a customer is getting special treatment (“This is a special deal for you only”), particularly if the company may be in a dominant market position.
• Avoid any suggestion that an industry view has been reached on a particular issue such as price levels.
• Do not use guilty vocabulary (“Please destroy/delete after reading”).
• Do not speculate about whether an activity is illegal or legal.
• Do not write anything that implies that prices are based on anything other than the company’s independent business judgement.
• Do not keep papers for any longer than provided for in the company’s document retention programme.
• Avoid keeping lots of different versions of the same document in your files or computer system.
• State clearly the source of any pricing information (so it does not give the false impression that it came from talks with a competitor).
• Keep accurate notes of all meetings with competitors and it is strongly advisable to ensure that contact forms are completed.
• Avoid power or domination vocabulary, such as “This will enable us to dominate the market”, or “We have virtually eliminated the competition”.
• Avoid language suggesting that the company has a strategy to drive a competitor out of business.
• Follow the same rules if annotating copies of notes or memorandums originated by others.

Electronic messaging and voicemail

Emails, texts, voicemails and other electronic communications such as on social media can often contain even more damaging statements than formal letters or agreements, because they are usually sent or left casually, in the false belief that they are confidential or will be destroyed after a short time. Electronic communications can be accessed during an inspection by the competition authorities or in legal proceedings. They are regarded as a particularly good source of information because they are stored by time and date and can give a full picture of what was done and said.

You should therefore:

• Take as much care in sending messages by e-mail or leaving them on voicemail as you would when sending more formal communications. Assume that all electronic communications may be read or heard by others, including competition authorities.
• Keep in mind that electronic communications, even if deleted, leave a potentially damaging record that may have to be produced to the competition authorities or in legal proceedings.
• Exercise particular caution with messages sent to or received from outside the company over the internet. Remember that electronic communications are often appended to other e-mail messages and may be forwarded or replied to several times.

Communications with in-house and external counsel

This section of the manual contains guidelines which must be followed in order to assist the company in claiming legal professional privilege for communications with in-house and external counsel.

Companies are in some circumstances able to prevent the disclosure of communications with their external or in-house lawyers on the ground that the communications are protected by the right of legal professional privilege and can therefore be kept confidential.

Privilege under UK law extends not only to communications with external lawyers from European Economic Area (EEA) countries but also to advice from in-house lawyers and lawyers from outside the EEA (e.g. US lawyers). Such communications will be privileged whether or not the legal advice given or sought is closely related to the investigation.

It should be noted that this is different to the position under EU law, where the right to claim privilege does not extend to in-house counsel.

To enable the company to substantiate any claim of legal professional privilege which it may wish to make in order to protect the confidentiality of communications with in-house or external counsel, these guidelines must be followed:

• Make sure that each request for legal advice clearly displays the name of in-house or external counsel, and that the words “Privileged and confidential request for legal advice” appear at the beginning of the communication.
• Do not send copies of your communications with in-house or external counsel to anyone else.
• Do not in the same communication also seek in-house counsel’s views on non-legal matters, even if they are related to the request for legal advice.
• If you are replying to a request for information from in-house or external counsel, ensure that the words “Privileged and confidential. Prepared at the request of in- house or external counsel” appear at the beginning of your reply.
• Do not refer to communications between non-lawyers as being “privileged and confidential”, even where in-house counsel receives a copy.
• All communications passing between you and in-house or external counsel should be kept separately in files marked “Privileged and confidential”.
• When dealing with third parties, you should not refer to legal advice received by the company without the prior consent of in-house counsel.
• In cases where it may be appropriate to refer to legal advice when dealing with third parties, the best course is to refer to a separate record of the advice which has been prepared by in-house counsel himself.

Document retention and destruction

• You should refer to the company’s document retention and destruction policy for general guidance when deciding how long to keep any particular documents or records. In the context of this manual you should note, however, that:
• You must not destroy documents or records (which would not otherwise be destroyed in accordance with the company’s usual policy) because you think they contain damaging information. This will damage the company’s standing with the competition authorities if it comes to light in an investigation, and can lead to criminal penalties.
• If you are notified that the company is under investigation by the competition authorities, all document destruction in the areas identified by in-house counsel must immediately cease until further notice.

Dealing with enquiries

Telephone enquiries

If you receive any enquiry from a lawyer from outside the company, put it through to in- house counsel immediately. Do not answer any questions.

If you receive an enquiry from an inspector or other government official, put it through to in-house counsel immediately. If counsel is not available, do not put it through to another person but note down the name of the caller, the purpose of the call, the name and number of the inspector and his contact telephone number. Record any other information he gives you, such as the date and time of a potential inspection. Pass all this information as soon as possible to in-house counsel.

You should be cautious if you receive a telephone enquiry about who does what within the company. Do not answer enquiries unless you are certain that they are bona fide and that you know who the caller is and what they want the information for.

Visitors

If one or more inspectors arrive in person, ask to see their identity cards (and write down their names, the name of their organisation and the time they arrived). Contact in-house counsel immediately or, in his or her absence one of the company’s senior managers designated to deal with this situation in order to pass on these details and, pending their arrival, take real-time advice over the phone as necessary on how to handle the inspection (how best to avoid prejudicing the company's position but also avoid obstructing the inspectors in the lawful exercise of their powers).

Try to keep the inspectors from starting any inspection until in-house counsel or a manager arrives; ideally, show them into a meeting room and get them to wait a short while.

Do not:

• Allow the inspectors to wander round the building.
• Put the inspectors in a room containing files or records.

APPENDIX

Contact report form

• Date of meeting/conversation:
• Venue (if a meeting):
• Organisation name:
• Name of contact and job title:
• Purpose of meeting/conversation:
• Summary of what was discussed:
• Name:
• Date:

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