Trade practices compliance programs

• Compliance culture
• 1. Commitment to comply
• 2. Compliance know-how
• 3. Compliance as business practice
• Why should companies invest in a compliance program?
• Business benefits
• Reputation
• Mitigation of penalties

A trade practices compliance program is designed to identify and reduce the risk of breaching the Competition and Consumer Act 2010 (the Act) and to remedy any breach that may occur. A successful compliance program will facilitate compliance within the organisation and help the company to become or remain a good corporate citizen.

There is no generic compliance program as each organisation’s circumstances are different. Some organisations may require:

• a simple program implementing an effective complaints handling system
• providing all relevant staff with trade practices training tailored to the business activity. 

More complex organisations may require:

• a team of dedicated compliance staff
• conducting regular trade practices compliance risk assessments and compliance program reviews
• designing detailed guidelines and procedures for different business units that face operational trade practices risks
• establishing systems to keep track of the company’s legal and regulatory requirements
• developing and maintaining staff education programs.

Whatever the type and style of the compliance program, it should be well managed, adequately resourced, properly documented and actively supported by the Board and senior management.

An effective compliance program is likely to have:

• strategic vision—compliance activities are linked to the company’s strategic goals. The method the company uses to achieve those goals is communicated, as are benchmarks for implementation
• risk assessment—the company actively identifies its compliance risks and reassesses those risks at regular intervals as part of entering into new business areas or activities. Specific compliance risks that may arise within each business unit or sphere of operations are considered
• control points—each of the risks are managed at specified control points. Control points are reinforced by establishing behavioural and procedural controls. Procedural mechanisms address and mitigate high risk areas in a business' operating environment, while the behavioural mechanisms emphasise the company’s policies for those risks
• adequate documentation—compliance endeavours are adequately documented to ensure they can be substantiated in the event of a breach
• identified positions that are accountable—for managing each element of the compliance system
• continuous improvement—the company self-evaluates its performance and its approach to ensure they are appropriate to its operations.

Not all these elements are prescribed by the ACCC in its templates. The templates suggest a framework for companies to develop a tailored and effective compliance program.

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Compliance culture

The ‘culture’ of a company can be seen as a system of deep-rooted values, attitudes and beliefs that affect the way company employees perceive the company, what it stands for and the environment in which the company operates, i.e. their relationship with suppliers, customers, investors and regulators.

A company with a good compliance culture has a dominant value from top to bottom that encouranges compliance with the law. A good compliance culture is shown by the promotion of a positive attitude towards legal compliance activity at all levels within an organisation. It is generally reflected in people proactively seeking to understand and act in compliance with the legal obligations affecting their work.

The values, attitudes and beliefs exhibited by senior management represent the single greatest influence on organisational culture. They must drive the development of the right attitudes and beliefs. If the board is not seen to be consistently committed to implementing a compliance culture, it may send a message to all employees that compliance is discretionary.

Senior management needs to recognise that setting the right culture will be a major responsibility for them, in parallel with monitoring and controlling responsibility.

It is increasingly the ACCC’s experience that organisations that institutionalise compliance culture move through the following three phases and once the final phase is achieved, companies very rarely revert back to the non-compliant state.

1. Commitment to comply

In this phase company management develops a willingness or commitment to address compliance issues and allocate the resources to achieve it. 

2. Compliance know-how

At this stage specialist personnel (e.g. compliance officer or compliance advisor) are appointed and are made accountable for compliance program development. Internal and external expertise is sought and assimilated. Corporate strategy takes account of compliance. Policies and procedures are developed to address compliance issues.

3. Compliance as business practice

At this final phase, compliance becomes the way business is done and no longer external to it. Compliance policies are considered integral to company objectives. Operational procedures take account of compliance; the performance of work duties in compliance with the law is the company norm. Compliant practices are expected and rewarded. Non-compliance is prevented and discouraged.

Importantly, it has been demonstrated that evaluation by external stakeholders, particularly regulators, of the company’s response at each phase is critical to a company’s progression through these phases.

Why should companies invest in a compliance program?

Business benefits

An effective compliance program that acts to embed a culture of compliance throughout the organisation can be a business enhancer. A superior knowledge of the risks faced by the organisation and of the measures in place to guard against those risks can provide a company with a competitive advantage.  

When staff are aware of their rights and obligations, customer service will improve and staff will also be more alert and better able to deal with unlawful conduct that the company may be subjected to.

A company can obtain value from good governance and compliance, develop a better culture, prolong its life and maintain its reputation, and may avoid or reduce the negative effects of litigation and regulatory intervention.

Reputation

Companies that contravene the Act may suffer damage to their reputation—unravelling years of careful marketing and brand development.

In the information age it is more difficult to escape events that in the past were consigned to fading memories and dusty library shelves. Information on past misconduct by companies can now be retrieved at the stroke of a keyboard.

Needless to say, a reputation for good corporate governance and compliance practices may encourage customer loyalty and increase a company’s share price.

Mitigation of penalties

Few companies set out on a business venture intending to break the law.

If the ACCC institutes proceedings, the verifiable presence of a compliance culture, as demonstrated by a substantial and successfully implemented compliance program, can be scrutinised by the courts when the quantum of penalty is determined.

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